Big Tech Slumps; Biden Gaffes; Kenyan Cabinet Fired | Horizons Middle East & Africa July 12, 2024
Good morning. This is Horizon's Middle East and Africa. Our top stories this morning. Cooling US inflation sparks a rotation out of big tech and a slump in Treasury yields. Meanwhile, the yen swings as Bank of Japan rate checks add to speculation of an intervention. President Biden says he remains determined to seek reelection, even as fresh verbal stumbles further heightened scrutiny of his campaign.
Plus, Kenyan President William Ruto dismisses most of his cabinet. It comes after axing his tax plan due to deadly protests and a moody's downgrade. Well, good morning again, everybody. It's just gone 8 a.m. across the Emirates, 5 a.m. over here in the U.K.
I am Gianni Versace in London for the last show this week. I will be back into by next week. But so much to talk about on the show today. Let's just kick off, though, with the market price action, as we usually do, namely because of so much that happens after that. CPI prints came through lower than
expected yesterday, spurred a massive market reaction. As you can see over there, it was not pretty for US equities. The S&P 500 closing below 5600, down about 9/10 of a percent. The Nasdaq down 2.2%. So heavy selling took place in the the tech space, particularly pronounced in Magnificent Seven. We saw a rotation out of those names into the broader index, which is quite interesting. The US dollar also dipping somewhat down
about half a percent after that number came out. But the biggest market reaction, I would say happened in fixed income. So this is a picture of what happened to ten year yields. After that CPI prints came out. Very strong rally. You can see down about 13 basis points post that number. The market is now pricing in a basically fully 100% probability of a September rate cut, 25 basis points of price, then 60 basis points of rate cuts now priced in by the end of the year. So big market moves in the US.
I'm going to talk more about the market price action later on in the show. But now let's talk more about politics. President Biden has vowed he will remain in the race even after two critical mistakes in the span of 2 hours at the NATO summit deepen concerns about his mental acuity. I'm determined on running, but I think it's important that I really I allay fears by saying, let them see me out there.
Let me see them. You know, for the longest time it was, you know, why and not prepared to sit with us unscripted. Biden's not prepared to in any way. Well, for more on this, Bloomberg's East Asia government editor Jon Herskovitz joins us now from Tokyo. Well, John, we were talking about how high the stakes were for President Biden yesterday. He wanted to give this news conference
to show everybody that he's got his mental acuity. How did it go? For the news conference. We saw some of the very good and some of the problems we had that stumble out of the gate, mistaking Vice President Harris and calling her Vice President Trump. But he spoke for nearly an hour for
subjects that ranged from Russia to the Hamas war to tax code. So there was a great level of detail and there were stumbles as well. I think if people were looking for things that were encouraging, they could find them. If you're looking for troubles in there, they could probably find them as well. It was a very high stakes news
conference where everything was under scrutiny. And it looks like this is the type of thing that's going to be going forward with the public appearances for Biden from here on out. And in terms of how the reception has been, again, yesterday we were talking about an increasing number of voices within the Democratic Party putting pressure on on Biden to think about stepping down. What has been the reaction since this press conference? Have more people come out and started to say a similar thing? Yeah, I think immediately, almost immediately after the news conference ended, I think there were three Democratic lawmakers who joined the bandwagon asking for him to step down. And we're seeing some meetings going on at very high levels. There's been some reporting that perhaps President Obama may be involved, former President Obama may be involved.
And you have the leaders of the party in the Congress, Minority leader Nancy, I'm sorry, former House Speaker Pelosi, Senate Leader Schumer and Hakeem Jeffries, current that minority leader in the House all weighing in on this, are looking to get in. So the the the lawmakers are showing that they are concerned. We have more joining the calls for him to step down. And we also have people who are standing
by the by Biden as the nominee for the Democratic party. Yeah, I mean, it just feels like it's yet another event where the summit itself where the event itself has been completely overrated by conversations about the mental states and acuity and physical ability of President Biden. But what have been some of the other major developments from the NATO meeting? And the main thing was to just show the importance of this alliance on its 75th anniversary. It's been one of the most successful military alliances in modern history.
