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Watch 'Bloomberg Daybreak: Middle East' Full Show (03/22/2023) - Bloomberg

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00:00This is Bloomberg Daybreak. Our top stories this morning. Markets countdown to the Fed's decision with financial stability and focus rate hikes. Doubts are creeping into the bond market for the first time, this hiking cycle. The latest on UBS, it looks like they may cherry pick the top deal makers from Credit Suisse. That's the Swiss government freezes different bonuses for CEOs, bankers. Bloomberg learned that Wall Street leaders and U.S. officials aren't discussing a potential intervention of First Republic Bank could include government backing bond markets in some of the world's most vulnerable economies or flashing default warnings. Comes as turmoil in the US and European banking system makes it even tougher for emerging nations to borrow and repay debt. We'll have the details just gone. 8:00 a.m. across the Emirates. I'm Yousef Gamal El-Din in Dubai. We're counting down to the Fed decision. Just a few hours to go when the S & P 500 many caution returns after the enthusiasm and the prior session to the upside. We are just barely above the flatline here on the S & P 500. Many are also looking at U.S. treasuries where J.P. Morgan is identifying the worst liquidity since 2020. U.S. tends to 357 90. Your Bloomberg dollar index is unchanged and the Brent crude just short of seventy five dollars a barrel. Standard Chartered is saying that the unwinding of speculative oil longs well, that's going to likely be done, at least for the moment. I want to talk about rates, volatility as we look forward to the Fed. This is your actual as opposed to imply an expected volatility in two year treasuries. That's eclipse to swings during the global financial crisis. Shout out to David Ingles. The key difference? Some market are coming out are more a decade of lower interest rates. The clear anchor for the Fed path should trim the tail of the rates distribution, but the dislocations and the volatility surface, that's going to take time to normalize. And remember, Jay Powell summed it up in the February press conference and he said certainty is just not appropriate here. And that is very much getting reflected in this trade. I want to talk about First Republic Bank. Another day, another set of events. This time, a Bloomberg scoop that is suggesting that government backing is one of the options that are being considered. This is what the stock's done over the last 20 days. Losses close to 90 percent. But with the Bloomberg scoop, you've seen a little bit of a stabilization. The understanding being that there could be an attempt to try to shore up the lender. This is according to people familiar with the matter. The firm's unrealized losses have been a sticking point. There are other ideas floating around, and that includes offering liability protection as well. The talks are still very much ongoing. I want to get out to the markets in Asia more broadly. Yvonne Man joins us from our Hong Kong studio for more on. Yeah, it's the calm before the Jay Powell press conference really in Asia. We're seeing quite a bit of risk rally here for a second day. As you mentioned, it seems like the banking sector woes have faded a little bit. We heard from Janet Yellen, the treasury secretary, overnight, saying that they could be looking at certain types of rescues or interventions for other banks as well, if, in fact, that situation does arise. So that is certainly lifting risk sentiment here leading up to this Fed. And we are leading but a lot more closer to a hike of 25 basis points. That's about 80 percent chance now versus maybe about a week ago when this was all kind of a toss up. So you're seeing the NIKKEI of some 2 percent in Tokyo equity gains or continue across the board here, 1 percent gains for Singapore, Taiwan and Hong Kong. The dollar's pretty steady right now. You are seeing actually given what we see in commodities, that's the better read here this morning with iron ore down some 2 percent. But is that yield pickup that we're seeing that we saw with treasuries and now we're kind of falling through in the Asia Pacific. But as you mentioned, the volatility may be suggesting that after 25 basis points, we could be seeing a signal from the Fed that they could be done with this pandemic tightening cycle. So that's not what the market is leaning towards in terms of what we're focusing on in terms of fundamentals. It's the earnings, earnings, earnings in Hong Kong and 10 cents really is going to be front and center the next few hours or so. So analysts are expecting that they could be snapping out of two consecutive quarters where revenue has contracted. So eking out a small gain potentially here we're seeing the stock up some 2 percent. It's all about advertising demands, all about getting approvals and what the company is going to comment on that. Neal, this isn't one of our interviews. Our CFO this morning confident that they could reach that sales target this year. The stock up some 7 percent. Jihye Lee auto also upbeat when it comes to their earnings. And we're watching all these chip makers as well. Given what we're going to talking about here, the bottom ministrations set to impose more China curbs on some of these chip makers. So watching the likes of Samsung Electronics today, Youssef, thank you for the roundup, but we'll check back in with you later on in the show. That's Yvonne Man there. I wanna talk about what Bloomberg's learned around UBS because apparently they want to cherry pick the top deal makers from Credit Suisse instead of supporting a plan to spin off the First Boston brand as an independent firm. For more, we're now joined by our finance reporter to be Yvonne Man in Sydney, Nabila. Why is it likely that first Boston just isn't going to happen? And how exactly does that play into UBS is thinking? You said this is about UBS valuing Credit Suisse's existing investment banking operation. So we're talking about the advisory business here. So the bankers who advise clients and deals, not the trading side of that business. UBS does see some value in that and it wants to cherry pick the best bankers out of that in areas like media technology. There's some spots where UBS doesn't have as great a coverage as Credit Suisse. So they want to be able to take those bankers and put them into their investment banking division. So if you do the spin out of Credit Suisse First Boston, this idea that was floated last year, then you lose those bankers and you're creating a competitor as well. So why would you want to do that? This is why UBS is saying no to that first Boston idea and they want to just keep those best bankers within their group. There is also news about bonuses getting deferred. Which parts of the bonuses are still going to get paid out despite that? So the cash is still getting paid out, Yousef. But the deferred stock bonuses that pot has. I mean, that already had lost so much value. So on Bloomberg calculations, those deferred stock fell by about six hundred million dollars. So it was worth a lot less than when they were promised in the first place. But they are now being frozen by the Swiss government temporarily. We don't know how long for. But the bankers will still get the cash. Yeah, we will, of course, continue to monitor inventors any update. Temporary usually is a bad sign of anything. Nebula. Thank you for the moment. That's Bloomberg Real Yield man in Sydney now. Fed policymakers are trying to balance their inflation fight with sudden turmoil in the banking sector. We count down to their policy decision late on Wednesday. Global economics and policy ended. The Kathleen Hays is in New York. Kathleen, the markets are coalescing around 25 basis points. There's a growing consensus on that front. Do the Fed watchers agree, including yourself? Well, because I've talked from the very beginning to a couple of people that I think are are wise and prudent that they would they might go ahead and do that with the 25 basis point hike, especially if it would depend a lot on how much this this sudden wave of banking crisis that swept over the U.S., swept over Europe. How quickly that dissipated. It's not done. A lot of experts say, look, banking crises can kind of pop back in and out. So we can't be counting on this 100 percent, but that there is this now. OK, so what they can do? Twenty five European Central Bank did 50 because they got such a big inflation problem. U.S. still has very high inflation. So the signaling the communication will be so, so important. Markets are now just about, you know, it is 80 percent chance that they'll get the 25 basis point hike. And the question to then is what happens beyond and more and more markets and pricing in something like a one more 25 basis point hike, maybe two more low. So much will depend on what they do and say yesterday, particularly with Jay Powell says at the presser and certainly what the dots show. What do you do in March? It was March of 20 20. But early in the pandemic, the Fed skipped one of its dot plots. It probably was the first one when they had done some big rate hikes really quickly. But they're not expected to do that again because that would signal, oh, they are really worried if they're not going to put the dot plots up. But what do you say if you're if everything's so uncertain, 5.1? That was the consensus for the terminal rate when they met last lasted their economic forecasts and their dots in December. A couple of things are kind of a little more specific, but fun to ponder because it's, again, the press conference, the policy statement. Well, what if they dropped the phrase ongoing increases when it comes to future interest rates? You said that's been in the policy statement for a while now. That would maybe make a little bit of waves in the markets, maybe a rally or sell off. But anyway, and then doves. There were a lot of doves going into this meeting who who had already said they were willing to stay with the 25, see how things turned out? Well, we can see how they turned out thus far. In particular, Steve Matthews on our Bloomberg eco team watching the Fed for a long time notes that the new the new Fed bank president in Chicago, Austan Goolsbee, is seen as somebody who might actually dissent. I would guess myself, though, that they want to show consensus. They want to reassure people and get a big meeting. Big signals, potentially. That's what everybody is waiting for. Yeah, I think you want to stay up for this one at least to by local time. It's quite late given our early starts. Kathleen, thank you for that. That's a Bloomberg Global Economics and policy at the Kathleen Hays. Now the Bush administration is set to unveil tighter restrictions on Chinese operations of chip makers that get us federal funding for more. Let's get now to our chief North Asia correspondent, Stephen Engle in Hong Kong Steve. This is another set of significant curbs. How did they build on what was passed earlier? Yeah, well, we always knew that there's 50 billion dollar Chips and Science Act that came into action when late last year, in October, November in the United States would provide both opportunity for chip makers around the world. But also now we're getting more details of the potential restrictions, because if chip makers want to take U.S. grants or tax breaks, incentives essentially to come and build in the United States, in the chip industry such as Taiwan Semiconductor Manufacturing, TSMC, which is building, what, two plants in Arizona totaling about 40 billion dollars, they have to soon make some choices. They did get a one year moratorium, but kind of an exemption from these export curbs to sell advanced chips into China and advance their factories. But that moratorium is just a year long. So soon choices are going to have to be made. And we're