Renewables is seen widening the appeal of its muchanticipated ipo. Yousef it is 8 00 a. M. Across the emirates. Welcome to Bloomberg Markets middle east. I am yousef gamal eldin in dubai. Our top story today, north korea reporting missile launches early this morning before the markets opened. Markets look at how reacted, we saw a spike in defense related stocks. Lets jump into my bloomberg. I have the industrial space right here. 6 . This little bit on a day where it is subdued and volumes are not quite there, defense stocks up him a 1. 5 . Have a look at some of these names, five within that space. That said, history tells us that when you have these spikes on the peninsula, you get a spike in stocks. And you get a drop subsequently. Japan ande story, south korea have issued a strong protest. We are looking at reactions from the u. S. , and most importantly china. Guests oned by our all this. What do we have here . It is just ratcheting up relieved attention. This,h, it is kind of something we have not seen in a long time. The missiles are fired routinely. The difference here is a comes npc. Goingas its i. So these things add with the latest mental launches some additional tension. Looking at my bloomberg at how and the past South KoreansConsumer Confidence has fared when news from a north Korean Missile launch came through. This is fantastic work. Look at the spike around 2013. Not much of a dent in south korean Consumer Confidence. You pointed out some of the key variables that are different this time around. What could a misstep look like and how quickly could escalate . What everyone is looking for now is whether the north will fire an icbm. Had is what kim jongun threatened to do, and trump said it wont happen. If that happens, that would ramp things up and take things to a new level because they would be testing for the first time a weapon that could deliver a Nuclear Warhead to the continental United States, so that would present an immediate challenge for trump. We saw three missiles land in japans youusive economic zone, and had Prime Minister shinzo abe and the japanese government saying this is a new level of threat as well and praised their alert level. Lets expand on the china element to the story. The norths main ally and protector. Tom mackenzie joins us from aging. How much pressure is china into rain in pyongyang here . Mounting pressure, i think, but a dilemma for beijings leaders. The administration in washington, trump has raised the ante on this and the pressure for china to act. China will not be happy about what is going on in north korea. It does not want things to overshadow its congress in beijing at the moment. It is taking steps. Coals banned the import of from north korea, back United Nations sanctions on north korea after previous missile tests. It does provide 70 of north koreas trade and a lot of food and energy aid as well, so there is more they could do in beijing, but there are some risks they need to work out here thehey dont want to see regime and north korea collapse, and they certainly dont want to see a u. S. Backed out like takeover in north korea should the regime collapse, so it is a difficult allen singh for leaders here in beijing. David im just wondering, you are covering the npc, we typically see chinese leaders want to project a perception of strength. We have a lot of reported meetings throughout the next couple of days, is there a chance this comes up and they make it public . I would be surprised if it ats not, up, particular a the Foreign Ministers press conference on wednesday. It is short be of their a long with how china deals with the trump administration. Not,er they like it or this is a topic that will be discussed, and they want to put forward this image of strength and leadership in the region, but this is an issue that divides the communist party and the leadership here. Would pushhose who for continued support for their ally, once described as being lips and teeth, but some suggest the tensions are getting too high. Is causing all sorts of angst when china is facing other big geopolitical and mustard challenges. Yousef we will leave it there for the moment. , lets pull up some key Asset Classes we are watching as these key themes are unfolding. Youre looking at gold slightly to the upside,. 6 , and gaining momentum. The yen. Pressure on those u. S. 10 year yield slipping after gains of five days, and also dipped below the. 0 Day Moving Average for wti lets cross over and look at natural gas. That one on the move as well. This is an extension of gains, but for all you hims three times higher in the 100 Day Moving Average for the time of the day. Onch 1 report from citigroup u. S. Electricity demand important as well. Lets talk more about how this impacts markets. You talked about the demand we are seeing for risk assets. Monday, i talked about these defense related stocks and south korea. We are joined by tony nash at complete intelligence live out of singapore. Thank you for joining us. Your general thoughts here on what the north has been doing, because we are used to this anyway, im just wondering in your view if there is anything different from what we have seen over the past several months . The other element i have not adard discussed is the tha discussion, the missile and fermentation in south korea, so that is a moving part that china and north korea are not happy with that related to that discussion. China is trying to push south korea back from doing that. If north korea keeps shooting these things off then it for it andthe need makes chinas discussions more difficult. Bringing china in into this conversation, your general thoughts on the npc, the growth target, six. 5 , not very exciting. A lot of people dont believe the number anyway. Your key takeaway, if any. Is ine, i think the npc Risk Management mode. They are focused on debt to equity swaps and taking that down, the leverage in the chinese economy, so our view at complete intelligence, growth at about 11 , but and u. S. Dollar terms, 4. 