Later this week . Saudi arabia bombs the yo , a countrytal already in crisis. It is 8 00 a. M. Across the emirates. This is Bloomberg Markets middle east. I am Tracy Alloway in dubai. Stocks from tokyo to hong kong all trading down. Them as ci asiapacific index is in the green, but that masks underlying weakness in the tech stocks because of the u. S. People having time to digest the tax reform passed by the senate late friday and finding some unpleasant surprises, and that fed into u. S. Markets yesterday. At the s p 500. A roller coaster ride relatively speaking. It was up, then down, down by. 1 . Fang down 2. 1 , the biggest tech stocks. 10 year yields ticking up stillly, so that thesis intact. Bloomberg dollar index sliding. Lets look at the region. We did have some big middle east news. Ae markets have not had formerto react to the yemeni president s killing. There was a hope that qatar might see some developments when it comes to the blockade issue. Meanwhile, take a look at turkey. Despite index up 1. 6 the highest inflation data we have seen since 2003. Than expected, but a lot of people think that will put more pressure on the turkish central bank. Meanwhile, brent crude picking up. Today is a good day to test whether a risk premium is still in bedded in the price of oil. Lets get over to debra mao for the first word headlines. The u. S. Supreme court has ruled that the trump travel ban can take full effect while the legal challenges continue. The ruling does not directly address the merits of the ban, but is a key victory for the president and suggests a divided court may uphold the restrictions. From can now bar people six mostly muslim nations even if they have a relationship with the u. S. Based person or institution. The muchanticipated brexit breakthrough failed to materialize in brussels. A tentative agreement was derailed by the irish border issue. The eu had given theresa may until monday to explain her policy for a postbrexit border. She even interrupted lunch to speak to the leader of the Northern Irish party. Shortly afterwards, she and Jeanclaude Juncker announced new deal. Efforts andur best significant progress, we and our , it was not possible to reach complete agreement today. European Union Finance ministers will discuss the u. S. Plans to slash taxes at a meeting in brussels that would later and whether it violates International Trade rules. The centerpiece of the tax bill that passed the senate is a reduction in the Corporate Tax rate to 20 from 35 . Spains economy minister said some reforms will violate wto rules and further analysis of the consequences is needed. Talksto launch free trade between china and canada have failed with the two sides canceling a press conference, but agreeing to keep nash negotiating. Thatn trudeau indicated there were differences. Thereent xi jinping said were differences, but the two are in a golden age of the relationship. Yemeni palace has been bombed, killing the former president as he was set to switch sides and offer riyadh a way out of the conflict. He rolled yemen for three decades before he was ousted in. He arab spring bitcoin could be one of the greatest shorting opportunities ever according to one export we have spoken to. Hedge funds are waiting for the introduction of new futures contracts before they start shorting the cryptocurrency. Been volatile recently, plunging 20 and less than 90 minutes last wednesday after briefly topping 11,000. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Tracy thanks. Dropping with Technology Shares tracking a selloff in u. S. Tech companies has the gains spurred by the u. S. Prospects of tax reform begin to fade. The dollar weaker this morning with treasury yields handing back part of the advanced they had made monday. Lets get more with mark cudmore from singapore. Mark, we were expecting this take pop in u. S. Equity markets, and instead we get a fizzle. What happened . There were a few dynamics happening. It is important to remember that the tax bill passed the house in november and stocks finished lower after initial pop, so a similar dynamic here. That is not all it is. The concerns about the alternative minimum tax is weighing on sentiment. It does seem likely that during reconciliation that that problem will be sorted out. They may have other problems, but that seems like an oversight over the weekend. It emphasizes how hastily this was put together last week and pushed through with pencil comments in the margin. It has people concerned about what will be the ultimate impact. Have they had time to study what the impact will be for all people involved and whether growth really will be boosted . Tracy one of the pcs the agreement thesis that remain in tact, 30 yields up a point, but there is an argument that will not last in the treasury market. Why is that . There is reason to be suspicious use can break higher next year. This is the theme every year, next year we will go higher. 2017 looked like a great chance with the promise of three rate hikes. Yet, the 10year and 30 year yields are not necessarily higher. A range ohraded in year because the curve is flattening. We expect those dynamics to continue next year. There are not many inflationary pressures coming through. We are at the end of the cycle where the curve does flatten. Ultimately it flattens out and we get a frontend rising and the back and stationary. We think we want have spiking yields during the next year positive headline on tax, but we dont think we are breaking through to a new range. There is still a narrative in the market the because of the 30 year bull market in bonds that we have to go into a longterm bear market. In aink the idea we can be sustained arranged in yields can persist for a while longer. Tracy right. Mark cudmore, our strategist in singapore there. Ets get more with mark tinker he joins us from hong kong. Take onious to get your what happened yesterday in the u. S. Market. Disappointment over the