On inflation data and the start of the Second Quarter earnings viewe. Viewed that season tracy we had quite a week in markets. We saw this dramatic shift in the bond market starting on thursday that escalated into equities as the day went on. Thats take a look at what actually went down at the close on friday. Take a look at the bonds. You can see the u. S. 10 year yield up to. 02 basis points. Not as bad as expected. This was off the back of the u. S. Jobs number four june, that came in much better than 222,000 in gain of june versus the 178,000 we had expected good german 10year yields also selling off good. Emerging markets bonds also selling off. Not nearly as to medicus thursday. Take a look at what happened in the equity market. U. S. Jobs number feeding into the s p 500, up almost two thirds of a percent on friday. The nasdaq 100 is interesting. A closed out 1 . Remember, that was the big loser at the beginning of the week. If you look at a chart of the nasdaq 100 over the past five days or so, it looks like a roller coaster. I find that amusing, but im easily amused. Meanwhile, the emerging markets stocks down a little bit, but not nearly as bad as some people might have thought on thursday feud yousef another important date for crude. This is off the back of concern there is so much oil out there. We got data out of the United States. It showed an interesting picture viewed you have expansion and drilling rates that offset the larger than expected drop in stockpiles. Bear in mind we had interesting moves in the Precious Metals space. Gold and silver taking a beating. This goes back to what you are saying a moment ago, having taken a can of raid and sprayed it throughout the gold Fund Community could gold bond community. There could be more downsides to compute a quick note on what is happening in this part of the world. You have to bear in mind that on the first front, you saw a little bit of narrowing when it comes to the trend. Overa widening, a spread treasuries. Also in terms of the wider market pulse. We did see bonds at their lowest level since issuance. Other classes have been resilient. If you collect the mmr go function, you get an idea of how key stocks have performed in the last five days. This was the week where we had the deadline from the saudi led block as to the compliance from qatar the did not come through. Here are some of the highlights. Some of the bigger deals being announced. Qatar stocks rebounding selectively. Qatar gas up, qatar navigation as well. The other story is the selloff in the emerging markets or off of it off the back of emerging markets. More popular defensive space, look at that. Here is a check of the first word headlines. Thank you. President trump and president putin held the first meeting in hamburg. Trump raised the issue of russian interference u. S. Elections several times. Putin denied meddling in the election, but both sides emerged with different accounts of trumps response. Moscow said trump accepted the denial but washington said trump merely agreed that the two sides should move on from the issue. Our position is known. There is no ground for saying russia interfered in the u. S. Election. Turkish president brca 1 expressed backing off of qatar. He said at the g20 meeting that accusations aimed at qatar by neighbors was unfair. He also said that they were inappropriate. There are allegations against qatar, we believe those are unfair and sanctions are not right. Just like all countries in the ld, the serenity sovereignty of qatar must be respected. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Thank you so much. Lets get more on our top story, the g20. Joining us is john paul the cap. Always lovely to see you. We are getting the headlines from the g20, but it seems like two numbers together. 19 versus one. This is the idea that on any number of trade policies or policies in general, it seems like there is quite a split between the u. S. And the rest of the g20 members. Think that is can be the case for the next while. We are used to it era of American Leadership in Economic Affairs and global trade. That is not the case under a trump presidency. The bottom line is that the world is going to need to get used to the fact that we are not going to have American Leadership on big trade deals. Not necessarily going to stop agreements from happening. He saw the eu and japan announce a big trade deal theyve been working on for the last four years. They will take place, but probably not as global in scope as they were previously. Yousef this was one of the most anticipated and possibly turbulent meeting of Global Leaders in years. What was your take away from the deliberations . Jeanpaul there wasnt any headlines in terms of donald trump and president putins leading meeting. I think that will be key for the middle east in general but also the gcc in particular in terms of everything going on in the region. Despite Donald Trumps insistence he will not lead global trade agreement, we still need American Leadership in the region in terms of solving a lot of the regional political crises that flareup from time to time. It is important we see russia and the u. S. Agreed to certain base parameters. Tracy just in terms of u. S. Leadership in the region. Obviously we saw news around syria, but in terms of the business relationships, one of the things that is interesting here is we have seen as the u. S. Exits from parts of the region, andinstance, iraq, european Chinese Companies come in. Jeanpaul last week was a key week for iran in particular. There was an announcement they would be investing into petrochemical plants and the natural gas field. Those announcements investment the high profile and send a signal to other european corporate that despite irans