It's been called on to do so much more now because of Russia's full scale invasion of Ukraine. Ukrainian President Zelensky was there seeking support. He was also seeking an invitation to for his country to eventually join NAITO, which didn't come. In lieu of that, he received more support militarily for a long range air defense systems, a plan to provide for the military for several years down the road. He also had meetings with various people, leaders who were who could tell him what they could and couldn't do.
So that was part of it. Also, this was a firm stand against Russia that came out of the meeting. There were also some tough language towards China as well. Some of the hardest Xi's language that's
come out of NATO's directly looking at China, talking it, talking about it being an enabler for Russia's war in Ukraine. Yeah, pretty strong language there with that declaration that that was issued to Bloomberg's East Asia government editor Jon Herskovitz. Thank you for the reporting the last couple of days. Let's bring in Mitchell Rees, distinguished fellow at the Royal United Services Institute. Good morning to you, sir. My question is, is President Biden going to be able to continue? Will he end up being the candidate for the Democrat Party into the next elections? Well, it's clear that he certainly intends to be that candidate. But there are forces beyond his control, as we just heard. There are prominent voices within the
party that are calling on him publicly to step down. The key thing to watch is the money. Are the big donors closing their wallets or will they continue to support the president all the way through to the convention? And that is an ongoing drama. And the performance of Naito, I think, was a mixed bag. Clearly, he's knowledgeable about foreign policy. That's not new. But these stumbles are not going away.
And now the media is placing the White House under increased scrutiny, perhaps to make up for perhaps a little bit of inattention to the president's mental state over the past year or so. Yeah, I mean, that is clearly dominating the airwaves, as I was just talking about with my colleague. It seems to me that if if President Biden were to decide not to run, it would have been because he himself chooses not to and he announces to perhaps in the next couple of weeks before the convention or he's forced not to run because so much pressure is being applied from within the party. But under what conditions do you think would he himself decide to step down? What would need to happen? Well, I think it would have to be the people closest to him that are having an intervention and basically looking at the polls, looking at his health, realizing that whatever he has all day, it's not going to get any easier or better. And it's not just a question of getting
to the convention or getting to the election in November. It's the prospect of four more years in probably the toughest job on the planet. And he's 81 years old now. He'll be 85 or 86 at the end of four years. Is this the type of dynamic, vital leadership that the United States needs and the world needs, frankly, and can he provided? And I think that the questions are coming hard and fast. And the answer increasingly is no.
Three quarters of Democratic voters are saying they would like another candidate. So we know that the press governance, that's a big part of his appeal. He's tough and determined, but it doesn't look good for him in order to either to stay in or if he does, then to to beat former President Trump. I honestly didn't realize the polling was so high. Three quarters of Democrats want a
different candidate. That's pretty damning. So who is likely to be that candidate? Would it be necessarily the VP, Kamala Harris? Well, I think that's the likely choice. And again, there are some advantages for doing that. Some people could see continuity. She would be able to tap into all the money, roughly around $91 million that the Biden Trump team have dedicated excuse me, the Biden-Harris team have dedicated to the campaign. That would give her an enormous head start.
And there's also the identity politics. She's a female. She's African-American. Would be very difficult for the Democratic Party to leapfrog her and select another candidate.
And right now, there is no other frontrunner other than her. There's a few names being mentioned, but I think it's very likely that she would be the the baton carrier for the Democrats going into November. Let me ask you how you think the perception of the rest of the world is. Again, this NATO's summit heralded as a very important summit, 75 years, some huge announcements vis a vis Ukraine.
And yet once more, the airwaves were dominated by discussions around President Biden and his physical health. How do you think world leaders feel about what is happening right now with the US going into the elections and the uncertainty around who the president's presidential candidate is going to be, and also how the context may change if President Trump does come back again? Well, I think you put your finger on it. It's the uncertainty that is giving allies some pause and some concern. But let's take a step back from the particular situation. Any time there's a question about U.S.
leadership in the world, America's allies and friends get worried. They get worried about our constancy. They get worried about whether we will continue to play a leading role in helping stabilize and increase prosperity for countries around the world. So this is really the latest. Whenever there's been a hiccup in the White House, President Trump getting re-elected, I think is also a question. But again, it's a change in party.
