Help us signs a contract for 20 new planes with an option airbus signs a contract for 20 new planes with an option for more. The ceo tells us he is confident emirates will continue flying high despite pressures facing regional customers. It is 8 00 a. M. In dubai. This is Bloomberg Markets middle east. I am yousef gamal eldin. We are off to a cautious start. Ive rebound in selective markets in the asian equity session. Gmm is your function. Quite a bit of strength on the kospi. India up. 8 . The backdrop is a weaker u. S. Dollar, and notably so. It is in the bottom of your second column on your bloomberg. Investors on edge after an inquiry into the financial system. The sovereign bond and commodities space, two things to point out. Comeback,al making a rubber up, downside on zinc. Energy, the bearish data did come out on friday with more rigs added to the u. S. Production story. Wti rebounding, up 1. 1 . A little bit of that coming through from the weaker dollar. Gold, that key inflation data coming out, currently a. 6 on that trade. , so close to2. 85 those fouryear highs. Look at the u. S. Junk bond market, the worst week in two years. Where will that come online . S p futures currently higher. 6 . Toh that, lets cross over first word headlines from around the world with sophie kamaruddin. Says ansraeli military antiaircraft missile probably brought down one of its fighter planes. The f16 was shot down as it took part in and attack. A russian plane has crashed after taking off from moscow, killing all 71 on board. It was heading for a southeastern city, but disappeared seven minutes into the flight. Known what caused the crash. Reports from japan say governor kuroda is to be given a second term. Will minister shinzo abe appoint governor kuroda for another five years. That would indicate the Prime Minister wants to continue with the bojs unprecedented Stimulus Program. South africas Ruling African National congress meets to finalize the transition of power from jacob zuma. The anc leader has told supporters the party must resolve this problem, including accusations of corruption against azuma. The new anc leader is expected to succeed him in his presidency. Has beenty airport closed indefinitely after the discovery of a world war ii bomb. The weapon was found during Development Work at the nearby dock, and the police have imposed an exclusion zone. It is not known how long the airport will remain closed. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. I am rosalind chin. Thank you. Lets talk about what is happening with key events. We were talking about how the asian equity markets were mixed early. We are seeing Downside Pressure in australia, but hong kong, china, and south korea all higher. Volatility around 29, but that is significantly higher than its average. Traders waiting for u. S. Inflation data for potential to move the markets. Lets cross over to a Senior Investment strategist at ocbc bank. What are your expectations for the u. S. Inflation data . We dont have a forecast, but not be surprised if it inches higher. What is happening now is the volatility we are seeing is on the back of expectations for inflation to hit higher, and we have seen that with the jobs numbers a week ago and growth that 2. 9 , and that has resulted in Inflation Expectations moving up, so markets will become sensitive to the number when it releases inflation data. Is a tug 04 the bond market and equities, and that will take center stage over the next few days. At what point at what yield does equity begin to let go in terms of momentum . Where do you see that line in terms of criticality . Volatilek it will be for the coming few weeks and months. We dont have a line in the sand where we say 10 year bond yields go to 3 . What is happening is there will be more weakness. Find yields heading towards 3. 25 in the next 12 months. Slowly,as it inches up i think it will not be so bad. If the yields move up quickly, i think that will scare the market. The speed is important, not just the levels. With the fed shrinking its balance sheet, trumps tax plans, it is inevitable that long bond yields will head higher. It is only a question of speed. It will spill into the equity markets as we have seen in the last few weeks. Have forced deleveraging at work, are we there yet . Is this a good time to start picking up assets in the u. S. . We have been telling clients to see this as an opportunity to bargain hunt, to accumulate as opposed to outright buy. Volatility has returned. It will not go away soon. We need more data points on inflation. This will take time. It will be not result in the next days, weeks, months. Volatility is here to stay. We advise clients to accumulate gradually as opposed to buying it outright. Volatility means opportunities to buy at low levels later. Yousef the other event is possibly donald trump announcing to fixng from a package a crumbling u. S. Infrastructure. Is that already priced into this market . The markets are skeptical as to whether he can pull it off. He has pulled off a major tax reform, but the u. S. Budget deficit, this will add even more to the budget deficit, and im not sure he will get enough support within congress within his own party to be able to pull off this deal, so i think the market is skeptical. If he does succeed and is able to get congress to approve as much as 1. 