tax reform, this discovery of the unpleasant surprise hidden within the legislation, or Something Like windowdressing at the year end and profittaking as the market reaches new highs . What is your take . It is quite classic early december behavior. , everybody has had a tremendous year really in the equity markets. Everybody has made money. Everybody has turned a profit. Particularly in the tech area, and there is a big temptation to book those profits, whether asia, the u. S. There has also been this squeeze through november with people trying to square their books. The big story really for benchmark investors this year has been what you didnt own. If you didnt own tencent in org kong or samsung in korea japan as an international investor, you are struggling to catch up with your benchmarks. There is this scrambling for the windowdressing on the one hand and the selling by some of the private investors, booking those dramatic profits they made through 2017 and flattening books before christmas. We do that every tear. Every year. It is largely Market Positioning in my view. Tracy hasnt someone whose job it is to pinpoint some of those market narratives, what happens to the rotation we saw last week . It took off on wednesday, then fizzled out yesterday. Will it pick up again . Rotation is out of momentum into some value. I dont think people are quite ready to put on a big bet for next year, but picking up on some of the themes you talked about earlier, i think people are noticing Pricing Power and that inflation is rising now. I think some of the cyclicals them up a followthrough at the flipside 11 people are if i boughte saying all the stuff everybody hated a year ago, i would have made so much money, so perhaps i will figure out what people dont like. People dont like Energy Stocks anymore. Everybody seems to hate the u. K. Maybe i should go there . I think there is some deliberate contrariness and because of that muscle memory. I think more of that will be picking up in the new year will have people buying the dogs of the dow come up but at the end of the day, most people are flattening and maybe taking a bit of cash. If the companies they have done pullback,f, 15 , 20 i think they will go back in and it will be buying of those momentum stocks. It will be a lot of shortterm noise between now and the year ended. Tracy a lot of shortterm noise. Hold that thought, mark tinker p you are staying with us. I will ask you to find the signal and all that noise. Irish borderthe issue derails theresa mays big brexit lunch at the last minute. The latest from brussels. As chinas Services Sector signals the fastest growth in three months, our guest says fears about the second largest economy are overblown. We are back with mark tinker after the break. This is bloomberg. Tracy this is Bloomberg Markets middle east. William Tracy Alloway in dubai. Chinas Services Sector signaled the fastest growth in three months in november as growth picked up and an independent survey put the pmi at 51. 9, up from 51. 2 and october, while companies hired at a faster pace. Still with us from hong kong is mark tinker. Mark, you just mentioned inflation in our previous chat. When you see that inflation in china, what do you think . Think it is important to recognize that china contributed more supply to the world than a contributed demand, so chinese growth was giving us more of everything. Now the shift away from production towards consumption is the china 2. 0 story thematically last couple of years, it is starting to show through some higher prices. The Chinese Consumer has got very strong real wage growth translating to Pricing Power. Disinflation,d there is a strong possibility that china can now import export inflation to the world. It is something we have to look out for carefully. The china consumer is the strong story in the Chinese Market now. Tracy quite a watershed moment if it happens. One of the big themes and china has been the selloff in. Bonds this chart shows yields on aaa rated Corporate Bonds are at the highest in three years. When i look at that, i assume part of that is the deleveraging effort taking place in china, and if you have higher funding costs, then eventually you will have slower credit growth and that must feed into the economy eventually, right . Yes and no. One of the most important things about china is that its Financial System is different from the west. We cant take the same messages from the same signals. If we go back a few years and you are a big stateowned enterprise, you could borrow 10 of the renminbi from one big beijing banks, then linda on to some Property Developer at 15 . There appears to be 20 billion in lending. That does not happen anymore. The banks arent lending directly to Property Developers at better rates. Ist you have actually done you have taken away some of the shadow lending and broad back into more traditional lending. Companynd point is that that bought at a very low rate, that is what we are observing here. Are importantly, the smes now able to borrow at lower rates than they used to, although they are higher than that aaa rated indicator shows. What is important to understand about china is that it is building a Financial Service infrastructure before our eyes. Are telling us the economy is slowing down and deleveraging means there is a bubble, nothing of the sort i. China is such that Interest Rates can appear to go up in the aretterm, but the people borrowing are seen their Interest Rates come down. Secondly, this is not a classic emergingmarket Consumer Finance bubble. The consumer in china is very under leveraged. Growth has been driven by real wages, not borrowing. When people try and make out the china markets that it must be because the economy is deleveraging, they are imposing an economic model on china that is not appropriate. Tracy mark, hold that thought. It is a very interesting one. Up next, we want to segue elegantly from china to europe, how the