learning from Commerce Department sources and from the Commerce Department themselves that the U.S. debate demonstrates essentially putting caps and is going to bar anyone who takes U.S. federal money under the Chips and Science Act will be severely limited on the amount that they can invest in higher and then even downstream chip technologies into China. In fact, there will be an investment cap of one hundred thousand dollars for advanced chip advancement capacity in China for those companies. One hundred thousand dollars in the chip industry. That doesn't buy much at all in expanding capacity. So you can see where these restrictions are going to really force a lot of these chip makers. We're talking intel. Twenty seven percent of their group revenue comes from China, TSMC, about 11 percent from China and the other Samsung and Japanese players. So this is it. This is potentially, you know, just up in the game for the United States. And the challenge to China and companies that want to do business and high tech and advanced semiconductors in China. We'll leave it there. Thank you so much for that. That's Stephen Engle with the nuanced analysis on some of these developments, Stephen Engle chief North Asia correspondent only get to some breaking lines to Bloomberg on China. Actually, this is on some of the progress that's been made in developing an MRI and a vaccine and that gets approved accordingly. So China has now approved the first MRI in a Covid vaccine made by CSP C Pharma. This is the intraday stock performance so far in the session. Remember that we are, of course, currently on break. We'll see what the investor reaction is after that. So this is a company, of course, in Hong Kong or listed Hong Kong, at least with 25000 employees. Let's get to the first world headlines for you from around the world. Dennis Mills has those medicine things. Yes. Said the U.S. is reviewing whether the impact of Silicon Valley Bank's collapse on Chinese startups was greater than what was disclosed publicly. Sources tell Bloomberg the Biden administration is pulling together data on Chinese companies that may have had accounts with regional U.S. banks. The US wants to know if there's a risk of broader contagion in China. And Japanese Prime Minister Fumio Qaeda made his first visit to Kiev since Russia's invasion. He offered strong support to Ukraine and invited President Vladimir Zelinsky to join the Group of Seven summit in May. She had made the trip after stopping in New Delhi to pressure India's prime minister to join other leaders in shunning Russia over its invasion. Japan is set to host the G7 summit in Hiroshima. The IMF has agreed to reach a staff level agreement for a fifteen point six billion dollar loan for Ukraine. It's aimed at helping promote Ukraine's long term economic recovery and pave the way for entry into the European Union. That loan is still subject to approval by the IMF executive board, which is expected to tackle the matter in the coming weeks. The ECB is asking lenders about indirect exposure to Credit Suisse after finding their balance sheets show few or no holdings of the firm's junior debt. The watchdog is said to be widening its approach to ask banks if they face risks from losing their clients money and their clients losing money. Rather, the takeover of Credit Suisse rendered. Around 17 billion dollars of 81 debt worthless global news powered by more than twenty seven hundred journalists and analysts and more than 120 countries and that of smells. And this is Bloomberg. Thank you. Let's get you a bit of a preview of what else is in the pipeline. Hear why a former World Bank chief economist, Carmen Reinhart, thinks it's too soon to expect the Fed to throw in the towel in their inflation fight. But a first mill, for that matter, has been talks about sectors to watch amid the banking turmoil. This is Bloomberg. I think it is too soon to expect that the Fed will will throw in the towel, so to speak, on their inflation fighting. I think also not a complete pause may not only be counterproductive from the vantage point of the medium term inflation objectives, but also could send the signal that they know something worse that the markets are yet to learn. The Harvard Kennedy School professor and former World Bank chief economist Carmen Reinhart. Extreme volatility in short term sovereign bonds across the world continues amid wild swings of Fed expectations. Elsewhere in the market, we're seeing relative comment of the FOMC meeting on the S & P 500 Mini. We're barely above the flatline, but somebody who is, of course, fully in play ahead of the Fed is will continue. He's the portfolio manager at Milford Asset Management. Well, what are you expecting here? Maybe not as much about whether we're going to be 25 or anything other than that. But what kind of language is going to come with it? We think the language is going to be first and foremost reiterating that financial system is stable and that the Fed will do what it takes to keep that financial system stable. And the second thing is that CAC can save the fight against inflation yet. So once again, reiterating that they do have the tools to fight inflation while keeping the financial system stable when it's done well, that should protect a little bit of calm onto the markets, the markets rallying into this meeting. But, you know, a misstep in language of communication, of course, that is a jumpy market. And we could get an unintended volatility of. Why do you think we're going to see the biggest adjustment post Fed, is it in equities? Is it in bonds? Is there another metric that you're watching closely? I mean, they're real barometers at the moment is gold and crypto at the moment, they were acting quite positively to this narrative that that a pivot may be coming, that the Federal Reserve is having to print money again or expand the balance sheet to calm this crisis in the banking sector. That interest rate cuts will be coming before the end of the year. So those, you know, gold and crypto, very sensitive. So expectations around liquidity and rate hikes. So there could be a parameter to see whether the market is taking whatever seat is to be double shall perish. I mean, obviously, equities and bonds were wrecked as well. But I think gold is right at the forefront at the moment, all of that kind of speed, direction. Well, the biggest fear for a trillion dollars worth of funds for the money money money managers out there is missing the next rally. And as much as funds, including some of your recommendations around cash for 40 percent know that's all good and well. But when and how do you approach a potential allocation? What will be the green light? And where would that money go into? No. That's correct. And it depends where you found funding, where your positions on a personal sense or fund you manage, we went into this recent downturn beginning a favorite 40 per cent cash. We have taken 10 percent of that and put it into the market over the last week. What we've been buying at the moment, we added top gold miners. That becomes a good heat. If the feed ends up having to pump a lot more liquidity to shore up the system, the banking crisis, and that causes a loss of confidence in the EU, we stole it into gold and gold. One of the luck to be a good catch and upside participants in that situation. We actually bought one of the leading banks in Australia, CBA Bank. We'd like the strongest banks in a region because we think they benefit from a flight to safety of the strongest banks. So adding adding some of to that have been enough. And one of the big areas we actually are adding to now is the resources. China tried, so resources, very strong performance since October on the back of China reopening. About half of those gains have been wiped out over the last few weeks. We still think in a world where the Western world, the pricing recession, that iron ore and some of these China resources trades are actually a good place to be. The thing that I'm watching as well and a lot of our global audience is very keen to get your view on the reverberations from SBB in First Republic and the negotiations that we understand to Bloomberg are still very much ongoing to see whether state backing is required. To what extent are we going to see more of that kind of weaknesses in the chain come to the surface? I mean, we we'd like to say internally we think there's gonna be more skeletons that come out of the closet here and we don't need to avoid those kinds of media. Yeah, that's right. We don't think it's only Shery Ahn the banking sector, but it may be the flow on effects to another sector. Could be commercial real estate in the United States, which which takes a lot of its borrowing. A lot of its lending comes from regional banks in America. So where you think that financial system will let you be stable, that the Federal Reserve and central banks will do what it takes. But banks and particularly regional banks in the US for the next little while are going to be very cautious on lending. That cautious as on lending is likely. It have flown a fix to other states that it's likely to cause the fastest slowing of the economy, it's likely to bring forward a recession. Ultimately, what we hope is getting cold off inflation means that interest rates can be hiked. So very much what we're looking at as an early recession and early earlier slowing growth. And that means generally within portfolios it does looking to staples and defense cases the way that they kind of earnings down to. Well, fantastic to see and to get you to weigh in on the Fed a few hours ahead of the decision that so we'll continue as a portfolio manager at Milford Asset Management. So much more to come on DAYBREAK. At least this is Bloomberg. Let's get you a quick check of the latest business flash headlines. Nike says sales rose more than expected as a trim the glut in its inventory that had forced the company to sell products at discount sportswear. Brand says global revenues were up 14 percent in the third quarter, beating analysts expectations or the weakness in China has persisted, with revenues in the region falling almost 8 percent. Beatle group says LNG prices could rebound to one hundred and seven dollars per megawatt hour due to an increase in demand. The company says that China is likely to recover about half of its demand this year after a drop in 2022. The recent slump in natural gas prices has also made the fuel more attractive globally. HSBC, the new owner of Silicon Valley Banks, U.K. ARM, is set to hold its first meetings with the collapsed lenders regional clients this week. According to Bloomberg sources, the bank will meet with technology, start ups and venture capital firms in the UK and Europe. HSBC took over SVP U.K. for a dollar and two cents earlier this month and has agreed to inject close to Iran's two point four billion dollars into the unit. And that is a Bloomberg business. First, I want to circle to the Middle East equity markets. This was the state of play, broadly positive then with the Saudi index up one point four percent. That's a second session of gains with the largest lender, Saudi National Bank. Perhaps surprising as some observers with the upside of about three point four percent. Abu Dhabi was around the flat line and the DSM really breaking a series of losses to finish the day higher by about one point one percent. I want to talk about a story that sheds light on the broader fallout from the SVP crisis. And this goes to Sweden, where the biggest pension fund has lost two billion dollars because of the US bank crises. So the scale of the losses became clearer because the private pension group has sold all of its first republic stake at a loss of seven point five billion kroner. That's according to the CEO. The uncertainty about First Republic was too great, partly due to the fact that the lender was downgraded to junk status. And it is, of