elevated Political Risk profile and the persistent threat that trump can tighten sanctions on iran, europe will go its own way. That might throw some interesting dynamics visavis the rest of the gcc. In terms of where we are, we have put up a chart on the bloomberg. Your emerging markets index. That rally point, we talked about it several times before. The key point is the decline of global trade leading indicator. Some headwinds for metadata. Lets put the trade story aside for a second and go to geopolitics. Leaders aren some pointing to. They have been able to secure deals when it comes to syria, for example. Those are expected to come into effect. How will that change the course of the syrian conflict . What are the wider implications for the region . Jeanpaul the optimist in me would hope that would be quite positive for syria, but this is a crisis that has been going on 2011. Geopolitics, it is just the cost of doing business in the middle east, and not just syria, it is libya, iran and qatar now, as well. I think investors with exposure to the middle east are custom to are accustomed to geoPolitical Risk. We just hope for the best. Tracy weve seen ceasefire agreements and syria before, one thing that makes this agreement slightly more interesting is the idea of a soft partition of creatingd maybe by deescalation zones, you see different geopolitical powers a sickly lay claim basically lay claim to the region. Is that something investors should be watching . Jeanpaul a partition of syria would probably at this stage seem to be the best Case Scenario in terms of putting an end to the conflicts. If you were to look out longerterm, i would try to draw comparisons with a place like bosnia, lets say, were often thats where after the conflict they have a powersharing agreement with different entities. It is a disaster from a policy taking perspective, you cannot get anything done, but im a little and security perspective, it reduced risks. It was said that isis is going to retake most of syria and theres nothing u. S. Can do about it. We will continue our conversation with jeanpaul. Ceo of france caroline tells us that he wants tighter regulation on middle eastern carriers. We will to you what is new. Tracy but next, saudi arabias privatization. Its plans for the health care industry. This is bloomberg. I am tracy alloway. Yousef lets widen the conversation. Saudi arabias king is said to approve health care privatization. It will change hospitals into corporations. Jeanpaul is the weather is on a set. In terms of economic growth, we had data recently, this is a reminder for clients, we put this on a chart. It has been a series of growth years for the kingdom, and then the downside, the contraction on the quarter, down. 5 of 1 . What is your health check in terms of where saudi arabia is with its reforms . The impact on sentiment coming from qatar, the prospect of weaker liquidity ahead of the saudi aramco put it in context for us. Jeanpaul it is not great. I think it is fair to say the economy is in recession. It is a very simple economic model when you think about it. It is Oil Production and Government Spending among which is financed by oil revenues that drives activity in the nonoil sector. When you look to the second half of the year, the only reason i am more optimistic on h2 that i was on h one is because we saw the reversal in cuts to the Civil Servant allowances and publicsector salaries. That is very positive for the short form shortterm economically, but you mentioned the reform program. That tells me theyre going nowhere with the form program. He can talk about privatizing health care, you can even talk about the aramco ipo which gets a lot of headlines internationally. None of that means anything. The most fundamental reform needs to happen over the next 510 years is this kind of less reliance on publicsector workers and Public Sector jobs for the National Spirit that reversal in reform goes the other way. Tracy how much does it help that you have qatar being sort of isolated from the rest of the gcc region . But potentially there is more of a pool of Foreign Direct Investment that could go into a place like saudi arabia at a time when they say they are attempting to privatize whats of infrastructure and other assets. Jeanpaul ultimately, i dont think the qatar crisis is good for anyone in the gcc. These are economies which are running doubledigit account deficits and relying on foreign capital the finance domestic mans. The mystic demands. Those kind of arguments one of held when oil was more expensive. When oil is 50 a barrel, these economies will have to work hard to present a positive image to the rest of the world. And all the guitar crisis does that for anyone at this stage. We havent heard anything yet about additional measures. Next withing to come qatar . Jeanpaul ultimately, i dont know. For what i understand, the initial 13 demands have been withdrawn. For my point of view, it is quite difficult to see what you might consider an exit strategy from this crisis, because neither side right now necessarily wants to publicly back down and publicly lose face. How they are going to negotiate out of this is going to be quite difficult. It is going to be even more difficult tying in what we just talked about in the previous segment, with a lack of u. S. Leadership in the region. Weve had a very different views coming out of the u. S. In terms of what is coming from donald trump the secretary of state and state department. That does not revive me with confidence the crisis can be resolved through the u. S. Tracy in terms of the actual Market Impact of the crisis on qatar, we have seen it in the stoxx, but also the bonds. Yield, you at the see it search when the whole thing started kicking off and then we got a reprieve and now it is back up again. That is a painful chart if you country relying on external financing to some degree or at least trying to be more reliant on it, and a country that also has a peg to the u. S. Dollar. Jeanpaul it is a big move, but in the broader context, this is an economy that has seen its land, air and sea links with its neighbors shut off. That move is actually reasonably muted in the broader context. If this were to happen to a moreer economy that had nonoil goods traits with the rest of the world, you would probably be seeing moves that would be accentuated. I would say a goes to show, the qatari economy is relatively insulated. 