This is Horizons, the Middle East and
Africa. Our top stories this morning.
Israel edges into Rafah after taking control of a key crossing.
Tensions remain high as talks stall. Stocks in Asia slide following a
sluggish US session, with investors split on whether the market can sustain
this month's rally. And Ghana's Supreme Court set to hear
legal arguments today on a proposed anti LGBTQ law.
Well, it's just gone 8 a.m. across the Emirates.
I'm sure a lot of you here in Dubai. As ever.
Let's just get you up to speed on how markets are faring.
We are trading sideways for the S&P 5200 has been a key level on the upside,
struggling to break through that. Today, futures at pointed basically
around flattish. The two year yield also giving up some
of the gains from earlier in the week. Today you can see we are slightly higher
in trade, sitting above 4.83%. Some hawkish comments coming through
from Neel Kashkari. We'll talk more about that later on the
show. Also, keeping a close eye on the dollar
today, up about 2/10 of a percent. And then finally, Brent, also you can
see dipping somewhat down about 4/10 of a percent despite the geopolitical
premium building. We are going to be talking a lot more
about what's been happening with Israel and Rafa in just a few moments.
One stock in particular I just want to draw your attention to is UBS.
Major Outperformer yesterday in the European session, up around 8%, its
biggest jump since that takeover was announced last March.
So a very strong reception to the results that UBS posted yesterday both
on the top and bottom line in addition to their capital distribution plans.
That was the picture, one of the major outperformers in the European markets.
But let's also check in on how markets in Asia are faring this morning.
April Hong is in our Singapore studio. What is on your radar today, April?
Now we're looking at how Asia stocks are treading water, the declines today being
led by Japan. And this is following on from the US
stock performance overnight as those string of gains bottom.
And today, the tech shares in Japan are coming under pressure.
But focus also shifting to earnings. We have the likes of Toyota reporting
later today. We'll talk more about the automakers in
just a bit. But keeping an eye on dollar yen as well
as we got, we're tweaking some of the language, the language related to policy
response from the fix moves, but that's not helping the Japanese currency at
all. Still sitting above 155 against the
greenback. So the board, because we talk a lot
about how the weekend is helping automakers in Japan, but if you take a
look at the last quarter, that's relationship that's broken down as we
see the automotive automotive index that's declined about 4% as the Japanese
currency weakens about 2%. So that would be key to watch as we keep
an eye on earnings today Jomana. Thank you, April, for that overview.
Now the US has passed a shipment of bombs to Israel last week over concerns
about a looming invasion of Rafah. That is according to a senior
administration official who adds the shipment was supposed to contain around
three and a half thousand bombs. Meanwhile, Israeli forces have taken
control of the Rafah border crossing for the first time since the fighting begun
in October. When it comes to ceasefire talks, the
Biden administration believes Israel and Hamas should be able to resolve their
differences. Bloomberg's Middle East and Africa
economy and government editor Paul Wallace joins us once more.
So let us just talk about the developments in Gaza overnight.
What we know is that Israel has taken control of the border crossing itself,
but it seems that they've stopped short of the full ground offensive that had
been talked about the last couple of months.
ADELMAN Exactly. So, so far, that's as far as Israeli
troops have gone. They seem to face little resistance.
Yesterday morning when they went in and took over the crossing, they said they
were acting on specific intelligence. They accused Hamas of carrying out what
they call terrorist operations through that crossing, which is the main point
of entry for aid in into Gaza and sits on the border
between Egypt and the Palestinian territory.
But so far, Israeli troops have not gone into the rest of the city.
Israel's government continues to say that it will launch an assault there
because it says several thousand Hamas fighters are in the city, but that it
will allow civilians to leave beforehand.
There are more than a million in the city, maybe 1.4 million.
They fled there, most of them to seek refuge from the war.
When it started in October, almost the entire rest of the world, including the
US, has grave concerns about any assault, and few people think it's
feasible to get civilians out in a safe manner and quickly.
But Israel says that it's got a plan to do just that.
Well, reports saying that around 100,000 people have already been moved close to
the border crossing. But, of course, the big question is
about that other 1 million plus still in effect.
What has been the response from the international community?