course, all coming to light now and more of that will come in the next few days. Much more ahead. This is Bloomberg. This is Bloomberg Daybreak Middle East. Our top stories this morning. Markets count down to the Fed decision with financial stability and focus rate hike. Doubts are creeping into the bond market for the first time, this hiking cycle. The latest on UBS, it looks like they may cherry pick the top deal makers from Credit Suisse that says the Swiss government freezes deferred bonuses for CEOs, bankers, Bloomberg Surveillance that Wall Street leaders and U.S. officials are discussing a potential intervention at First Republic Bank. That could include government backing. Bond markets and some of the world's most vulnerable economies are flashing. Default warnings comes as turmoil in U.S. and European banking systems makes it even tougher for emerging nations to borrow and repay debt. We'll have the details. Let's get straight to the market update for you on the S & P 500, where around the flat line unchanged as we count down to the Fed decision in the coming hours. Bear in mind that we had a move to the upside in the prior session. So perhaps a moment to reflect on the US treasuries. It is a story of lower liquidity. That's what J.P. Morgan makes clear in. Despite that, the pricing has held up quite well. U.S. tens of 358 0 9, the Bloomberg Dollar Index currently front and center at a thousand two hundred and forty points, and then Brent crude to shore to seventy five dollars a barrel. Standard Chartered saying that the uneven unwinding of speculative longs is likely done. Want to get to the chart, the round rates volatility as we consider what the Fed may do. This is actual as a post implied and expected volatility in two year treasuries. That's eclipsed the swings during the global financial crisis. The difference now is that markets are coming out of more of a decade of low interest rates. We're going to get a clearer anchor from the Fed. Well, if we do, that should trim the tail of the rates distribution. But the dislocations, the volatility surface is going to take time to fully normalize. Remember, Fed chair said himself in the February press conference. Certainty. Just not appropriate here. When I get into First Republic. I talked about the impact to pension funds all the way out Sweden. This is a story about First Republic and the Bloomberg scoop that moved the intraday pricing in after hours. It's important to remember that we understand that state backing is one of the options that are being considered. The talks are still very much ongoing between Wall Street leaders and U.S. officials about what to do to shore up this lender. The unrealized losses of this bank have been a sticking point. Other ideas that have been tabled include liability protection, 89 percent of the stock market's value. This stock's value has been wiped out as customers pulled out their money. We're down 87 percent over just 20 trading sessions. I want to get out to the markets in Asia more broadly. Yvonne Man is back with more from our Hong Kong studio. On the first republic is one thing, basically the banking sector here, though, at least HSBC were up for a second day. It seems like those banking woes have subsided a bit. A lot of the focus has now turned to the Fed. And believe it or not, we are actually seeing a rest rally here in Asia really continue what we saw in the U.S. session, as you mentioned. So it seems like the markets are leaning a little bit more towards a 25 basis point hike. The key thing to watch is the dot plot here. And so at least for now, markets are pricing a maybe we'll see that 25 basis points. But potentially the Fed might be done. And take a look how it were fairy here. Equities are up. NIKKEI is up. Some 2 percent. Dollar's pretty steady across Asia affects but a little bit weaker here against the Aussie dollar. We're seeing a bit of recovery here for that currency. Commodities are still seeing a bit of pressure here, but yields really tracking higher for what we saw on the yield curve overnight, as well as up the boards to go to how broad based this rally is, is basically every sector in the green here in the region, really led by the likes of info, Texas Tech, Energy, Consumer discretionary are all leading the charge here today. And it just goes to show right here. Take a look at some of these big, heavy weighted tech stocks like the 10 cent Samsung, TSMC, Alibaba, all of which are gaining here today. The fact that people are really buying into this whole tech story, it really just goes to show that they might think that the Fed might be done right. So Tencent is still one of the focus next year. Earnings coming out. Later on, we see the stock up some 2 percent. Yousef. Thank you. Much of on the great roundup. That's Yvonne Man with the market details. I'll get to the U.S. Treasury Secretary, Janet Yellen, because she has defended actions by the US government to stem a banking crisis in the wake of Silicon Valley. Banks collapse and pledged that there could be repeated if necessary. Take a listen. Our intervention was necessary to protect the broader U.S. banking system. And similar actions could be warranted if smaller institutions suffered deposit runs that pose the risk of contagion. Her promise comes as doubts about the health of First Republic Bank continue to swirl. Bloomberg Simone Foxman joins us now from Doha, Samoan. What message do we get then from Yellen about the path forward? You know, I think there are three pieces of this one, this is not the global financial crisis. Banks are in a much healthier position overall, as is the overall banking system. Number two, she said this situation has improved seeing deposits at some of these regional lenders that have been really at the heart of these market concerns. We've seen them stabilize over recent days and that's something she pointed to as a positive. But number three, don't count the U.S. government out. That, quote, show that that that's what we had just there, talking about how the government could potentially intervene if there were signs that the contagion was spreading, that a banking crisis was starting to get out of control. And that, I think, coupled with some of the scoops we've had in recent days here at Bloomberg, whether it's about, you know, potential backing for First Republic that would come from the government or about, you know, the potential to guarantee deposits in a more broader fashion. I think those are signs that the government is willing to do more. Coupled with those remarks from Yellen. And then new reporting from our finance team suggests that we could get some sort of government involvement in a deal to try and stabilize First Republic. What else came through? Yeah. So there's really a mish mash, we understand, of things here that are apparently being considered both by Wall Street and U.S. officials, and really the intention is to make some kind of investment in some kind of buyout of First Republic more attractive for a potential investor. I worked on a couple of the things that seemed to be on the table. None necessarily seems to be the clear winner here. One listing the bad assets potentially off first. Our first republic's balance sheet. Number two, providing some kind of liability protection. Remember, in the wake of the financial crisis, we saw a lot of banks sued over the the the problems of their forebears. So that could be something also maybe easing limits on ownership status or more flexible application of capital rules. Remember, if someone comes in and acquires First Republic, that could impose stricter capital requirements under some of the regulations we've seen over the past couple of years. Either way, though, you know, the Biden team wants to avoid involving the taxpayer here, but it does look like the government may need to stand in in some way to kind of get some deals, get some rescue out the door. And then new headaches for U.S. officials and the fallout from SVP and signature bank. Could you explain that? Yes. So part of this has to do with the unique business lines that both these banks, as well as Silver Day, don't forget about them, were involved in. But specifically start with signature. Signature was very involved in New York commercial real estate, specifically multifamily lending, and has now an 11 billion dollar portfolio of loans extended to owners of rent stabilized apartments. That was not included in the deal by New York Community Bancorp. So this is 11 billion of loan portfolio essentially sitting on the FTSE books. That is extremely unattractive to investors. So that's one. Then over it SBB, we saw the amount of loans extended to insiders tripled since the third quarter of last year. So just in the past couple of months, no allegations of wrongdoing, at least not yet. But I think all of this raises the specter of bad behavior. And I said, don't count out silver gate. And remember, there was an ongoing criminal investigation there. So I think even if this crisis and this all this angst in the markets subsides, we're going to be dealing with the fallout from this for quite some time is if. Simo, great catching up, thank you for that. That's Simone Foxman. The kind of financial center in Doha. And we have a big interview coming up on Thursday. It's gonna be with the Seat City CEO. Oh, Jane Fraser joins David Rubenstein at the Economic Club of Washington for the first conversation with the major U.S. bank leader since the financial sector turmoil began. Much more to come. This is Bloomberg. Let's turn to the oil market now, because some of the world's top traders are saying prices won't stay down for long ISE the initial shock of the banking crises is overwhelmed by a rising demand and tight supply. For more, let's go to Christine Berg in Rio. Christine, oil is looking a bit softer ahead of the Fed. What is the message coming from some of the top trading us? Well, look, you said good morning, first of all, and I just want to say what a difference a couple of days makes. Earlier this week, we had highlighted that some of the major oil bulls out there were tempering their calls for higher crude prices. Goldman Sachs and T.D. Securities had basically scrapped their calls for crude prices to reach one hundred dollars a barrel this year. Morgan Stanley shaved ten dollars a barrel off of its predictions for branch prices in the second half. But the message coming out of a key commodity summit yesterday was that oil is still fundamentally bullish. Goldman Sachs is Jeff Curry saying that there's no indication so far that contagion from the banking crisis is weakening physical commodities demand. Now, on the supply side of the equation, Curry did say that we could see a pullback in lending to U.S. shale drillers as regional banks in the United States deal with the crisis. He actually said, quote, We're ravaging the ability for CAP to come back into the system. Traffic Girl was also cautious on U.S. supply and predicted that we'll see prices rise back into the 80s by the end of the summer. Gun Baugh sees prices reaching about ninety two dollars a barrel by the end of the year. And then you've got here and Iran who really doubled down on his call that oil may rise to as high as one hundred and forty dollars a barrel this year. And he, of course, pointed to those bullish fundamentals. Talk to us a bit more about the market fundamentals, because we saw WTI restore a key technical level. I was looking at at some of these charts and it's nothing short of short of awesome. Yeah. Definitely. So let's first tackle the fundamental side of things, because I want to talk about Russia. Here we talk about fundamentals. Of course, we have to think about Russia and where it factors into the equation. We've been sitting here for weeks talking about resilience in Russian oil production, resilience in Russian oil exports. But what we heard overnight from Russia was that