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Speaker 1: Is likely, all things being equal, likely to result if

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Speaker 1: not a sudden stop, I wouldn't necessarily go there. But

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Speaker 1: in higher um risk premia on range of sterling assets,

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Speaker 1: higher financing costs, the consequence of that is less of

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Speaker 1: it will come in. People will make decisions around that um.

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Speaker 1: But in terms of market functioning, because you reference market functioning,

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Speaker 1: I just wonder minus, can I ask me just to

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Speaker 1: say a word on this is This is not news,

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Speaker 1: but I think it's important to understand that you know,

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Speaker 1: what we're doing as the Bank as a whole is

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Speaker 1: to use everything we can to mitigate any of these

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Speaker 1: factors in and around the reference, regardless of of of

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Speaker 1: of outcome. Our Our job is to try to mitigate

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Speaker 1: and maybe just say a word if you could. I

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Speaker 1: mean on the Sterling side, as there was a Bank

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Speaker 1: of England Governor Mark Karney. He has been talking about

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Speaker 1: the Bank of England's decision to issue a strong warning

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Speaker 1: about the impact of a decision to leave the Pan

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Speaker 1: Union on the British economy. The pound at the moment

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Speaker 1: one forty one has actually fallen after he said that

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Speaker 1: it is possible Britain could go into recession. This is

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Speaker 1: Bloomberg Radio. This is Bloomberg Surveillance even coming into I

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Speaker 1: guess it's a month before right that we are expecting

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Speaker 1: that you could get some Dameshie pressure coming onto the

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Speaker 1: euro We actually think this is an opportunity rich environment

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Speaker 1: if you do have good research your patient and I

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Speaker 1: think we're going to continue to see swings and energy prices,

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Speaker 1: but we'll have an opportunity for the stocks to rally

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Speaker 1: as energy prices go back up. Bloomberg Surveillance your link

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Speaker 1: to the world of economics, finance and investment on Bloomberg Radio.

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Speaker 1: This is w b b R New York, w d

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Speaker 1: C h F M Booie, Boltimore, Washington, w jay Z

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Speaker 1: F m HD two Catonsville, w x G S Newton,

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Speaker 1: w j M N ninety four point five f m

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Speaker 1: HD two Boston, k m W Oakland KOs F one

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Speaker 1: of week point seven f m HD two San Francisco,

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Speaker 1: and soon is EXEM Satellite Video Channel one ninet. Welcome

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Speaker 1: back to Bloomberg travell and say to Clock on Wall Street.

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Speaker 1: I Michael McKee along with Tom Keane. The Bank of

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Speaker 1: England holding policy steady but suggesting there is a major

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Speaker 1: economic risk should the country vote to leave the European Union.

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Speaker 1: A lot of other news happening this morning as well.

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Speaker 1: Let's check in with Karen Moscow for a news markets update.

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Speaker 1: Thanks so much, Mike. What we do? A headline crossing

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Speaker 1: the Bloomberg right now, Honeywell planning to spin off its

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Speaker 1: resins and chemicals business. We also had news on Monsanto,

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Speaker 1: as you told us, they are exploring a potential bid

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Speaker 1: for US competitor Monsanto, and a deal that would create

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Speaker 1: the world's largest supplier of seeds and farm chemicals. This

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Speaker 1: is according to people familiar with the matter, who say

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Speaker 1: the German firm has held preliminary discussions internally and with

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Speaker 1: advisers about buying Monsanto, which is a market value of

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Speaker 1: almost forty billion dollars. Futures this morning, we're watching their

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Speaker 1: rising as and Pemity futures up thirteen and a half

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Speaker 1: point to DOWI Mini Future is up eight seven NAS

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Speaker 1: documny future is up twenty six. The decks in Germany's

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Speaker 1: up six tenths percent. Ten year Treasury down e thirty seconds,

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Speaker 1: the yield one point seven five percent. NIMEX screwed oil

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Speaker 1: up one percent or forty seven cents to forty six

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Speaker 1: seventy of barrel comics gold is down six tents percent

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Speaker 1: or seven dollars thirty cents. At twelve sixty eight, announced

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Speaker 1: the euro a dollar thirteen eighty two, the British pound

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Speaker 1: a dollar forty thirty nine, and again one oh nine

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Speaker 1: point three four. Tom and Mike Karen thank you so much.

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Speaker 1: What a morning for economics and international economics will gring

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Speaker 1: you all the headlines from Governor Karney Lurics surveillance brought

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Speaker 1: to by Cone Resnick Accounting, tax advisory is economic policy changes.

