Arkets middle east. What a week to look for two, we have the jobs report later in the week and earnings for some of the heavyweights around the world. Let me recap friday. Is there ever a friday that is not of info. . Not even full . Things tow important point out in the s p. In terms of tobacco stocks, they got absolutely smokes. This is on reports that the government is seeking to cut nicotine levels to nonaddictive levels. That had an impact. Also broadly, the week did see disappointing earnings. The stoxx 600 climbed 1. 1 in europe, the lowest in 14 weeks. Loreal was one of the companies that drag it down. The eurodollar had a tremendous week. And the u. S. 10 year paper relatively unchanged. On a show you some of the other key Asset Classes that will be in focus. Brent crude is one of those. Not bad if you are able in this market. The best week of the year. A lot of paltry increase. At golde a look futures. 1275 per ounce. Out the here pointing gold is breaking the sixyear downward trend line. The dollarrent trade up dollarrand traders appeared we are just under two hours away from the opening of the markets in dubai. Let me show you the broader picture with the mrr function. I have done this on my bloomberg. You can see the broadly negative picture on trade on thursday, mrr, this isch to how some of these individual securities fared over the course of five trading days, you can see how easily i pull it up and change the range. This was a picture with some of the earnings they came in, commercial bank of kuwait up 9. 4 . What he stocks dominating the picture. Kuwaiti stocks dominating the picture. Alomar i earnings uninspiring. Saudil get into the earnings system and more digital shortly. And more shortly. Australias Prime Minister says counterterrorism agencies have foiled a plot to bring down a plane. Four men were arrested after rates on several properties in city. In a televised press conference, Malcolm Turnbull said increased security screening were implement it at all airports. He added the plot seemed to be carefully planned and was not the work of a lone wolf. We face a range of terrorist threats, some of them loan actors. Actors who activate very quickly with very little warning. On other occasions, you get quite elaborate conspiracies. This appears to be in that category. Toafter losing a senate vote repeal obamacare on friday, President Trump threatened to end key subsidies to help insurance programs. Warned he, trump would cut the socalled costsharing reduction which helps ensure is offset cause for costs for americans. Trump urged the senate to not be total quitters. Has hit iran with a fresh banks of sanctions fresh batch of sanctions. Six Iranian Companies describe as central to the ballistic missiles, Steve Mnuchin promised to counter the program. These are the second batch of sanctions imposed on iran from the Trump Administration this month. Opec and nonopec members are set to meet next week to discuss compliance with cuts. It will be cochaired by russia and kuwait and focus on why some countries of falling behind their pledges to curb production. Overall complaints compliance fell 70 in june after members including saudi arabia boosted output. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Yousef thanks. Lets talk about data from saudi arabia central bank. It is pointing to some weakness in the economy. Were joined by the head of capital management. Great to have you back on the program. Lets get into the foreign reserve data, which group for the First Time Since may of last year. Inflection point or a oneoff . Thank you. The oil prices, according to our information, the oil should be on average 54, that would be online wiki Government Oil revenue, which would be online with the Government Oil revenue. Reserve might increase. Recently the government had issued a bond locally and had issued an International Loan three months ago. That actually reduced the pressure on the reserve until now. Assets, ite foreign might happen, but it wont be as and 2015. 16 until now, the level of foreign reserves, the gdp is 80 , very healthy. Yousef that is one side of the story the data we got last thursday late thursday detailed economic stories, two highlights. We put this on the charts because the other batch includes interesting numbers on what is happening with consumer sentiment. This is a 198. Int is your point of sales the private sector. This goes back to 2011. Even the last data point they came out last thursday. Have you read those numbers . They show further weakness in what is happening with saudi consumers, doesnt it . Happened, saudi arabia there are two things i want to clarify. Allowances reversed aback, the percentage of consumption increased. Junew that at the end of and intimate. End of may. The announcement is. 7 . With expectation of dust increase, consumption changes. People say that set of consume. That is what has happened. The consumption, the growth of conception, but there was an increase of the employment rate. Yousef brady stand on the saudi Economic Growth projections. We have quite a few downgrades over the past few weeks. What you see the saudi gdp headed in q3, q4 Going Forward as we going to 2018 . If you look at the gdp, is based more on oil prices. Sector in 2016, was just over 10 basis points. I think that was because of so many delays of payments to the private sector. So many payments have happened at the end of 2016. Now we show that the nonoil private sector has grown by almost 1 in q1. Estimations are higher. It was mostly 1. 