it's close to implementing planned production cuts of 500000 barrels a day this month. Deputy Prime Minister Alexander Novak also saying that those production cuts will be extended through the month of June. So fundamentally, that removes more barrels from the market. And crucially, it removes those barrels as we move into the peak summer driving season when crude demand tends to pick up. Now, going back to that WTI key technical level that you spoke about. Yes, that's true. Is if so, WTI broke out of the oversold territory range it had been holding in recently. But I guess the question is, will that hold? And the answer there really is what is the Fed going to do today and how is that going to affect the mood out there in the markets and expectations for demand given the macro backdrop going forward? Yeah, I prefer Brent WTI. I'm international, I'm global. No need for you, it's a bit different. But I just I just have a little bit of a preference for Brent. Christine, thank you, though, for the bigger picture in all of this. Christine Berg live from Rio. Now let's get to the Turkish president, Richard Tiber. He faces another week of setbacks. Just under two months out from Election Day, the once former economy czar, Matt Miller has turned down an offer to join his administration. Bloomberg's medicine mills has more on this medicine. This is very significant in terms of the implications for other one's campaign. Mimics ship was on a panel with me 10 years ago at the World Economic Forum, and he's seen probably as quite a threat. That's really interesting. I want to get your intel on that after the show. But it does seem like a big deal to kind of have him rebuffing Erdogan, giving that he's kind of coming from inside the house. Right. They've worked together. This was the ex finance minister, as you know. He met with Erdogan for about an hour last week after coming to this decision to not join on here. But this shows potentially also that he is doubting Erdogan's economic policy. We've been talking about this. But for the context here, as a reminder, Erdogan have not necessarily embracing an autonomous central bank, believing in the idea of decreasing interest rates in the face of record breaking inflation. A very different story than what we're likely to hear from the Fed in the US today, for example. So it's too early to reach a consensus on what should Zach's rebooking and rebuffing of Erdogan necessarily means for his chances in the election. But it is a sign of Erdogan maybe needing to do his usual tactics of some last minute stretches and going into this election. I mean, his political agility has been uncanny. That's for sure. But then you've got these raging economic issues in Turkey. The lira squeeze chute, which when you look at the charts, the market's pricing in substantial losses to come. Right. Yeah. I mean, the overnight forward implied yield on the lira U.S. dollar pair surged to 423 percent from eleven percent on Monday. If you look at this chart here, you'll see just this massive, massive peak there in shorts. Short sellers are flocking to the lira, according to our sources. And there's spillover as well into equities and bonds as investors are selling assets and pouring into lira cash. And foreign investors are trying to liquidate their long positions in the lira as well. And markets are potentially looking for a sign to price in changes to Turkey's central bank here. Changes to the monetary policy coming out also after Erdogan dismissed the central bank governor over the weekend. If we look at the Bursa Istanbul 100 index as well, losing about a tenth of its value this week while the banks sub index tumbled about 15 percent as well. So this could be, again, not just a story about Erdogan dismissing the central bank governor, but could be a broader story about the economic issues facing Turkey. Record breaking inflation and currency issues and and the lira just joining and on that list of troubles as well. And then right here in Dubai, we have some inflation numbers out. And to suggest that we're around four point nine per cent, it doesn't feel like four point nine per cent. Living here, I'll say that. Really? OK. It feels like four point nine to me. Like a lot more to me. But I'm coming. It feels like more, right? I mean, you have the context. I've only been here for a couple of weeks. But I really expected coming from New York to feel like I was getting a bit of a deal here. And that has not been my experience. Not complaining, but yeah. Exactly. Like you said, year over year, CPI hitting close to 5 percent. That's mainly driven by food and beverages. And the demand to move to Dubai is also not easing on that increase in prices. There's a 26 percent year on year job and the average cost of a villa in Dubai, the annual cost of that hitting eighty thousand U.S. dollars a year. Even the banking crisis doesn't seem to be necessarily changing the way people are feeling about potential global slowdown impacting their desire to move to a place experiencing inflation like Dubai. I spoke with someone yesterday who said they'd rather actually invest in Dubai real estate than keep their money in cash in a bank right now. So maybe we're going to see even more demand coming into Dubai despite this inflation and also Dubai, huge employer as well. We have news that Amazon is opening a fulfillment center here. So continuing to see that kind of bullishness on Dubai. Yeah, I need a separate budget for the Road Transport Authority because there exists a showing fine enough to find for me. And it's it's only the DAX much there. There are a lot more active than they used to be. Many thanks for that. That's Bloomberg's medicine. Still much more to come on the show. This is Bloomberg. After a week of turmoil, what's the Fed's next move? The job of reducing inflation is not only worried about the signal it would send if they get nothing. Trust Bloomberg for the fastest coverage and exclusive analysis. Central banks groping their way through a dark room looking for Schrödinger's cat. Does this indicate that the Fed is petrified? Bank supervision take precedent. If you want to fight inflation, you'd better sort out your financial system. Bloomberg Surveillance. The Fed decides Wednesday on Bloomberg your Global Business Authority. Shares in the Chinese electric vehicle maker NEOs surged in Hong Kong after the CFO told us that they're confident of doubling sales this year to 250000 units. Here's our exclusive interview with Stephen Fang about his outlook for the company and the wider sector in China. That very confident to achieve our recess target infant industry by focusing on three key actions. First, broaden the product portfolio. We are going to launch five new models based on our new technology platform to point all in the middle of this year after transitioning all the models to entity platform. We'll be all for we'll be able able to offer eight models, complementary and competitive in diversified market segments. Second, expand the charging and the swapping network. We plan to deploy additional 1 selves in the parcel stations in China, along the highways and in such U.S. cities with high potential. By doing this, we are able to access more markets and offer better recharging experience for existing users served. Unlock the value of a technologies. You know, Avi Neal, we are. We plan to roll out more advanced towards the features based on our in-house flow stack aided technologies which come standard every new and do two vehicles. What are your plans as far as you talked about volumes? What are your plans on pricing? Because there's there's there's this somewhat of a price war going on in some in some segments, of course, of the TV market in China. What are your plans are on pricing your models? I think the short answer is that you always try to maintain a very stable price system. I was actually in that year and this year churn out a market is going through a very profound reshuffle, sex to the increasing penetration. So in any price war lead to industry consolidation. But for Neal, I think we would like to refresh ourselves by COMPERE Per DAX innovative technologies, comprehensive policy stuff, infrastructure and vibrant user community. But the supply disruptions that we've seen since Covid, it's really forced light on makers to shift their where their operations are. Our supply chain management just in time inventory convention. How have you looked at this opposite actually? Nancy, it was a very turbulent year. A lot of disruptions from the supply side and sometimes on the demand side. But this year, it looks see looks become better and better. So first, we need to go through this. Price will beat me on this year and then we expect the industry to go through some profound fundamental consolidation. But obviously, the demand is still there. People just want to make better choices. Right. Well, when you sound there's a we're looking at a profound consolidation in the industry. Are you seeing that there are too many players out there? And do you expect the number of players to decrease substantially? Are you looking to buy any of the existing players? I think it's almost concensus that China now has too many automakers. Okay. We have no plan to buy any one. That was the Neo CFO, Stephen, thank speaking to us exclusively earlier today. Want to get you a quick check of the latest business flash headlines. Kids and video says it has developed a new tool to help ease a major choke point and chip design and is enlisting TSMC to use it. The company says that its new software library will dramatically accelerate the development process for CHIP claims to create the stencils used to etch chip designs into materials overnight rather than over two weeks. GameStop shares soared in extended trading after the company reported its first quarterly profit in two years. Net income was 48 million dollars. That's a turnaround from last year's hundred and forty seven million dollar loss. Net sales fell over 1 percent, two point to three billion dollars. Still beat analyst estimates. The CEO, Matt Furlong, says he now sees a path to full year profitability. And that is your Bloomberg business. But I want to get to a cryptocurrency check because we have held up quite well to the upside. North of twenty eight thousand dollars, up a two fifths of 1 percent. Count down to the Fed. There is a consensus that we may get 25 basis points from that. The risk of higher yields or higher interest rates is, of course, for gold and other precious metals. So I want to take a look at that trade that becomes front and center following the brief flirtation with two thousand dollars an ounce. So we are currently at one thousand nine hundred and forty dollars an ounce unchanged. I want to flip the board again and get to your equity futures. This is where we stand on this Wednesday on the S & P 500. Many are unchanged as well. There is a relative calm, very narrow ranges across asset classes. You know, be it any effects in Treasuries or in this particular case in equity futures where the little move to the upside in the prior session, but now firmly flat even on the Nasdaq futures, somewhat of an upside in U.S. stocks, futures by two fifths of 1 percent. The coverage continues from Dubai and the rest of the world as we dig deeper into some of the entities that have 81 exposure and the ongoing fallout from the banking crisis. This is Bloomberg. This is Bloomberg Daybreak, at least our top stories this morning. Markets count down to the Fed decision with financial stability and focus rate hike. Doubts are creeping into the bond market for the first time, this hiking cycle. The latest on UBS, it looks like they may cherry pick the dealmakers from Credit Suisse that says the Swiss government freezes deferred bonuses for CEOs, bankers. Bloomberg learned that Wall Street leaders and U.S. officials are discussing a potential