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Speaker 1: So did business decisions speak to the experts at Cone

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Speaker 1: RESIDUC for forward thinking advice. You need find out more.

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Speaker 1: Akhon Resnick dot com. We need to find out more.

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Speaker 1: Michael McKee on b OE. The import of this press conference,

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Speaker 1: all of them are different nation today, Asian, it is

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Speaker 1: important that we bring in someone who's accent has not

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Speaker 1: been lost as to New York. John Pharaoh joins us

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Speaker 1: right now. John, I can honestly say I've never seen

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Speaker 1: a central bank governor leader chair game edown recession as

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Speaker 1: much as early in that Prescott. Yeah, I want to

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Speaker 1: take him in the room. I've been in that room

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Speaker 1: many times covering news conferences for Bloomberg, that was the

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Speaker 1: most tense news conference for Governor Krni since he took

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Speaker 1: the Holm, and I would say the most tense news

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Speaker 1: conference since Mervin King was the governor in the depths

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Speaker 1: of the financial crisis. A very delicate situation as a

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Speaker 1: politically independent central bank wades into a very political subject,

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Speaker 1: and the risks around Brexit is what he emphasized, Tom

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Speaker 1: and it's the elephant in the room. It's what he

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Speaker 1: called it, and a real prospect if indeed the UK

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Speaker 1: votes to be to leave the European Union, at least

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Speaker 1: in his mind, a real prospect of a recession. We'll

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Speaker 1: put us in context for us, if the United States

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Speaker 1: Federal Reserve were to say, you know, there were a

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Speaker 1: is a a financial risk or a risk to the

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Speaker 1: dollar from something, it would raise political hackles from a

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Speaker 1: lot of people currently wading into the middle of this.

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Speaker 1: One of the reporters said, the British people anxious to

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Speaker 1: hear from an independent voice. Do people see the Bank

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Speaker 1: of England as more independent of politics than they think

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Speaker 1: of as the Federal Reserve here in the United States.

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Speaker 1: I think it's worth emphasizing this is probably one of

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Speaker 1: the most politically independent central banks on the planet. I

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Speaker 1: think what's not helped is the reaction of the government

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Speaker 1: more than the reaction of the central bank. You would

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Speaker 1: have noticed, Michael that as soon as we had that

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Speaker 1: decision from the Bank of England and as soon as

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Speaker 1: we got the details from the statement, Prime Minister David

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Speaker 1: Cameron went straight on Twitter and said he agreed with

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Speaker 1: the Bank of English decisions to emphasize the risks to

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Speaker 1: the economy. That's not going to help anybody when they're

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Speaker 1: trying to say that they're politically independent. John Farrell with

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Speaker 1: SO now joining us. A gentleman who was signed a

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Speaker 1: letter with a hundther economists this morning. David blanche Flower

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Speaker 1: is at Dartmouth College for remember of the Bank of

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Speaker 1: England and one of the leading critics of shades of

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Speaker 1: Austerie across our global economic system. Professor blanche Flower, I

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Speaker 1: have two quick questions. Why did you sign your letter?

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Speaker 1: And it seemed to be a very ecumenical letter across

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Speaker 1: all of economics. Yes, I think it's a very broad

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Speaker 1: group of people. In some sense, it reflects what Governor

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Speaker 1: Carney actually said, and particularly in his statement about the

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Speaker 1: downside risk to the UK economy from Brexit. Um, it's

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Speaker 1: hard to see. And if you think of risks when

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Speaker 1: the central banks worry about our risk balance to the

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Speaker 1: upside or to the downside. Essentially, what you heard from

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Speaker 1: him was a whole list of risks to the UK economy,

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Speaker 1: to the downside, to the exchange rate, to demand, to supply,

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Speaker 1: and he ducks questions about does brexit actually mean the

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Speaker 1: our word and eventually kind of hedged a little bit

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Speaker 1: and said, well, it's possible we could have a technical recession.

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Speaker 1: So I think the answer is that it looks that

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Speaker 1: the risks of doing so right now is economy, particularly

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Speaker 1: UK economy is slowing, look to the downside, and economists

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Speaker 1: are very worried about a leap to the unpleasant unknown.