They're used to President Biden. This would be a change back for some of them. That's not welcome. But I think for many others, secretly they would welcome a Trump presidency. Trump had some foreign policy successes during his his term in office. And I think that the criticism that we're hearing of Trump is a little bit overblown. I don't believe that he would withdraw the United States from NAITO. There's not a consensus within the
Republican Party to do that. In fact, the leadership just yesterday came out supporting NAITO and supporting America's membership in Naito. And then legally, you'd need two thirds of the vote in the Senate in order to officially withdraw the United States from NAITO. And that's not going to happen. Yeah, very clear.
Well, we'll definitely pick up the discussion in the next few months as things heat up into those elections. Mitchell Reece, distinguished fellow at Royal United Services Institute. Thank you. Still ahead here, why our capital expects two Fed cuts in the year and the later part of this year. Head of Asset management Aarti
Chandrasekaran joins us next. This is Bloomberg. This morning. CPI inflation for June points to encouraging further progress towards lower inflation. Notably, the core CPI increased just 0.1% in June, with a decline in goods prices offsetting a modest increase in services prices. St Louis Fed President Alberto Musallam on the latest inflation prints out of the US, which cooled broadly in June to the slowest pace since 2021.
Core CPI rose just 0.1% in May, sending the strongest signal yet that the Fed could cut rates soon. Let's bring in Aarti Chandrasekaran, the head of asset management at Shaw Capital. Well, a bit of a downside surprise to the CPI. I would have thought it would be better for equities to see such a cool prints, and yet that wasn't the case. Why not?
I mean, it was better for for the small and mid-cap index, but not definitely for the S&P 500. I think, as far as equities market is concerned. All eyes is on the earnings, of course. Right. So you have a quarter to earnings card fed by the bar for corporate earnings is extremely high for quarter two and this is on the back of a not so great quarter one in terms of earnings call, especially for the consumer names. Maybe saw a lot of profit warnings from the like of the Walgreens from the likes of the a lot of other consumer names as well. So as we enter into into the earnings
season, I think it's all about earnings expectations will not be met. Well with the management guidance we asked for all those days before. Will everyone be able to be actually carry on the sentiments and and will they not be any risk on the multiple so far? So I guess it's all about earnings. It's all about the pumped up expectations that we have. Right. And of course, the earnings season does kick off today with the US banks, but it feels as though the big theme yesterday as far as the price action is concerned, was that rotation that took place out of big tech, out of Magnificent Seven into the broader index. Do you expect this type of rotation to continue? Is it going to be sustainable or is it just a one off event that happened yesterday, but then the dip buyers will come back in again to support this market? I think it's a bit too early to say as far as the small cap on the mid cap is concerned. You know, the reason why it rallied as
today was obviously because of lower inflation draw a lower rates, which eventually will feed on to the consumption and the consumption patterns of the consumers will change and that will feed onto the earnings of the small cap and the mid-cap names. So everything boils down to the earnings, the earnings for the rest of the S&P 500. Beyond the tech, if you look at it, it's quite steep. You're talking about a 7% earnings growth for quarter two, much higher than quarter one, much higher than the expectations of quarter one. And going into it, it does look like that could be some of the some of the reversals that could happen if those earnings are not expectations are not met, especially so for for the consumers, for the retailers, for the industrials, for the cyclicals. Yeah, And I see it as a twin issue there because the estimates are high, but then also valuations are high as well. So there are two bars that they need to
cross. Let me turn our attention to fixed income. The market is basically 100% pricing in the possibility of a 25 basis point cut at the September meeting.
Have markets gone ahead of themselves? Is there any way that the Fed doesn't cut in September? It's your mind. I don't think so. I mean, let's take a step back and think about it. Right. So we have a court every pretty much every single data over the last 12 months has actually slowed considerably. Look at the PCI. You're talking about a 2.6 versus 4.1 last year. A core CPI that I came that came in today is 3.3 versus 4.8 last year.
Consumption is slowing to 2% this year from 3% last year. Private sector jobs have actually slowed from 400,000 230,000. An employment rate is inch up from 3.6 to 4.1.
