Uncertainty. The corruption crackdown in saudi arabia, the details. New poll finds most britons bracing for a postbrexit tax hike. Tracy this is Bloomberg Markets middle east. Angie a quick assessment of the markets in asia. The msci asiapacific regional. 75 , closingbing in on levels we have not seen this high since november. What is really remarkable about the selloff that we saw in the areal equity space, we seeing that recovery in asian stocks and sentiment today. , 1 nikkei 225 climbing higher because of the weaker yen, also putting aside concerns about u. S. Tax reform. We also have the hang seng, 1. 25 up, some big players, tencent higher. Te. Ck out z it is lifting higher, 9. 25 higher, and one of the reasons could be massive money coming through stock connect changing large caps in hong kong. Tracy, what is happening in your neck of the woods . Tracy it is nice to see green it . Hat board, isnt some assets that mean a lot for this region, the u. S. Dollar sliding a little bit. It rebounded yesterday alongside u. S. Stocks, but that did mean we saw gold fall. Gold posted its biggest drop in two months yesterday. It is rebounding this morning. Look at the brent crude price, up . 13, 14 since her barrel. We are waiting for u. S. Stockpile data that is expected to show another reduction in inventories of crude, and meanwhile look at that dubai index. That is one area where we have not seen the relief rally feet in just yet. Yesterday,i falling being dragged down by a big drop in the National Property company emaar properties. First, lets get first word headlines from around the world. The german chancellor Angela Merkel says she would rather face a new election than try to run a maine already government. Coalition negotiations broke down, differences with the greens could not be resolved. I have no plans for a minority government at the moment, so we have to wait. A new election is one way, a minority government is another. And a country that has some much to do, that will be something that has to be thought of very carefully. I dont want to say never, but i am skeptical and i think new elections would be the better way. The u. S. Designating north korea has a state sponsor of terrorism to it opens the door to additional sanctions and further isolates kim jonguns regime. North korea joins iran, sudan, and syria on the u. S. Terror lists. This designation will impose sanctions and penalties on north korea and related persons and supports our maximum Pressure Campaign to isolate the murderous regime. British voters expect taxes to rise up to the u. K. Leaves the European Union. That is according to a new poll published ahead of wednesdays budget. The survey found 69 expected a tax hike, compared with 31 who think they cut is on its way. Chancellor Philip Hammond is under pressure from members of his own conservative party as well as the labor opposition to increase spending when he outlines his plan. Saudi arabias super rich are said to be reassessing assets in case riyadhs corruption crackdown widens. Told thathas been people who are currently implicated have been asking banks and legal firms on how to protect their wealth. Those already detained include one whose holdings include stakes in citigroup, twitter, and other global businesses. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Tracy thank you so much. Has confirmed she will leave the fed once her successor Jerome Powell is sworn in. Yellen could have stayed because her term as governor does not end until january, but her decision leaves President Trump with an additional spot to fill. Angie the ecb is likely to make small adjustments to policy guidance rather than any major change in language. That as it ins quantitative easing. We get the account of the most recent ecb meeting this thursday, a day after the minutes after the latest gathering. Thinksour next guest tomorrows fed minutes will be a sleeper and with thanksgiving in the u. S. , activity will be muted. The Senior Market analyst joins us now from singapore. Thank you for coming on. With the janet yellen news. The big question that markets are asking right now is how much scope does this give President Trump to reshape the fed in the way that sees fit . Think there is a limited amount of leeway because the voting panel on the fomc is a rotating vote, so you have all these governments and they take turns that thing on the actual voting panel, so you cant be dovish, hawkish, or neutral at any one time. I think it is quite interesting that he has not actually given any indication yet as to who he is leaning to come it so my guess is he is not quite sure which way he wants to go. Some probably looking for hawkish governors come up it may be is not quite up to having a panel made up of people like that at the moment. Angie it will be fascinating to watch, this fed entry. In terms of janet yellen, what will her legacy be . She has managed to an bark on the progress of tightening, beginning the reduction of the Balance Sheet without roiling markets as much as some people had expected. In fact, she seems to have the opposite problem now. This is chart 8280. It shows that even though the fed has been raising benchmark rates, financial conditions continue to ease, but somewhat surprising given what we were talking about two years ago, isnt it . Year, definitely is it i think her legacy will be how she has navigated all these potential twists and turns and holes in politics and cap to be fed on a steady course. I think she was given quite a shock by the taper tantrum a couple of years ago that made the fed rio says how they were going to slowly unwind, but i governor yellens legacy will be the actual navigating of the final part of quantitative easing and actually moving towards this normalization. The biggest frustration will be that the economy is firing on all cylinders, but wage growth has not appeared. It is the fed nirvana they were looking for to really start their tightening process in earnest, but overall i think she has not been high profile like ben bernanke, but she has actually done a very good job. Wanted to get in this question. Where do you chase yield . You take a look at the yield differential between twos and 30s, pretty incredible. And take a look here, this is 6951. I have it on my bloomberg terminal. Junk bonds, these are the stocks that should be giving you the best yields and are just giving 5. 