And I think it's interesting to note these comments from senior officials in
the US government saying that they actually had suspended the supply of
bombs to Israel throughout the course of last week in anticipation of this
potential ground offensive. So that tells you that the US isn't
fully on board. It certainly does speak to how concerned
the US is. The US official position is not that no
offensive on Rafah can take place at all, but that it cannot take place until
the civilians have moved out. However, in reality it's clear the White
House and Joe Biden himself don't think that's possible and thus
there shouldn't be an assault of any kind on on this on the city.
I think these reports we're hearing about the delays in shipments of
offensive weapons speak to the tensions that have just been growing and growing
between Israel and and the US over the last few months.
The EU's come out its foreign policy chief, Josep Borrell.
He said that the EU had made pretty clear to
Netanyahu, the Israeli Prime Minister, that an offense on Rafah should not take
place as far as he was concerned. What we've seen in the last few days is
the start of that assault. So he's saying it's already begun.
Israel is downplaying that and saying, no, this is not an assault on Rafah.
It's a very limited operation so far. All right.
Very good context to have there, Paul. And that was Bloomberg's Middle East and
Africa economy and government editor Paul Wallace.
Palestinian officials say all aid from Egypt has stopped since Israel took
control of the Rafah border crossing. Rafah and Kerem Shalom are critical
entry points for the flow of food, medicine and other supplies into Gaza.
Let's bring in Kate Phillips for also vice president of global policy and
advocacy at the humanitarian organization Mercy Corps.
Thank you for joining us this morning. Kate, before I go into our conversation,
I just want to confirm with you that you are a humanitarian, a part of a
humanitarian aid organization with actual people on the ground in Gaza.
How many people do you have on the ground right now?
That's correct. We.
Mercy Corps has worked in Gaza since 1986, and as of October 7th, we had 70
staff in-country. As of now, we we have 40 remaining staff
in-country, mostly in and around Rafah. Okay.
So that is good context then, because we would like to hear from you about some
of the difficulties of the aid passage into parts of Gaza.
I was just speaking to my colleague Paul about Israel taking over the border
crossing overnight. What are the implications on
humanitarian aid and the passage of humanitarian aid into the Gaza Strip?
Well, there is massive implications. I mean, just by way of additional
context, just to bring us forward to the moment that we're facing right now,
after seven months of as the bombardment and the total siege of Gaza in which
water, electricity, commercial supplies, most fuel has been cut off.
You know, we have 34,000 people who have been killed, 14,000 of which are
children. And as of late March, we had 1.1 million
people who were in Category five acute food insecurity, which basically means
that they are actively facing famine. So the situation was already incredibly
dire in the lead up to this week's events.
And having the Rafah border crossing closed will only add fuel to that fire
and make this far more difficult, not first, because people will have to move
again. It's a limited incursion at this time of
eastern Rafah, but it may develop into something much larger for all of the
area of Rafah, where over half of Gaza's population have been sheltering in
relative safety. So people will have to move, which I can
get into in a moment. But having the actual crossing closed
and Karem Shalom closed means that no aid will be coming in, which will make
the situation I just described far, far worse.
Well, you talk about people having to flee or move to these so-called safe
zones. How easy is it for the population to
move around and actually get access to those safe zones?
It's not easy at all. Roughly 1.9 million people in Gaza have
been actively displaced since the beginning of this crisis.
And when I say displaced, I don't mean one time some people have been
displaced, including our staff, which you kindly asked about multiple times.
As the military activity has moved from the north through central Gaza and down
to the south. So they are exhausted.
They have limited means and they have limited resources to make this journey
along. What I might note is also a perilous
route. There's a lot of unexploded ordnance in
areas of Gaza that have already faced fighting.
And as people make that journey, which is which is very difficult as they
describe, they will arrive in areas of Alma, Wannsee and Khan Yunis that have
virtually no infrastructure, no clean water, no electricity, no real housing
materials. So there will and there won't be very
many aid organizations there to greet them just because of these conditions.
And so they are being pushed into a situation of incredible danger where we
expect these hunger numbers to dramatically rise and the amount of
communicable disease also to arise as people are crowded into areas where they
have no health services. Kate, can I just ask you as an
organisation, what are you advocating for at this point in time?
At this point in time, we're unfortunately advocating for a lot of
the things that we have advocated for since late October, which is a durable
first and foremost, a durable cease fire in Gaza.
And this is not from an ideological perspective but from an operational
perspective. It is impossible for aid organizations
to safely deliver aid at scale to people who need it in Gaza without a cessation
of hostilities. Also, the death count will continue to
rise and the civilian infrastructure will continue to be destroyed and
pulverised as it has unless we see a durable cease fire.