Every single data has moved to. What hasn't moved is a Fed funds rate at five and three and eight, which which is why we think the Fed funds rate is not exactly the right number to be. It has to move down, down the line 50 basis points this year and probably a bit more by next mid of next year. I'm looking more at about four and a half or four and a quarter by mid of next year. And even then it's super restrictive.
Even then it's restrictive enough to keep the lid on the inflation in my view. Okay. So if we end up at four and a quarter, where do ten year yields ends up because we're sitting at around four and a quarter right now. I think that's that's that's where the steepening thing will start playing out. What what typically happens, I mean, in my view is that the dynamics of the short term and the short end and the long end of the club is playing out. Once the cutting cycle starts, we will see the short end will have an ample room to decline. But the same cannot be said on the long
end of the curve because that is actually where the supply starts getting into the question. That's that actually boils down to the fiscal concern of the economy and then and a lot more things that actually start happening on the long end of the club. So that could be a twist deepening of the call where the long and can actually stay there or could even sell off while the short and could start to rally. So I think as we walk into the end of this year, we have to brace ourselves for quite a steep alcove and a steepening of course. Yeah, bull steepening, to be clear, because it's led by the front end of the yield curve. Artie, Senator, second, great to have you with us on the show, the head of asset management at Shaw Capital.
Also coming up, more drama for Kenya. President William Ruto fires most of his cabinet members. We'll have more on what this means for the country and his leadership next. This is Bloomberg. Welcome back to Horizon's Middle East and Africa and London. Kenya's president, William Ruto has dismissed most of his cabinet after deadly protests against his tax plan to raise more than $2 billion. Ruto has been trying to push through deeply unpopular tax measures to stabilize government finances and gain access to new funding from the IMF in line with the powers. Given to me by Article 1521 and one 5 to
5 be for the Constitution decided to dismiss with immediate effect all the Cabinet secretaries and Attorney General of the Republic of Kenya. Of the Cabinet of Kenya. For more on this, Bloomberg's David Malanga joins us now. Clearly, the president is under a lot of pressure, but why did he dismiss his cabinet? Well, money, your money.
The short answer is because the protesters demanded that he does that. I mean, they have been on the street for the past few weeks demonstrating against that hugely controversial tax bill, and they demanded that he withdraw it and the government lives. And this is because, you know, they were being asked to pay a little bit more than they thought they should be paying at a time when economic times are really, really tough. So he went ahead and, you know, dismissed most of his cabinet. It's just himself that is remaining, as well as the deputy president who is constitutionally protected in that trial and the prime cabinet secretary who doubles as the foreign minister. He said that, you know, he has listened
to the people and he needs to find a way of dealing with, you know, the heavy debt that he inherited that Kenya is dealing with as well as, you know, make the government more efficient. And he needs a broad based mandate to to do that. Yeah. I mean, you know, you think about the problems facing the Kenyan economy, the riots, the needs from a fiscal perspective, and dismissing the cabinet isn't going to make those problems go away.
So what options does the president actually have going forward to help tackle and deal with these issues head on? The challenge really is going to be for him to try and find a balanced way going forward, and that is, you know, find a path that does not return the Kenyan economy to the hole it was in. I mean, when he came into power, you know, like you rightly said, the economy was really doing badly. The currency was, you know, tanking the way, you know, net outflows from from the stock exchange. And it was already in that distress.
So, you know, to to to to deal with that. He came up with this really ambitious fiscal consolidation plan, which was based on revenue generation and getting more revenue into into the Treasury. But it looks like, you know, he stepped a little bit too hard of the cuts for for for for for the masses to to to to to accept. So he really has to find, you know, a way that does not take the economy back, but also generate jobs for many of the young people that were on the street. And MF came out yesterday actually saying that they believe they can work with their working with Kenya to find a balanced path going forward.
And as you know, the IMF is really a big part of this story. So it remains to be seen whether whether that will actually happen. Yeah, a lot of turmoil politically and economically. Bloomberg's David Malinga, thank you so much. All right. A quick look at equity futures now.
We talked about the close yesterday, not a pretty one for us and Nasdaq, particularly the Nasdaq, which was down 2%. But today they're leaning flat. S&P futures basically trading around flattish, NASDAQ slightly weaker to the tune of a 10th of a percent. Coming up in a moment, we're going to be talking about Saudi Arabia.
