Good morning. This is Horizons Middle East and Africa. Our top stories this morning: Stocks stabilize, Asian markets limit losses after Wall Street's worst selloff since June. Investors remain cautious as questions linger over whether the AI trade is facing a correction or a deeper reset. Oil retreats, crude falls as President Trump is set to favor more time for diplomacy with Iran before considering fresh strikes. This shift eases fears of an immediate escalation, even as attacks around Hormuz continue and Gulf leaders push to avert another round of U.S.-Israeli strikes on Iran amid fears of a wider conflict. Regional powers are stepping up diplomatic efforts as Washington weighs its next move on Tehran.
It's just gone 9 a.m. across the Emirates. I'm up here in Abu Dhabi this time around. We are live at the opening ceremony, just about to start, with conversations about energy and everything around energy markets. But before we get to all of that, let's get a quick look at where markets are sitting. You're seeing some moderation in S&P futures, about 5/10 of a percent higher. Of course, this is after the bruising selloff that we saw by the end of last week, the S&P 500 falling about 2%. Nasdaq 100 had sunk 3.5%, as a matter of fact, briefly crossing the threshold of a technical correction. But right now you're looking at Nasdaq futures that are about 1% higher. Again, you're seeing a moderation in the movement. What is down this morning, however, is Brent crude prices, about 3.2% lower. This is of course as President Trump comes back to the region and suggests that we might see diplomacy taking shape in the Middle East. Of course, that remains to be seen. We will be having those conversations around the day and around the next couple of days.
Bitcoin, of course, the rout that we saw by the end of last week, that hack in Binance's withdrawal has come back this morning. But of course, the story to continue monitoring and a story that we will be discussing later on on the show. And then look at the benchmark yields in the United States, not doing anything this morning, 4.92%, 4.93 almost percent. Of course, all investors are waiting for the midterm elections and what happens in the aftermath of that, whether it's the moves on inflation, on the benchmark yields or on oil prices. But for a look at what is happening in Asian markets this morning, we've got Anthony Stevens standing for us in Hong Kong. Anthony, good morning. What are you looking at?
Morning. Thanks. You mentioned that markets were doing better than expected, and one of the big reasons for that is the earnings out of tech. So we had some very strong earnings from Tokyo Electron. That stock's up almost 7%, Advantest following on from its strong earnings last week up almost 3%. And most notably SK Hynix leading Korea here. Korea has bounced around 6% intraday from the open as people get back into Hynix after that very strong result. Similarly, in China, we saw very strong results from Jiangsu Optical. Now flip the board and we can kind of see some moderation of that optimism because some of those values are up because people are shutting down books. On the other side of things, companies that have done well so far this year are seeing some significant selling without any news, really. So we see selling in the Chinese banks. We see selling in the Singaporean banks. You know, we saw selling in the Australian banks. So positions that have done really well this year are getting removed.
Now we switch to India, which has just started trading, and that's a much simpler story. The Indian infrastructure story is back in play here after the Reliance Industries result, that stock's up 7%. We similarly see reform in the Tata Group potentially on the cards, that stock's up 4% on Tata Steel, and very strong sales numbers for Maruti in the consumer space continues that theme of the upwardly mobile Indian consumer. So Maruti is up 3% and Jio Financial Services, related to Reliance, is up 4.5%.
Okay Anthony, thank you as always for those market updates. Of course, you will be back with us in 30 minutes or so. Also Anthony Stevens in Hong Kong. Now retreating to the geopolitical picture, oil prices are dropping this morning as hopes build that diplomacy could delay or avert another round of U.S. strikes on Iran. President Donald Trump is reported to want to give talks more time, while Iran says that discussions on reopening the Strait of Hormuz are making progress. But tensions remain high, with Gulf states fearing that Tehran will make good on warnings that any renewed attack would trigger a broader response across the region.
We know that the rules of logic tell us that the Iranian stand and the American stand are far apart. And if these positions are not bridged, then we have to worry about the worst. So we are hoping that there is a diplomatic breakthrough before that actually happens, from the perspective of the UAE. And I would also say Gulf countries, we don't really want to see another round of confrontation in the region. We want to see a diplomatic and political resolution of this crisis, protracted crisis that we have seen.
For more, we're now joined by Onur and Bloomberg's managing editor for the Middle East and North Africa, Onur. Good morning. You're joining us from Dubai. We're having these wider conversations about oil, energy, but of course that is in the context of the geopolitics. Are we seeing any genuine diplomatic opening this time around? Good morning Abir.