7 . I think it will be between them. Yousef hold that thought, we want to expand the discussion, especially with what is happening with the corporate balance sheet. We will dig into that. You are staying on the program. Also to come, lets get you a preview. We will talk about a carrier that lost close to 2 billion last year, dealing another blow to the outlook for middle eastern carriers. We will break that down. First, we will drill down into the saudi earning season. The kingdoms heavyweights are outrting a lot of lenders with numbers. How you navigate and where does it tell us where the kingdom is headed . This is bloomberg. Yousef this is Bloomberg Markets middle east. I am yousef with commingling yousef gamal eldin. Joining us on the set for more stories, our editor. Could see you. Downgrades forof arguably what has always been the vulnerability in the broader gcc. Talk to me about the significance of this in the wider context. There is no doubt they have been the weakest links in the gcc economies, along with saudi arabia but different reasons. Saudi arabia edging that higher. If you ask investors, they would be more invest more worried ain. T boring bahr the asset price does not reflect the fundamentals. Offering if you look at the fiscal data, you see hardly any change that reflects policymakers cutting the budget deficit. Last year. 21 of gdp that is the highest in the gcc. 10xpected to come down to this year, but we have not seen any signs in the numbers, spending is flat. Ive not seen any sign that this is actually, you know, coming down. Foreigners are making on they have space to borrow, but at what cost . You talk to investors and they will tell you, if they dont see a significant Fiscal Consolidation soon, they will be under more pressure. Yousef the gulf crisis came at an inconvenient time. The last thing they need was political anxiety or the split we are seeing. Theo what is going on with gulf crisis, we saw the arrival of some Foreign Ministers in bahrain yesterday. Are we at the edge of a cliff of a another set of sanctions, measures from the gcc . What is really on the table . Bahrain is firmly in the saudi camp. That in trenches its a lying spirit in trenches its alliance. Oman and quake did not really take part in the decision to isolate qatar. It remains to be seen whether other members will help them if they are in trouble. We are not going to escalate significantly more, they are said we will have a measure here or there. They have had nine individuals or organizations to the list. Hey want qatar to prosecute interestingly, when we spoke to analyst a couple weeks ago, they said we dont see additional economic sanctions that do not involve self harm on both sides. If you are saudi arabia and you ,o to International Companies it can hurt your standing. Ultimately, theyd denied intending to do that. And just in question. People dont see the scope for significant escalation that doesnt involve self harm. Yousef shooting themselves in the foot. Lets get back into the. Onversation with mazen the price being paid for the crisis, it is not limited to qatar. Will we see even more downgrades Going Forward from these ratings agencies, the cost of credit and funding. Will it get worse from here . Mazen if you look to what is happening in the gcc and saudi arabia and the link with a qatar and common benefits, saudi arabia is not affected. Qatar is not a big supplier of oil. 2 irt is not exceed the share does not exceed 2 . But they need to the opec agreement for many reasons related to the economy. The gas market and currency exchange. Saudi arabia, what is happened is the gcc conflict and what is happening with qatar in saudi arabia. That is facing the now is to revive the private sector, that is what was suggested. To revive it and try to cap the growth of an employment unemployment. Gdp exceeding the current gdp. The government stimulating the economy. The pif to invest in the private sector, the other side, aramco. I think this might happen q3 or q4. At the im looking analysis. We are about a quarter of the way through the earning season, a good way to see where were at. At the top, you have your surprise and growth cap. You can see 28 out of 146 countries have reported. There are more patches of red in sales and earning growth then green patches. It is not just a disappointing earnings season we are seeing in the u. S. And europe, it is clearly also the case in saudi arabia, isnt it . Actually, and saudi arabia what is happening right now, the market actually, the growth of earning was more because of a con amazing the expense, making it more efficient. The growth was not high for it is tocompanies, but manage in the market. We are seeing for example, a big reduction in demand, a used to be 55 million, we are expecting 47 or 46t expecting with zero debt, majority of companies. They can manage paying a dividend in production. Banking, the decline in borrowing,rowth of may have doubled dividends. There is no need to capitalize the earning and cost of the decline of borrowing, it has become actually much to distribute dividends. 3. 3 ,rket search from despite the highest in the gcc. Yousef which sectors are you bullish about . Which sectors are you optimistic on . Im looking at the petrochemical industry, they are pointing out that risks are looking within the u. S. Classics capacity search surge. Blockbuster m a continue to disrupt. Industries is in focus. Waiting, but because of the Oil Production does not increase, were announcing new products. New projects. The growth that is happening because of the evolution of shale gas, that increases the global so thats global supply, the Global Demand is huge. Polymer is almost equal to the real gdp. The growth of real, global gdp. Is aboutge of prices with the oil price, the oversupply. That is what is happening. Im not really that worried about petrochemical analysis. Petrochemical is not equal to the oil business. Yousef that is exactly what we want to right, that is what i want to pick up on. Well have more about what is happening with opec and nonopec and their attempts to balance the inventory. U. S. Stock files are continuing to shrink. We are seeing lackluster growth at restarting u. S. Crude, but how much longer is is going to continue . Is it just a flash in the pan . We will find out for you. This is bloomberg. Yousef this is Bloomberg