And the reason I say durable is the diplomatic negotiations are sort of
snagged right now, particularly on a point of how long that cease fire will
last. And while a temporary cease fire would
be very helpful in terms of a pause so aid can get in and people can have a
break from this violence, we don't want to also postpone the inevitable of a
significant incursion in Rafah that would cause major damage from a
humanitarian standpoint. So we don't want to delay that.
We want to make sure that undue harm does not come to people and that the
suffering in Gaza doesn't deepen. Lastly, we are asking for an end to the
siege of Gaza, which has really been driving the humanitarian needs
in-country this whole time. So turning back on water, electricity,
telecommunications and allowing commercial traffic because no amount of
humanitarian aid will ever be able to replace those basic necessities of life
that existed before the events of October seven.
And Kate's. We're going to leave it there.
Thank you very much for joining me today on the show.
That was Kate Phillips Barroso, vice president of global policy and advocacy
at Mercy Corps. Up next, we will also get the market
outlook with boxes as investors seek firm evidence of an earnings recovery
before taking the stock rally further. This is Bloomberg. I think the most likely scenario is
where we are right now, which is just we stay put for an extended period of time
until we get clarity on Is disinflation in fact continuing or has it, in fact,
stalled out? I don't think we know the answer to
that. I would say the most likely scenario is
we sit here for an extended period of time.
Minneapolis Fed President Neel Kashkari speaking at the Milken Institute Global
Conference in Beverly Hills. Let's bring in Chad on my show, the
chief investment officer at Bank CS on the guest on the show today.
Wonderful to have you with us. Thank you.
Maybe let's just tie in some of the commentary that we've heard, not just
from Kashkari overnight, but also linking back to the Fed chair, Jerome
Powell, last week about the trajectory of monetary policy in the U.S.
going forwards. And I thought it was quite interesting
last week that the Fed chair pushed back against the possibility of rate hikes.
And yet you have one of the more hawkish members of the committee, Neel Kashkari,
saying that, well, we have to be careful.
We have to be sure that inflation is on the right track before we start cutting
interest rates. It doesn't seem as though there's
unanimity on this on this panel. True.
But we know he's is a hawk, frankly. So it was no surprise yesterday that he
shifted, let's say, the pendulum towards a possibility of a rate hike.
But I think Chairman Paul was was quite clear last week, pushing back, you know,
stagflation fears. But also I think that was very
important, tackling the quantified tightening, tapering, let's say, idea.
And I think that was a positive surprise for the market that both in terms of
timing in amounts that, you know, they might indeed temper quantitative easing.
I think that was a positive message. But again, you know, we know that the
Fed wants to see more data coming that they are likely to stay puts.
We still believe that the next move is going to be a rate cuts, but indeed it
may be later than expected. And after a fresh rate cuts, they might,
you know, stay put also for some time. That's easy to see in the next data,
what they are telling us in terms of inflation.
But also it's funny because at the beginning of the year when I was having
these conversations, the talk was about not just when were the Fed's going to
get going, but also where they would end up.
And I think now the narrative has really evolved in about and the sense that the
market is expecting the Fed to start cutting interest rates later, but also
ends up at a higher rate than they were before.
Yeah, that has implications on assets. Yeah, well, a higher term, the rate does
have implication indeed. But, you know, when we look at monetary
policy, you know, we like to look at financial conditions.
You know, overall, if you look, for instance, at the Goldman Sachs financial
condition Index is still very low. So that means, see, that's a positive
for the markets and that's something we need to to take into account.
And look at M2 supply growth, it turns positive for the first time since
December 2022. So we still have inflation being sticky,
but at the same time, we have loose financial conditions and monetary
growth, which is turning positive. And this is why, by the way, we seen
prefer equities over bonds is despite the fact that we don't you know, we not
seeing interest rate cuts, you know, in the coming weeks or months, financial
conditions remain supportive for risk assets.
Yeah, Yeah, that's a very good point about the financial conditions aspect of
it. Let's talk about equities.
S&P sitting around 5200. It feels like it's struggling to break
through that level. Will it break kind of break?
Do you think that we're going to keep moving higher?
You know, we think it's kind of flatter, normal to have to see some momentum
fatigue. The very strong run we had since
October, there have been, let's say, various factors, you know, preventing
the S&P family to move higher. Geopolitical risk was one of them, these
interest rates, etc.. So that is is another one.