2 trillion for infrastructure spending, that is good news for the economy, but bad news for the bond markets because inflation will be fueled further. Does that change her view on how the fed might tackle all of this . You might get additional fiscal stimulus from the government, then you have the realities on the other hand . Lot says three times this year. We have taken it up to four times. Some see five rate hikes this year. I think it depends on the Inflation Numbers coming out. With the economy doing well, the job market tightening, wage growth at a high, the tax plan , andg fuel to the economy a very tight labor market, i would not the surprised if the fed is forced to hike rates more than expected. Yousef the budget director of the u. S. Said yields could see a spike in Interest Rates as a time hisut over argument was Economic Growth would bring everything back in line. We still have a lot to talk about. Still to come, a lot to talk about. Is confident it will continue to fly high. Our exclusive interview is still to come. Up first, a governor kuroda come back. Reports that the governor will be given a second term as the head of the central bank. Is stimulus set to . We discuss that next. This is bloomberg. Watchingou are Bloomberg Markets middle east. I am yousef gamal eldin in dubai. , vines and line with the threemonth average volumes in line with the threemonth average. Selling in israel. Stocks the big six retreating as tensions with iran are playing into it. We saw a rebound in qatar. Airbus and emirates have signed 80s. Tract for 20 a3 it comes after airbus admitted it might have to terminate the project unless new orders come along. Its most important plane is still suffering teething problems. To company has suspended due engine supplied by pratt whitney. Igo has reported three inflight shutdowns. Dubai investments selling shares in its cooling unit in the Fourth Quarter and aims to start Investment Trust as it seeks to boost profit. The ceo spoke to bloomberg as his Company Reported an 18 decline in full your profits. With his happening, we are very excited this will go portfolio isand growing. We are doing this in a market that is 70 owned. Twore excited because those will be listed in 2018. Harvey weinstein is being sued by the city of new york for creating a hostile Work Environment at his company. Mayattorney generals suit complicate attempts to sell the studio, a 500 million deal. Harvey weinsteins lawyer said while his behavior was not without fault, there was no criminality. That was your Bloomberg Business flash. Im seeing a relatively stable dollar yen at 108. 70. From the bojjapan governor kuroda, he could be given the second term. Prime ministers ands appoint governor kuroda for another five years when his current term ends. The Prime Minister was to continue with the bojs unprecedented Stimulus Program that has weakened the again and stoked corporate earnings. Lets get back to our guest. Ultimately, hardly a surprise for anybody in this market. What is the best Case Scenario under another term with governor kuroda . Stimulus is all governor kuroda can do. Prime minister abe has to do his part as well. Reforms in japan are still lacking. The boj has done a good job. He has loosened Monetary Policy significantly. It has helped the economy, the stock market. So being reappointed is good news for japan in the stock market because you have a stable pair of hands, and you need that now with the markets facing volatility and turmoil and uncertainty. It is best to stay the course and hopefully inflation rates in japan will pick up. We see the boj as the most accommodative among major Central Banks. Yousef you dont see some tweaking to the yield curve control program, perhaps a chance to go short on dollaryen aggressively . Be surprised if they raised Interest Rates a little bit given the fact of the Federal Reserve is likely to hike more than expected. U. S. Long bond yields are headed north. I would not be some rise. I dont see them having room to do anything dramatic because Inflation Numbers in japan are low relative to other developed markets. They still have to adopt fairly accommodative Monetary Policy to help the Inflation Numbers pickup. Ftcsef you look at ct , iitioning on dollaryen want to go to your wider views on the asian space given market cautiousness. What are you recommending clients right now . Essentially we see u. S. Dollar weakness across the board , except against the japanese yen, but we dont see the yen falling off a cliff either. Dollaryen 112 over the next 12 against major currencies, the dollar basically weakening. We think what the fed is doing is no longer a novelty. The fed was the first to start hiking rates, but you will see other Central Banks jumping on the bandwagon. I think what we are telling our clients is asian fx going forward, that it will benefit from what is happening with the dollar. Yousef what about the credit markets . We saw Corporate Bonds come under pressure. There might be additional pressure with yields in emerging markets. How do you navigate those waters at the moment . It is very tricky. Clearly the bond market spreads have tighten. The bond markets will lose some of their shine, but we are telling clients to have some bonds because essentially they serve the purpose of stabilizing the portfolio. You are right. We are more positive on equities than bonds given the risk for higher inflation and higher yields. One has to be selective what one buys, including the emergingmarket on space. That market space will face some pressure down the road as well. Yousef it was great having you on the program, the Senior Investment strategist for ocbc bank. A preview of what is coming up am a because we are just getting warmed up. Skies not being the limit for , the ceo lays out the carriers ambitions for 2018 in an exclusive interview. This is bloomberg. Yousef it was a beat for air arabia is all year income. Carrier caneves the fly higher thanks to the oil price and growing demand for travel. He told me up his predictions for growth. We have budgeted for 7 growth. His easily achievable in terms of passenger numbers. Obviously it is difficult to predict exactly the bottom line for the airline in 2018. Reason tohere is no believe it will not be as good, if not better than 2017. Yousef what are the bright spots you