Yes, there is definitely some movement there, but I'd be very cautious about calling it a breakthrough just yet. We have seen that Iranian Foreign Minister Araqchi just yesterday said that there has been some progress in implementation of a two-day plan to reopen Hormuz. But essentially what this is, is an accelerated version of a seven-day plan to reopen the Strait of Hormuz that Iranians put to the Americans back in September, which was flatly rejected by Trump. So yes, there is clearly some movement on the diplomatic front, but it is way too early to say that this is going to result in some kind of a breakthrough and allow the region to avert another round of fighting between the US and Iran.
Onur, we had written a big piece over the weekend about the reaction of Gulf states. Of course, you were just listening to Gargash, who is a senior adviser to the UAE president here. What has the reaction from wider Gulf states been about what Iran's retaliation could look like this time around, and how are they looking at that?
Well, I think across the Gulf there is both a sense of concern and frustration with the way things have been going. As you just mentioned, the US and made it very clear that Gulf states feel like they are being dragged into a war that they have been trying for months to avert through diplomatic talks. And we have seen that sentiment echoed at that conference over the weekend in Bahrain, with Egypt's foreign minister also saying that should the war resume, the second round of fighting could be more destructive than what we have seen in the first round back in February, March and April. We have seen the Iranian supreme leader, Ayatollah Khamenei, ordering his commanders to expand the geographic limits of any Iranian retaliation and expand a list of US and Israeli targets should Iran come under renewed attacks from the US and/or Israel. So what we're looking at is this region feeling extremely frustrated that they're not part of the decision making, but they may bear the costs of renewed fighting should the US and/or Israel decide to attack Iran again.
Okay, Onur, thank you as always for those updates. Onur, Bloomberg's Managing Editor for the Middle East and North Africa, joining us out of Dubai. Now carrying on the conversation, months of disruption across the global energy markets have kept crude and fuel prices elevated, delivering a major profit windfall for the world's biggest oil companies. For more on this discussion, we're now joined by Bloomberg European oil reporter Mitchell Freeman. Mitch, good morning. Good to have you in Dubai with us, in Abu Dhabi as a matter of fact, with us at ADIPEC. Let's talk about big oil and the profits that they have been making, whether we're talking about Europe or even the ones in the United States. Can we just talk about how the disruption in oil supply has impacted those profits?
Yeah, the upheaval in global energy markets has driven the third highest quarterly profits ever for the five big oil supermajors. And refining is the real choke point, and about 10% of global fuel processing capacity is offline. And so the available refineries are running all out to produce diesel, jet fuel, gasoline to get that into the markets as demand remains quite elevated for oil products. And so these global oil majors are integrated companies where they can kind of optimize their downstream refining with their trading optimization to best, you know, make those fuels.
But despite all of that, we're still seeing a lot of oil majors holding back on spending plans. What is the rationale behind that?
Yeah, it's been an interesting tone from the oil majors. It's a bit different from previous boom cycles where they kind of chased growth, and now they're trying to show a discipline. And we even heard Shell CEO say we've made these mistakes in the past of overspending during these times, and now we need to be disciplined and spend within the kind of framework of their plans and not kind of diverge from that. So we expect to see kind of more disciplined spending from the oil majors.
And I mean, you're here from London. We were talking about ADIPEC and what to look forward to this year. What are you kind of looking for when coming to this conference? Of course, encompassing some of the world's biggest oil companies, ministers of energy from across the world. What should we expect over the next couple of days?
Yeah, I'm curious to hear from the IOCs about their plans for the Middle East. Are they looking to invest further in the region? What are they trying to do? There's obviously all sorts of infrastructure build-out plans, both here in the UAE and elsewhere. And so we're looking to see how are those IOCs going to partner with the countries, with the NOCs, and how they can build out that infrastructure. That's one key area I'm looking for.
Okay. And we're excited, we're going to be spending the next couple of days, three days together watching all this unravel. Thank you so much. Great having you this morning. Of course, Bloomberg's Mitchell Freeman covering oil. And coming up, the U.S. midterms are set to reverberate globally. We will be taking a look at what is at stake next. This is Bloomberg.
President Trump says he might have to become Mr. Veto if Democrats win a majority in Tuesday's midterms. The comments in a New York Post podcast mark a rare acknowledgment that Republicans could lose the elections that are coming up. So let's get more with Bloomberg's chief European correspondent, Oliver Crook, who joins us this time around from New York City. Ollie, good morning. What can we read into this comment from President Trump?