And then we started the earnings season with some doubts, you know, due to the
banks results. Now, if you look at earnings season,
we're talking about the BITRATES. You know, a company's on average beating
expectations by 7%. So still quite good.
So we still have these earnings tailwinds for the markets, uncertainties
regarding oil prices and other things regarding interest rates.
But I think what was also very interesting last week was the job
number. Yes, last Friday was a Goldilocks report
because you have unemployment rate ticking higher.
But see below four percents, you have early earnings, you know, a growth
decelerating. So if we have these kind of, let's say,
market context where we have earnings growth, you know, being a headwinds at
the same time, the next let's say rates move being a cut, we don't know when,
but it's still going to be a that's what the market expects.
Again, it's a very decent background for equity markets.
Yeah, I take that point. But then also, you know, there is a lot
baked in already and I thought it was really interesting in this earnings
season. Yes.
That the surprises, the upside have come through, but the market has not rewarded
the companies that have come. With the positive surprise in, if
anything, they've punished the companies that have missed it.
Does that tell you about positioning? Yeah, You know, we entered the you know,
the earnings season. When you look at, for instance, CTAs or
they were position hedge funds and also the cash held by money managers.
Definitely. You know, there was some catch up in
terms of long positioning. So this is why, you know, as you rightly
mention, the bar was quite high. But see, you know, if you look at the
guidance, it you know, it gave, let's say, some comfort that indeed companies
might be able to deliver later this year.
Also, if you look very important things cycle.
You know we're in presidential election year.
Yeah usually there is indeed some kind of pullbacks in April-May and then the
summer historically is more positive because the markets start to look, you
know, as the presidential election and potentially some fiscal, you know,
support coming and potentially also some monetary policy support coming.
Yeah, well, you know, we'll save that conversation for the next time you come
on the show because there's a lot to discuss into the US elections.
Thank you for thank you so much today that was shown I mean sure the chief
investment officer at Banks's thank you very much.
Also coming up, Ghana's anti LGBTQ bill is being challenged in the Supreme Court
today. We discuss the impact next.
This is Bloomberg. You know, it's estimated that Africa is
missing 4 million health workers. And, you know, we're not going to have
enough finance to come up with that. And so the idea that we should take
these capabilities and create that, it's very, very exciting.
Bill Gates, speaking at the Global Solutions Summit in Berlin about
harnessing air to help with Africa's health challenges.
Now, Ghana's Supreme Court will start hearing legal arguments today on a
proposed law that seeks to punish people identifying as LGBTQ with up to three
years in prison. For more, Bloomberg's On Zero Ganga in
Kigali joins us now. And it sounds like this bill is going to
have huge implications, both socially and potentially financially as well.
But maybe let's just start off with an overview of the details of the bill.
What is it actually propose? Jumana.
This bill proposes jail term for those who identify as LGBTQ.
Those who fund LGBTQ activities and also advocacy.
If you also know somebody who is in the queer community and you don't report
them, you could also face consequences. And just to put this into context.
Nearly 35 African countries have made homosexuality activities illegal, But
Ghana's bill is considered one of the harshest right alongside Uganda's that
prescribes aggravated or rather, prescribes death for those convicted of
aggravated homosexuality activities. And there has been consequences.
In Uganda's case, for example, they were frozen out of the World Bank funding and
the US excluded them from preferential trade status.
And the same will apply to Ghana. The US State Department has made it very
clear that if this bill becomes law, it will have a chilling effect on foreign
direct investment and also tourism. The irony is the president is a human
rights lawyer and he's very smart. He knows that the consequences are
coming. At the beginning of his tenure, he was
very staunch against anti or rather anti LGBTQ.
But right now he is lukewarm. When Vice President Kamala Harris was in
Ghana, he said that he was hoping that parliament would be sensitive to human
rights, which just means that nobody knows whether the president will assent
to this bill post the Supreme Court. Indira, thank you so much.
Also worth bearing in mind for anyone who is watching this.
Ghana is in the middle of a restructuring programme, $20 billion on
the line here. Questions about World Bank are going to
have to respond to this bill if it does actually get passed into law.
So it is also interesting from a financial perspective.
Let's get a quick check on cocoa and coffee.
Those commodities have been in focus the last couple of days.
We have seen a spike in cocoa yesterday, up 13 and a half percent, the biggest
jump since 1960. Coffee slightly higher as well.