intervention at First Republic Bank that could include government backing. Bond markets and some of the world's most vulnerable economies are flashing default warnings. That's as turmoil in the U.S. and European banking system makes it even tougher for emerging nations to borrow and repay debt. We'll have the details. It's 9:00 a.m. across the Emirates. I'm yours have committed Dean in Dubai. Manus Cranny is out on a get straight to the market action. As we just a few hours out from the Fed decision on the S & P 500, many were pretty much unchanged. There is a sense that opportunity beckons, at least for the folks at Julius Spare. They're saying, hey, we like what we see in terms of some of the large cap bank balance sheets and capital buffers. They look healthy, but they are recommending sticking with defensive quality names until there is more visibility. US tends to 359 42. Your Bloomberg dollar index is unchanged. There is a calm and a very narrow range for a lot of these asset class moves and the Brent crude just short of seventy five dollars a barrel with Standard Chartered seeing the unwinding of speculative longs. Well, that's likely done when I get to the rates volatility and reflect on what we've seen in terms of actual as opposed to implied and expected volatility into your treasuries. It's eclipsed the swings during the global financial crisis. The difference now is that we're coming out of more than a decade of low interest rates. A clear anchor from the Fed could trim the tail of the rates distribution, but the dislocations and the volatility surface, that's got to take time to fully normalize. Remember, during the February press conference, the Fed chair did sum up the whole situation, saying certainty is just not appropriate here. We are getting a bit more certainty, perhaps is around First Republic, a Bloomberg scoop that potentially the government backing is one of the scenarios that is being discussed between Wall Street leaders and as we understand it, U.S. officials as well to try and shore up the lender. That is according to people with knowledge of the situation, the firm's unrealized losses. That's been a sticking point. Some of the other ideas that have been tabled include offering liability protection. The stock comes under pressure after hours by about 9 percent. Eighty nine percent of the stock market value this year has customers money being pulled out. So all of that coming full circle when you get out to the markets in Asia. Yvonne Man has the updates from our Hong Kong studio on the banking woes, at least for now, have subsided a bit here. So we're seeing a second day of gains when it comes to risk assets here in Asia, which is quite interesting leading up to this Fed decision, which some have said is really going to be quite a controversial or consequential sort of decision for the Fed as well, I think, to overlook the financial stability concerns and continue their fight on inflation. The market seems to be at least betting that that might be the case, that they might actually start to pause after a 25 basis point hike. So you see how risk attached to the way stocks are up 2 percent gains for the NIKKEI 2 to 5. Hong Kong coming back from that lunch break. And we are still seeing gains of about 2 percent here in the city. Dollars pretty steady as mix across Asia affects. You see the ISE recover a little bit after a bit of a weakness yesterday on their sort of messaging that they might be done when it comes to tightening as well. And we're watching how bond markets in Asia really find what we saw across that yield curve. You mentioned the treasuries volatility while we continue to see that whipsaw here, but yields ticking up higher across the board, especially when it comes that Aussie 10 year yield. But if you take a look at how people are looking at, you know, some of the heavy weighted stocks in Asia, the 10 cents, the Alibaba, the TSMC is a Samsung's all a rally here today. This is a broad based rally. Just goes to show people on the face of this tightening cycle that maybe the Fed is still looking at 25 basis points today, but they're willing to at least buy tech stocks. Just goes to show maybe this pandemic sort of tightening cycle is nearing its end of late. Keep in mind, also watching CNBC pharma, that stock continue to edge higher by 3 percent. There was news just now talking about that China is approving its first RNA vaccine from the local firm here. So that stock also reacted to some earnings that were actually upbeat as well. Said. Yvonne, great to touch base. Thanks for the round, the Pats. Bloomberg's Yvonne Man. Now, we've learned that UBS wants to cherry pick the top deal makers from Credit Suisse. Instead of supporting a plan to spin off the First Boston brand as an independent firm. For more, we're joined by our finance reporter in the bill, Ahmed in Sydney. Nabila, why is it likely then first Boston won't happen? And how does this exactly play into UBS? So UBS really likes the look of Credit Suisse's investment banking division. So that's good news for those bankers. But they plans to spin that division out into First Boston and have that be run by Michael Klein because it was merged with his business as well. That looks now dead. There are two reasons for that. One is that UBS really doesn't want to pay him one hundred and seventy five million dollars. The Credit Suisse agreed in the deal last October. The other thing is that business, without the support from Credit Suisse is trading in wealth management operations, which obviously they now won't have post. This merger really doesn't make sense as a standalone. So it's looking likely it's dead. So UBS is now trying to figure out how to get out of that deal without having to pay up tons of cash. And then about the credit squeeze bonuses. Those are getting deferred. What are some of the benefits here, though, that are still going to get thrown? So bankers will still get their cash that was promised to them for last year, but they deferred the component of their compensation, which is deferred stock has been suspended. The Swiss government wants that to be suspended temporarily, they say, although we don't know how temporary that exactly is. One thing, though, the value of that stock actually has fallen by about six hundred million dollars. For those bankers. So it's not worth as much as it was even a couple of weeks ago. Let me know, thank you for the analysis as Bloomberg's Nebula Ahmed in Sydney. I want to get to the Fed because policymakers are trying to balance their inflation fight with sudden turmoil in the banking sector as we count down to their policy decision later on Wednesday. Our Asia economics correspondent and the current joins us. And the markets are coalescing around a 25 basis point rate hike. What do Fed watchers point out, including yourself? Broadly speaking, the market is priced for the 25 bits hike use of, like you say, that would get the Fed right back to where it was in and around 2007. But it's a pretty confused backdrop heading into this meeting. Like you say, there is this damned if you do, damned if you don't approach the Fed either focus on inflation and has to hike interest rates. That in itself could, of course, stoke more market volatility, which, of course, might flow through Thoreau's regional banks. On the flipside, if they held off with their rate hike and took the eye off inflation just to focus on funds its ability near term, the danger is then that they get accused of letting inflation take off again. So it's a very difficult one is very tricky balancing act fortified in terms of how they navigated. We will have the press conference from Chairman Jay Powell. We will get new projections from them for the first time since December 4. And that'll give us a hint of where they see it's going from here. But as I say, the broad take is that they will raise interest rates. But it's a pretty confused backdrop, I think, heading into it. And then what are some of the surprises that we could see from the Fed? It's probably not going to be on the actual interest rate decision. It's going to be about the language. Is it even possible to find the balance between reassuring the market on the bank shocks and the fight against inflation? Yeah, I think you're right use. I mean, on rates, look, of course, it could hold that would be something of a surprise. Don't forget, Nomura is out there saying they could cut. So obviously that would certainly be a surprise. But broadly speaking, I think the real scrutiny will be on what language, what signal, what messages are they sending around the financial system, especially the regional banks? What kind of condition are they in? What is the Fed willing to do? What will their new projections say? Will they pull back? Where do they see peak interest rates in the months ahead, for example? Will they make any tweaks at our balance sheet operations? That's something that people are talking about as well. Well, you know, the era of Kutty Mike Duffy paused or even ended altogether. So quite apart from the headline decision, there was going to be a loss within the Fed's commentary and broader decision making that people will be keeping an eye on. That is not so important in the context of this banking scare that we've had over the past few weeks. And I thank you for weighing in on all of this. I couldn't do it without you. Bloomberg's and the current. Thanks again for that. To get some headlines on inflation, actually, and on the outlook. This is from the Bundesbank chief. So this is Joachim Nagl, who is also a member of the ECB Governing Council. And in an interview with the FTSE saying that the fight against inflation is not over. More hikes need to be done to get inflation under control and also adding that we must be stubborn in that fight. So quite, quite a set of strong words from the Bundesbank chief. Well, also underscores that the current situation is not a repeat of the 2008 crisis. He's envisioning a soft landing on Germany and the eurozone as well. And it should do more on cutting back some of the app repurchases. Euro dollar intraday currently unchanged, but we'll continue to monitor any more lines that come from that interview. Now let's get to the Manhattan district attorney, because there appears to be a bit of movement on a potential filing of criminal charges against the former U.S. president Donald Trump over alleged hush money payments to the adult film star Stormy Daniels. For more on the story, let's bring in Bloomberg's Bruce Einhorn. Bruce, we understand a lot of the area around Manhattan is on high alert. Probably most of downtown New York is run me through what we could see over the coming hours. So, Yusuf, former President Trump had sent a message on his social media platform late last week saying that he would be arrested on Tuesday. So that indictment hasn't come yet. A lot has to do with just the timing of when grand juries meet in New York. The grand jury doesn't meet every day. So the fact that it didn't happen on Tuesday doesn't mean that it's not going to happen sometime in the days ahead. Of course, we don't know what the grand jury is going to do. But the expectation is among many people that there will be an indictment. There is heightened security around the courthouse. There was a bomb scare at the courthouse involved at this time that a judge was going to be hearing a separate case involving the former president. This was brought by this is a civil case being brought by the New York state attorney general, Letitia James. Alvin Bragg has also issued a statement in response to House Republicans. Three top Republicans in the House have called on him to appear at Congress and have accused him of political interference. Prosecuting the former president for political reasons. Alvin Bragg issued a statement saying that he would not be intimidated. All this comes at a time when ABC News has reported, citing