Canceling billions of dollars in projects. It is 8 00 a. M. Across the emirates. I am yousef gamal eldin. Shery i am sherry and in hong kong. Reboundingcross asia following that risk off tone set by the u. S. , the asian benchmark gaining. 3 , but not helped by japan, which has returned from its holiday. ,e are seeing Government Debt tracking those gains in u. S. Treasuries, and i understand you are taking a look at that as well. Yousef you understand correctly. That is what i am looking at. We have brexit, which spurred the demand for safe havens. Into perspective when it comes to 10 year treasury yields, it tells a different story. This chart goes back to 1985, younger than i am, and we are in a classic textbook a story of a bear market. Quarterlyll below the resistance line, so we need to go over that to break through that, so you are looking at two point 38 , and you need 2. 8 to break through that line, and that will be by the end of march, which analysts are saying something completely different. 2. 4 , so stillay a long ways to go, and important to put some perspective in all of this. What are you looking at . U. S. if youre looking at yields arise, then a stronger u. S. Dollar, and that affecting markets across asia. India gaining. 6 persons, rebounding from losses in the previous session. The hang seng gaining and 5 , china ppi data overshooting estimates. Topix down. 8 , returning from a long weekend to her that is the market check in asia. Yousef thanks. It is two hours away from the opening of emirates markets. A positive picture in this part. 8 . E world, dubai up gains for some financials, especially insurance stocks. Downsidebia to the. 8 , a lackluster start for , earningsks in 2017 missing estimates. Down, look at egypt,. 9 snapping a multisession winning strick. Lets check in on first word headlines from around the world. Senior Donald Trumps but unpaid adviser, Jared Kushner playing a lead role and will work with the chief of staff and chief strategist. He leaves the familys Real Estate Company to comply with government ethics standards. Yahoo announcing sweeping Management Changes as it transitions into an investment company, Marissa Mayer and five others resigning from the board. Resignationsheir are not due to any disagreement with the company. The newndt will be chairman. Soaring on news that alibaba and others want to take it private, part of alibabas decision to integrate with traditional brickandmortar stores. The deal will happen at 10 hong kong dollars per share. Ntime had been suspended before christmas. Itmany warns britain that must adhere to rules on freedom of movement if it wants access to the single market. Angela merkel laid out her position as theresa may prepares to launch brexit negotiations. Merkel said anything other than compliance with eu rules would have consequences for the remaining states. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Basically we have the world covered. Shery thank you. Has hadreflation story left with factory gate prices climbing more than forecast. Stephen engles is here with the latest number, so only four new months and more than four years of factory deflation. What is going on . It is inflating now on the back of rising commodity prices, yes, industrial capacity has tightened, yes, the weakening hasr has raised yuan raised the import bill. This is feeding into the factory gate prices in china, rising 5. 5 year over year in december. We were expecting 4. 6 , bigger than november, 3. 3 , the fourth straight month of rising prices at the factory gates after four years of deflation. It is interesting to break it down because producer goods in mining, up 21 in december. Raw materials up nine point 8 , manufacturing 5. 1 . These were all in deflation a few months ago, now showing close to and in some cases in mining, doubledigit gains. Purchasing in put prices, up 10 in december, ferrous metals up 14. 9 , again,s up three months ago these were all in deflation. Says,orman from hsbc dont worry too much about it. This is his explanation. Keep in mind that a year ago, prices were down i o must the same, so over two years, prices are unchanged, so what looks like a big reflation is not the beginning of hyperinflation, rising inflation, rising price pressures. Look at the ppi in detail, the commodity part has been increasing, but the other stuff not so much. Think you have a question . Yousef i do have a question. Prefer stronger ppi oversee pi, so how are Consumer Prices holding up . Fairly benign . You are right. They watched cpi inflation like a hawk. They have had a loose Monetary Policy for some time, but it has not fed into Consumer Price inflation, still below the government target of 3. 5 for the full year, coming in at 2. 2 in december 2. 1 . We were expecting 2. 2 , so a benign environment. We can predict this accurately because of the bloomberg Consumer Price inflation food index, which showed food prices, even though we are in the middle of winter, food prices had been trending lower, so that is the biggest determinant of cpi. When food is low, cpi comes in low. Of industrialwer companies in china continues, and that will factor into those prices at the retail level. Yousef thanks. That is Stephen Engles on the latest data from china. Lets get more market action. What is it looking like . I want to start with the oil contracts, the wti u. S. Contracts, coming back after that drop in mondays session, up by. 3 , ahead of u. S. Government inventory coming through on wednesday, likely to show we saw u. S. Inventories rise by 2 Million Barrels last week. Unfortunately, the Oil Gas Sector trading off the back of that big slump we saw in crude yesterday, so the sector off by. 5 , santos in australia down by 2 . A number of the producers in off byng as well, cnook 1. 