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Speaker 1: I want to take the other side, professors, you know

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Speaker 1: we do. Gerard Lyons writing in the Times of London

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Speaker 1: this weekend in support of Brexit. It was a lonely

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Speaker 1: letter but no doubt with a large support across your

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Speaker 1: United Kingdom. What did Mr Lions get wrong within his

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Speaker 1: analysis at Brexit would not harm Britain? Well, good, good

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Speaker 1: friend of mine, Jared Lyons, we were actualtely graduate students together. Um.

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Speaker 1: I mean Jared is a sensible economist. There are differences

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Speaker 1: in view, um, but I think it's much more of

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Speaker 1: a leap of faith. I mean there are There's another

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Speaker 1: letter from eight economists that Gerard signed, and essentially in

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Speaker 1: that letter the argument was made that it's clearly would

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Speaker 1: have a major impact on manufacturing, but that wouldn't actually

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Speaker 1: you can just let manufacturing go and freedom was a

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Speaker 1: good thing. But I think it was really very much

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Speaker 1: tied to the politics, the politics of being separate from

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Speaker 1: way of regulating the UK economy. So I think if

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Speaker 1: you listen to the to the debate today, the economics

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Speaker 1: appear to be soundly on the side that this is

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Speaker 1: a downside risk. Um. Some people take the view that

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Speaker 1: the freedom this might bring it's a price worth paying.

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Speaker 1: But they have The problem they have is they haven't

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Speaker 1: enumerated what brexit would actually mean Brexit to what what

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Speaker 1: arrangement would there be? Would you would you take the

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Speaker 1: Norwegian model where you have a relationship with the EU,

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Speaker 1: you pay your money, but you don't get to vote.

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Speaker 1: Would it be some looser arrangement where you have to

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Speaker 1: do hundreds of bilateral trade deals, and President Obama said, well,

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Speaker 1: we wouldn't do someone simply with the US, so that

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Speaker 1: gives enhanced uncertainty, essentially rubber stamp today by the MPC.

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Speaker 1: If you I'm reading his state and it says a

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Speaker 1: vote to leave the U change could have material economic effects,

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Speaker 1: and I agree with that. Let me ask John Ferrell

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Speaker 1: quickly the state of the British economy right now it

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Speaker 1: has turned down. How much of that is cyclical? How

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Speaker 1: much of that is for exit uncertain I think it's

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Speaker 1: so incredibly difficult to strip out the uncertainty. But when

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Speaker 1: you look at services, Michael, the p m I is

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Speaker 1: at a three year low. You've got to take notice

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Speaker 1: and sit up and take notice of that because it

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Speaker 1: makes up the bulk of the economy. My question to

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Speaker 1: Danny at this point would be, Danny, should they be

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Speaker 1: cutting rates? Bottom line? Well? Actually, I think I would

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Speaker 1: have actually voted for a rate cut, but I certainly

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Speaker 1: perhaps would have been persuaded by other members of the

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Speaker 1: committee that that would be seen to be too political.

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Speaker 1: It's back to Tom and Mike's question, um, and there

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Speaker 1: might be a danger that that would compromise the NPC's

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Speaker 1: kind of credibility. But I think the evidence is clearly that,

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Speaker 1: and I think Kinnie was signally and the report signals it.

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Speaker 1: If there's a vote to Brexit, the strategy probably quite

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Speaker 1: clearly given the downside shock that's coming, a cut would come. Um. Obviously.

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Speaker 1: The other one is even if you're in remain not

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Speaker 1: You're right that the p m I is is slow,

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Speaker 1: but so it's business competence, so is the labor market.

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Speaker 1: Retail sales planings are falling. So I think that and

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Speaker 1: the market thinks that the next move will actually be

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Speaker 1: a cut, And yes, it will be. The question will

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Speaker 1: be when, well, let's it's come back. We're gonna come

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Speaker 1: back with Professor Blanch. We're gonna throw John Farrell out

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Speaker 1: of the studio. He's way too young, he's way too

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Speaker 1: handsome to be in here with us. But but we're

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Speaker 1: going to continue with Professor Blanch. There is a headline

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Speaker 1: which gives pause. Karney sees possibility of global negative Brexit spillovers.

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Speaker 1: Stay with us this important morning. Let's get you cut

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Speaker 1: up on what's happening around the world. We turn to

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Speaker 1: Michael bar Thank you very much, Mike toom. Brazil Senate

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Speaker 1: as voted to just end President dil Marusso from office

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Speaker 1: and start an impeachment trial. The vote was fifty five

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Speaker 1: twenty two. This morning, rusself is accused of illegally doctor

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Speaker 1: and fiscal accounts to hide the size of the budget deficit.