people familiar that a judge in Washington, D.C., involving a separate case involving the classified material at Mar a Lago has found that the former president intentionally misled one of his attorneys about the existence of classified documents. There is something that ABC says they didn't get. If it. If I could just jump in here because I want to also lean on your experience covering politics in the United States and just try and understand all of these developments may shift the needle in the race for the presidency in 2024. Good question. Let's just finish up on the last thing, because this is important. Trump's campaign has said that the ABC News report is false. So we just want to make sure that's out there as far as how this will affect the campaign. Course, it's very, very early at the moment. It's just former President Trump and one other candidate who's declared for the Republican nomination. We expect that Florida Governor Ron sentence will jump in. How this will affect the campaign. It's hard to say. Some people would say that this could rally the Republican base around former President Trump. On the other hand, attempting to run for president while under investigation, as we saw in 2016 with Hillary Clinton, leads to all sorts of complications. So way too early to say that this would be a positive for the former president. Bruce, thank you for making it to the show. Much appreciated. It's Bloomberg's Bruce Einhorn in Hong Kong. Let's get to the first with headlines from around the world, medicine mills NASDAQ. Thank you. Yes. If the U.S. is reviewing whether the impact of Silicon Valley banks collapse on Chinese startups was greater than what was disclosed publicly. Sources tell Bloomberg the Biden administration is pulling together data on Chinese companies that could have had accounts with regional U.S. banks. The U.S. wants to know if there's a risk of broader contagion in China. And Japanese Prime Minister Fumio Qaeda made his first visit to Qiu since Russia's invasion. He offered strong support to Ukraine and invited President Vladimir Zelinsky to join the Group of Seven summit in May. She, too, made the trip after stopping in New Delhi, where he pressured India's prime minister to join other leaders and shunning Russia over its invasion. Japan is set to host the G7 summit in Hiroshima. And the IMF has reached a staff level agreement for fifteen point six billion dollar loan for Ukraine. That's aimed at helping promote Ukraine's long term economic recovery and to pave the way for its entry into the European Union. The loan is still subject to approval by the IMF executive board. But they're expected to tackle the matter in the coming weeks. And the ECB is asking lenders about indirect exposure to Credit Suisse after finding their balance sheets show few or no holdings of the firm's junior debt watchdog is said to be widening its approach to ask banks if they face risks from their clients. Losing money. Takeover of Credit Suisse rendered around 17 billion dollars of 81 debt completely worthless. Global news powered by more than twenty seven hundred journalists and analysts and more than 120 countries. And that smells. And this is Bloomberg. Thank you for that. Let's get you a snapshot of what else is in the pipeline. Our comp capital talks about fear of contagion in the banking sector and why they don't see it as a risk, though, in the Gulf. But up first, we'll talk to first off with Darby Banks, Simon Ballard, about the most sensitive step the Fed can take amid the banking breakdown. This is Bloomberg. I think it is too soon to expect that the Fed will will throw in the towel, so to speak, on their inflation fighting. I think also not a complete pause may not only be counterproductive from the vantage point of the medium term inflation objectives, but also could send the signal that they know something worse that the markets are yet to learn. The Harvard Kennedy School professor and former World Bank chief economist that Carmen Reinhart. Extreme volatility in short term sovereign bonds across the world continue amid wild swings on Fed expectations. Elsewhere in the markets, we're seeing a bit of calm, quite contained moves out of the FOMC meeting on the S & P 500 anywhere barely above the flatline by about a tenth of 1 percent. A similar story for Treasuries. I want to get out to Simon Bollard. He's the chief economist at First Abu Dhabi Bank. He's been the gym. He's been warming up for this Fed decision. Simon, what are we walking into here? Yousef Gamal El-Din. Yeah. What an interesting one it's going to be, as you say, it's all about race optionality. I think going forward and how the how the Fed plays its hand. And you've mentioned earlier in the in the showing of the range of options that the Fed has, it could continue to to chase inflation. It could choose to focus more on financials and pause or as you say, even if you're saying it could potentially cut. I think at the end of the day, the only sensible option out there is a 25 basis point measured move. Again, as you suggested, it's the language that's going to count as much as anything. But I think 25 basis points, you know, keeps it on track towards its tighter bias in terms of inflation. More important, I think if you if it went more aggressively to try and attack inflation, it better do more damage, only to try and sort of accommodate risks around the financials. And that would be a subliminal message to the market that it's it's committing to a more hawkish or a more dovish narrative going forward to a 25 basis point sort of keeps it on track rather than shifting it in either direction in a sort of a more dramatic way. Say. OK. Simon, so he has to, you know, give the impression of being confident while at the same time not appearing complacent. He's got a banking crisis and he's got fighting inflation. Whether or not you can do it simultaneously, I mean, there's another separate debate on that front. But can you even strike the right tone at the end of the day? Doesn't sound like a balance that you can hit. Well, again, it's it's a lucky shot and it's not just him, of course. You know, he's got you know, he's got yellow and the Treasury and actually, you know, government support of the financial sector at the same time. I think what is of what is going to be interesting, though, is, you know, how he how he plays this is the tone for the longer term. I see the market pricing in a series of rate cuts. These two rate cuts, perhaps by the end of the year, don't necessarily subscribe to that and certainly not as early as September. Perhaps if he goes aggressively now or talks about continued tightening, then the market will will reimburse as far as, you know, the yield curve concerned, and that will drive sort of a greater need for an easing bias and rate reductions before the end of the year. But I think that's pretty for a 2020 force business at the moment. But yeah, he's certainly walking a very, very delicate tightrope. But he goes into this meeting decision this evening. Simon, I mean, you cover a wide range of assets from your understanding of valuation and spreads, where are we likely to see the biggest adjustment to what's going to come from the Fed this evening? I think a lot of it's priced in. I mean, we've we've priced in 25 basis points. That's now the consensus. If we got if we got a shock on the side, I think that a really negative risk. We got something more hawkish or more dovish, as Ms. Rinehart said. You know, that would be, you know, something we don't would ever pay yourself. So I think in either direction, you'd see a spike in volatility and probably a sell off in risk in the short term. As far as, you know, relative value was concerned, you know, here we are sitting in the Middle East. I think, you know, we had the Buddhist affirmation of the year of the UAE at Abu Dhabi, Doubleday, two ratings overnight or late yesterday. Again, that sort of underscores sovereign sort of strength here. And again, that's a pocket of an oasis of value you wish. And a backdrop of sort of more global sort of challenging environments. How is the collapse of 81 going to still come to the surface in certain parts of the world? Something that you addressed in your latest research, just run us through your thesis and how that's going to play out. OK, so two interesting things. First of all is the fact that, you know, 80 wants to be thrown under the bus for the sake of the shareholders, which normally they would be they'd be senior to shareholders then in a liquidation such as this, so that against the changes, the changes, the goalposts going forward. I think necessarily it's good to foresee A B, steepening of the capital structure curve, a repricing of 81 risk just generally across the market. And I think, you know, within sort of investment strategy generally, you know, this is teaching us to look much more idiosyncratic plea to credit quality across the quality curve. And I think, you know, we'll see a much greater degree of differentiation within financials, within other sectors as well going forward as tighter monetary conditions continue to bite or bite more than they are already. Because, of course, we know that there's this lag of sort of 12, 18, 24 months, perhaps even between monetary policy implementation and the effects being felt in the economy. We're going to get a steeper quality at the end of at the end of all this. I mean, with that kind of uncertainty, is it still wise for mean bigger banks like the ECB to press on? Because we had the Bundesbank president call him Naga telling the FTSE that, you know, inflation is stubborn and we got it. We got to keep at it. Still a lot of work to do. Inflation could flare up again otherwise. Do you subscribe to that view? Well, the ECB, of course, faces a much more sensitive set of inflation dynamics, and then here we are in the Middle East or certainly in the US. You know, their dependency on sort of imported energy prices from from Ukraine and Eastern Europe. So your Nagel talking sort of aggressively isn't isn't that surprising. But at the same time, he has to sort of respect that and recognize the disparate nature of the eurozone. And the strains at the periphery are going to be under way with each and every tightening. But I think, you know, with their inflation, core inflation still sitting at the high single digits, whereas we're at mid single digits now in the in the US, you know, there's this period argument that, you know, the ECB can remain more aggressive in the short term. But again, you know, you stretch the elastic band too far and eventually it will snap. Simon, thanks for coming on, the show is gonna be a long night for many of us in this part of the world. Simon Bolivar is the chief economist at the First Abu Dhabi Bank. Load up on those energy drinks. So much more to come. This is Bloomberg. Want to get you the finger on the pulse of regional equity markets broadly positive. Two things I want to highlight. One is the move to the upside in the Saudi index, one point four percent driven by the kingdom's largest lender by assets. This is Saudi National Bank. Perhaps surprising some observers and analysts by raising three point four percent. But as a broad based industry wide rally through Riyadh bank surged almost 4 percent. We'll see how that reaction plays out after the Fed decision. The other thing is Dubai, right? So we're seeing a recovery there, snapping a series of losses, ultimately ending one point one percent higher. I want to flip the board and talk about irony or because that is the standout in the commodity column in terms of the intraday move dropping for a third day on signs that the steel market isn't picking up even as peak construction season approaches. Prices are going to slide to one hundred dollars by the fourth quarter, according to CBA analysts. We are down 2.5 percent at the moment. Much more ahead. This is