Stay with us. We'll be right back. Good morning. This is Horizon's Middle East and Africa. Top stories today. Cooling US inflation sparks a rotation out of big tech and a slump in Treasury yields. Meanwhile, the yen swings as Bank of
Japan rate checks add to speculation of an intervention. President Biden says he remains determined to seek re-election, even as fresh verbal stumbles further heightened scrutiny of his campaign. Plus, Kenyan President William Ruto dismisses most of his cabinet. It comes after axing his tax plan due to deadly protests and a moody's downgrade. It's just gone. 8:30 a.m.
across the Emirates, 5:30 a.m. here in the UK. I'm just going to Versace in London. Well, let's get you up to speed on some of the price action yesterday. Wall Street, big pullback. S&P down almost 1% in the in the trading by the end of the trade yesterday. Nasdaq down 2.2%. This after that, weaker than expected CPI prints, core CPI coming in at 0.1% month on month below expectations, a
0.2. That spurred also a massive rally in fixed income. Let's just take you through the price action that we saw in ten year yields, down about 12, 13 basis points throughout the course of the session yesterday and the dollar also dipping. But here you can see US yields. Now, we've retraced some of those steps, still about six basis points lower after the last couple of days.
The market is fully pricing in a rate cut in September, about 60 basis points price then by the end of this year. Let's also check in on how markets in Asia are faring. Avril Hong is in our Singapore studio standing by In April, did you get a bit of a tech sell off as well in the Asian session? Yeah.
Investors in this part of the world also rotating out of the big tech names. TSMC is the biggest drag on the stock gauge for the region and on the Taiex. The tech rich gauge is also the ones that are leading declines in the region. The Nikkei getting a bit of a further headwind from the knee jerk reaction to Japanese equities after the yen actually saw a bit of sharp gaining after the US CPI print. Now Hang Seng is the outlier today. It's interesting we're seeing the Chinese tech names doing well. Maybe there is that expectation of some near-term catalysts into the third plenum that takes place next week. The CSI 300 is negative.
This is against the backdrop of that big miss on China imports data for the board. Take a quick look at what we're seeing on the yen. As I said earlier, there was a sharp move for CPI print that spurred speculation that we actually saw Japanese authorities intervene in the market. If they did do so. It doesn't look like it was terribly effective, though, because look at where the yen is now versus the greenback back above that 159 level tomorrow. It looks remarkably similar to that ten year yield chart. So you wonder whether it's intervention
or just that market price action based on what happened with the USD APR. Thank you so much for the overview. Now, Saudi Arabia is likely to cut billions of dollars in spending on some of its biggest development projects and place other plans on hold. That's as the Kingdom grapples with the scale of its vast economic makeover and faces budget deficits until at least 2026. Projects, including the Neon Project, are said to be facing lower than requested funding.
Joining us now for more on this is Bloomberg's Middle East finance reporter, Zainab Fattah. And Zainab, let me just start off by asking you, how big are these budget cuts planning on being? Good morning, Jomana. Yes, the budget cuts are pretty much wide and sweeping and basically focused on certain projects. So sources are telling us that there is a sweeping review happening right now. All projects in the kingdom and this is being overseen by the de facto leader in Saudi Arabia, Mohammed bin Salman. They're trying to reprioritize these
projects and figure out where they want to go first, where they want to slow it down, where they want to cancel it for now and wait for demand to catch up. The result is that we're hearing Neom got about 80% of the requested budget approved for this year and this is the first budget cuts that they have since they started. At the same time, we have projects like the coast, which is in Jeddah being kind of scaled back. It's a $50 billion project that's going to that was going to be mostly focus and entertainment and hospitality. We're seeing projects across the board also go through certain cuts here and there as the government has to grapple with the reality, which basically they have to deal with lower FDI and the rising costs because of the competition between these projects and the enormous amount of money that's needed to fund such vast projects across the kingdom.
