Apple, Samsung's AI Bet; Biden Pressure; Tech Rally | Horizons Middle East & Africa July 11, 2024
Good morning. This is Horizon's Middle East and Africa. Our top stories this morning. Asian stocks catch a tailwind from Wall Street's tech driven rally ahead of the US inflation report. Both the S&P 500 and NASDAQ 100 close at
all time highs. President Biden's advisers to meet with Senate Democrats as more party voices question his decision to stay in the White House race. Plus, Apple and Samsung are betting on AI to fuel demand for their new line ups. The iPhone maker expects a 10% bump in sales later this year.
Well, it has just gone 8 a.m. across the Emirates, 5 a.m. over here in the UK. I am Gianni Versace in London this week. Let's get you caught up on markets because guess what? We saw another record high for both the S&P and Nasdaq in yesterday's session. Big rally and you can see both of them there.
S&P breaking through 5600 for the first time ever, ending the session up more than 1%. And Nasdaq as well, fueled by gains in both Apple, Apple suppliers and Nvidia. So another very strong session for the U.S. stock markets.
And it seems as though of Fed Powell's testimony has come and gone with little impact on the market. If you look at that two year yield. We're still pricing in about an 80% probability of the Fed beginning their rate cutting cycle come September. So not a lot of movement there. Brent, also in focus, as we've been talking about this week, you can see we are about 8/10 of a percent higher. We have an oil segment later in the show. We're going to talk about some of the
drivers there, but essentially a strong seasonal demand in the summer months. Our terminal chart today, we are talking about the CPI, namely because we've got that data coming up later today, the expectation is that the headline rate will come in at 3.1%, the core number at 3.4%. But still you can see a slight moderation coming through in the month to month drivers of inflation. And here we're just we're just showcasing the fact that demand pressure has begun to slightly fade. That's that purple bar that you can see over there in terms of the composition of these CPI figures. But let's check in on how markets in Asia are faring. April, have some of these Asian markets
caught, The US stock market broke overnight. Yeah. We're seeing Asia stock gauge at the highest since February 2022, helped along by the gains among Apple suppliers as well as TSMC following its sales surge they reported just a day ago. So you're seeing a lot of green on the screen, fueled, of course, as well by Powell's comments, Tony. Inflation at 2% for records that supportive also not just for stocks but Asia currencies. The one is among the folks that's gaining ground getting a bit of an added boost today after the Bok governor. They left things unchanged on race.
But they also said that markets expectations for easing might look a bit excessive. So restrictive policy expected there. And we've seen the one among the currencies that are gaining ground today. Also wanted to highlight what we're seeing in Chinese stocks, some of the gains coming from the stocks with outstanding shorts given tighter restrictions that Chinese authorities are pushing to that Jomana. April, thank you so much.
Another day of green in Asia as well. All right. Turning to our top story in US politics, President Biden is facing mounting pressure within his own party to step aside. Vermont Democrat Peter Welch has become the first sitting senator to directly endorse replacing the president's. Earlier, former House Speaker Nancy Pelosi called on Biden to make a decision quickly. Our East Asia government editor Jon Herskovitz joins us now. Good morning to you, John. It appears as though the walls have
started to close in a little bit on President Biden. He oversees defying all of those calls and wants to stay in the race. The question is, can he? Yeah, it's really difficult to say. We're seeing pressure on the political front with the prominent members such as Nancy Pelosi and the Senator Welch, and also with Senate Majority Leader Chuck Schumer, also saying that leaving the door kind of open for this and we're seeing pressure on the donor end as well. So it's it's Biden is in a really difficult position, but he also has something very pressing going on right now in Washington.
We have the Naito Summit that's underway. Biden is leading. This is a celebration of the alliance. So Biden is facing a difficult moment in his presidency for what happens next and also with the future of the alliance of NATO's. So there's a lot going on and it's really difficult to say. But Biden has said that he's staying in the race as the pressure keeps on mounting. Well, even Hollywood of wading into the debates. It was pretty remarkable to see some of
the comments that George Clooney penned yesterday saying that we are not going to win in November with this president. What should we make of the statement coming from none other than George Clooney? Yeah, George Clooney is a wonderful, celebrated actor. But I think that beyond we have to look what the comments look in the broader context. The entertainment industry has a number of moguls that have been very supportive of Biden and have been donors for him and the Democratic Party throughout the year.