50 is hydrocarbons. From what i understand, the stream pumping natural gas to the uae is still functioning. The rest of the nonoil economy is being driven by the construction sector, Government Spending in preparation for the world cup. That is probably not going to stop, either. This is one of those situations where kind of the inflated nature of the qatari economy helps mitigate the crisis. Tracy you are staying with us because next were going to talk about egypt and the egyptian. Finally a little bit of a breakout. Exciting stuff. This is bloomberg. We are live from dubai. Is still withaul us as we continue to speak about egypt. The second move upward this year to a record high 18. 75. Also joining us is bloombergs economy and government editor. We were just talking during the break about how the bank managed to surprise the market. Put it all in perspective. Nobody was expecting this, expecting a minority an increase, and the rationale was if you want to target inflation in egypt, raising Interest Rates doesnt really work because the transition mechanism is not perfect. But the central bank as we saw raised 200 business points. They working in their statement to balance the message, this is temporary they told us in the statement, probably this is the end of the tightening cycle. It will be down, not up. Tracy they have a history of doing this, reversing after. If that is the case, does that mean this is not about inflation, it is maybe more about managing inflows as you ease capital control . Managing inflows, you could argue they dont really need that at the moment because inflows have been really strong since the pounds flotation in december, weve seen between seven and 8 billion. Week, it has seen to price increases in domestic fuel and electricity by substantial margins. This decision is to mitigate the impact of those two decisions. Yousef were talking about inflation and Interest Rates, we put this on our chart. You can pull it up on your bloomberg. This is again to show, as you can see, in the last few months, the egyptian depositories have gone up. The bottom, that is the cpi, the slightly rate that is moderated but far too high by historical standards. If the transition mechanism is not working, and we talked about this before, what kind of options does this even have . Alaa we have an economist onset here. [laughter] alaa i asked the imf about this in april. Saysd them, textbook either target with Interest Rates or delay subsidies, subsidy cuts. They said, we prefer Interest Rates. As we saw, the cuts went ahead. It was a surprise and the upside for many people, because the increases were much larger than was expected. On inflation, before the subsidy move, you talk to people in the tell you, month on month inflation is stable. Month on month we have seen the trend stabilizing go down. The 30 annual rate is to an extent due to base effects that would moderate toward the end of the year, and the forecast is that by the end of the year, it will still be in the high 20s, but will go down in 2018. Again, that is the reason why the market is so surprised. A lot of people dont really get , again, how do you if the transition mechanism is perfect, why are we raising Interest Rates 400 basis points . Tracy as you suggested, lets bring in our economist. What is your read on the Interest Rate hike . Is it about inflation or Something Else . Are we nearing the end of the hiking cycle . Jeanpaul it has nothing to do with shortterm inflation. I think you hinted at a couple of minutes ago. Egypt is gradually easing capital controls and emerging from a balance of amos crisis. As it does that, it needs to ensure to continue attract foreign capital. They have been successful in the tracking in the key bill market, but is not just about inflows. They look at egypt for the next half of 2017 into 2018, you are looking at what you would call trapped capital, the amount of capital inside the egyptian economy over the past few years that because of capital controls, wasnt able to leave the country. As the central bank, if they are going to hold to their statement and the imf program of gradually easing capital controls, we have no idea how large those outflows can possibly be. In my view, this 200 basis point rate hike was printed and temporary. Yousef this is where the currency is at. It did not watch much move much. Do you see further strength in the pound . I dont know what other analysts are calling, i am forecasting a target of 17, not far off to where we are now. Yousef were at 17. 1. Tonpaul it is difficult forecast the egyptian pound right now, in my view it is not being driven by fundamental practice. This is a tightly managed currency. Theres nothing wrong theoretically with having a tightly managed currency. Many countries around the world do. The problem is that if you keep telling the market it is a freely floating currency. If you see 9 billion of yousef we have to leave it there. Thank you. Plenty more to come. This is bloomberg. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. 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