We'll be right back in just a few moments. This is Horizon's Middle East and
Africa. Our top stories this morning.
A senior White House official tells Bloomberg the US paused a shipment of
bombs to Israel over worries about a wide ranging military offensive on the
southern Gaza city of Rafah. Stocks in Asia slide following a
sluggish US session, with investors split on whether the market can sustain
this month's rally. And Ghana's Supreme Court set to hear
legal arguments today on a proposed anti LGBTQ law.
Well, it's just gone. 8:30 a.m.
across the Emirates. I'm sure a lot of Versace in Dubai.
Let's get a check on these markets for you.
The S&P trading sideways, the futures pointing to a flat open.
This after struggling to break through 5200 to the upside that a lot of Fed
commentary still coming through. We heard from Neel Kashkari yesterday,
one of the more hawkish members of the FOMC, suggesting that rates may have to
stay higher for longer. So clearly that having an implication on
some of these financial assets, two year yields has moved higher, about three
basis points higher, but still around 20 basis points since the FOMC meeting last
week. We can see the US dollar also trading
slightly firmer as well. And then Brent crude also sitting a
little lower today, down about half a percent.
And again, all eyes on that OPEC meeting in a couple of weeks time.
CIA yesterday saying that they don't think that there's going to be a change
in production. So something to watch out for in terms
of stocks. There's one stock that did extremely
well yesterday in European trading. That is UBS.
You can see it was up almost 8%, its biggest jump since that acquisition deal
of Credit Suisse was announced about a year ago.
But the the reaction in the market was pretty positive as the stock beat on
both bottom and top line, in addition to reconfirming their capital distribution
targets for the year. So very solid results out of UBS
yesterday. Let's check in on how markets in Asia
are faring as well. April Hong is in our Singapore studio
standing by. Yeah.
Jomana, we're seeing Asia stocks declining, snapping a four session
winning streak. Tracking the Wall Street performance
today. Japan is leading those losses.
Tech is under pressure, but we're seeing the automakers also losing ground as the
focus shifts to the earnings. We're going to hear from Toyota at the
bottom of the hour. But this week, also from the likes of
Nissan and Honda, and we'll figure out just how the cheap yen is playing into
their corporate school, cause let's flip the board, because also declining today
is the MSCI China. That's a spiral up from its January lows
of 20 plus percent. Flip the board if we can.
I just wanted to show you the relationship that is so strong with the
so called Chinese tech aids. And this will potentially inform whether
this rally that we've seen on these Chinese stock benchmarks will go
further, especially given their outsize importance on this index and how we're
watching out for their earnings into next week.
The likes of BI do Alibaba Tencent reporting Jomana.
April, thank you so much for that overview.
That was April Hong and Singapore. Well, back to our top political news,
geopolitical news from the region. The US paused a shipment of bombs to
Israel last week over concerns about a looming invasion of Rafah.
That is according to a senior administration official who adds the
shipment was supposed to contain around three and a half thousand bombs.
Meanwhile, Israeli forces have taken control of the Rafah border crossing for
the first time since the fighting began in October.
When it comes to cease fire talks. The Biden administration believes Israel
and Hamas should be able to resolve their differences.
So let's bring in Tina Fordham, founder and geopolitical strategist at Fordham
Global Foresight. Good morning to you.
Thank you for getting up so early to speak with us on our show today.
There is a lot going on in the world of geopolitics, which is right at your
wheelhouse. Let me just start with everything we're
hearing from Israel and Rafah overnight. And the context of all of this is there
is supposed to be negotiations going on vis a vis a truce deal.
How likely is it at this point that we are going to get a truce deal between
Israel and Hamas? Well, nice to see you, man.
And hello from from London. Unfortunately, I'm not very optimistic
about a breakthrough on the talks and a ceasefire, even though the situation is
incredibly urgent. And both Hamas and the Netanyahu
government face huge pressure from their erstwhile supporters.
And of course, the humanitarian situation is absolutely dire.
The reason is that for neither side have the costs of this conflict and frankly,
the risk of alienating their supporters become too high.
Right. I call it Schrodinger's ceasefire.
Now you see it, now you don't. Mm hmm.
Well, Israel's goals have been one of the goals, obviously, is to neutralize
Hamas, the other to bring back the hostages.
Should the ceasefire actually be agreed to?