And this feeds into what Bloomberg reported earlier this week, where we talk to donors on Wall Street who are also in a wait and see attitude as to what's going to happen. Feeling kind of powerless now just to find out what will happen next with the Democratic with the Democratic president and where the Democrats are going. As a result, it seems that donations are thinning as people are waiting. The big donors are waiting to see what
happens next. With George Clooney, we're seeing this on the Hollywood front and we've seen it. We're seeing it now also on the Wall Street front. Yeah, that clearly is the concern here. And that's the longer there's this haze about what's going to happen, the more difficult it becomes for them to attract donations. So it's going to become a material issue
as well. Our East Asia government editor John Herskovitz, thank you. Well, as President Biden works to reassure colleagues and voters he is fit for office, sources say that some NATO allies are meeting with advisers from Donald Trump's camp.
Delegations from across Europe are reportedly quietly slotting in meetings with advisers and others with links to the former president as they grapple with the possibility he might reclaim the Oval Office. So for more on this, Bloomberg's Russia economy and government team leader Tony Halpin joins me now from my typical studio in Dubai. Good morning to you, Tony. Look, as we were just talking about with
John, that there is a lot of nervousness domestically and also, it seems, amongst allies in Washington about Biden's prospects. How much is riding on the US election for NAITO? Well, it's critical for NATO allies. I mean, advancing age has become an unexpected theme of this summit because of the speculation around Biden. But for NATO allies who are watching all of this are nervous about Biden's prospects. The essential question is Trump and what
will he do if he becomes, as is increasingly plausible president again in November? Trump has been very critical of NATO's in the past years, threatening to pull out of NATO allies, of his advisors, of his have suggested that maybe Trump will change the collective security guarantees so that the US would only really come to the aid of allies who meet defense spending commitments. And famously, Trump is an admirer of Vladimir Putin and quite critical of the tens of billions of dollars that have been spent supporting Ukraine. So for, you know, two allies in Europe who are watching all this, they have a lot of questions about future security. Would Trump return to the White House? Quite notable that NATO issued a declaration on Wednesday saying quite strong things, targeted things about China's role in supporting Russia. What exactly are they accusing Beijing of here? Yes, they called China a decisive enabler in a statement, which is basically accusing Beijing of supporting Russia's war machine by the provision of what's called dual use components that can be used in military equipment as well as consumer goods, and providing the kind of material support that allows Russia to continue fighting in Ukraine.
Beijing denies this, of course. It says that all of its trade with Russia is above board. But there's no doubt that Russia depends very heavily on China. Vladimir Putin has already met with
Jingping twice since May, and they say that they have a no limits friendship, which Russia is certainly exploiting to try to maintain its economy and its war machine in the face of Western sanctions. So there's the declaration that's been issued obviously earlier in the week. We're talking about some of the military support that has come through.
Drones have featured very heavily in the Russia Ukraine war. How has Ukraine been using them to to even the odds against a much stronger, much more potent, larger Russian military? Yes, drones have emerged as the kind of defining feature of this war. And one reason is because they can be produced really quite cheaply. Ukraine manufacturers turn out thousands of drones a month and they're used on the front line for everything from surveillance to taking out tanks.
You can equip a $400 drone, for example, with some explosives strapped to it with duct tape that can take out a tank that might cost $9 million to produce. So Ukraine has been using that to balance out the battlefield because Russia enjoys, of course, many more opportunities to provide troops to the front line to produce tanks and other weapons because it's bigger than Ukraine. And Ukraine can balance out that force by resorting to things like drones. And they're doing so very effectively. Fascinating. Well, if anyone is interested in reading more about that, it is the stories up on our terminal vis a vis those drones that Bloomberg's Russia economy and government team leader Tony Halpin.
Thank you. Now for a look at some of the other stories we're following this morning. Israel is telling all Palestinians in Gaza City to leave immediately as fighting intensifies in what used to be the enclave's most populous area. The Israeli military dropped leaflets on the city, telling residents to move south.
Gaza City was home to about 1 million people before the Israel-Hamas war erupted in October. It was the first place Israeli forces targeted in their ground offensive. And the Biden administration will apply new tariffs to steel and aluminium shipments diverted through Mexico.
That's in a bid to prevent China from getting around existing levies. The White House is looking to head off what it fears could be a flood of steel and aluminium products from oversupply in China. And still ahead here, why Vanda Insights thinks that crude's rally to nine week highs in early July has opened the door for a pullback.