irish border issue locked a brexit breakthrough. The latest from brussels next. This is bloomberg. U. K. Prime minister theresa mays so she is confident of a positive outcome on brexit and she meets with eu officials this week. The optimistic tone comes despite the two sides failing to reach an agreement on monday to move on to the next stage of talks. A major Sticking Point is what happens to the irish border. On many issues there is common understanding, but we want to move for together. On a couple of issues, some differences remain which require further negotiation and consultation. And those will continue, but we will reconvene before the end of the week, and i am also confident we will conclude this positively. Efforts andur best the significant progress, we and our teams have made over the past days on these issues, it was not possible to reach a complete agreement today. Still with us to discuss the drama in europe from hong kong is mark tinker. Is a great bloomberg story describing what happened over theresa mays luncheon brussels, interrupted by that phone call from the head of the dup in ireland. Means this latest hurdle that striking a deal before the end of the year just got much more difficult. I cant deny that. At least people are now accepting a deal has to be struck. We have been in this curious situation where a lot of people have been saying nothing will of her happen. I think the recognition they are moving on to negotiating is quite important, whether by the end of this year, i dont think we will get anything conclusive, but this is politics. You have got 27 countries negotiating, its like a trade deal coming from the other direction. Of vested27 sets interests. Ireland is a member of the eu. It has strong concerns about the border with northern ireland, has does the u. K. , so this is focused on a specific issue. We knew it was coming. I am sure it will be resolved, but as markets go, we have to sit here and wait for the politicians to come up with something that we can try to incorporate into our views of how things will pan out. Until that this result, there is not much we can do. Tracy waiting on politicians is never a fun exercise. Let me ask you the market question, if we dont get progress by the end of december, how concerned do you become about the prospect of brexit talks collapsing altogether and what would that mean for markets . Think this year is a hard to deadline. I think markets have tried to price in a few one way, then the fx market isd the not making any judgment on this at the moment. The equity markets are listening to what the companies are saying and doing. It is as business as usual. That byity is that march 19 that we will have a trade relationship between the u. K. And the eu of some sort. It is not going to be apocalyptic. The world never works along these ways the weight media and some politicians will say. Takebody is saying lets this one step at a time. You havent seen mass exodus, collapses, or any of these hyperbolic stories. Simple, butng to be the same as any other trade relation. This is not a hard stop in december, but at least we have started the prospect of because you nations. Prospect of beginning negotiations. Faltered, thend rallied her what accounts for the relative resiliency we have seen in that currency . It depends on who you are looking at against. Tracy it is all relative in fx. And the euroing have been surprisingly strong and the dollar surprisingly weak, so i think it is a dollars story more than a sterling story. Tracy with their the u. S. Dollar, very quickly . Wh come 2018 that it will be a firmer currency rather than a weaker one. Tracy the bloomberg dollar index still sliding this morning. Again, we have 2018 to look forward to. We will see how that plays out. Mark tinker, thank you so much for joining us. Up next, moving closer to home. Saudi arabia is arming the yemeni after houthis killed the former president. What next for a country already in crisis . This is bloomberg. We are 90 minutes away from the market open in the emirates. We are waiting to see local markets react to the news out of yemen yesterday. Centsent oil price up six this morning. Good day to test whether geopolitical risk premiums are still embedded in the crude price, isnt it . Lets check in on the first word headlines. Debra the u. S. Supreme court has ruled the trump travel ban can take full effect while legal challenges continue. The ruling does not address the merits of the ban, but is a key victory for the president and suggests a divided court may uphold the restrictions. Trump can now ban six mostly muslim nations if they relationship with institutions or persons that are u. S. Based. The eu had given theresa may until monday to explain her policy for a proposed brexit border. She interrupted lunch with Jeanclaude Juncker to speak to the leader of the Northern Irish party. Shortly afterwards, they announced no deal. Despite our best efforts and significant progress we and our teams have met over the past days on many issues. It was not possible to reach a complete agreement today. The eu finance ministers will discuss the u. S. Plan to and whether it violates International Trade rules. The centerpiece of the tax bill that passed the senate is a reduction in the Corporate Tax from 35 . spains economic minister says some part of the reforms will violate wto rules, and that further analysis of the potential consequences is needed. Plans to launch free trade talks between china and canada have failed with the two sides abruptly canceling a planned press conference. Prime minister trudeau indicated one Sticking Point is canadas preference for wider progressive tax. The premier admitted there were differences and said the two sides are in a golden age in the relationship. Of the could be one greatest shorting opportunities ever. That is according to one expert we have spoken to. Several sources have told bloomberg got hedge funds are waiting for the int