What does that tell you about their efficacy at implementing one of the
goals? Because seven months in Hamas are still
very alive and present. Well, that's right.
And there's been a lot of discussion about whether, you know, by the defined
the stated objectives, whether the Israeli government's operation in Gaza
can ever really be effective, because, as has been said, you can't eliminate an
idea. And with that in mind, there will always
be supporters movements like Hamas and and its ilk.
So is that with that in mind? I'm not confident about a ceasefire.
Perhaps a pause. But as we well know, a cease fires are
historically a chance to to rearm. And that's why I think we see both sides
dragging their feet. For Netanyahu, this conflict is
essential. When the war ends, his political career
is finished. Let me ask you about the broader
implications for the region. Bloomberg and other outlets have been
reporting that the U.S. and Saudi Arabia may be close to a
defense deal, normalization deal, ultimately a pathway to normalization
between Saudi and Israel. What would that mean for the region?
And what do you think the likelihood of that actually getting through Congress
is at this point? Well, it's incredibly compelling, isn't
it, that the idea that the the blockages in the Middle East that have kept it
from benefiting from from wider regional integration for so long could actually
be overcome. And yet we have the same obstacle that
we've faced for so many decades now between Israel and Palestinians.
The deal that's been presented is it just seemed to me for a number of
reasons and, you know, we have to remember that we're in an era of the
revival of great power politics, right. So that the the influence that we see,
the relationship between the US and Saudi Arabia is a defense relationship.
And the Saudis and other JCC states look to Washington for security and they want
to keep the door open to China for commercial relations.
This proposed deal between Washington and Riyadh is part of that.
What's different from where we were in the autumn of last year when a similar
breakthrough seemed possible, is that the Palestinian issue is back on the
table. Yeah.
Yeah. Well, you have coined this period in
history the geopolitical risk supercycle.
Why do you think this period of tension is so much more pronounced than previous
episodes of flaring up of geopolitical tensions within the region and around
the world? This is my thesis.
I came out with it before tensions reignited in the Middle East.
And I think it's very important for investors and observers to understand
that we are looking at a period of a structural increase in conflict.
We can trace this back to around 2012. Conflicts are longer, they're more
lethal, and they have more third parties involved.
To my previous point on the other side, we have fewer tools and interventions to
help absorb the friction, whether that's liquidity from central banks or, you
know, coordination between the international community.
And when we have these two factors at play and for an extended period, as I
see it, we get more of the kinds of disruptions, the event risks that we're
seeing now. Tina, very clear.
We're going to have to leave it there. Thank you so much for joining me on
Bloomberg Horizons today, Tina Fordham, founder and geopolitical strategist at
Fordham Global Foresight. Lovely to see you.
Now Aramco has kept its $31 billion dividend payout to the Saudi government
and other investors despite lower profit.
The payouts are becoming increasingly crucial for the kingdom's economy, as
crude prices remain below the levels it needs to balance its budget.
Now for more, let's bring in Bloomberg's Anthony Paola.
Anthony, we were talking about Aramco yesterday, the preview into their
earnings, and we said that your expectations that profits are going to
fall, they actually did fall. Net income fell 14% and yet no change on
the dividend payout to the government. So what do we read from that?
Yeah, net profit a little bit lower than the expectations actually, but the
dividend bang in line there. That's because they had announced that
dividend previously.
It's based on the bumper earnings of 2022 when oil prices were very high
after that Russian invasion of Ukraine. And then the earnings from from last
year, which were pretty good, even though they didn't reach those levels of
the year before. So we've got two years of a very good
profit leading into that special dividend component, which adds on to the
regular dividend. Aramco has said they want to make that
regular dividend progressive, continuing to increase it, and they want to keep
that special dividend which is set for four payments this year.
That's going to bring dividends to about $125 billion for this year.
So that's that's a that's a big payout. We're listening to the CFO as yet on
Russian speaking yesterday to analysts. And he was saying that they're confident
they can support that dividend while also paying out for their capital
expenditure plan, keeping up those investments that are necessary to to
keep the oil production going, that that keeps those profits coming in.
I mean, it is, you know, interesting within the context of the Saudi budget
deficit and the fact that this dividend is coming through because we know the
kingdom has big plans. They need the funding for those plans.
So it makes sense that the dividend is still being paid in such a substantial
form. But what did we learn yesterday about
Aramco's path and forward path and vision?
