Speaker 1: Is likely, all things being equal, likely to result if
Speaker 1: not a sudden stop, I wouldn't necessarily go there. But
Speaker 1: in higher um risk premia on range of sterling assets,
Speaker 1: higher financing costs, the consequence of that is less of
Speaker 1: it will come in. People will make decisions around that um.
Speaker 1: But in terms of market functioning, because you reference market functioning,
Speaker 1: I just wonder minus, can I ask me just to
Speaker 1: say a word on this is This is not news,
Speaker 1: but I think it's important to understand that you know,
Speaker 1: what we're doing as the Bank as a whole is
Speaker 1: to use everything we can to mitigate any of these
Speaker 1: factors in and around the reference, regardless of of of
Speaker 1: of outcome. Our Our job is to try to mitigate
Speaker 1: and maybe just say a word if you could. I
Speaker 1: mean on the Sterling side, as there was a Bank
Speaker 1: of England Governor Mark Karney. He has been talking about
Speaker 1: the Bank of England's decision to issue a strong warning
Speaker 1: about the impact of a decision to leave the Pan
Speaker 1: Union on the British economy. The pound at the moment
Speaker 1: one forty one has actually fallen after he said that
Speaker 1: it is possible Britain could go into recession. This is
Speaker 1: Bloomberg Radio. This is Bloomberg Surveillance even coming into I
Speaker 1: guess it's a month before right that we are expecting
Speaker 1: that you could get some Dameshie pressure coming onto the
Speaker 1: euro We actually think this is an opportunity rich environment
Speaker 1: if you do have good research your patient and I
Speaker 1: think we're going to continue to see swings and energy prices,
Speaker 1: but we'll have an opportunity for the stocks to rally
Speaker 1: as energy prices go back up. Bloomberg Surveillance your link
Speaker 1: to the world of economics, finance and investment on Bloomberg Radio.
Speaker 1: This is w b b R New York, w d
Speaker 1: C h F M Booie, Boltimore, Washington, w jay Z
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Speaker 1: w j M N ninety four point five f m
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Speaker 1: and soon is EXEM Satellite Video Channel one ninet. Welcome
Speaker 1: back to Bloomberg travell and say to Clock on Wall Street.
Speaker 1: I Michael McKee along with Tom Keane. The Bank of
Speaker 1: England holding policy steady but suggesting there is a major
Speaker 1: economic risk should the country vote to leave the European Union.
Speaker 1: A lot of other news happening this morning as well.
Speaker 1: Let's check in with Karen Moscow for a news markets update.
Speaker 1: Thanks so much, Mike. What we do? A headline crossing
Speaker 1: the Bloomberg right now, Honeywell planning to spin off its
Speaker 1: resins and chemicals business. We also had news on Monsanto,
Speaker 1: as you told us, they are exploring a potential bid
Speaker 1: for US competitor Monsanto, and a deal that would create
Speaker 1: the world's largest supplier of seeds and farm chemicals. This
Speaker 1: is according to people familiar with the matter, who say
Speaker 1: the German firm has held preliminary discussions internally and with
Speaker 1: advisers about buying Monsanto, which is a market value of
Speaker 1: almost forty billion dollars. Futures this morning, we're watching their
Speaker 1: rising as and Pemity futures up thirteen and a half
Speaker 1: point to DOWI Mini Future is up eight seven NAS
Speaker 1: documny future is up twenty six. The decks in Germany's
Speaker 1: up six tenths percent. Ten year Treasury down e thirty seconds,
Speaker 1: the yield one point seven five percent. NIMEX screwed oil
Speaker 1: up one percent or forty seven cents to forty six
Speaker 1: seventy of barrel comics gold is down six tents percent
Speaker 1: or seven dollars thirty cents. At twelve sixty eight, announced
Speaker 1: the euro a dollar thirteen eighty two, the British pound
Speaker 1: a dollar forty thirty nine, and again one oh nine
Speaker 1: point three four. Tom and Mike Karen thank you so much.
Speaker 1: What a morning for economics and international economics will gring
Speaker 1: you all the headlines from Governor Karney Lurics surveillance brought
Speaker 1: to by Cone Resnick Accounting, tax advisory is economic policy changes.
Speaker 1: So did business decisions speak to the experts at Cone
Speaker 1: RESIDUC for forward thinking advice. You need find out more.
Speaker 1: Akhon Resnick dot com. We need to find out more.