But first, the Fed chair, Jerome Powell, has been careful not to give markets a timeline for its rate cut policy ahead of CPI numbers coming out of the US. Saxo shares their market strategy next. This is Bloomberg. Welcome back to Horizons. Middle East and Africa out of recession
in London. Traders are looking ahead to inflation data coming out of the US after Fed Chair Jay Powell reiterated that the central banks need for more clarity that high prices are slowing. We want to be more confident that inflation is moving on a path sustainably down to 2%, not at 2%, but on a path sustainably to 2%. That's the test we've articulated. I have some confidence, as I said
earlier, that that we are on a downward path. I think if you look at the data, it's pretty clear that. But we have not said, though, that we have sufficient confidence and that will be a decision that our committee makes. All right.
Let's bring in Turkey to that effect strategy head at Sachs. So joining us from Singapore. Good morning, Jarrod. Just keeping an eye on some of the price action the last couple of days.
It is remarkable how little the dollar has moved in response to Powell's testimony. Why do you think that's the case? I on. I thank you for having me back. Yeah, certainly. I mean, I think the Fed has been very clear with what they're trying to achieve right there. Like you just had Paul on earlier and he's not looking at inflation going back down to 2%, but it's rather the continuation of that disinflation trend after their fingers were actually burned in the first quarter. And likewise, for the markets, really after expecting those six or seven Fed rate cuts earlier in the year and of course, getting a reality check on inflation, of course, markets are being slow to price in a Fed move for now.
So even after that kind of a comment from Powell at the testimony, we don't see the market as fully pricing in that September Fed rate cut. Still, I think it's a lot dependent on where the LIBOR market goes from here as well, because as much as we are seeing a slight loosening that it's not a drastic and that's really something that can steer the Fed towards a rate cut faster than this continuation of disinflation itself. Yeah, it's interesting. In the last couple of opportunities,
Powell has flagged the the weakening and some of the softening that's taking place in the labour market, both in Central and also in the testimony this week. Let me just ask you again about the USD, because the theme perhaps up until the beginning of July was one of strength, and yet that's begun to change. You know, in the last ten days the x Y is down about 1%, which is quite sizable. What do you point that down to? And do you expect this weakness in the USD versus other major currencies to continue? Absolutely. So we do see the US dollar starting to weaken a little bit from here. And I would emphasize the fact that it will be a little bit and it will be very, very selective because as much as, of course it seems, we are getting closer to that first Fed rate cut.
And that means there's going to be some downside pressures on the US dollar. We have to remember that the Fed is still going to be relatively slow in its rate cutting pace, and that keeps the U.S. dollars one of the highest yielding currencies still. And secondly, we're getting closer and closer to that U.S.
election and all this, you know, talk about Joe Biden's health issues and the resulting increase in the possibility of Trump's presidency. That is inflationary. That is dollar positive as well. Yeah. So let me just ask you about the other elections that have taken place in France. You spent pretty much all of last week and this week talking about the impact that that could have, the hung parliaments and so forth.
But I've been reading a few analyst's notes that seem to suggest that what's happening within France is going to be, it says, idiosyncratic to France and not necessarily have broader repercussions on Europe as a whole. Therefore, should there be a political premium priced into the euro, given it's just the France story? I would say there is still a risk, you know, to what happens in France, more importantly, to what happens between France and Euro Europe's relationship. And that certainly has an impact on France, because as we see more disintegration of the euro zone economy, that means that in the near term, the euro might have room to stay stable because of that cyclical weakness that's coming through in the U.S. dollar, because of the fact that geopolitical risks tend to fade away quickly after the elections are over. But in my view, I think the medium term
headwinds to euro have only increased with that kind of an outcome that we've just seen in France. Even though the ECB, of course, have started their rate cutting cycle, but when they did deliver that first rate cut, the signaling from Legarde was quite hawkish at the time. Do you think that it's going to be difficult for the ECB and perhaps the Bank of England if they start their own rate cutting cycle to diverge too much away from the Fed's once they do eventually start as well? Absolutely. Repercussions on currency obviously come into the mind, you know, for these central banks as well.
And I would say it's obviously one thing as the divergence to the Fed. But the second important thing is their own domestic inflation has not really returned to the target. Now, we might see UKIP's inflation headline inflation coming back to 2%. We've seen that.