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Speaker 1: Donald Trump will meet today without Speaker Paul Ryan and

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Speaker 1: other Republicans on Capitol Hill who are reluctant to support

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Speaker 1: the presumptive nominee. The Obama administration will unveil today rules

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Speaker 1: on the limit of methane emissions. The rule is designed

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Speaker 1: to produce leaks of methane from oil Wells Global News

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Speaker 1: twenty four hours a day, powered by our twenty four

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Speaker 1: hundred journalists more than a hundred fifty news bureaus from

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Speaker 1: around the world. I'm Michael bar to Baca bar, thank

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Speaker 1: you so much. We are monitoring the attorney press conference

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Speaker 1: in England. It is quite tense, but yet not all

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Speaker 1: market moving. As Michael McKie mentioned, sterling stronger than weaker

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Speaker 1: one on cable. That would be pound sterling as compared

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Speaker 1: to the US uh dollar. And again news from Brazil

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Speaker 1: President russaf uh impeach this morning will have much more

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Speaker 1: Business flash and I'm Karin Moscow. US stock index futures

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Speaker 1: are rising along with oil and let's go to the

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Speaker 1: First Word Breaking news desk for today's morning call. Here's

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Speaker 1: Bill Maloney. Good morning, Bill, Good morning Karen. That's right.

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Speaker 1: US futures continue to rally after yesterday sell off. DOUT

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Speaker 1: futures currently hired by ninety points, sesames gained thirteen and

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Speaker 1: a half, and NASA futures rise by twenty six. The

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Speaker 1: U S tenual at one point seven and up markets

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Speaker 1: are also rising, led by one point three percent gains

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Speaker 1: in stayin on the US Economic Frinday thirty, import price

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Speaker 1: in necks and initial jobs claims and at ten thirty

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Speaker 1: natural gas storage change regarding earnings this morning, Ralph Laurin

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Speaker 1: beat Cole's Miss shares it down seven percent pre market,

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Speaker 1: and deal News Bear said to explore bid four mon

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Speaker 1: Santo Man Santo is trading higher by seventeen percent pre market,

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Speaker 1: and honey Well to spin off its residents and chemicals business. Finally,

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Speaker 1: over at Wells Fargo Live from the first breaking news

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Speaker 1: task Gombo Maloney Care, Thanks bail to hear live breaking

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Speaker 1: news over your Bloomberg Times Squawk Ago on your terminal.

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Speaker 1: That's squ a w k go and that's a Bloomberg

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Speaker 1: business flash. Tom and Mike Karena, thanks so much. Futures

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Speaker 1: of Futures of eighty six, Sterling flat stronger, weaker now flat.

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Speaker 1: Governor Kearney continues comments on the state of the United

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Speaker 1: Kingdom and global ramifications of except Bloomberg Surveillance. This morning

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Speaker 1: slash high conviction. David blanche Flower Where Dartmouth College and

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Speaker 1: we look at the headlines coming out as Governor Kearney

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Speaker 1: walks a most difficult path right now again, I go

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Speaker 1: back to the headline, UH, thirteen minutes ago, Karney Sea's

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Speaker 1: possibility of global negative Brexit spillovers. That's a tough sell

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Speaker 1: to a lot of people. Professor blanch Flower, why does

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Speaker 1: Brexit EU matter in Asia? Well, Um, the big line

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Speaker 1: in his in the report that global financial conditions could tighten,

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Speaker 1: perhaps because risks of break up in the rest of

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Speaker 1: the European Union would probably follow up on me. I

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Speaker 1: mean there are these words what grexit and nexit and

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Speaker 1: other things. I mean the assumption is that aggregate demand

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Speaker 1: in the UK and Europe falls and this has spill over.

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Speaker 1: I mean, the thing we learned in two thousand and

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Speaker 1: eight is once that once something falls we saw in

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Speaker 1: the US, it has implications to the rest of the world.

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Speaker 1: That's in a sense what globalization means. We actually are

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Speaker 1: all in these things together. What happens in financial markets

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Speaker 1: in Europe has implications for the rest of the world.

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Speaker 1: So I think I think he's right to warn that

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Speaker 1: the big the big question is why did the MPC

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Speaker 1: duck making an actual mathematical forecast as to what it

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Speaker 1: would mean if there was a Brexit? And that's what

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Speaker 1: a lot of questioning in the press conference has been about.

