Silence. Oller recs his breaks his silence. He says his country is open to dialogue. The imf says saudi arabias economy will see close to zero growth this year due to falling oil revenues. For investors, a big week of earnings. We will have all of the announcements. Welcome to Bloomberg Markets middle east. A big start to the week. It is sunday, start of the trading week in the middle east. It comes to quote oil a come down to crude oil. The Ministerial Committee will be gathering heal and looking at a couple of key things which i will highlight for you. One is what is happening with commitments and compliance. We see the complaints data at 92 in june. Iraq is at 29 . The initial responses we are getting from key participants as they are content with the level the broadert of agreement. What i want to point out here is that there are other key issues, including the fact that they are not in a position to make decisions, they will be making recommendations as they look through data. Ultimately, what is going to happen with the roll forward in bringing global inventories down. Looks like a crisp morning there. Does take a look at the u. S. Markets, closing lower on friday geared investors are breaking for the fed decision and tech earnings this week. The health of the economy is still being debated. Some analysts call it a goldilocks situation. Since decembere 1993, down 2. 3 to 9. 36. Yousef. Yousef we are just under two hours away from the opening of the markets in the emirates. A fascinating week. We sell rebound in key financial spirit a lot of lenders came out met earnings that expectations. Key stocks gaining over 5 . Ultimately, it was not much of a change for the broader s p, gcc meeting gcc index. Relatively unchanged all week. Qatar still showing some signs of strength and signs of life. Stocks are made the worst performers this year. Lets check in on the first word headlines. Qatars amir has broken his silence over the gulf dispute, saying they are open to dialogue with the saudi led alliance if their sovereignty is respected. Qatars naders they are saying that qatars neighbors have violated International Law by trying to isolate them. Dialogue on orto all of the pending issues, not only for the benefit of the peoples and governments but to spare our region of the pointless efforts to our region. After address came hours amending it was said that the amending of counterterrorism laws was a positive thing. The imf says saudi arabias economy will stall this year with 20 with the gross close to zero. 0. 4 to 0. 1 , citing opec Production Cuts. Welcomes saudi arabias reforms, saying that would help narrow the fiscal deficit in coming years. Is first word news. This is bloomberg. Lets get more on the latest development out of doha this is the first time we are hearing from the qatari amir since the saudi led sanctions. Somewhat open response. How are you reading what he said . Im reading this is part of an effort to start tuning start toning down some of the sharp rhetoric exchanged over the last month or so, especially in the media of both groups. Here is a saudi let block and qatar in the other. We had the news late last week that there is a roadmap being worked out between the u. S. And u. K. , theyre going to propose to cap cap. Two qatar. There was the change to antiterrorism laws and now they are saying they are willing to talk. It seems they agree on the broad framework of what needs to be done, but it is the implementation that they are arguing over. Hes going to meet with some of the gulf leaders. Theyve been focal about their vocal about their reservations. What are we expecting from the conversation . I think it is going to be very different meetings in qatar and saudi arabia. Not laid the role of a neutral party. He is completely down on the side of qatar. Theyre sending troops there as part of a longstanding agreement and in saudi arabia, the conversation is probably going to go around, making sure the relationship does not worsen but also to see what role turkey can play to get qatar to shift its position may be to find a solution. Thank you very much for that analysis. The chiefg in economist for the oman investment fund. You just heard what the amir had to say. Is this the beginning of a positive do think this stand up will have a quicker resolution . Is this the all the branch that was needed . I have said when this started, it was unlikely to escalate. This has been proven quite right. Spats are periodic. There are always kind of these agreements around these countries. Stronger ties are much than any divergence they might occasionally half. A sure the same land, the same religion, the same language. And they are entrenched. They have entrenched interests that bind them together. One way or another, they have to find a way to solve these agreements. I remember our conversation very well, you are adamant that this would be resolved swiftly. I want to talk about the impact on asset allocation. Is this possibly a catalyst for renewed inflows into golf gu lf assets . Investors have not really been keen this year. Could we see a change across the board . Fabio i dont think there will be an Immediate Reaction by international investors. Investors look more at fundamentals than the political front. Oil price and so on. A positive development but i dont think it will be a trigger for an immediate restart of capital flows into the region. Yousef you are staying with us. We still have plenty to get through. A little bit of a preview of what is to come on the program. We will be talking with someone from the emirates abd. What they need to do to accelerate the Global Rebalancing that is taking so much time to get through. But next, not too hot, not too cold. Is the u. S. Stuck in a goldilocks situation . This is bloomberg. You are watching Bloomberg Markets middle east. You i am live in st. Petersburg. And i am in dubai. Marketswrote that the are like goldilocks, not too hot or too cold. The gap between indexes and a liking policy fundamentals. How