1 , with an assumption of a 7. 1 Exchange Rate with the u. S. Dollar, so we see more devaluation coming around. We think they have been holding off for the npc, but once the npc is passed, we will see the central bank resume a gradual devaluation of renminbi. Are the systemic risks we have talked about on this program so many times over the past few weeks really under control . Of course they are not. So widespread and so large, and the first step of getting a grip on systemic risks is information, and xi jinping, one of the first things he did when he came in, and dispatch people from the central audit hero to the provinces to better understand what was going on, so that picture has come back and they are seeing things more clearly, but we are not convinced they have the right data even to make a decision, so they are steering the boat as much as they can. I dont think they are managing the economy poorly. I think it is a question of the data and tools they have to management. We see 2017 as a relatively fast growth year, up on 2016, but we will see things slow dramatically in 2018, and we are expecting a recession in renminbi terms in 2019 in china. Yousef hold that thought. We will consider continue our conversation. Lets check first word headlines. So may kamaruddin. Sophie kamaruddin. Claims came via Breitbart News that the Obama Administration tapped trump tower during the election. James klapper denies any wiretap was ordered. Libya slipping after halted exports from two of its biggest terminals and reduce production after clashes with rebel groups. Libyas National Oil Corporation says shipments have been suspended until security improves. The libyan army has been carrying out airstrikes, attempting to regain control from rebels. The British Government is being warned that it risks inc. Reduce the the worst of all worlds if postbrexittailor immigration rules for specific industries. A sector by sector approach under consideration by Prime Minister theresa may not reduce immigration, but would push up costs. Reason may want to start brexit talks by the end of this month. French president ial candidate fi llon has rejected calls to stand down. The conservative is accused of using public money to a his wife and children for caring out fictitious jobs. He denies the accusations, but his Campaign Director and and rightwing politicians have abandoned him. We are focusing on the French Elections with some exclusive interviews and paris later today. At 7 30 a. M. London time, the ron joinsadvisor to mac us. Ons we speak to fill Economic Advisor come at 1 00 this afternoon in dubai. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Sophie kamaruddin. David good one. Coming up on the show, we talk the markets, what is driving them. Ratef a case for a fed hike this month and its possible implications for this part of the world. This is bloomberg. David it is 1 15 in the afternoon tokyo. The last few hours a trade, a rainy afternoon. Effect if you will across the equities. Yousef you are watching Bloomberg Markets middle east live on television and radio. Lets get you kicked started in terms of what to expect for middle east trading. Do, two hours away from the opening, lets show you some markets across the region. An interesting benchmark there, pretty much unchanged. Index, downward pressure, the biggest loser in the middle east, the lowest level in two months. Tech down 2 , skepticism about the recovery. Weakness and financials. Also weakness inside arabia when it comes to financials. We did see some bright spot in some of the banks. Down. Dawul upside performance from egypt, extending momentum, up 1. 5 . Lets talk more about the fed. Janet yellen left little doubt that the Federal Reserve will raise rates this month. Guest, tonyback our nash at complete intelligence. His the fed moving too fast. Is the u. S. Economy Strong Enough to withstand another move in fed rates this month . It is delicate. It is not too early, and there has been a lot of discussion over the last 69 months that it might be too late, but it is probably the right time. I dont know if we will hit the four hikes that was stated in one of the meetings recently, but whether it is this meeting or next meeting, i think it is probable, and i think the economy will absorb it in stride and i dont think it will be anything people are surprised by. This puts the Interest Rate diversions in focus again between europe and between the United States. You can see that in the spread ds andn the twoyear bun treasury yields. This makes life for the ecb with this decision this week . Sure it does. The diversions is an increasing issue. With asiais an issue with sovereign debt and corporate debt nominated in u. S. Dollars, and that diversions weighs heavily on the minds of a number of policymakers. Tony, the jurys still out if we will see four. Whether the u. S. Economy is healthy enough for four 25 basis point hikes. Due to asiaat then as far as outflows are concerned . To see ak you start tightening of liquidity and asia and you start to see a lot of considerations from Central Banks about what their policy really is, and especially if you look at corporate and even sovereign debt and parts of Southeast Asia and china in the corporate sector, u. S. Dollar denominated debt is a concern, so you will see people taking tightening up to make those payments, but it will force a recalibration for risks and for currency considerations