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Speaker 1: On the one side, um Um karnis trying to say,

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Speaker 1: we need to be careful about the politics. But but

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Speaker 1: the questions there were you given us the words what

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Speaker 1: about the numbers? Um And he said, they talked about

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Speaker 1: being a shock to the pound, and he wouldn't answer

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Speaker 1: when they was asked, well, it's gone down nine in

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Speaker 1: the last near you know, in the last few months.

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Speaker 1: How much of a shot do you think it would

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Speaker 1: be a shock. So obviously that that's an issue. But

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Speaker 1: I think this means in a global economy, which we

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Speaker 1: saw in two thousand and eight, a big negative shock

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Speaker 1: to the fifth largest economy in the world would have

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Speaker 1: implications everywhere else. Now, Governor Karney said, should that happen,

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Speaker 1: the Bank of England obviously has scope to lower interest

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Speaker 1: rates there at fifty basis points, so they could cut

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Speaker 1: the base rate. But uh, there is a going into

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Speaker 1: the eating. There was a forecast of chance of a

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Speaker 1: rate cut from the Bank of England this year based

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Speaker 1: on economic developments as measured by swap rates. What's your

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Speaker 1: likely scenario for BOE policy outside of Brexit? A very

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Speaker 1: good question, Mike. I think the telling thing that Carni

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Speaker 1: said was that the evidence is that the UK economy

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Speaker 1: is slowing um. He actually said that the MPC decided

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Speaker 1: that half of that was probably because of the fears

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Speaker 1: of Brexit, and the suspicion would be if there was

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Speaker 1: no Brexit vote then things would turn around, but he

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Speaker 1: said there are a risk to that. So the risk

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Speaker 1: here is actually that I think there's a lot of

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Speaker 1: evidence in the data that in fact, the UK economy

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Speaker 1: started to turn perhaps before this Brexit idea became so

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Speaker 1: close to people's minds, particularly because the poles are so close.

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Speaker 1: But it looks to me that the labor market turned down,

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Speaker 1: the p M ized business confidence can turn down, consumer

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Speaker 1: confidence turned down, and retail sales volumes did too, so

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Speaker 1: even in the face of the market yield of generating

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Speaker 1: more stimulus. So I think that really is the question.

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Speaker 1: It looks to me that even on the remain side,

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Speaker 1: the forecast is overly optimistic. There's still forecasting a huge

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Speaker 1: jumping investment next year, that wage growth will suddenly instead

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Speaker 1: of falling as it's been doing recently, it will suddenly

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Speaker 1: jump again. So this puts a highly optimistic forecast even

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Speaker 1: if there's a remain. So my view would be the

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Speaker 1: market is right. I think the next move will be

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Speaker 1: a cut. The questions simply will be when, and it

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Speaker 1: will be true that there will be a cut, whether

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Speaker 1: there's a remain or or Brexit, and especially as a Brexit,

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Speaker 1: we will that will be a major negative shot to

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Speaker 1: the UK economy. There are the constant question is what

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Speaker 1: if the UK votes for Brexit, what will be the implications?

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Speaker 1: But what if they vote to stay in what happens?

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Speaker 1: What happens June? You know the day after? Yeah, well,

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Speaker 1: essentially you carry on in the same way. I mean,

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Speaker 1: that's what the forecast has been. And then there has

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Speaker 1: to be a kind of a clerk vacation as to

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Speaker 1: whether the slowing was really driven by the fear of

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Speaker 1: leading or not, because once the Brexit votes, say, has

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Speaker 1: been turned down, then you get clarity. Um, but there

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Speaker 1: will you know, So I think that's what we'll see.

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Speaker 1: But I think the reality is that um, that the

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Speaker 1: UK economy had started the slow already. And and the story,

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Speaker 1: of course is the timing of this boat. I think

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Speaker 1: I've said on your program anytimes the business cycle turns

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Speaker 1: were about eight years in to um, you know, a

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Speaker 1: shot aim in the start of two thousand and eight one,

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Speaker 1: where we're in two thousand and sixteen. Presumably another shop

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Speaker 1: is coming or has actually probably arrived, and central bankers

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Speaker 1: are very bad at picking those turning points. So my

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Speaker 1: great questions, but I think the downside shock is relevant

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Speaker 1: in both scenarios. Never enough time, David Blashflower, anybody far

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Speaker 1: Dartmouth College, thank you so much. He again signed a

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Speaker 1: letter with a hundred ninety nine other economists today pushing

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Speaker 1: back against Brexit. From New York, Michael McKeon turn King

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Speaker 1: Governor Kearney still speaking, Bloomberg surveillance coming up there, with

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