But the pressure that continues to come from the services side of inflation and the wage growth are signalling that we could see another return higher in even that headline print in UK. And same goes for the eurozone as well. So it's really hard to be confident about inflation being back to the target levels in a sustained manner. And again, I would come back to the point that the second half of this year is going to be a lot more about trading those U.S. elections.
And as we see more and more possibility of that second Trump presidency again, that will make it very important to consider it's a structural inflation impact as well. Charles, as ever, it's wonderful to chat to you. FX strategy head at Saxo. Thank you. Also coming up, the world's leading smartphone makers are counting on AI to boost demand. We look at the latest moves by Apple and Samsung to fire up sales. This is bloomberg.
Welcome back to Horizon's Middle East and Africa. I'm Gianni Versace in London this week. Apple's suppliers are mostly higher in Asia after a Bloomberg scoop that will see strong iPhone shipments in the latter part of the year. Our tech reporter Annabelle Jewelers joins us now with the details. Annabelle, so this is interesting because it obviously lifted the stock higher in addition to Apple suppliers.
Why does Apple think it's going it's going to be selling more iPhones later this year. Yeah, John, it really just comes down to I because Apple was seen as being a little bit late to the party when it came to artificial intelligence. But last month they had their worldwide developers conference WW DC where they basically unveiled what they were planning to do with the technology. And so for the iPhone and other devices, they unveiled Apple intelligence. So this is really about trying to infuse this new technology across a range of devices, things like reading text or images and more. Of course, revamping Siri, for instance.
All of this is going to come out in the upcoming iPhone. And so that is why we're starting to get these estimates coming through that Apple could see much better numbers. They're expecting to ship 90 million products in the second half of this year. That's about a 10% increase on earlier devices.
And again, it just sort of points to that demand, especially when you've actually seen pretty sluggish uptake for for Apple iPhones in recent years, particularly in the Chinese market. So, again, yes, it's good numbers and why we're seeing that positivity today. And yeah, I remember when the analysts were putting out the reports at the beginning of the year and people were certainly a bit lukewarm about the upgrade cycle.
So let's see what actually does turn out. But it's not just Apple. Samsung, we spoke about this yesterday. They're launching a set of new products today, some wearables they get involved in in the luxury premium wearable market. What about AI and its integration into those products as well? Well, again, it's really being integrated across its offerings. Yes. So again, it was that focus at the event
overnight Galaxy unpacked and and we saw new features. But you mentioned wearables, of course, that was a large part of it. So essentially we had the focus on foldables two different devices uptake there or iterations there. Really in the wearables segment, we had two new watches and here Samsung is really going head to head with Apple. One of those watches in particular looks quite similar in a lot of ways.
So the Apple Watch Ultra and then there's also a new ring. And this is something that's quite new in the wearables space, but this ring can again track your fitness, track your sleep, lots of other things using I of course, in part and that is going to have a price tag of $400. So, yes, a new line up coming out. It's interesting timing. Of course, we're discussing there in the ad break when the focus is on Paris this week for this unveiling. You've still got what's going on back in
Seoul, which is the ongoing strike. Thousands of Samsung workers are protesting and asking for things like more pay, bigger bonuses as well. That's more focus on Samsung's Chipmaking facilities, but still different crosscurrents, I guess, affecting that company this week. Yeah. No, absolutely. I've got to say, I actually had to give up my smartwatch recently because I'm one of the minority that does not want to know all that data about my health. It's better not to know sometimes from our tech reporter, Annabel Jewellers.
Thank you so much. Now for a look at some of the other stories we're following this morning. Citigroup will pay almost 36 million in fines to US bank regulators over issues related to data quality management and risk controls. The Federal Reserve says its penalty for was for city violating an enforcement action from 2020. Citi didn't admit to or deny the regulator's allegations.