long will the markets be stuck in this mode . In the sense it is not great, but at least is stable. Goldilocks visavis Central Banks, what we have discussed is the loosest tightening. Very gradual. Policies, visavis youre not going to give breakthrough but at least not anything bad like protectionism that can result in a trade war. Markets are comfortable that despite everything going on in washington, it is goldilocks for them. I keep on stressing it is a journey, not a destination. What does it look like . Describe the ultimate destination, because this is the journey for the last couple of years and it continues. Is the destination a scarier plus scarier place . The destination is a more uncertain place. The journey has been enjoyable and long. It is been comforting because we have had low volatility and rewarding because we have high returns. The problem is, in journey has to lead to a destination and a destination has to be validated by fundamentals. Right now, the fundamentals are uncertain in terms of Economic Growth and ultimately corporate profitability, and also in terms of policies. Enjoy the journey, but remember this destination is uncertain as of now. The metaphors. Ago, thenths conversation we would have been having was the divergence between hard and soft data, the hard data had not caught up. The hard data would catch up. Now what is the conversation between the hard and soft data . Data has failed to lift up the hard data, and the concern is the soft data may come down. If it does, we would be unwinding another element of the postelection environment. Remember, we have already sitting already seen it yields come down. Weakenedr has significantly. We have seen lots of unwinding of the postelection phenomenon and the question is, is the soft data the last the next shoe to drop . Why do you think we have seen the majority of the reaction in the dollar . Weve not seen a lot of dramatic moves in the bond market, for example. What is your understanding of that . We have seen some of dramatic moves if you have been looking at the differential between the u. S. And germany. It has moved in a huge way and consistent with what weve seen on the currency as people have repriced their expectations of the relative growth and relative centralbank policies. We have seen significant portfolio flows into europe. There are changes going on that underpin that. Have not seen volatility because markets are confident Central Banks will continue to be willing and able to repress volatility as they have done for years. The Federal Reserve really led the market. The market has faded anything from the Federal Reserve through the end of the year. Theyve also faded potential for fiscal policy this year. Maybe next year. What is the most important policy variable at the moment that maybe the market is still maybe under estimating . I think the most important variable is that the market is looking at the fed through traditional eyes. That means there is only one policy objective, the stand it the standard mandate. Employment is tightening and inflation is somewhere between a yellow flashing light and a red. If you bring in a third factor, and i think that what is that is what the market is underestimating, future economic instability, this may be a tighter fit in with the markets believe right now. Yousef lets pick up on that conversation. What the Central Banks are doing. File be a fabio is to with us. , aterms of what the ecb said lovely piece written on the bloomberg wending out that from the Vantage Point of the ecb, the world looks like an increasingly dangerous place. Continues to exist. We saw the euro strengthened to the highest level since august of 2015. What was your key takeaway from what mario draghi said . That i would imagine mario draghi was referring to the litmus test that will come in the autumn on the reversal of andqe in the u. S. First, followed by the same kind of policy in europe. Aremmed was saying we goldilocks, at least in the u. S. , with steady growth. This growth has been spilling and some other parts of the world a little bit. A little bit in china and japan. It seems the fundamentals are slowly improving for the global economy, but the big elephant in the room is this massive monetary stimulus that has been injected in the economy for a decade now. Reverse this stimulus is anybodys guess, because we are in uncharted territory. Last week, Mario Draghis response to the question, are we there yet, is we are not there yet. He is out for the next couple of weeks. Last time next time we will hear from him is after the summer break. Are we going to hear a message about patients . Patience . Or something more meaningful . Fabio i dont think so. The ecb is an institution that is run collectively by the people in frankfurt and the government of the National Central bank. To form a consensus is bigtime. I have witnessed that. Hole, they speak about broader issues. They dont focus on the immediate policy challenges. I would imagine we wont hear much of anything new. Hold someinitely success of his policy. The recovering europe is becoming selfsustaining. Looking forward to the next three years, we see that with a victory of macron, france is trying to implement Structural Reforms which the ecb has been calling for a long time. There will be a new Franco German engine that could change governments up governments of the eu. This is the most important positive development we have seen in the past few months. Stay with us. Fabio will join us, he is the chief economist from the oman investment fund. Were going to talk more about the that between qatar and saudi led block. How is it hurting the regional economy . This is bloomberg. Yousef youre watching Bloomberg Markets middle east. Aroundick up the story some of the International Monetary fund over the last 48 hours. The have curtailed their Growth Outlook for saudi arabia for 2017. They are citing opec Production Cuts, which shows you how much is at stake in the deliberations here in st. Petersburg