2 . Tracking towards the highest level we have seen since the beginning of november. You have flat movement on the shanghai composite on its lunch break. Hong kong holding up well despite the weakness in energy players. The hang seng higher by. 5 . Elsewhere, some Good Movement from the Southeast Asian markets. India tracking well, higher by. 7 . Ont yen fluctuation weighing the nikkei today, down by. 9 , its first trading day after being close yesterday for a public holiday. You are seeing weakness in the oil price way on the Australian Share market. Ofs is its first loss so far 2017. Remember, the Index Holding at 18 month highs. A lot of support from the gold players, so thats where we are seeing the buying today, in gold, and that movement in the yen, so safe haven action in play today. Yousef very much so. Lets get you a preview of what is still too calm, easing the tensions, can jack mas investment in prove Donald Trumps relationship with china . Titans, but saudi when will cost measures make an impact . We will discuss that. This is bloomberg. Yousef welcome back to Bloomberg Markets middle east live on bloomberg tv and radio. I am yousef gamal eldin. I am shery and in hong kong. President obama rejected israels criticism about the recent Security Council resolution condemning settlements in the occupied territories. He told channel two that remarks from Prime Minister benjamin deflect attention from the problem and added they played well to the Prime Ministers Political Base and the Republican Party and washington, but dont match the facts. Telecoma new ceo, the theator said he replaces previous ceo, who has resigned. It came as a result of the companys transition from a stabilizing phase two growth and expansion. He has been a board member at the National TelecomRegulatory Authority and was ceo of Global Telecom holding. Rollsroyce enjoyed its secondbest sales record last year, delivering 4011 cars in 2016 thanks to record demand in the u. S. , the u. K. , germany, and asia. Japan performed the best with sales rising 51 . China saw a 23 rise. Says middle eastern demand for luxury goods has been dampened by uncertainty. A little of april back in the middle east. Manyiddle east was due to circumstances, oil price, Economic Development in that area, also political unrest or to a certain extent, but oil was not beneficial to the business, but the rest of the world was fantastic for us. Yousef lets talk about that the implications for this part of the world off the back of donald trump. Of equities for Franklin Templeton investment, great to have you back. In terms of general sentiment to donaldlook trumps cabinet, what are the implications for this part of the world . First of all, it remains difficult to discern whether or not Trumps Campaign rhetoric will translate to policy action. U. S. Record highs in indices are based on the expectation that he will deliver on his domestic agenda, loser fiscal policy, deregulation, and job creation. At the same time, emerging markets remain fearful of his trade protectionism, and you have seen sharp selloffs and emergingmarket currencies. Whilst we believe risks are significant, we also think it could be a bumpy ride for Global Financial markets. The region looks attractive in that context. In reality, there are only two transmission in a can is some this region. Yousef one is a stronger dollar, and that would translate into some of your views. These are the one day moves in the ejection stock market. It ejection stocks for 2017 are one of your top picks. What is the story around egypt and 2017. , removey now unlocked the biggest hurdle to putting money back to work in the market . Absolutely. We remain constructive on egypt because of the economic trajectory and because the currency is undervalued. Devaluationited which is a precondition for the loan from the imf is addressing a serious imbalance in the economy. Egypt has one of the most attractive growth profiles in the region as the result of years of underinvestment and an everexpanding population, so we believe this is an area where we will see inflows and foreign investment. A fallas experienced from grace because it has been plagued by social unrest, dollar shortages, and currency issues. We think if you look at the devaluation in 2003, in the years following that, we saw five golden years of economic year, 5. 5 percent per and we dont see any reason why it should not achieve those growth rates Going Forward. Shery i want to zoom out. You are talking about egypt, but for an investor considering going into the middle Eastern Markets, when it comes to the valuation of the markets there, take a look at my bloomberg. You can see the msci in index and its valuation standing with a pe of 15 times earnings. The dividend yield stands at 2. 