8 , well below that to decade average. These are amongst the riskiest bonds, and even then just less than 6 for your risky bet. Where do you chase it . Is one of thes legacies of quantitative easing and why it does have to finish up and be consigned to the holes of history. It has caused so many distortions around the world, and in times past, quantitative haveg means Central Banks hoovered up every investmentgrade bond, and that is pushing investors into more risky assets, such as junk bonds. You buy a lot of junk bonds, and in the yields go down, and this is causing distortions everywhere. In its heartis what the Federal Reserve and the ecb are looking to try to unwind at the moment. We are starting to see some stress on the junk bond, high yield side, quite a few issues have been pulled in the last couple of weeks and the highyield index has started creeping higher again. Angie jeff, you are staying with us. Will segue over two stocks. We are going to discuss the latest on u. S. Tax reform, why an early the center in the warning of reformn and how that will feed into u. S. Equities. Angie reports that saudi billionaires are ring fencing their assets. We will discuss how far the corruption search could go with exotic capital. This is bloomberg. Tracy this is Bloomberg Markets middle east. I am Tracy Alloway in dubai. Angie i am angie lau in hong kong. The latest business flash headlines. At t insisting its takeover of time warner is a vertical merger that does not lessen competition. This after the Justice Department filed an antitrust suit to block the deal, saying it would greatly harm american consumers. At t basra Randall Stephenson insists that selling this he in a news channel is not going to happen. There has been a lot of reporting and speculation whether this is all about cnn. Frankly, i dont know. But nobody should be surprised that the question keeps coming such anuse we witnessed abrupt change in the application of antitrust law here. The bottom line is that we cannot and we will not be party to any agreement that would even give the perception of compromising the First Amendment protections of the press, so any agreement that results in less forfeiting control of cnn, directly or indirectly, is a nonstarter. Tracy france and the netherlands have won a contest to host European Union agencies, the first concrete political victory in the battle for brexit spoils. The Eu Banking Authority will move to paris, and the regulator will move to amsterdam by the time britain departs from the block in march 2019. The two cities emerged victorious after a series of secret ballots by a few governments in brussels. Trans canada has won approval to build the Keystone Xl Crude Oil pipeline across nebraska. Officials approved an alternative route that could be challenged by environmentalists and landowners. Moodys says it does not provide certainty for the projects completion. Construction of the 8 billion 1900 kilometer pipeline has been on the drawing board since 2008. That is your Bloomberg Business flash. Lets turn our attention to the United States and ron johnson, the first gop senator to voice his opposition to the current tax plan. He says he is encouraged that Republican Leaders have been discussing his concerns. The Senate FinanceCommittee Approved the package last weekend at schedule his head to the floor next week. Many expect johnson to vote yes in the in. In the end. The center ofy obamacare before ultimately supporting the effort. Lets bring back our guest, the Senior Market analyst. You look at the tax Reform Efforts and you look at the markets, im curious how much do think is priced in at this moment . How much is the rally we have seen in u. S. Equities for instance reliant on the administration being able to pass that reform package . Think there is quite a lot priced into the equity market in particular, and to a certain extent the u. S. Dollar as well. They are expecting some sort of to repatriate all these dollars that american corporations have stashed overseas. The danger is that the whole thing falls flat, and that would most certainly see quite a vicious correction in the u. S. Dollar. For equities, it would be shortlived. We have seenelloff over the last two years in the u. S. Equity markets has lasted about 24 hours, then the market starts making its way higher again, so it has been a noticeable trend, and i dont see anything to change that outlook. I think it would be more dangerous for the u. S. Dollar rather than equities in the longer term. Tracy i love that you brought up the u. S. Dollar. It was about a simultaneous upward move in stock and treasury yields. 