and what compliance is important. In terms of the economic pain saudi arabia is currently enduring, lets bring back fabio , the chief economist at the oman investment fund. The imf coming out and adjusting its overall outlook for the kingdom. Just the beginning perhaps of further pain as it tries to adjust to the structure of this economy that is still so dependent on crude oil . Fabio yes. This change in the growth forecast is not surprising. We have to remember one thing. World,ople ignore how real and nominal growth calculator. Producesa country that one Million Barrels of oil for 20 years and nothing else. This country would have zero real growth. What would really matter for this economy is nominal growth as the oil price fluctuates. It is this movement that will drive the economy. For saudi arabia, where the oil price is one of the main factors, clearly when oil prices are week from a historical point of view, the consequences or the economy are unavoidable. Thewe need to remember that same way as the oil price can go down, it can go back up quite fast. Therefore, we have seen that for the time begin time being, 50 per barrel has been a sort of threshold that has preserved the oil revenues for all the major exporters in the gcc and elsewhere. Butsituation is not easy can the and word for a few more years. Lets take a look at this chart, 7273. This is saudis gdp growth trend. You can see it slows as the crude price heads down. Economy is expected to grow. When do you think we will start to see a meaningful impact on the nonoil economy in saudi arabia, because that is their bigoted there big objective. Not related to oil, it will take years. It will not come next quarter or next year. We have to think that even the normal nonoil economy in the gcc depends on oil revenues. Oil revenues filter into the normal economy through Civil Servant wages, through investment in infrastructure. The two things are not completely unrelated. Actually they are related. The 2030s a matter of program and all of these reform something implement it fast enough . Implemented fast enough . Fabio reforms are never easy. It is true that the challenge is to create an economy based on sectors such as biotech, i. T. , agriculture and education. So a knowledgebased economy pull the really cool rest of the economy and make oil less crucial for the countries. However, this requires a reforming education. They need have skills to change the whole aspect. These days families want to be connected 24 7. Thats why at comcast were continuing to make our services more reliable than ever. Like technology that can update itself. An advanced fibernetwork infrustructure. New, more Reliable Equipment for your home. And a new culture built around customer service. It all adds up to our most Reliable Network ever. One that keeps you connected to what matters most. Watchingou are Bloomberg Markets middle east. I am in a gorgeous st. Petersburg this morning. And i am in a rather warm dubai. It is 8 30 here. You are watching Bloomberg Markets middle east. These are your first word headlines. House republicans and democrats have reached a tentative deal on sweeping sanctions legislation to punish russia for its election meddling and aggression toward its neighbors. It clears the way for a houseboat next week on a bill that would sharply limit President Trump ability to suspend or terminate sanctions. In addition to russia, the new legislation includes sanctions against north korea and iran. General election general electrics the parting ceo is blaming markets for drops. It was the biggest loser on the dow this year after secondquarter earnings disappointed. Four years results were also likely to fall short of expectations. In august down as ceo but will stay on as chairman antillean of the year. Chairman until the end of the year. The u. S. Is dropping charges against j. P. Morgan traders accused of hiding 6. 2 billion in trader more than five in trading more than five years ago. The government says they could not depend on the testimony of the men at the center of the case, who was center of the case. It forced jpmorgan to pay more than 1 billion to federal probes by the u. S. And u. K. Those were your first word headlines. This is bloomberg. , thegan and citigroup biggest arrangers in the middle east and africa expect the slow by the end of the year. Matthew, the first half of the year has seen record bond issuance. That is for the first six months. What has been driving met . Itthew the keeping driving is the governments are out trying to fill the budget deficits left by the collapse in all price. We have seen the qataris came , abu dhabi, and that trend will probably continue. We will see more of that happening and following that is once the sovereigns cannot come that kicks open the door for the corporates to come out and capitalize on the market opening the sovereigns have done for them. Yousef matthew, the other big story over the last 48 hours has been news around i do not around that they are considering a new reviewing. It is around some of the stakes they had in their foreign investments. Matthew exactly. They have announced a sale in europe, as you say, under the previous management of james hogan, they have bought a lot of minority stakes, a lot of european carriers, which was really to try and drive traffic through the abu dhabi have. Hub. Another impact, the airlines in the region are struggling. They have had to review this strategy. I think the interesting thing we will have to watch Going Forward is how many more sales might come out, so many more of these struggling airlines era tell you is another investment they italia is another feeling investment they have made. Be up forhings will grabs. Yousef Matthew Martin joining us they are coming with stories coming out of the region. This weighs heavy on the shoulders of many, what is going to happen at the meeting between nonopec and opec here in st. Petersburg. Ahead of the meeting, we spoke to one of the key people close to the global tr