5 . Difficult to give a blanket statement for the region as a whole, but given what investors may be considering on this front, where do you think the middle Eastern Market stands in relation to the benchmark . Look, i think this is a year investors will be discerning and highly selective about where they invest in emerging markets. We believe it will be a year of differentiation and diversions, and as a result, stronger and economies get stronger, and weaker economies may show their from ability so from a valuation perspective, the middle east is trading in line with global emerging markets, offers a higher dividend yield of 4 to protect some of the downside and potential volatility, so what we are advocating is not a onesizefitsall approach, but a highly selective approach, even when it comes to investment within the region. In the emergingmarket con text, some of the low debt levels, vast reserves, and continued his reforms serve to differentiate. Shery do stay with the spirit we want to continue that conversation. We will continue to talk about middle Eastern Countries and where to invest. This is bloomberg. Saudi arabia said to have recruited Price Waterhouse coopers to help it canceled 20 billion of projects. Our economy reporter joins us now for the latest on the kingdoms of tightening. What projects are likely to be cut here . Thee are expecting government to look at criteria for which projects they will cut. The first is whether the project has Strategic Interests essential for saudi arabias economy, the second thing is probably how far along the projects are in terms of execution, and the third thing is what return they are expected to generate once completed. As one advisor said, it will be eigh, a metrow an economiccca, or city and the south of the country that generates profits from day one versus something that may work or may not. Ofsef this has been part this ongoing process of reforms, revisiting the contracts, the spending. Why are they choosing now to move ahead with what looks like a major significant step forward . It is something they have been working on all along. Last year, they did a project Management Office that was tasked with carrying out the projects. This year, they are looking at making sure that they carry out the projects that they have to. Whatever they can do away with because the main thing for them is to try to control the spending, which ran amok for many years. Overranar, saudi arabia its budget by 20 . In 2016, they tried hard to make sure they stayed within what they put ahead first. Yousef great to have you on the show for the additional inside and lets widen out this conversation. The saudi arabia story, i put up a chart that gives us context. You can pull it up on your bloomberg. We are looking at the correlation between saudi stocks and global stocks, and for the First Time Since 2008, that positive correlation has been broken, emphasizing the uniqueness of the saudi story. This is not a global story. This is a domestic agenda story. Some important transitions in these economies, and saudi is amongst those. Saudi has made some important strides over the last 12 months, and this restrengthens its investment appeal. We are more reassured than ever before about Fiscal Consolidation and cutting expenditure, and that has more bearing than what is happening at the global level. Shery and also, we are seeing this conversation on msci inclusion for saudi arabia. How significant is this move for the country . Be seismicis would for the entire region. Today, representation in the msc inemerging markets msci emerging markets stands at 2 , so with the inclusion of saudi arabia, that may add 3 to its current weight, and that 5 , it becomes difficult for Global Investors to ignore the region, so it brings a region from the periphery right into the mainstream, and the additional thing to think about is the potential ipo of saudi aramco. That might add another 3 to the index and bring its weight closer to 8 , much closer to its of gdp contribution, so this is an important catalyst. Is a lot ofe excitement around the saudi story, but also big risks, especially when cutting its oil output. Last 24 hours, Bloomberg Intelligence is saying that kind of output could reduce gdp growth by two percentage points, and you are also looking at the additional pressure from the budget consolidation we are talking about. How will this look in terms of Economic Growth for saudi arabia . That is a great question. Saudi is struggling between what we see as shortterm headwinds on corporate earnings compared with longerterm structural upgrades to its growth, so in the short term, we do believe there is going to be some earnings downgrades as Company Profitability gets dented by the governments movements, subsidies an additional 1 let these. Additional levies. Yousef they are now looking deeper into the cycle changes, currently discussed in terms of stocks as part of that msci emerging markets inclusion. Always great having you on Bloomberg Markets middle east. Here is what is coming up, the indonesian connection. We will get you that story. This is bloomberg. Rishaad it is 12 30 p. M. In hong kong. The dollar slumping for a second day. Bloomberg dollar spot index slumping for the fourth time in five days, yen and gold edge higher. Anxiety over Political Developments creeping into the market, increased volatility with oil gaining on tuesday after its biggest fall in five weeks. China Producer Price index rose at the fastest rate in five years, up 5. 5 from a year ago, four months after the end of a multiyear deflation. Now poised to become a Global Inflationary force. Chinese Consumer Prices jumping 2. 1 in december, just below economists thinking. U. S. Prosecutors planning to charge high level volkswagen figures over the emissions scandal following the arrest of an american manager. The debbies compliance charged with conspiracy to defraud the united states. Compliance executive is charged with conspiracy to defraud the united states. A filing from lawyers for tata sons says that cyrus mistry reduce the number of directors and accused him of never raising concerns about problems with the groups operation and of things slow to react to losses. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Shery thank you. Founde