The Fed says the bank is taking steps to correct violations. And HSBC is revamping parts of its investment bank in a move that will make it look much more like rivals such as Citigroup. According to an internal memo seen by Bloomberg, executives in the global banking business will shift existing sector teams into five larger groups. The note says the move will allow bankers to work more efficiently and with better focus. And as we head into the break, let me
just plug some of the key equity futures that we're watching today. Of course, a major CPI prints coming up in the afternoon. This as the S&P and NASDAQ broke record highs once again this year. A winning streak for US stock markets. The Dow, you can see also trading sideways through 40,000. And then your stocks future building up
from some of the gains that we had yesterday, pointing to a more positive start to the trade as well. This, of course, as a lot of eyes on the French index. The currency has turned around in the last couple of days as well. Some more green on the board there. But coming up, we're going to be talking about oil prices, which have been climbing for a second day with the founder of Vanda Insights, Vandana Hari, who joins us to tell us more about where oil markets are headed. This is Bloomberg. Good morning. This is Horizon's Middle East and
Africa. Our top stories this morning, Asian stocks catch a tailwind from Wall Street's tech driven rally ahead of the US inflation report. Both the S&P 500 and NASDAQ 100 closed at all time highs. President Biden's advisers to meet with Senate Democrats as more party voices question his decision to stay in the White House race. Plus, Apple and Samsung are betting on air to fuel demand for their new line ups.
The iPhone maker expects a 10% bump in sales later this year. It has just gone 8:30 a.m. across the Emirates, 5:30 a.m.. Over here in the U.K., I'm Gianni Versace in London this week.
Let's get you caught up on markets because the S&P and Nasdaq broke through to another record high yet again. The close yesterday, both more than 1%. As we focus somewhat on Powell's testimony and not moving the needle in terms of market expectations of rate cuts, we're still sitting at about 80 basis points, 80%, rather, not 80 basis points, definitely not for the September meeting. You can see that reflected in two year yield sitting at 4.62%. Obviously, a lot of focus on the upcoming CPI prints. I'll get to that in a moment. But I just want to draw your attention to Brent as well.
We've been monitoring it very closely. Back above $85 now, almost sitting at $86, about 8/10 of a percent higher in the overnight session. This as we see drawdown in some of those U.S.
inventories given the strong summer demand. We're going to talk about that more in a moment. But CPI is going to be in focus later today. And this is the breakdown. I thought it was interesting to flag that some of the momentum that has come through on the demand side.
So demand pressure, the demand drivers of US inflation have started to soften somewhat, which means that looking ahead, there are expectations that these this disinflation disinflationary process will continue. Today, the headline expectation is for the number to come in at 3.1%. That is down from the 3.3% rise reported in May. The core figure is expected to hold steady at around 3.4%, but on a month to month basis, expect it to come in at 0.2%. 0.2% is that number. If we're below it, it will be a doubling
of the price of the market. Obviously above it. It will be a hawkish surprise. So let's check in as well on how markets in Asia are faring. Errol Hong is in our Singapore studio.
Errol? The drama that we're seeing. Asia stocks rallying as well, tracking Wall Street's performance. It is a tech driven rally. The stock gauge for the region at the highest since February 2022. We're seeing the likes of TSMC among
those that are the biggest boost to the region's benchmark. This is, of course, helped along by all the A.I. narrative that's fueling demand for chip stocks. As we saw just a day ago, TSMC reporting a sales surge. Now, Apple suppliers are also doing well today after the iPhone maker said it would be shipping more iPhones as kit hijinx. Another stock that I wanted to highlight as we see the likes of HANA Securities upgrading its price target for the stock, it sees market value hitting 200 trillion won versus about 175 trillion won.
Now and this is helped along by the higher chip prices. Things are likely to come through as well as the weaker one. Now, Samsung Electronics, as you can see, is a bit of an outlier, maybe no surprises there given the indefinite strike.
That's the way. But as I mentioned, their weaker one expected. But today we're actually seeing a stronger Korean currency and most of the Asia effects are actually climbing, thanks to Paolo's comments seem to highlight that that 2% inflation is not needed. And of the four records, so we're seeing a softer dollar overall, the Korean one getting that added boost today after the bank left rates unchanged. But it also flagged that market expectations for rate cuts might seem excessive, So policy likely to remain restrictive, and that's fueling what we're seeing on the Korean currency. Of course, among effects, we're keeping a close eye on US CPI due later today, Jomana. Yeah, as is the rest of the world.
April, thank you so much for that overview of some of the Asian markets. Let's turn to energy now. Oil is climbing for a second day as signs of growing demand and a risk on tone across the broader markets combine to aid sentiment. US stockpiles have fallen while gauges of jet fuel and gasoline consumption both rising as the northern summer travel season continues. So for more, let's bring in Vandana Hari, the founder of Vanda Insights. And good morning to you.
Great to have you with us. What do you make of the price action we've seen in oil the last couple of weeks? It has been on the rise again. What do you point that down to? Good morning, Jomana. Thanks for having me.