Yeah, I mean, one of the booming sectors in Saudi Arabia has been the construction sector. There's still been a lot of allocation going into construction because of all of these plans. How are these likely spending cuts going to impact construction companies? So there are a couple of things happening. On one hand, we see Saudi Arabia prioritizing projects in Riyadh and putting more money into them. So like that idea and the project, the King Salman Airport projects, those are going ahead and money is being allocated for them because Saudi Arabia wants, on the one hand to be able and ready to host the Expo 2030 and possibly be able to host the World Cup if they actually get the rights for it. That meant we're not seeing wide scale
job losses across construction in Saudi Arabia. Mostly contractors are telling us while we're kind of cutting on the Neom side and the Red Sea, we're seeing a lot more resources and projects being awarded in Riyadh. Interesting. So it's almost like a reallocation of resources when it comes to construction because of those potentially big events coming up. Bloomberg's least finance reporters. And in fact, I thank you. And of course, you can read the full article on the terminal. Joining us now is Carlos Slim Mena, economist at Standard Chartered.
Good morning to you, Carla. Let me just ask you if you know, when you hear stories like this and the fact that Saudi have had to re-evaluate where their spending is going and how much they're spending, does it change the picture for you on Saudi's economic trajectory over the medium term? Good morning, Alina. Absolutely. When we look at the readjustment of investment capital allocation in Saudi, we would argue that the positives of this of this readjustment is actually outweighing the negatives of the readjustment and that the concerns and the considerations on funding on the external sector, because these projects consume a lot of affects reserves by way of paying for a higher import bill. The liquidity considerations, as well as the focus on the return on investment.
All of these considerations when we see the readjustment of the investment allocation is actually positive. Now, at a micro level, specific companies that are in the construction sector, yes, may have to reposition and realign with the government's priorities, whether it's by area, as Zainab was explaining earlier, or by specific projects. So there is a downside in plans that the construction companies may have had for 2024 and beyond. But overall, from a macro perspective, we do see positives. Saudi Arabia has been the largest bond issuer this year, even more so than China, which is an amazing statistic.
And the question that I always get asked from people outside not so familiar with the region is whether Saudi Arabia are beginning to face serious funding issues because there has been a pickup in bond issuance. You see the secondary sale offering for Aramco, raising the Aramco deal, etc.. Broad Broadly speaking, there's been a pickup in capital markets activity. Is this a reflection of Saudi Saudi's finances getting squeezed? And if so, is it worrying? ROMANO When we look at the fiscal performance to date and when we look at the fiscal performance into the future, it does seem that the oil prices currently are trading below the breakeven of Saudi Arabia and that the fiscal deficits will have to continue being funded by both external issuance on the Eurobond front, but also domestic issuance on the local currency front. So yes, issuance is rising, public debt to GDP is rising from a moderate pace. So we're starting from a 25% of GDP base. We will probably see public debt to GDP
increasing to about 30% of GDP when we add to it the state owned enterprises debt as well. That puts the debt to GDP of the public sector closer to about 50%. So that is on the rise. But as long as growth continues to be positive and be close to what we estimate is a non-oil sector growth of 4%, then we're not concerned about the funding constraints for the economy. The economy is borrowing and Saudi is borrowing to grow and to structurally expand its non-oil sector, which is now about 20% larger than the pre-pandemic base. Yeah, yeah. I mean, obviously that's been a big push for Saudi 2030. That essentially is what Saudi 2030
vision about. It's not just about building projects like Neom, but about diversifying the economy. Let me just ask you the other question that always comes up, and that is one that pertains to oil, the price of oil. If oil stays where it is right now, $85, it feels as though that there's less pressure on Saudi public finances. But the picture could be very different, say, if oil were to drop to $70. So how dependent is the Saudi Arabian economy at this stage still on where the price of oil trades. Downside risk to oil prices remains the
key risk to not just the Saudi economy, but most of the economies in the U.S. or in the MENA region that are oil exporting economies. And yes, diversification efforts have made progress. We've seen some progress on the non-oil sector expansion.