Speaker 1: Michael McKee on b OE. The import of this press conference,
Speaker 1: all of them are different nation today, Asian, it is
Speaker 1: important that we bring in someone who's accent has not
Speaker 1: been lost as to New York. John Pharaoh joins us
Speaker 1: right now. John, I can honestly say I've never seen
Speaker 1: a central bank governor leader chair game edown recession as
Speaker 1: much as early in that Prescott. Yeah, I want to
Speaker 1: take him in the room. I've been in that room
Speaker 1: many times covering news conferences for Bloomberg, that was the
Speaker 1: most tense news conference for Governor Krni since he took
Speaker 1: the Holm, and I would say the most tense news
Speaker 1: conference since Mervin King was the governor in the depths
Speaker 1: of the financial crisis. A very delicate situation as a
Speaker 1: politically independent central bank wades into a very political subject,
Speaker 1: and the risks around Brexit is what he emphasized, Tom
Speaker 1: and it's the elephant in the room. It's what he
Speaker 1: called it, and a real prospect if indeed the UK
Speaker 1: votes to be to leave the European Union, at least
Speaker 1: in his mind, a real prospect of a recession. We'll
Speaker 1: put us in context for us, if the United States
Speaker 1: Federal Reserve were to say, you know, there were a
Speaker 1: is a a financial risk or a risk to the
Speaker 1: dollar from something, it would raise political hackles from a
Speaker 1: lot of people currently wading into the middle of this.
Speaker 1: One of the reporters said, the British people anxious to
Speaker 1: hear from an independent voice. Do people see the Bank
Speaker 1: of England as more independent of politics than they think
Speaker 1: of as the Federal Reserve here in the United States.
Speaker 1: I think it's worth emphasizing this is probably one of
Speaker 1: the most politically independent central banks on the planet. I
Speaker 1: think what's not helped is the reaction of the government
Speaker 1: more than the reaction of the central bank. You would
Speaker 1: have noticed, Michael that as soon as we had that
Speaker 1: decision from the Bank of England and as soon as
Speaker 1: we got the details from the statement, Prime Minister David
Speaker 1: Cameron went straight on Twitter and said he agreed with
Speaker 1: the Bank of English decisions to emphasize the risks to
Speaker 1: the economy. That's not going to help anybody when they're
Speaker 1: trying to say that they're politically independent. John Farrell with
Speaker 1: SO now joining us. A gentleman who was signed a
Speaker 1: letter with a hundther economists this morning. David blanche Flower
Speaker 1: is at Dartmouth College for remember of the Bank of
Speaker 1: England and one of the leading critics of shades of
Speaker 1: Austerie across our global economic system. Professor blanche Flower, I
Speaker 1: have two quick questions. Why did you sign your letter?
Speaker 1: And it seemed to be a very ecumenical letter across
Speaker 1: all of economics. Yes, I think it's a very broad
Speaker 1: group of people. In some sense, it reflects what Governor
Speaker 1: Carney actually said, and particularly in his statement about the
Speaker 1: downside risk to the UK economy from Brexit. Um, it's
Speaker 1: hard to see. And if you think of risks when
Speaker 1: the central banks worry about our risk balance to the
Speaker 1: upside or to the downside. Essentially, what you heard from
Speaker 1: him was a whole list of risks to the UK economy,
Speaker 1: to the downside, to the exchange rate, to demand, to supply,
Speaker 1: and he ducks questions about does brexit actually mean the
Speaker 1: our word and eventually kind of hedged a little bit
Speaker 1: and said, well, it's possible we could have a technical recession.
Speaker 1: So I think the answer is that it looks that
Speaker 1: the risks of doing so right now is economy, particularly
Speaker 1: UK economy is slowing, look to the downside, and economists
Speaker 1: are very worried about a leap to the unpleasant unknown.
Speaker 1: I want to take the other side, professors, you know
Speaker 1: we do. Gerard Lyons writing in the Times of London
Speaker 1: this weekend in support of Brexit. It was a lonely
Speaker 1: letter but no doubt with a large support across your
Speaker 1: United Kingdom. What did Mr Lions get wrong within his
Speaker 1: analysis at Brexit would not harm Britain? Well, good, good
Speaker 1: friend of mine, Jared Lyons, we were actualtely graduate students together. Um.