Well, I'm using the word vision, but how are they seeing the next 12 months pan
out in terms of profitability? Yeah, for sure.
But there's a lot of vision in Saudi Arabia and Aramco goes goes a long way
to funding that. And of course the base of that is as the
oil production. But what Aramco is doing is, is adding
on other things. Now they're getting big into
petrochemicals. Now they're expanding through joint
ventures, refining and then petrochemicals downstream, which will
allow them to use some of that oil, use more of that oil, and making things like
plastics for consumer goods rather than transport fuels.
And the other big thing is, is natural gas.
So they're looking to get into LNG abroad.
They have a huge project called Jeff Water in Saudi Arabia, which aims to
meet domestic demand first. Then possibly they'll do some blue
hydrogen. If there's demand for it, possibly they
could do some LNG export, but they want to buy up also gas assets abroad so that
they can have some access to some LNG supplies and then do some trading.
So so they're looking to diversify that profit stream and have a more
international viewpoint. Yes, even Aramco are diversifying as
well, moving from upstream to low stream downstream, it sounds like.
Anthony, we're going to leave it there. Thank you so much for joining me on the
show. Bloomberg's Middle East energy reporter
Anthony Dippold on how the Emirates chairman says he is not
happy with the delays they are seeing in Boeing deliveries.
The airline is one of the biggest buyers of the 77 seven wide body planes, but
delivery has been delayed to the middle of next year because of certification
issues. Now, I spoke with Sheikh Ahmad bin Zayed
about that and the carrier's recent leadership reorganization.
I think you see with a new reorganization of the Emirates Airline
just recently been announced a couple of months ago, restructuring business
within you guys coming in. It's much new within the organization.
You know when to come to 8 to 10. That's something between us to to
decide. Of course, in terms of possible
successors, though, I know in the past you've talked very highly of the
Emirates CEO. Oh, you've also talked about the CEO of
Flydubai. Are those the two main names that you're
considering right now, as do successors? Yeah, we have.
I mean, within the organization, you can always see the ones who are on the top.
You know, they are most likely they are the ones who will really, if there is
any chance that they will step. And in your conversations with Mr.
Clark, is there an understanding that maybe he'll stay on in some capacity?
No, I don't think we talk about something like this.
We always talk about business and what is the future of it and how we can
really push the business and to see more business coming to to Dubai and to the
airport. Yeah.
Well, let's talk more about the business.
You know, one of your biggest customers and.
Clients that you deal with as bullying. And the company has faced many issues in
the last couple of months. We're talking about management changes.
We're talking about planes in Grounded. What do you think needs to happen there
in order for people's concerns around safety to be allayed?
Yeah. When it comes to Boeing or what's
happened, I think if you are referring to the troubles of an ex and the delay
that we see, I don't think we are happy. And also all the rules signed up for
this aircraft. I met up with the new management just
recently to touch bases. You know, they promised that they would
be able to change things and make things grow faster.
So, you know, because for us not saying we are stuck, but they are
they are the only two player there. It's Boeing and Airbus.
So we have that, the 777 and the decision on the certification, that
would be very slim. What do you think management need to do
to get things back on track again at Boeing?
You know, I think you need to work hard. You need to understand you need to keep
up with any promise that you promise I would deliver on that day.
You should be delivering on that gift. Emirates chairman and CEO Sheikh Ahmed
bin Zayed and Maktoum. They're now the head of Saudi Arabia's
new investment fund for chips and air Technologies.
As the country would divest from China if it were asked to do so by the US,
allowed CEO in mid-air, told Bloomberg that the US is its number one market.
Saudi Arabia has a tremendous reputation of being dependable, being a trusted
partner, of supplying the energy. For decades and decades it has been.
We would like to hope to achieve the same sort of status in our semiconductor
in the US side as well. The US is the number one market.
The US is the number one partner and we hope we can partner more deeply and
trust it and secure It is a key word for us.
I met her speaking to Bloomberg on the sidelines of the Milken Institute Global
Conference in California. Also coming up on Horizon, Disney shares
take a tumble despite its strong second quarter earnings.
We discuss the disconnect coming up next.
This is Bloomberg. Welcome back to Horizons, the Middle
East and Africa. I'm Gianni Versace in Dubai.