are looking forward to when it comes to markets, size, scope, scale, saudi arabia for example . Airports and 12 the whole economy is changing. Again, i go back to the improvement in the bottom line. We have seen some of this coming back, but more importantly we have grown our business. Good spots would be places like morocco, going from strength to strength and we are putting in more capacity. Egypt is another one we have grown 100 yearoveryear, and we may chrome or this year. The tourism, the world cup will bring some business. So thathas qualified, will bring additional, unexpected business. Yousef how comfortable are you with where you are over the next 34 years given where oil prices are . Ball one had a crystal beoil, we would probably not having this interview. I would be more focused on oil predictions. We hedge oil for operational reasons. So far for the last five years we have been doing it, it has helped us. 2017 again had a good impact on our overall result. At, we what we look continue to hit around 50 , a wille we feel either way end up with a good, positive result for the company. So therefore oil hedging is not necessarily done for the profitability. It is time to make sure that we have security and insurance of the operation. That, a good oil price that we have seen, it will feel the economy can a positive manner and give us an overall improvement of the business. Hsbc were making the argument in a Research Note that there is a consolidation play in the market. Not talking just regional, we are talking cross regional. Air arabia was one of the names on that note. Any discussions ongoing or ideas as to whether mergers and acquisitions are a way to push forward . Being a publicly listed company come up the have the publics money and we need to that we take advantage of an opportunity for investment. We should consider it. There are always discussions going on with multiple people, but 99 of those dont really work out because they dont necessarily meet our needs, the synergy that benefits our business. At present, nothing is going on. But if something comes up that wefeel matches our dna, then would be more than happy to look at it. Yousef the story around sentiment, you tell me the oil price was supporting Consumer Confidence. People want to travel more. There is the other side of the coin, which is the reality of higher cost of living, vat, dampening sentiment. Are you seeing evidence of that, and what are you doing to offset some of that as governments roll out more taxes and reduce the money they spend . With the technology around us, Everyone Wants to travel now. The one time traveler a year is becoming two times or three times. The young generation, their thoughts in mind are very different to taking holidays. They dont want to take one trip a year. They want to be always on the road, any opportunity. We have seen quite a lot of. Hort breaks last year despite the realities you just described in terms of cost of living increase not just the uae, but the region, we do not see a slowdown in the travel. Yousef it is 8 30 a. M. In dubai. Getting ready for the start of a trading day. Im looking at bloomberg dollar index, it has weakened a little more. Down a quarter of 1 . Lets get you a quick check of the first word headlines around the world. The Israeli Military says a syrian antiaircraft missile probably brought down one of its fired airplanes saturday. Fighter planes saturday. This is the first time israel has lost a combat plane to enemy fire since 1992. Nearsian plane crashed moscow, killing all 71 people on board. Thene was headed to a plane disappeared off the radar seven minutes after flight. An investigation is underway. Angela merkel says she wants to serve a full term in office. She agreed a new coalition with democrats that it is time for a change. Her fouryear term. Ruling congress will finalize a transition of power from the president. The leader told supporters the party must resolve its problems, including accusations of corruption. They are expected to succeed him in the presidency, as well. Harvey weinstein is being sued by the city of new york for creating a hostile Work Environment. Complicated general weinsteins attempt to sell his studio. Weinsteins lawyer says while the movie moguls behavior was not without salt, there was no criminality. The closest gateway to u. S. Financial district has been closed indefinitely after the discovery of a world war ii bomb. During Development Work. Police have imposed a 200 meter exclusion zone. It is unknown how long the airport will remain closed. Day innews 24 hours per more than 120 countries. This is bloomberg. Now over to singapore. Nice to see green on the screen. We are having the best day on the regional index, which we are looking at, excluding japan which is closed for the holiday, since january. The cost be leading the gains up over 1 . A strong rebound coming through in largecap players in china. They had their biggest one, their biggest oneday drop in two years friday. Have a look at wti, coming back up by over 1 but still below 60 per barrel. Wti crude over the last week had a huge impact on a lot of those Energy Players, erasing the gains it had seen over 2018. I want to show you some of the strengths in the currency markets. It is generally a story of a weak dollar. The Australian Dollar up by one third of 1 . Markets comingqe under pressure. Weakness in australian banking and disappointing earnings numbers. The regional index, the i. T. Stocks are leading the gains. Essentially, investors getting back into those stocks, which they downed last week. You can see tencent is leading the gains. Hong kong on the lunch break sent tencent shares up by 2. 5 . A Steel Company in focus in india after its thirdquarter innings earnings were up. Tire is under for is underperforming. The overall kospi was up over 1