Markets middle east. Lets talk about what is happening with crude oil. It had its best week, surging with the biggest weekly gain since the summer. Physical since december. Physical spreads are also proving. The russian minister says he feels the oil market would rebalance more quickly. Mazen, in terms of what to expect Going Forward, we havent c nonopec meeting, opennonop opecnonopec meeting happening. Are they going to go to a level that a satisfactory for the saudis . Not satisfactory for them, for the whole oil industry. The giants in the industry are being affected mentally. The declining Global Investment byoil is expected to shrink 1 trillion, and we know it is a capitalintensive business. Is 47erage depletion million barrels, there is no new investment and new discoveries. The number of discoveries has declined massively since 2016. That might create an urgent crisis in 2018 or 2019. To avoid the crisis, the global producers have to incorporate together and create a price that is sufficient for the consumer and the demand at the same time. They have to continue investment and support. They haveicient to have sufficient supply. It is about the global economy. Yousef do you think it will be difficult for the market to wean itself off the absence of crude oil from the opec nonopec group. It will take some time to phase out this kind of intervention after the first half of 2018. It wont just look at the agreement, everybodys going to reach the excess, the most excess supply. Until now, we are not sure. There is notre actually supply, we are not even sure about the demand for the producers. Agreement if the climbing of the Global Investment continues. Yousef well have to leave it there, were out of time. We have plenty more to come. Dubai. S 8 30 and in you are watching Bloomberg Markets middle east. Trading the u. S. Are blame over a naval incident in the persian gulf. Said said a u. S. Tehran a u. S. Aircraft carrier fired a warning shot in what kuwait is calling on professional confrontation with iranian vessels. The u. S. Navy said they were forced to fire when ships were unresponsive to attempt to communicate. The brother of a former pakistani leader is being lined up to be the countrys next Prime Minister. He will contest the national assembly. He stepped down friday after being ousted after corruption allegations. On fridayther stepped after being ousted after corruption allegations. It should take 45 days. Until then, the former Petroleum Minister will be interim premier. Unemployment rate rose to 12. 7 in the First Quarter. It is a rise of 4 10 of a percent from the previous quarter. Rate for saudi really saudi women sell. Fell. Fromplan to ban nonsaudis working in grocery stores. Model threeed its final form. Electric car comes with two battery types with the longrange able to drive 310 miles on a single charge. Taken in more than 500,000 deposits for the model three. It is estimated it could take more than one year to fulfill the orders. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Yousef thank you. Ago, therewo months was a shock to the islamic finance industry. A latest page in the ongoing saga, the company has said it wont need a payment request by deutsche bank. Welcome back on the program. I know you have been watching this closely. Talk to me about what extent you are surprised about the latest moves around the payment rate to deutsche bank. What is it mean for the broader conversation when it comes to gas . Committee announcement quite some time ago when they made the injunction and loan in in london. It is an increase of the protection, to get the investors around the table to discuss. Isce we last spoke, the key a judgment by the English Court on the fifth of july. I think that is the is a very interesting judgment. Someompany applying different interpretation but i think it is important to get down to the details of the judgment, i think that will tell us a lot about the thinking of the court and where this may be going. Yousef what is the next mile style milestone that could be a catalyst and what a conversation . Is booked toearing be on the seventh of september in england. I think the important thing before that is to appreciate the fact that the English Courts have ordered that the injunctions be stayed. The order also says the English Court is taking jurisdiction to hear the entire issue, including the element of uae government doctrine. It says i, the English Court, if required will hear evidence on uae law, but i will be the court and jurisdiction for deciding this matter. At what point does this become a concern for the industry . When the story first broke, there was a lot of reservation and anxiety, a lot of feeling it will send shock waves. But lets face it, despite the razzmatazz at the beginning, it has faded into the ground into the background. When does the market as a whole wake up and say this is an industry level problem with serious ramifications . Rizwan that is what were all sort of trying to avoid innocence. Let me take a step back. As you rightly say, when it started there was a lot of discussion and noise and concern. , and it has settled think it has settled because the market, the analysts, the practitioners have realized this is actually not an industry issue, not an islamic finance issue, but actually a credit issue. People. Forted the announcement by the company that they would not be able to make payments in july and october followed by a week later with a said actually, we think our sukuk is unlawful. The real challenge or concern will be the decision of the escort. Cited on theually basis of contractual obligations find him signed up by the parties. Yousef also, saudi arabia raising 4. 5 billion dollars in what was the first local bonsall this year. Really injecting some energy in what was a pretty dry market. Rizwan probably the busiest summer we have seen on the perspective of sukuk issuances. It is a phenomenal issue. Mails of