Disney shares tumbled the most in 18 months after reporting a tepid outlook
for growth and streaming subscribers. That is despite strong second quarter
profit beating. So Bloomberg's Charlie Rose joins us
from London. Well, Charlie, despite the fact that
Disney recorded strong earnings for the second quarter, we did see quite a
dramatic fall in its share price. Are people just concerned about the
future of the Disney Plus the streaming business?
Yeah, Jamal, I mean, that seems to be why Wall Street reacted negatively to
what was otherwise a pretty strong report here.
And so thinking about Disney Plus, I mean, that is crucial for the for the
future of this company. And actually, in the previous quarter,
Disney Plus achieved a historic first. They were profitable for the first time
in history. But what investors really seemed to be
reacting to was the fact that management said that there could potentially be
subdued growth in its overall streaming business in the current quarter.
So that was something that seemed to weigh on sentiment.
But something else that was really important here as well was parks.
So Parks in 2023 made up 70% of operating income for Disney.
And actually, management said yesterday that they also saw some subdued growth
there as well. You know, you talk about the subdued
growth when it comes to streaming. What is the catalyst for that?
Is it just that there's more competition?
Is it because the market has become a lot more saturated?
Is it a pricing issue? What does it tell us about the state of
the consumer market right now? It's interesting rate.
It seems like every day there's a new streaming platform out there.
And so I think that issue of of of competition is certainly one.
I think this is one for Disney of investment as well.
So, you know, they have made significant investments not just in the US, but
around the globe. One issue that they're dealing with is
rights for cricket in India, which have been incredibly expensive, but of course
could in the long run prove to be lucrative.
And management yesterday reiterated the fact that they feel confident about
streaming. CEO Bob Iger said in a statement that he
believes that the overall streaming business will reach profitability by the
fourth quarter. And this is really important because
activist investors have been looming. You know, Bob Iger just won a very
important battle with Nelson Peltz. And at the issue there was streaming.
Yeah, absolutely. And that's always going to be the
question that gets put forward to them, despite the fact that other parts of the
business seem to be doing well as well. Charlie, thank you so much for that
overview. All right.
Coming up, Chinese President Xi Jinping is in Serbia on the second leg of his
European tour. More on that trip.
This is Bloomberg. Welcome back to Horizon's Middle East
and Africa. I'm Jomana Versace in Dubai.
Nintendo says it will soon announce a successor to its seven year old switch
gaming console after forecasting a bigger than expected profit decline.
President Shintaro Furukawa posted on X to see an announcement on the next
hardware platform will be made in the coming year.
That came after warning that operating income will fall 24% in the current
fiscal year. Reddit shares jumped in extended trading
after first quarter sales topped estimates, impressing investors with its
first results as a public company. Revenue increased 48% in the period to
$243 million. And the social network projects sales in
the current quarter of up to 255 million well ahead of the average analyst
forecasts. Donald Trump's criminal trial for
allegedly mishandling classified documents has been postponed
indefinitely. It's a significant victory for the
presumptive Republican presidential nominee who is facing four criminal
cases and seeking to avoid multiple trials before the November election.
Trump is currently in court on charges he concealed hush money payments to a
porn star, and Chinese officials are threatening to
release audio of a purported phone call with a Philippine military official that
Beijing claims is evidence of an agreement over a disputed territory in
the South China Sea, according to a transcript seen by Bloomberg.
The head of the Philippine military's Western Command agrees to a new model in
handling resupply missions in the area. Manila has previously denied such deals.
Let's take a quick look at how equity markets are faring as we headed towards
the end of the show. Equity futures seen trading sideways, if
not slightly lower. The S&P is struggling to break through
that 5200 to the upside meaningfully. NASDAQ 100 also leaning sideways.
We had some hawkish commentary come through from Kashkari yesterday
suggesting that rates will be higher for longer.
The Dow also seen holding at around 39,000 U.S.
stocks. Futures seen opening up about ten basis
points weaker on the session. 4900 is where we at.
One of the major performers yesterday was UBS.
As we spoke about a quick look at U.S. treasuries as well.
We're coming off a successful three year Treasury auction yesterday, giving a bit
of a bid to two year yields today. You can see they're trading sideways at
around 4.84, still around 20 basis points lower than that Fed meeting last
week. Ten year also sitting at around 4.4, 6%.
Final quick check of oil. This is the picture for crude markets as
we head into the closed slightly weaker on the session, but there is plenty more
to come. And, of course, we will be back with you
tomorrow. Same time, this is Horizon's Middle East
and Africa.