We've seen significant progress on the public finances, with non-oil government revenue constituting constituting a larger share of total government revenue. Where we also need to see more progress, especially going forward in the next phase of diversification, is on the external sector, so that funding coming into the economy becomes less correlated to oil prices, and non-oil exports can make up a larger source of proceeds into the economy. The other big question mark for the Saudi Arabian economy and indeed for the region as a whole is what they can do to attract more FDI. I actually put that question to the Saudi finance minister, Jordan, a couple of months ago and what his response was. FDI in general everywhere has slowed down, but it does feel that it is rather pronounced. Also, when you think about the money that's going into Saudi Arabia, is there anything they can do to attract more foreign money? I think the structural reform momentum will likely continue in Saudi Arabia and in the rest of the history of many economies. Also focus on the FDI angle of
diversification and attracting more funding into the economy. The interesting part that we are seeing in Saudi by way of reforms and progress is also on the local currency debt issuance front, where Saudi is not only looking to attract FDI and is trying to implement the reforms that would be conducive for higher FDI, but also putting in place the building blocks to begin attracting a larger share of foreign investment and to local currency debt markets to diversify sources of funding dollar funding into the economy. Yeah, very clear. Carla, great to have you on. And hopefully next time I'll be with you on the sets in the in Dubai. Carlos Slim, the MENA economist at Standard Chartered's, thank you. Now for a look at some of the other stories we're following this morning.
Key Republican lawmakers are calling for a formal intelligence assessment of the budding partnership between Microsoft and Abu Dhabi AI firm G 42. US officials are concerned China could access sensitive tech through its links with the Emirati company. Microsoft announced it would invest $1.5 billion in G 42 earlier this year on a key promise the firm would fully decouple from China. Tesla shares fell after it postponed the unveiling of its robotaxi until October. Sources tell us that the carmaker wants
teams working on the project to have more time to build additional prototypes. Optimism over the launch, originally scheduled for August, had contributed to an 11 day streak of gains for this stock. And coming up, the trial of a Binance executive held in Nigeria is set to resume. More details next. This is Bloomberg. Welcome back to Horizon's Middle East and Africa. I'm sure a lot of research in London and American finance executive is due to return to the courts in Nigeria, facing charges of money laundering and currency speculation. US Citizen Trigger on Cumbrian was
arrested in February and US lawmakers who visited him last month said he was wrongfully detained and in poor health. But Nigeria says he's being held lawfully with full access to medical care. So a bit of a political issue emerging. For more on this, Bloomberg Nigeria
bureau chief Anthony Brown joins me now. Anthony, just bring us up to speed on this case. As I said, it seems to be an increasingly political case and a situation that's emerging between the US and Nigeria at this point. Yeah, it is increasingly political
because yeah, so a good friend and colleague were invited to Nigeria, RC Warri, and then to come and discuss finance operations in Nigeria. Subsequently, the discussions didn't go too well and two of them were arrested and detained. One of them escaped and got round, couldn't escape. So he so he has been on trial since March or thereabouts, and he's been detained in one of the prisons in the capital, Abuja, not to a notorious prison cell.
And he has been there since then. U.S. officials are complaining that he's been all well and badly treated and they want him they want the U.S. to use his powers to get him released, returned to his family. So what actually does happen next? You say that he's detained. You know, give us give us a path forward
and what happens in terms of a next steps and the possibility for the detainee to actually be released? Yeah, that's a bit tricky going forward. She's still on trial. The Nigerian government insists that he's being legally tried and that they are not going to release him onto the trail and is being accused of that. My little Audriana tox additionally is
being tried along with banners. His next court appearance is Tuesday next week. Basically, weaknesses are being called there to present evidence against the my opponents is a bit tricky to see how this progresses because personally is being tried as a representative of the company and is legally don't is a bit confusing on how he's personally liable for the stance of his company. So the trial is going ongoing, massively up in court and the court will decide. We'll hear more witnesses and expecting to be free on that. Did he after the court speaking, after
the prosecution presents all his weaknesses with that team, was that his defence? That's still a long way away. And so the trial will continue and we'll see how it plays out in future. Yeah, Definitely want to watch Bloomberg's Niger bureau chief, Anthony Brown, thank you so much. Coming up as well on our show.
Well, celebrities from Kim Kardashian to David Beckham are expected to join some of the biggest names in global business at a lavish family wedding thrown by Asia's richest person. More on the star studded event next. This is Bloomberg and, of course, it's Friday. Welcome back to Horizon's Middle East and Africa.