Bloomberg. Physical work DAYBREAK released. Our top stories this morning. Markets count down to the Fed decision with financial stability and focus rate hike. Doubts are creeping into the bond market for the first time, this hiking cycle. The latest on UBS, it looks like they may cherry pick the top deal makers from Credit Suisse that says the Swiss government freezes the fruit bonuses for CEOs, bankers. Bloomberg learns that Wall Street leaders and the U.S. officials are discussing a potential intervention at First Republic Bank can include government backing bond markets. And some of the world's most vulnerable economies are flashing the false signs. That says turmoil in the U.S. and European banking systems makes it even tougher for emerging nations to borrow and repay debt. We'll have the details on. I get back to the market action. We're just hours away from the Fed decision and you could feel the market holding its breath. We're just around the flatline on the S & P 500 Mini. But six whiskers higher. The other thing I'd like to point out is around what's going on with U.S. treasuries, because J.P. Morgan makes the point that they're seeing the worst liquidity since 2020. US 10 to 350 847. Your Bloomberg dollar index is unchanged. And then Brent crude to sort of seventy five dollars a barrel. The new note out from Standard Chartered with the argument that the unwinding of speculative longs is likely done. I want to get to rates, volatility, get to the geek here side of this equation and the conversation. You can get this chart on your terminal because this is actual as opposed to the implied expected volatility into your treasury. That's eclipse the swings that we saw during the global financial crisis. The difference this time round, some markets are coming out for more than a decade of low interest rates. Are we going to get a clear anchor from the Fed path? Well, that could trim the tail of the rates distribution and the dislocations and the volatility surface are going to take time to normalize as a result. Remember, at the last press conference, the Fed chair said certainty is just not appropriate here. From there, I take it. Some commentary from you, York. I'm not a member of the ECB Governing Council, the Bundesbank chief in comments to the FTSE. Now he tends to be hawkish to begin with, but I'll tell you anyway what he said, there's still some way to go in terms of raising interest rates for the ECB. We're approaching restrictive territory that basically he told the newspaper that once the ECB stopped hiking would then have to resist calls to cut rates as doing so would enable inflation to, quote, flare up again intraday at the moment, not a lot of a repricing underway in one or 769. I want to get to the U.S. Treasury Secretary, Janet Yellen, because she has defended actions by the government to stem a banking crisis in the wake of Silicon Valley's banks collapse and pledged they could be repeated if necessary. Take a listen. Our intervention was necessary to protect the broader U.S. banking system. And similar actions could be warranted if smaller institutions suffered deposit runs that pose the risk of contagion. Their promise comes as doubts about the health of First Republic Bank continue to swirl. Bloomberg Simone Foxman joins us now from Doha. Some on the message from Vienna and made it very clear that the path forward is going to be one where there is a lot of support forthcoming from governor. Yeah, that's right, and she was really here trying to reassure the public first that this is not the global financial crisis. The banking system is much better off than it was. Second, that the situation has improved. Deposits have come back to these troubled lenders. But third, you know, as you mentioned, Youssef, that the government is there, the government is there to support if it sees further signs of continuing contagion. And, you know, her message yesterday really adding to some of the reports that we have seen out, whether that's the potential to guarantee more broadly deposits in the U.S. banking system, at least this under consideration, we understand, or some of these measures that we may see the government come in on to help first Republic Youssef. And then new reporting from our finance team suggests that we could get some sort of government involvement and deal to stabilize First Republic. Unrealized losses. The sticking point, isn't it? Yeah, absolutely. Because there are things that there are things on. First Republic's books that simply a buyer or an investor might not want to assume. But really, there are a litany of things under discussion between U.S. officials and Wall Street. According to Bloomberg sources, I'll read off a couple more. One, potentially providing some liability protection for any potential buyer. Remember, after the financial crisis, a lot of the lenders that took over other lenders ended up finding themselves the subject of wide ranging lawsuits. Also, the potential to ease limits on ownership stakes. And finally, perhaps the more flexible application of capital rules, because, you know, if some lender were to come in and acquire First Republic, that might boost them above the kind of asset threshold that they'd currently have and make them subject to a lot more rules. You know, the Biden team's main point here has been to avoid involving the US taxpayer pare and losses. So we're gonna see how the Treasury, how the executive branch kind of maneuvers if they do get involved in this deal. But I should note, though, we saw some substantial declines in first from public shares after hit mate made back some of its losses in recent days after this news came out. I think that flagging just that there's broader government concerns still about First Republic. And then new headaches for U.S. officials and the fallout from SBB and signature bank. What's come through? So all of these banks and we should include, I guess, silver gate in this list, though, it's not the subject of the latest reporting. All of these banks had kind of weird, unique business lines that they were involved in, and that's going to raise some new headaches for authorities in the United States. So signature, for example, had an 11 billion dollar portfolio of loans out to multi-family borrowers, rent stabilized borrowers in New York City. These are extremely unattractive. This is not valuable assets. And the FDIC still has these on his hands because they weren't part of that deal by New York Community Bancorp to acquire some of the remaining assets of signature SBB. How we've found out, according to government data, that it extended triple the amount of loans to insiders, so to board members and CEOs and the like. Sorry, board members and executives and the like since the third quarter of last year. Now, there's no wrongdoing necessarily being accused here. But this certainly raises some questions about what the bank was doing. We're going to see also Justice admitted department officials looking at potential bad behavior across these banks. Remember, Silver Gate was the subject of a criminal investigation. I think the context here is that even if we see our banking crisis woes dissipate there, this is going to go on for for quite a while. Youssef. Yeah. Thank you for the details. Simone Foxman the kind of financial center we thought. Now we have a big interview coming up on Thursday. Heads up. So the city's CEO, Jane Frazier, joins David Rubenstein at the Economic Club of Washington for the first conversation with a major U.S. bank leader since the financial sector turmoil began. Of today's Fed decision, swaps are priced for an 80 percent chance for a quarter point rate hike. That marks a departure from every other Fed meeting over the past year, which traders have fully priced at least one such move. Let's get more on the regional implications. Zena Rich, the executive director for Fixed Income Asset Management Comp Capital, joins us. Zena, what have you put in your diary in terms of what the Fed's going to deliver? The 25 basis ones is no longer with everyone. Everyone is looking at. But we still think that 25 basis point is what the Fed is going to do in fighting. Inflation is still when the Fed is focusing on as long as the macro permits. And for now, the macro still permits that. It's debatable if they need it, but they can do it. How is this going to feed through the pegs into this part of the world? Who do you expect to follow? And you know, where could we see the biggest adjustment? I think that the central banks in the region are going to follow through like they did before. They're going to follow through and most probably they will hike in line with the Fed. The market largely discounted that. So we don't think that they're going to be massive repricing or a massive move following that. We've seen a little bit of relief and the stresses in cyberwar, for example, when you look at it as a liquidity metric, you think that's just a brief transition or do you think that we actually had an inflection point? We've reached the high end. There's a little bit of normalization that's going to it's difficult to say if it's just an inflation inflection or it's going to be there. But I think that overall liquidity is easing. And in this whole banking sector, it's less of a concern than it was end of last year. And we expect once we have some state stabilization in the markets and rates that most hold, banks will come to the market with primary dealers. What kind of damage has been done as a result of the collapse in eighty ones, primarily in Europe and in the United States. We've had a couple of days to go through the rubble. Where where is it in the Gulf. So in general, I think that what happened with the credit she said you want puts a question mark as to how effective are a two ones as an asset class and whether it is the first time they've been tested and they've tested in a massive way in the region. We have seen some sort of a fear, but we haven't seen any panic sell off, and rightly so. Banks in the region are very well capitalized. Liquidity is good. The reliance on wholesale funding is limited, even taking into consideration the mark to market losses on the GM book. We expect no more than 60 to 70 basis points hit on capital ratios. So what does that mean for strategy specific to Gulf bonds? When you look at the J.P. Morgan index in terms of the spread over, you know, bonds in the region to U.S. treasuries, I mean, we still think that the recession is our base case in the US. So for that we exit we prefer investment grade over high yield. And given that we think that oil prices are going to remain range bound, we think that the region, specifically the ISE part of the region, is our preferred path. We still like of structure because we think that once the Fed's even if it's not going to pivot, even if it signals any halting or any change in its tone, we think that the short end will collapse and the long end will remain capped. So that's why think there is a new analysis out from Bloomberg about the pain that's been caused in some of the emerging markets, specifically around bonds. This is how the banking crises and ultimately higher rates as well, just short of liquidity has now added for sovereigns joining the distressed debt club that includes Nigeria, Tajikistan, Egypt and Bolivia. You've spotted this 300 basis point move in NBA Egypt. I mean, have we reached a bottom? What's the Egypt story going to look like in the coming weeks? So the Egypt story is two fold on one side. It suffered from the general risk off mode that followed the Credit Suisse and the SVP stories. But at the same time, there has been significant question mark as to will Egypt be able to do the necessary reforms in order to continue with the IMF plan, because as it is now, refinancing risk is getting higher and access to the capital markets, it's pretty much closed. So investors are still waiting to see