So I do zoom out over the past couple of weeks, of course, we saw crude rise to nine week highs, Brent, about $87 a barrel. And after that, there has been a pullback, which I think was overdue. I do feel that the summer demand bump narrative was a bit overdone. We can get a little bit more into that. But
just again, zooming in to what happened overnight, as you were just mentioning, U.S. oil stock changes are a pretty significant signal for the market, especially in the current Atlantic hurricane season. And last night, we saw the U.S. crude stocks come in more or less, as expected, a little bit lower. But gasoline stock decline was much more than expected.
Also, if you have it back to the past fortnight, U.S. oil stocks, the drew down by much more the week before, which amounts to almost a million barrels per day decline in U.S. crude inventories over the past fortnight, which is significant. You know, given that this is a high summer demand season and, you know, declining crude inventories obviously are a bullish signal for the market.
Yeah, Yeah, it certainly appears to be a big driver just in the last 24 hours. And let me also just ask you about the upcoming hurricane season. I think there was a little bit of nervousness around Hurricane Beryl. It seemed to have a limited impact on oil supply.
But people are talking about the fact that it came much sooner and earlier. So the typical start to the hurricane season, that doesn't bode well for the rest of the summer. How are oil markets thinking about this? Yeah, I do expect this year's Atlantic hurricane season, given that it's been predicted, projected to be much stronger than normal, you know, more active. I do expect it to keep the oil market on tenterhooks. As you quite rightly observed, Hurricane Beryl was the first or the earliest storm of the season to turn into a Category five hurricane, you know, a week or so ago. So that has, if anything, only
reinforced the market's belief and in the in the forecast that it's going to be a strong season. And there's a lot at stake. You know, there's obviously about 1.9 million barrels per day of oil production offshore in the US Gulf of Mexico. That tends to be in the path of major hurricanes.
And then there is the refining capacity across Texas and Louisiana, you know, up north of 8 million barrels per day, nearly 40% of U.S. refining capacity is concentrated in those two states. But, you know, so that said, actually, it's one needs to be very careful in factoring in a hurricane either during its approach or its passage or or the aftermath, because it can impact, as I mentioned, upstream, downstream operations, but also U.S. crude and LNG exports and imports. So, you know, the trade data all goes back to us as well. Yeah. One thing that that that caught my attention yesterday in specific stocks, you know, BP dropped more than 4% the last couple of trading days and they warned of significantly lower refining margins in upcoming months. What sort of a macro impact is that
going to have if BP are saying that their refining margins are going to move lower, is that not likely to be somewhat of a dampener to this, you know, the bullish thesis that you present for oil? Yeah. So BP and Exxon Mobil have both warned similarly about the dampening effect of poor refining margins on their Q2 results. So we are talking a very, very short term here, obviously, and sort of they are looking in the rearview mirror. It's not a surprise, Jomana. Refining margins have been under considerable pressure, but is actually, you know, presents a divergence with crude prices in running up through June, all in refining margins, especially in Europe, are not doing well. So I'm not at all surprised. I wouldn't be surprised to see BP
continuing to be under pressure. We do see BP, Shell and ExxonMobil and other refiners in Europe actually are planning to shut down and, you know, trim their refining capacities in Europe. Overall, that region is suffering from a structural drop in fuel demand and just old refineries, which are, you know, no competition for the big and new refineries that have come up in the Middle East.
And one now coming up in Nigeria as well. But Dangote refinery. So doesn't bode well long term for European refining margins either. Yeah, Well, let me just round up the
discussion by asking you about the elephant in the room, and that is OPEC and what they're planning on doing with their supply since that that Riyadh summit and the announcement that they were looking to start tapering potentially starts tapering as of Q4. Of course, then they have to change the language and say that it's subject to market conditions. Do you expect them to start tapering some of those supply reductions in the fourth quarter? Yeah, I think unless prices really take a major tumble, which I don't expect will happen, certainly not through Q3, I do expect OpEx to go ahead with tapering. I think they've given themselves a long runway saying that they will bring back the 2.2 million barrels per day that has been reduced by eight members over a
period of four years starting in October this year. And look, it's it's really it's a tiger by the tail for Opec+. It's it gets difficult progressively and especially when just a smaller subset of the alliance is bearing quite a bit of the burden of cutting supply. So I think they will have to I think their continued reiteration of a very optimistic global oil demand growth figure of 2.25 million barrels per day for the year is also, you know, in the same vein, I think it supports basically the decisions to bring start bringing back some of that oil into the market that they've held back for for quite over a year now.