I'm Jomana Versace in London. Shares of the biggest US banks have been on a tear this year with all but Morgan Stanley outpacing the S&P 500. Jp morgan City and Wells Fargo kick off quarterly earnings today with net interest income, investment banking and a rebound in loan profits in focus. So joining me now is Bloomberg's Charlie Wells. Charlie Strong start of the year for some of these banking stocks, up more than 20%. What has been driving them so far as we look into this earnings season? It's been a really strong future story for these banks. And so forward earnings per share for
the next 12 months for banks have actually been about as positive as they've been since the middle of last year. There's a lot of momentum there, and a lot of that has to do with optimism about a Fed rate cuts. But this just this isn't just about Fed rate cuts. Banks, of course, are some of the most regulated industries in the United States. And actually they've been on a pretty positive footing with some regulation recently. So, you know, they they just pass their Fed stress tests that allowed them to increase buybacks, to increase dividends, shareholders like that. And also they're pretty happy about how
it's looking on that Basel three end game. A lot of those capital requirements that they were fretting about last year look like they could be less stringent. Yeah, and certainly that's one of the less talked about things that came out of Pell's testimony earlier this week. We're also focused on the inflation picture. But what what else should we be watching out for in these results? So with Jp morgan City, Wells Fargo all reporting today, where could the wild cards come from? Oh, so they have been sending some really strong smoke signals about investment banking fees. And so Citigroup reporting in just a few hours saying, you know, fees there in the quarter could be up 50% from the year before.
Jp morgan, 30%. You know, it was a low bar from the year before, but they've really got to meet those beat or exceed those expectations. And also the American consumer. The reason why we care about these banks, where we talk about them, they give us an insight into that US consumer, if loan loss provisions, if delinquencies are looking like they could be up, that could also put some unexpected strain on these bank shares. And you know, I can't have you here without bringing in some of the price action, especially yesterday post CPI. The market is pretty much set on a
September rate cut. Now, if that does happen, it looks like it will happen. How does that affect the big banks? So that could spell some good news for deals. It could create an even more positive environment for those to take place. It could take some of the strain off the consumer. So, you know, make credit card delinquencies look less bad, maybe kind of reduce those. But it could also bring some positive,
positive news for, you know, net interest income as well, taking some of the pressure off deposit costs that these banks have increasingly been feeling. Yeah, Well, Bloomberg's Charlie Wells, thank you so much for the preview. It's going to be a big a couple of days, a couple of weeks for the earnings season in the US. While the son of Asia's richest man is getting married today after months of lavish celebrations, Ananth Ambani will tie the knot in front of the world's most famous celebrity. Somehow he didn't get an invite. And biggest names in the global business.
A-list performers, CEOs and world leaders are all part of a lavish wedding celebration that is spanned across India, Gujarat to Italy's Portofino, Ambani said, pulling out all the stops for their son and his soon to be wife, Radhika Merchant. After more than 130 days of pre-wedding events, the couple will finally tie the knot this week in a 3D ceremony where Boris Johnson and Hillary Clinton are reportedly on the guest list. The extravagant celebration is a testament to the ballooning wealth of Asia's richest person, Mukesh Ambani. With more than $120 billion to his name, Ambani is ranked 11th in the world, according to Bloomberg Billionaires Index. But it wasn't always this way.
Ambani Riches skyrocketed only after overcoming a year long feud with his younger brother after their father's death in 2002. Mukesh Ambani then took the reins of Reliance Industries, an oil refining company. And I was trying to. Sectors like technology, consumer, retail and renewable energy. In the last decade, reliance on investments from Google and after investment authority among others. Now on and his siblings Bhushan Prakash,
heirs to a staggering fortune under India's largest private conglomerate. So that's one of the events for the weekend. And of course, anyone who's into sports will know that it's the Wimbledon finals coming up. And of course, that you're a final is a coming home for England. On a personal note, I've just got to say I'm wrapping up my week of doing the show out of London this week, but I fly out at 8:45 p.m. on Sunday evening, which means I get to watch the first half of the match, but not the second half.
The question that I have to viewers is should I change my flight to watch England bring it home? What do you think? That was her sense of at least in Africa. I just want to Versace in London. Stay with us for a break here. This is Bloomberg.
2024-07-16 20:22