54 53. Rt behind me is you can see the trump trade clearly in action around novemberdecember last year, and it has lost a little bit of steam, especially the dollar portion. Give us your thoughts on the greenback. Why is a softer dollar now the story of markets . I think it is only a passing phase. I think we are seeing a lack of momentum in the senate and the house of representatives to get this tax bill over the line. I think market started off 2017 all guns blazing that we would see obamacare repealed, tax reforms, etc. , and it would all be great for the u. S. Economy, but a year later we have basically got nothing done in the states. I think that undermines the entire u. S. Dollar reflation trade from a very early phase. Is trying to call the feds bluff on their hiking cycle as well. Lull, buto be in a the u. S. Dollar will strengthen as rates go up. Fact thatnger is in we get nothing done on this tax trade. Next year, we have midterm elections in november. Of the senate and house of representatives to put their next on the line in 2018 will be less than it is today. This time last year we were worried about whether 2017 would be a year of highs. How about 2018 . The concern is still the same. What about next year . Than trying to pick the top of stock markets, and i think that is where it is at come it would be better to wait for a signal that the markets have topped. Every time there is a selloff, i look like a genius for 24 hours after donald trump won the election because i predicted he would, but after that, i have been wrong for the rest of the year. Up. Sort of sums it all we have been to brexit, donald trump elected, but the stock markets keep going up, so until we have a firm signal that the markets have topped, any dip is there to be bought. There is still plenty of money on the sidelines looking for attractive prices. Nice to have honest temporary geniuses on the show. You are staying with us. Up next, that record da vinci art sale and whether it means we have reached peak liquidity. We will take a look at some market risks. This is bloomberg. The United States is designating north korea as a state sponsor of terrorism. The move opens the door to sanctions and isolates kim jonguns regime. I guess things the north korean situation is a storm in a teacup, but the situation in saudi arabia might not be. Is also concerns that bitcoin is a bubble and someone paying 450 million for a da vinci last week screams peak liquidity. Our guest is still with us from singapore. When you have that much discretionary dollars, cash on the sidelines, and youre going with a da vinci, what does that say about where we are at . I can probably qualify that. It is the only da vinci available in the world in private hands and must be priceless. What was interesting were the other paintings and that auction, modern impressionist and such, 30 million, 40 million. One paid 30 million and the guy painted it with a brush on a broomstick, so we are all in the wrong jobs. I am worried that we are almost at the liquidity, with some parts of the global community, it is very much like the 1990s were the japanese were buying these impressionists at ridiculous prices and was a leading indicator the nikkei was about to crash in japan and go into 25 years of deflation. I know which painting you are talking about. Untitled. That artist could not even be bothered to name it. Take a look at this chart, 5036. It is the price of faries on average and read four re there is a whole generation who has only expense the cost of capital, and that is not how the world works. There will have to be a lot of adjustments. The fed will have to take it gently. We will actually see capital allocated on a more efficient basis rather than chasing high yield bonds we were talking about down to yields of 4 . Allocatede capital more efficiently, but i do think it will lead to strengthen the u. S. Dollar and actually put pressure on some over leveraged assets and some of those paintings bought last week wont be quite the magical investments that people thought. Lets talk about the economic side of this equation. If liquidity is reducing, as long as we have a synchronized global recovery, you would think that provide some help for the markets. How much of a boost is that going to be . The Federal Reserve, the first into quantitative easing, the ecb now making signals, the bank of england is basically done one hike and said we are not touching it for the foreseeable future. Everybody is taking it very gently, but the fact is they want to put some money in the bank so to speak for the next recession or crisis so that they are able to cut rates. We need to bring the cost of capital back from zero or 1 to whatever it should naturally be, which is not where it is at the moment, so we will see a gradual process and as long as the World Economy stays buoyant and china stays buoyant and asia and we dont have any problems with over leveraged economies with large amounts of u. S. Dollar debt, then i think we can meander our way through 2018 safely. We will have to leave it there. We did not even get to bitcoin. Coming up, we turn to the oil market. Iraq is adding to opecs headaches. He will discuss how their output could change the production picture. This is bloomberg. Tracy it is a 30 a. M. In sunny dubai. In sunny dubai. We had a positive session in asia overnight. The msci asiapacific index up. 7 5 come making up for losses we saw yesterday. We will have to wait to see whether that sentiment feeds through into the middle east market later today. One thing that might help, we still have oil holding onto gains, although they are shrinking as i look at my screen. With get over to debra mao first word headlines from around the world. The german chancellor Angela Merkel says she would rather face a new election than try to run a minority government. Before Party Coalition negotiations broke down, the probusiness free democrats said differences with the greens could not be resolved. I had no plans for a minority government at the moment, so we have to wait. A new election is one way, a minority government is another. And a country that has a much to do, that is something to be thought of very carefully. But it want to say never, am very skeptical and i think new elections would need the better way. The United States is designating north korea a state sponsor of terrorism, opening the door to additional sanctions and further isolates kim jonguns regime. Iran, sudan,oins and syria on the u. S. Terror list. This designation will impose further sanctions and penalties on north korea and related persons and supports our maximum Pressure Campaign to isolate the murderous regime. Debra british voters expect taxes to rise after the u.