Yeah, Yeah. And let's see how the market takes it when they start doing that. Vandana Hari, thank you so much for joining us today, founder of Vanda Insights. Our Caicos founder, Bill One has been found guilty of criminal charges stemming from his firm's multibillion dollar collapse.
Bloomberg's Vonnie Quinn has more from the federal courts in Manhattan. Tiger Culbert, Bill Hwang, the founder of Archegos Capital Management, found guilty of a raft of criminal charges in Manhattan today. These pertain to racketeering, conspiracy, two counts of securities fraud, wire fraud, and several counts of market manipulation, in particular stocks such as Viacomcbs Discovery and Tencent. U.S. Attorney Damien Williams of the Southern District of New York said that Hwang intentionally lied to Wall Street banks to try and help the trading capacity of the firm in order to intentionally move the prices of stocks in the portfolio higher and that this new loop just continued and continued. The defense, for its part, said it couldn't have been a pump and dump scheme because Huang never sold a single share. There was no dump.
Defense also saying that the wipe out was due to a black swan event or indeed a week where there was a perfect storm. Now that we came March 22nd of 2021. It was a week where Viacom issued more shares and the SEC said it was cracking down on some China companies listed in the United States. Two events very detrimental to archegos his portfolio.
Within hours, margin calls started coming in from various banks and by Friday, Archegos was no more. And collectively, banks across the street were down 0 billion. Sentencing, which in theory could be up to 200 years, at least for Hwang, but is obviously likely to be a fraction of that is set for October 28th. Both Wong and Halligan are likely to
appeal. Vonnie Quinn Bloomberg News Now for a look at some of the other stories we're following. Bloomberg is being told demand was strong for Saudi Aramco, $6 billion bond sale, its first dollars at offering since 2021. A source says Aramco pulled in more than $31 billion of orders. The latest offering as part of a deals rush from the kingdom, which needs funds to help cover an expected budget shortfall and an ambitious economic diversification plan. And the alphabet is said to have shelved
efforts to buy customer relations manager HubSpot. Alphabet had communicated interest in a potential deal earlier this year, but sources say they never got to detailed discussions around due diligence. A takeover could have ranked amongst the biggest this year. HubSpot shares tumbled on the news. And coming up, a hawkish commentary from the Bank of England's chief economist has traders walking back bets on an August rate cut. We have the market analysis for you
next. This is Bloomberg. Welcome back to Horizon, the Middle East and Africa. I'm Gianni Versace in London. Traders now see less than a 50% chance of an August rate cut from the Bank of England's after comments from chief economist who. Meanwhile, the monthly GDP prints out today is likely to show the economy is on course for a healthy gain in the second quarter. Economists expect output expanded by
0.2% in May following no growth in the month prior. So for more on this. Bloomberg's strategist veteran joins me now from Dubai. So very interesting comments from
Chappelle yesterday. They seem to have moved the markets to sitting at around 5050. It's not yet clear that they're going to cuts at all at this next meeting. Absolutely. I'm kind of skeptical. I've been in the skeptical camp for some time now that they will go in August because, you know, it wasn't such a surprise that Catherine Mann would push back on suggestions of an early rate cut because she's a well-known hawk. So the markets set in store a lot by
what her bill said. And his comments kind of suggest that, look, he's not willing to pivot towards an early cut either. He's pointed out to three factors that that underpin his thinking. One is labor market tightness. The other is pay increases, wage growth. The third one being services inflation. So, you know, if you look at the confluence of factors and if you look at services inflation that is running at 5.7%, it's hard to make the case that the Bank of England rate at 5.25 needs
to go down. So effectively, the Bank of England is running a negative real policy rate when adjusted for services inflation. So which is why, you know, the people who are more skeptical on the panel about an early rate cut or control will continue to be skeptical. Germano. Yeah, yeah.
I remember back in the day when I used to interview the governor, I would say to him, you know, similar questions, and you'd say, well, look, it's about the it's about the forecast. It's about where they see inflation headed, not where it is today. But still, it's difficult to justify on those services. Inflation numbers is still so, so high.