with of countries and with those governments, so you would see a slow down. You would also see portfolio flows move to the u. S. As well and it would cause real concern for equity markets here in asia. David lets bring donald trump into the conversation. s try to ask cap extrapolate the path of the dollar for the next 48 years. If you look at data going back to the 1980s, we have seen a structural weakening and the u. S. Dollar. If donald manages to shrink the current account deficit or get a sir place, could we be looking structural Weakness Starts to reverse itself . Quite possible. I dont think he will see a trade surplus. We run a number of scenarios on this. We think you will see a tightening of the trade deficit, but you will not see a surplus. The real consideration is the fiscal and tax relief, fiscal spending and tax relief, so if the trillion dollar infrastructure plan comes through, we expect a 1. 6 trillion dollar impact 201. 8 trillion impact, and that will strengthen the dollar no doubt. There will be dealt up against that, but we do think the fiscal impact will outweigh the debt. We dont think we will see dramatic dollar strengthening, but will see incremental dollar strengthening over the next les ts say 45 years. Theef the other thing market is watching is how the elections in europe will be unfolding. France and focus. How worried are you that this is going to go along the same lines we have seen in europe with the more populist themes . Not worried either way. Either way the vote goes, it is fromill of the people, so a planning perspective, we always have to be ready for these unexpected changes. Lets say a say, Marine Le Pen victory comes around and say that is totally presented, but it will discontinuity and the policy picture in europe. The question is how quickly that accelerates. Does she have the standing in the National Legislature to get some of her agenda through . I dont necessarily think she will. We are not planning on that. We think it will be a statement and depending on how the next 915 months goes, we will see if she gets more of a plurality of that legislature. It is only after that time that we should expect to manage changes. Leave itny, we have to there. We appreciate your time. Thank you for coming on the program. See you on twitter. Tony nash at complete intelligence. , can theiring aramco ambitions widened the appeal of its muchanticipated ipo. More on the oil giants renewable push, next. This is bloomberg. David you are watching Bloomberg Markets middle east. Yousef i am yousef gamal eldin in dubai. Saudi aramco may be the Worlds Largest oil company, but its green ambitions might lower investors to its ipo. 5 billion in Renewable Energy and saudi arabias efforts to reduce its reliance on oil. Give us some context about how much money they are really willing to put into green investment. Good morning. Thats right. Saudi aramco is looking to invest in new technologies across the board, so they have investc funds that will in new technologies beyond their regular oil and gas business, which is mainly saudi arabiabased. Allocating, they are 5 billion for projects outside the kingdom. More broadly, the country itself is looking for a Renewable EnergyInvestment Plan of 30 billion to 50 billion and bring on 10 gigawatts of solar and wind power by 2023. That would be a fifth of what they have now, so a big increase in Power Capacity there to meet demand. David lets talk about timing. It makes sense and looks good on paper, so why didnt they do it earlier . It makes sense now as prices have come down. The cost of solar panels has come down. There is huge capacity and the market, almost overcapacity, and they have gotten better about making them more efficient. Saudi arabia had an earlier plan with the broader scope, wanting to bring 40 gigawatts of solar power on by 202040 by 2040. That never caught traction. Now we have the new king and new deputy crown prince pushing this theon 2030 three model saudi economy, so Renewable Energy will be a big part of that. They are putting into place some of those regulatory and purchasing entities that they need to get the Solar Program off the ground, so we are expecting that will go ahead now. Take awayis will not from opecs plans and saudi arabias Oil Production in any way is it . Plan is a plan to revitalize and revamp the economy and make it less reliant on oil for income, so they will create other industries. Those industries would use a lot of electricity and power, and now saudi arabia generates a lot all thingsom oil, taking away from its export potential. Yousef i have to jump in here. Lindsey moore coming on the program. This is bloomberg. I am sophie kamaruddin. These of the first word headlines. Japan have and called urgent security meetings after confirming that north korea launched several missiles monday morning. Japans government says four projectiles were fired and they flew around 1000 kilometers into the sea. Prime minister shinzo abe says he will launch lodge a firm protest and south korea called it a serious provocation. Development and Reform Commission says cutting excess capacity is a top priority. The policymaking bodies leaders told a briefing in beijing that private enterprise now creates 80 of jobs in chinas economy. Speaking on the sidelines of the cutsthey said capacity would improve the environment. The dutch Prime Minister has warned of economic chaos if the Freedom Party wins next weeks elections. Opinion polls say the liberals are virtually tied with the and party. The vote on march 15 is europes first major test sense britain opted to leave the eu. This is an opportunity to stop the trend after brexit and the u. S. Elections and before the french and german electi