Speaker 1: I mean Jared is a sensible economist. There are differences
Speaker 1: in view, um, but I think it's much more of
Speaker 1: a leap of faith. I mean there are There's another
Speaker 1: letter from eight economists that Gerard signed, and essentially in
Speaker 1: that letter the argument was made that it's clearly would
Speaker 1: have a major impact on manufacturing, but that wouldn't actually
Speaker 1: you can just let manufacturing go and freedom was a
Speaker 1: good thing. But I think it was really very much
Speaker 1: tied to the politics, the politics of being separate from
Speaker 1: the EU, which is seen as a sort of socialist
Speaker 1: way of regulating the UK economy. So I think if
Speaker 1: you listen to the to the debate today, the economics
Speaker 1: appear to be soundly on the side that this is
Speaker 1: a downside risk. Um. Some people take the view that
Speaker 1: the freedom this might bring it's a price worth paying.
Speaker 1: But they have The problem they have is they haven't
Speaker 1: enumerated what brexit would actually mean Brexit to what what
Speaker 1: arrangement would there be? Would you would you take the
Speaker 1: Norwegian model where you have a relationship with the EU,
Speaker 1: you pay your money, but you don't get to vote.
Speaker 1: Would it be some looser arrangement where you have to
Speaker 1: do hundreds of bilateral trade deals, and President Obama said, well,
Speaker 1: we wouldn't do someone simply with the US, so that
Speaker 1: gives enhanced uncertainty, essentially rubber stamp today by the MPC.
Speaker 1: If you I'm reading his state and it says a
Speaker 1: vote to leave the U change could have material economic effects,
Speaker 1: and I agree with that. Let me ask John Ferrell
Speaker 1: quickly the state of the British economy right now it
Speaker 1: has turned down. How much of that is cyclical? How
Speaker 1: much of that is for exit uncertain I think it's
Speaker 1: so incredibly difficult to strip out the uncertainty. But when
Speaker 1: you look at services, Michael, the p m I is
Speaker 1: at a three year low. You've got to take notice
Speaker 1: and sit up and take notice of that because it
Speaker 1: makes up the bulk of the economy. My question to
Speaker 1: Danny at this point would be, Danny, should they be
Speaker 1: cutting rates? Bottom line? Well? Actually, I think I would
Speaker 1: have actually voted for a rate cut, but I certainly
Speaker 1: perhaps would have been persuaded by other members of the
Speaker 1: committee that that would be seen to be too political.
Speaker 1: It's back to Tom and Mike's question, um, and there
Speaker 1: might be a danger that that would compromise the NPC's
Speaker 1: kind of credibility. But I think the evidence is clearly that,
Speaker 1: and I think Kinnie was signally and the report signals it.
Speaker 1: If there's a vote to Brexit, the strategy probably quite
Speaker 1: clearly given the downside shock that's coming, a cut would come. Um. Obviously.
Speaker 1: The other one is even if you're in remain not
Speaker 1: You're right that the p m I is is slow,
Speaker 1: but so it's business competence, so is the labor market.
Speaker 1: Retail sales planings are falling. So I think that and
Speaker 1: the market thinks that the next move will actually be
Speaker 1: a cut, And yes, it will be. The question will
Speaker 1: be when, well, let's it's come back. We're gonna come
Speaker 1: back with Professor Blanch. We're gonna throw John Farrell out
Speaker 1: of the studio. He's way too young, he's way too
Speaker 1: handsome to be in here with us. But but we're
Speaker 1: going to continue with Professor Blanch. There is a headline
Speaker 1: which gives pause. Karney sees possibility of global negative Brexit spillovers.
Speaker 1: Stay with us this important morning. Let's get you cut
Speaker 1: up on what's happening around the world. We turn to
Speaker 1: Michael bar Thank you very much, Mike toom. Brazil Senate
Speaker 1: as voted to just end President dil Marusso from office
Speaker 1: and start an impeachment trial. The vote was fifty five
Speaker 1: twenty two. This morning, rusself is accused of illegally doctor
Speaker 1: and fiscal accounts to hide the size of the budget deficit.