But we also have a GDP, GDP prints coming up and it is expected to come in stronger than the prior month. Will that also upset the markets pricing for a potential August rate cut? I think that will cause an immediate knee jerk reaction, But I don't think this is going to be the definitive print that the markets are waiting for. I think next week's inflation data is likely to settle the debate. It's going to be the final nail in the
coffin one way or the other to decide which way the August decision pans out. But, you know, interestingly, what Powell mentioned yesterday was that, look, it's not just about one set of data points that's going to sway them. And that kind of strongly suggests to me that even with even if we get the kind of lowest reading on the economy and a slightly lower reading or inflation bobbing there abouts is not going to swing it for Powell and others on the council. So I think that, you know, in balance, I think I would expect the Bank of England to still hold an August. Yeah. Bloomberg, my studies vendor. Um, thank you. And let's see what ends up happening
with the data today and also the pricing in August. Well, speaking of the U.K., some great news. We had a very strong result out of England yesterday. England are going to be playing Spain in the 2024 year final. England defeated Netherlands two one in a very last minute goal. This happened in the 90th minute from substitute Ollie Watkins.
So everyone was sitting on tenterhooks for those 90 minutes thinking, Oh, no, we're going to get a repeat. It's going to be penalties again, not again for England. And yet we got that goal. We I say we and I'm half English in the 90th minute which takes England to the final. So it's going to be a big one this Sunday evening. All right. Also coming up, and Nigeria is taking on high with inflation with a six month action plan. We are live in the capital, Abuja.
Next that this Bloomberg. Welcome back to Horizon's Middle East and Africa. I'm Gianni Versace in London. Nigeria is taking on high food inflation that's rising at the fastest pace in three decades with a 180 day action plan. The government has announced a six month duty free window to import wheat, corn and other food crops. Nigeria is already grappling with the consequences of a wave of economic reforms. So let's bring in Bloomberg and Ruth
overrun Bea, who is in Abuja. Ruth, why is the government introducing this 180 day action plan to curb inflation? Hey, thank you for having me. Essentially, what this policy means is that the government realizes that it's not able to produce enough food to feed its people, which is driving inflation. As you know, food inflation has risen to 40%, over 40% in Nigeria. So the government is hoping that by opening its borders, it can bring in food as quickly as possible, and that could lead to price drops of food items in the in the country.
And also, the government is also trying to call arrests that are happening in pockets of areas in the country because of food inflation that is going up. And as you know, Nigeria is a population of more than 200 million people. 40% of that population lives in extreme poverty. And that is a problem for the government, because if people begin to go to the streets to to protest cause the implication of that is is something that the government is nervous about and is trying to, at least for the short term, bring in food to cope.
Cost of food going to cost inflation in Nigeria, and also to also augment the ongoing process of rice boosting food production in the country. Yeah. Yeah. And Ruth, just tell me, how likely is this to impact the actual central bank's rate decision next week? Or is it is it too soon to tell it to say at this point? It probably would, because once the Monetary Policy Committee is looking at the government's policy and the fiscal policies that the government is implementing, it's sort of an inflation.
It might and it might allow the CBN to pass on increasing interest rates or at the very least not increase it as aggressively as it has been raising it in the last few metres that we've seen. But ultimately it depends on the impact of this new policy on how much impact it make. It makes the what's called an inflation. Yeah. Ruth Well, let's see how this all pans out. They certainly need to do something to bring down those levels of inflation, as do other central banks around the world. Bloomberg's Ruth MP, thank you so much.
Right. Let's take a quick look at how some key assets are trading. We have that big CPI figure to watch out for later today. Will there be a further deceleration in the headline number, the core number month to month expected to come in at 0.2%. Today, the picture is little bit more muted despite the very strong handover that we had from Wall Street yesterday. Another record high for S&P and the Nasdaq yesterday, boosted by some solid gains in the tech space the likes of Apple and video pushing higher Apple suppliers also pushing higher, too, after that Bloomberg scoop that Apple are going to be are looking to be quite optimistic about the number of iPhones that they can sell in the latter half of this year.
And then this is the yields in front of you can see two year yields not doing a lot here. 4.6 to the ten year is below 4.30. Again, 4.28 and a half is where we're at again, trading sideways. The market is still pricing in about 20 basis points of rate cuts for that September meeting. So the market is still centering on that rate cutting cycle beginning as soon as September. And finally to round things up. This is a picture of energy we've been
following quite closely. Brent is trading just shy of $86, but that was Horizon, the Middle East and Africa. I just want to reset you in London. Stay with me, because I will be doing a
break here. Up next, this is Bloomberg.
2024-07-17 23:10