if we're going to see tangible steps in the restructuring plans. The twelve month forwards crossed forty against the US dollar. Do you have any remote understanding of what a fair valuation would look like? This is what the market's waiting to see. We need to see a clearing level for the currency in order for portfolio inflows to get back in. In order for the ISE to get the ISE to get back in. So we haven't seen this. Level, yet we think that the clearing level can be in the mid to high 30s when the currency is completely let go. It might overshoot, but we need to see that in order for the market to start to believe that that inflow can still come in and the carry trade still makes sense. I mean, broadly, are you trying to keep a bit of a more defensive and lower profile until the volatility from the Fed passes and the fight against inflation becomes clear? Because before you just hand inflation to deal with, now you've got this banking uncertainty on top of it all. Absolutely. The list of known unknowns is getting bigger. So in these in these circumstances, you don't you want to avoid micro risk when you have such significant macro risks. So as long as the macro overlay is still uncertain, you don't want to add another layer. So it's especially that the risks are big and they are getting bigger for Egypt specifically. Same thing applies for Turkey. For example, you have the elections upcoming. You still have the question of who's going to win. There are some DAX unorthodox monetary policy. That's why in this in this current macro situation, we prefer to stick to AIG until the unknown become known as Haidi Lun. Thank you for making time in your schedule. An influential voice ahead of the Fed decisions in a risk. The Executive Director for Fixed Income Asset Management at our com capital. Thanks again for that. Plenty more ahead on the show. This is Bloomberg. Turkish President Recep Tayyip Erdogan faces another week of setbacks. Just under two months out from Election Day, the once former economies are Matt Miller has turned down an offer to join his administration. Bloomberg's medicine mills has more on this. So this is significant because Mehmet Shim Schick was one of the leading or he's one of the leading economic minds. Turkey is very much in touch with foreign investors. And for them on this is probably no positive news in terms of potential threats. Yeah, I mean, if he is not getting on board with Erdogan, what does that say about what the broader consensus is going to be in Turkey heading into this election in under two months? I think the big question for markets, though, is Erdogan. Does that mean an autonomous central bank is? And I love the way your last guest put it. You eliminate micro risks amid macro risks. And we've got a lot of macro risks going on globally, but also specifically in Turkey. Take a look at the lira, for example. We've just got news tumbling 1 percent versus the US dollar, bringing annual losses to 18 percent. Record lows against the dollar, which is fueling that annual inflation in Turkey, hitting 70 percent in April. This shows, again, a broader questioning about Erdogan's economic policy of decreasing interest rates amid that record breaking inflation. We know also demand from short sellers for the lead lira surging up to four hundred and twenty three percent on the lira U.S. dollar pair from eleven percent on Monday. That indicates, again, that soaring demand for short sellers there, which is causing interest rate bets to surge as well. So big questions about what's going to happen with Erdogan. Yeah, the local currency has been absolutely decimated over the last two years. In terms of the commodity story, I'm looking at Brent crude. I was reading a note by Standard Charter there saying, hey, you know, this unwind of some of the technical team that's done with. What do you watch? Yeah, I know you like Brent over West Texas. So that's the chart that I pulled for our chat, Yusef. But you can see in the chart that it's up a little bit and it is an indication of just how quickly these things can change. Oil having a terrible week last week, a rough couple of days. It's at the end of the week and then recovering a little bit at the start of this week. We had a guest yesterday who said they still expect oil to hit eighty eight dollars a barrel through the end of the year. That demand from China, demand globally is still expecting to stay strong in spite of these macro headwinds. We also know that Russia is expecting to decrease supply and cut off some of that supply and production in the coming months as well. So that's likely also going to put up the price as Russia closes on those closes in on those production cuts. But again, this does come after that turmoil last week. Oil hitting a 15 month low. And as we talked about Goldman, the big oil ball decrease in expectations from one hundred a barrel to ninety four. Then right here in Dubai, we had inflation numbers out. I'm not going to say how much I spend on food beverages every month, but I will say it's gone up. And I feel it's gone up more than what the CPI suggests, because on a headline level, what, four point nine percent? Yeah, I feel like this is always the case with CPI. Does the headline data actually indicate what you and I are feeling on a daily basis, which feels like a really, really high number there, but yeah, exactly. Food and beverage, the biggest push on that CPI number hitting just under 5 percent. But this is not impacting demand for people wanting to move to Dubai. We're seeing that really strong interest in the real estate market with an average sale of an annual villa sales. And by jumping over 26 percent, the cost of that being eighty thousand U.S. dollars. And amid these kind of bigger issues and questions that depositors are having about where to put their money amid a potential banking crisis, we're likely to see continued interest in the real estate market. And we might see that hitting a place like Dubai, even in the face of this record breaking. Yeah. I love some of the categories in this particular CPI basket, including furnishing households and recreation and culture. Yes. Roland, Hotels. Thank you very much, Mary, for that. That's a medicine mills there with the update on to buy CPR. So much more to come on the show. This is. After a week of turmoil, what's the Fed's next move? The job of reducing inflation is not only worried about the signal it would send if they get nothing. Trust Bloomberg for the fastest coverage and exclusive analysis. Central banks groping their way through a dark room looking for Schrödinger's cat. Does this indicate that the Fed is petrified? Bank supervision take precedent. If you want to fight inflation, you'd better sort out your financial system. Bloomberg Surveillance. The Fed decides Wednesday on Bloomberg your Global Business Authority. You're right, a headline from UBS. They are going to buy back some Bailey notes post Credit Suisse deals. So the breakdown is as follows. These were some of the notes issued on March 17. Two days before the Credit Suisse takeover agreement. The other headlines being that the tender offer of some UBS group's senior unsecured bailout notes to buy four point six to five percent of a fixed rate note due in March 20. Twenty eight and four point seventy five 0 percent. Fixed rate notes due in March of twenty thirty two. Now, we'll try and make sense of all of this and analyze the full statement in the next couple of minutes. But this is an announcement from UBS to buy back some billion notes after the Credit Suisse deal. UBS moving quickly, as we understand as well, and some major decisions regarding what to do with the credit squeeze, a legacy investment bank assets. We will, of course, keep you updated. Don't get to the Middle East equity markets now with our resident expert, followed by Norway follow. Let's start off with Al Rasheed Capital recommending a defensive tilt in Saudi equities. What's going on? Absolutely. They're defensive plays a major favorite among strategists at the moment. With so many question marks about the global economy, if they say so as it flows, will stick to the defensive plays as well as the recently IPO names in Saudi Arabia, but at a reasonable price. Other than that, they say that the only sector that they're bullish on is the insurance sector in Saudi Arabia. And in terms of lender following the collapse of SBB, they say that while there isn't that much of an exposure to fixed rate assets and Saudi banks, they say that the market will still be in a sort of wait and see mode of which lenders to pick up after disappointing margins in 2022 and a weak outlook for a long growth. And of course, Bloomberg Intelligence has all sorts of analysis of all different Saudi banks that are what your viewers can look at. And then the national medical care gets an upgrade from our com capital. What's behind the new strategy? Note upgraded to a core by the stock rallied 7 percent yesterday, actually more than 7 percent this year. Capital said that national medical care's profits. They raise estimates by 6 percent, saying that the acquisition of Jordan Medical Services will boost the net income of national medical care. And they said that the valuation discount of that stock is unjustified. That's a core buy for our capital. Like I said, Youssef, so have a very strong conviction on that stock, which was pretty much flat on the year after before yesterday's rally. And then what's the latest in the IPO news cycle preset? This is an artificial intelligence company, data analytics firm owned by Abu Dhabi's G. 42. It's owned by Chef Danone. This company had 26 billion dollars of order for a 500 million dollar IPO. Clearly, so much appetite for the second IPO of Abu Dhabi. Add not gas is still up 18 percent. Investors are so at least some extent bullish on the region. This is a new name. We do not get a lot of technology names coming in the region. So having more of a, you know, wider sectoral range in the region is pretty exciting. And it starts trading on March 27 and we'll see how that performs on the first day. But I thank you very much. Great. Third space that's followed by Norway there. I want to get back to equity futures for you as we count down to the Fed decision. Are we going to get 25 basis points? Looks like that is the most likely outcome. What kind of language is going to be used with that in terms of gains, in terms of reassurance around the volatility in global finance in the last few trading sessions on the S & P 500 Mini? There is a little bit of a pause for breath just barely above the flat line. Let's let the board get to US treasuries where we've talked about the rates volatility, actual versus implied and expected into your treasuries. That has now eclipsed the swings of the global financial crisis on us too, as we are at 414 0 5 and the US tends just around three fifty eight. Let's put the board again because not unnoticed has gone this a rally in bitcoin. We continue to cement above twenty eight thousand dollars. Is that now a lead indicator in terms of where we are with risk appetite? This disconnect between crypto currencies and some of the deeper, more mainstream asset classes, including, of course, stocks and bonds. There I take you to the energy equation. Brent crude still holding around seventy five dollars a barrel, just short of that at the moment, six tenths of one percent downside. I'm only thinking about the ongoing analysis around what the First Republic Bank consequences will be for some counter parties, for the industry more broadly. The coverage continues. This is Bloomberg.

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"Bloomberg Daybreak: Middle East" live from Dubai, connects Asian markets to the European opens. The show focuses on global macro issues with a Middle Eastern context. (Source: Bloomberg)

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