Yeah. Well, it's interesting to hear the president of the United States, who's now openly talking about what strategy he would employ if, in point of fact, the Democrats won not just the House and managed to flip that, but also were to manage to flip the Senate. Now, it's widely expected that the Democrats will take the House. The path to the Senate is slightly more complicated, but it's certainly within reach in a number of these races for the Democrats. So now we have the president talking openly to the New York Post about what he would do. And now, effectively, what he is referring to is the veto power of the president of the United States, that you need two thirds of the Congress in order to overcome. So the Democrats can pass legislation as long as they don't have two thirds, the president can effectively veto it and kick it down. It's significant, Abir, because now the president is talking very openly about this prospect of the Democrats potentially winning both the houses. But it's also significant because it suggests that Trump, in these comments, is potentially willing to work with this Congress in the future. He says he would be vetoing things for months and months and months, but after that, the Democrats would have to come forward and cut a deal with the president. Now, that seems to indicate that the president would be then theoretically open to making deals with a Democratic Congress, though I suspect many of the Democrats, even if they do find a path to victory in both the House and Senate, are not holding their breath for that prospect.
Ollie, let's talk about the Senate for a second. The Democrats are hoping to flip not just the House, but also the Senate. Do you think that that just becomes a little bit harder because of Michigan and what we saw happen overnight?
Yeah, it's really interesting, Abir. So just a sort of reminder to everybody, effectively the Democrats need to net four Senate seats. That means not losing a single one. And basically flipping, for Michigan is one that is currently held by the Democrats. The senator is stepping down, and there was a very, very bitter primary race between Abdul El-Sayed and Haley Stevens that effectively pitted the two against each other. And Abdul El-Sayed did manage to win, but by less than one percentage point, by fewer than 15,000 votes. Now, Haley Stevens has not only refused to endorse El-Sayed, but in fact has endorsed the Republican challenger, Mike Rogers, and effectively campaigning alongside him yesterday. Now, this is obviously very peculiar behavior within sort of Democratic politics, particularly in the age of Trump. And given how close that primary was, if she does take a portion of her followers with her, this could spell trouble for the Democrats. That being said, we do have some polling overnight from Michigan that suggests, from the New York Times and Siena, that it is still up by about 11 points. That, however, will not capture the events of the last 24 hours. But I believe it's also very significant because it does illustrate this massive fissure that exists within the Democratic Party. It's papered over right now because of that intense anti-Trump sentiment. But it is that sort of fissure that exists around a number of different issues, Israel included, which is the one in question here, but also about how progressive this Democratic Party is going to be going forward.
Okay. Ollie, you're going to have a busy two days ahead of you. Thank you for making the time for us. Bloomberg's Oliver Crook joining us out of New York City. And now let's return to markets. A selloff in stocks eased during Asian trading today. This is as U.S. equity futures turned a little bit higher. And it comes after the Nasdaq had its worst day since June on Friday. So joining us now to unpack all of this is UBS Global Wealth Management's chief economist, Paul Donovan. Paul, good morning. Good to have you with us this morning. I mean, such a monumental week for stocks last week. Let's talk about the AI selloff. Let's talk about the rebound that we're seeing this morning. And let's talk about what exactly just happened. Do you think that this selloff that we saw that drove the Nasdaq a little bit over 3% lower on Friday is exposing the gaps? Is it a reset? Is it investors gearing up ahead of earnings season? What exactly are you looking at this time around?
So I think the first thing to recognize is that this is a very focused selloff. This is primarily about the tech sector. So I don't think we can read from this into the wider economy. This is not a red warning light for the economy as a whole. And I think what is happening is after, you know, a very dramatic year as far as technology is concerned, what we are seeing is investors looking at the specifics, looking at the likely earnings of these companies in the future and just sort of reassessing where that is going to be going. The AI story is not going to disappear, but that doesn't mean that one should be casting all sense of normality aside. You know, you need to look and see where the earnings are likely to come from. And that's what we've been saying with this sort of general reassessment as we come into the end of the year.
Okay. But we're also looking at companies like OpenAI reportedly scaling back some of its fundraising ambitions. Do you think that investors are now looking a little bit more harshly at the AI trade and maybe kind of picking out the winners and the losers in the whole rally?
So I think what we're seeing here is not necessarily people looking more harshly at the AI trade, because the AI trade is a very broad concept. I mean, it's about the companies that apply artificial intelligence in the future, not just about the companies that are providing the infrastructure. And so it's still where are the gains going to come from using AI to generate efficiencies, to cut costs, etc., etc. And that very much broadens out the process. But what we have been saying is that after this very, very narrow focus on the infrastructure of AI, there are questions being asked about the financials of this, the viability of that. And that's perfectly normal at this stage of a new technology's development. This isn't particularly unusual. So I don't think that there is anything to be overly concerned about here. It's more looking at the big picture, not just at this narrow focus.
Okay, let's return to this region. And I was taking a look at some of the notes that you guys had sent earlier. And you mentioned the UAE as an example for attracting wealth. And I mean, I'm in Abu Dhabi, you're in Dubai, two major hubs here in the region. Do you think that that attraction of wealth can last, given everything that's happening in the wider geo-economic scene?