Speaker 1: Donald Trump will meet today without Speaker Paul Ryan and
Speaker 1: other Republicans on Capitol Hill who are reluctant to support
Speaker 1: the presumptive nominee. The Obama administration will unveil today rules
Speaker 1: on the limit of methane emissions. The rule is designed
Speaker 1: to produce leaks of methane from oil Wells Global News
Speaker 1: twenty four hours a day, powered by our twenty four
Speaker 1: hundred journalists more than a hundred fifty news bureaus from
Speaker 1: around the world. I'm Michael bar to Baca bar, thank
Speaker 1: you so much. We are monitoring the attorney press conference
Speaker 1: in England. It is quite tense, but yet not all
Speaker 1: market moving. As Michael McKie mentioned, sterling stronger than weaker
Speaker 1: one on cable. That would be pound sterling as compared
Speaker 1: to the US uh dollar. And again news from Brazil
Speaker 1: President russaf uh impeach this morning will have much more
Speaker 1: from England Bloomberg Surveillance. The news update brought to you
Speaker 1: by Elbow Beach Bermuda, an ocean front enclave of classic
Speaker 1: style and contemporary luxury, fifty acres of lunch gardens and
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Speaker 1: Beach Bermuda dot com for more details. Global business news
Speaker 1: twenty four hours a day, if Bloomberg dot Com, the radio,
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Speaker 1: Business flash and I'm Karin Moscow. US stock index futures
Speaker 1: are rising along with oil and let's go to the
Speaker 1: First Word Breaking news desk for today's morning call. Here's
Speaker 1: Bill Maloney. Good morning, Bill, Good morning Karen. That's right.
Speaker 1: US futures continue to rally after yesterday sell off. DOUT
Speaker 1: futures currently hired by ninety points, sesames gained thirteen and
Speaker 1: a half, and NASA futures rise by twenty six. The
Speaker 1: U S tenual at one point seven and up markets
Speaker 1: are also rising, led by one point three percent gains
Speaker 1: in stayin on the US Economic Frinday thirty, import price
Speaker 1: in necks and initial jobs claims and at ten thirty
Speaker 1: natural gas storage change regarding earnings this morning, Ralph Laurin
Speaker 1: beat Cole's Miss shares it down seven percent pre market,
Speaker 1: and deal News Bear said to explore bid four mon
Speaker 1: Santo Man Santo is trading higher by seventeen percent pre market,
Speaker 1: and honey Well to spin off its residents and chemicals business. Finally,
Speaker 1: some of your Wallshet upgrades and downgrades, Santa Fe raised
Speaker 1: overweight up Barkley's and Janie Capital cut to market reform
Speaker 1: over at Wells Fargo Live from the first breaking news
Speaker 1: task Gombo Maloney Care, Thanks bail to hear live breaking
Speaker 1: news over your Bloomberg Times Squawk Ago on your terminal.
Speaker 1: That's squ a w k go and that's a Bloomberg
Speaker 1: business flash. Tom and Mike Karena, thanks so much. Futures
Speaker 1: of Futures of eighty six, Sterling flat stronger, weaker now flat.
Speaker 1: Governor Kearney continues comments on the state of the United
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
Speaker 1: we look at the headlines coming out as Governor Kearney
Speaker 1: walks a most difficult path right now again, I go
Speaker 1: back to the headline, UH, thirteen minutes ago, Karney Sea's
Speaker 1: possibility of global negative Brexit spillovers. That's a tough sell
Speaker 1: to a lot of people. Professor blanch Flower, why does
Speaker 1: Brexit EU matter in Asia? Well, Um, the big line
Speaker 1: in his in the report that global financial conditions could tighten,
Speaker 1: perhaps because risks of break up in the rest of
Speaker 1: the European Union would probably follow up on me. I
Speaker 1: mean there are these words what grexit and nexit and
Speaker 1: other things. I mean the assumption is that aggregate demand
Speaker 1: in the UK and Europe falls and this has spill over.
Speaker 1: I mean, the thing we learned in two thousand and
Speaker 1: eight is once that once something falls we saw in
Speaker 1: the US, it has implications to the rest of the world.
Speaker 1: That's in a sense what globalization means. We actually are
Speaker 1: all in these things together. What happens in financial markets
Speaker 1: in Europe has implications for the rest of the world.
Speaker 1: So I think I think he's right to warn that
Speaker 1: the big the big question is why did the MPC
Speaker 1: duck making an actual mathematical forecast as to what it
Speaker 1: would mean if there was a Brexit? And that's what
Speaker 1: a lot of questioning in the press conference has been about.
Speaker 1: On the one side, um Um karnis trying to say,
Speaker 1: we need to be careful about the politics. But but
Speaker 1: the questions there were you given us the words what
Speaker 1: about the numbers? Um And he said, they talked about
Speaker 1: being a shock to the pound, and he wouldn't answer
Speaker 1: when they was asked, well, it's gone down nine in
Speaker 1: the last near you know, in the last few months.
Speaker 1: How much of a shot do you think it would
Speaker 1: be a shock. So obviously that that's an issue. But
Speaker 1: I think this means in a global economy, which we
Speaker 1: saw in two thousand and eight, a big negative shock
Speaker 1: to the fifth largest economy in the world would have
Speaker 1: implications everywhere else. Now, Governor Karney said, should that happen,
Speaker 1: the Bank of England obviously has scope to lower interest
Speaker 1: rates there at fifty basis points, so they could cut
Speaker 1: the base rate. But uh, there is a going into
Speaker 1: the eating. There was a forecast of chance of a
Speaker 1: rate cut from the Bank of England this year based
Speaker 1: on economic developments as measured by swap rates. What's your
Speaker 1: likely scenario for BOE policy outside of Brexit? A very
Speaker 1: good question, Mike. I think the telling thing that Carni
Speaker 1: said was that the evidence is that the UK economy
Speaker 1: is slowing um. He actually said that the MPC decided
Speaker 1: that half of that was probably because of the fears
Speaker 1: of Brexit, and the suspicion would be if there was
Speaker 1: no Brexit vote then things would turn around, but he
Speaker 1: said there are a risk to that. So the risk
Speaker 1: here is actually that I think there's a lot of
Speaker 1: evidence in the data that in fact, the UK economy
Speaker 1: started to turn perhaps before this Brexit idea became so
Speaker 1: close to people's minds, particularly because the poles are so close.
Speaker 1: But it looks to me that the labor market turned down,
Speaker 1: the p M ized business confidence can turn down, consumer
Speaker 1: confidence turned down, and retail sales volumes did too, so
Speaker 1: even in the face of the market yield of generating
Speaker 1: more stimulus. So I think that really is the question.
Speaker 1: It looks to me that even on the remain side,
Speaker 1: the forecast is overly optimistic. There's still forecasting a huge
Speaker 1: jumping investment next year, that wage growth will suddenly instead
Speaker 1: of falling as it's been doing recently, it will suddenly
Speaker 1: jump again. So this puts a highly optimistic forecast even
Speaker 1: if there's a remain. So my view would be the
Speaker 1: market is right. I think the next move will be
Speaker 1: a cut. The questions simply will be when, and it
Speaker 1: will be true that there will be a cut, whether
Speaker 1: there's a remain or or Brexit, and especially as a Brexit,
Speaker 1: we will that will be a major negative shot to
Speaker 1: the UK economy. There are the constant question is what
Speaker 1: if the UK votes for Brexit, what will be the implications?
Speaker 1: But what if they vote to stay in what happens?
Speaker 1: What happens June? You know the day after? Yeah, well,
Speaker 1: essentially you carry on in the same way. I mean,
Speaker 1: that's what the forecast has been. And then there has
Speaker 1: to be a kind of a clerk vacation as to
Speaker 1: whether the slowing was really driven by the fear of
Speaker 1: leading or not, because once the Brexit votes, say, has
Speaker 1: been turned down, then you get clarity. Um, but there
Speaker 1: will you know, So I think that's what we'll see.
Speaker 1: But I think the reality is that um, that the
Speaker 1: UK economy had started the slow already. And and the story,
Speaker 1: of course is the timing of this boat. I think
Speaker 1: I've said on your program anytimes the business cycle turns
Speaker 1: were about eight years in to um, you know, a
Speaker 1: shot aim in the start of two thousand and eight one,
Speaker 1: where we're in two thousand and sixteen. Presumably another shop
Speaker 1: is coming or has actually probably arrived, and central bankers
Speaker 1: are very bad at picking those turning points. So my
Speaker 1: great questions, but I think the downside shock is relevant
Speaker 1: in both scenarios. Never enough time, David Blashflower, anybody far
Speaker 1: Dartmouth College, thank you so much. He again signed a
Speaker 1: letter with a hundred ninety nine other economists today pushing
Speaker 1: back against Brexit. From New York, Michael McKeon turn King
Speaker 1: Governor Kearney still speaking, Bloomberg surveillance coming up there, with
Speaker 1: all due respect. Highlight brought you by land Roper. If
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