1 00:00:03,080 --> 00:00:06,920 Speaker 1: This is Bloomberg surveillance. If you look at global equities, 2 00:00:07,120 --> 00:00:10,560 Speaker 1: US market for example, is near highs despite all the 3 00:00:10,640 --> 00:00:13,480 Speaker 1: risks out there. I think if Britain wordalie, who would 4 00:00:13,480 --> 00:00:15,640 Speaker 1: see significant spell over and one of the big ones 5 00:00:15,760 --> 00:00:17,919 Speaker 1: is going to be in the financial sector. We don't 6 00:00:17,920 --> 00:00:20,759 Speaker 1: think the markets are rational under any circumstances. Markets can't 7 00:00:20,760 --> 00:00:23,640 Speaker 1: be rational. We are human beings. We are irrational responding 8 00:00:23,640 --> 00:00:27,560 Speaker 1: to irrational and rational news. Bloomberg Surveillance. You're linked to 9 00:00:27,600 --> 00:00:31,960 Speaker 1: the world of economics, climats and investment on Bloomberg Radio. 10 00:00:32,080 --> 00:00:35,720 Speaker 1: Good morning everyone, Michael McKinnon, Tom Keene, Bloomberg Surveillance. After 11 00:00:35,760 --> 00:00:41,120 Speaker 1: the yelling statement, after the press conference, markets aggressively recalibrate 12 00:00:41,200 --> 00:00:45,599 Speaker 1: and readjust to a debbish fed Futures negative ten They 13 00:00:45,600 --> 00:00:51,040 Speaker 1: were negative eleven moments ago. Down futures negative eighty. Currencies massively, 14 00:00:51,120 --> 00:00:56,360 Speaker 1: that's the correct word, massively adjust euro yen. Take out 15 00:00:56,400 --> 00:01:00,200 Speaker 1: the dollar euro yen one sixteen forty dollar yen one 16 00:01:00,200 --> 00:01:03,560 Speaker 1: oh four nineteen. We'll start with foreign exchange for X 17 00:01:03,600 --> 00:01:07,760 Speaker 1: brief brought you by Interactive Brokers. Forex traders focus on 18 00:01:07,840 --> 00:01:10,960 Speaker 1: tightness of spreads. If cost matters, visit I d k 19 00:01:11,440 --> 00:01:15,160 Speaker 1: R dot com slash for X to learn about their 20 00:01:15,200 --> 00:01:18,440 Speaker 1: four x E c N. It includes fourteen of the 21 00:01:18,520 --> 00:01:22,480 Speaker 1: largest inter bank UH dealers one oleven seventy two on 22 00:01:22,640 --> 00:01:26,760 Speaker 1: euro and yen has actually been pretty good, uh the 23 00:01:26,880 --> 00:01:29,840 Speaker 1: last hour, and it's just rolled over a little bit 24 00:01:29,920 --> 00:01:33,680 Speaker 1: one oh four seventeen with the overnight strength of the 25 00:01:33,760 --> 00:01:37,440 Speaker 1: yen a stunning one oh three fifty five or nowhere 26 00:01:37,440 --> 00:01:40,679 Speaker 1: near that, but rolling over right now to a stronger 27 00:01:41,080 --> 00:01:46,400 Speaker 1: uh yeah, Sterling weaker ever so not massively, not big, 28 00:01:46,480 --> 00:01:50,200 Speaker 1: not off a cliff, not that hysteria, but nevertheless one 29 00:01:50,360 --> 00:01:55,400 Speaker 1: forty one nineteen Sterling begins to indicate a direction towards 30 00:01:55,400 --> 00:01:59,600 Speaker 1: a one forty handle euro Swiss. I've been watching all morning. 31 00:01:59,680 --> 00:02:03,120 Speaker 1: Are Johnson his an interview with Thomas Jordan of the SMB. 32 00:02:05,000 --> 00:02:09,239 Speaker 1: Want to wait one oh wait one a neuro u 33 00:02:09,520 --> 00:02:13,840 Speaker 1: swissy Uh David Wilson run through some of your equity 34 00:02:13,880 --> 00:02:17,640 Speaker 1: coverage today again with futures negative tent. How do you start? Well, 35 00:02:17,680 --> 00:02:19,799 Speaker 1: you start with the financial companies. I mean you see 36 00:02:19,800 --> 00:02:22,440 Speaker 1: Bank of America, City Group, JP, Morgan, Chase and their 37 00:02:22,520 --> 00:02:25,760 Speaker 1: peers down maybe three quarters of a percent. You've seen 38 00:02:25,840 --> 00:02:28,600 Speaker 1: bigger declines in the European banks a trade here in 39 00:02:28,600 --> 00:02:31,400 Speaker 1: the US. Credit switees off two and a half percent. 40 00:02:31,480 --> 00:02:34,280 Speaker 1: Deutch to bank down just rolling over again in the 41 00:02:34,360 --> 00:02:37,560 Speaker 1: last number of minutes, absolutely and setting new loads in 42 00:02:37,600 --> 00:02:41,520 Speaker 1: the process. So we're talking record decline in terms of 43 00:02:41,560 --> 00:02:44,080 Speaker 1: the share price. Marks up one and a half percent. 44 00:02:44,400 --> 00:02:47,919 Speaker 1: The drugmaker release study data showing the cancer treatment key 45 00:02:47,960 --> 00:02:51,760 Speaker 1: Truda worked better than chemotherapy in patients with a form 46 00:02:51,840 --> 00:02:55,520 Speaker 1: of lung cancer. Key Truda already used to treat nolan oma. 47 00:02:55,960 --> 00:02:59,080 Speaker 1: Macy's is up two percent. The retailer averted a possible 48 00:02:59,200 --> 00:03:03,080 Speaker 1: strike its flagship department store in New York's Herald Square. 49 00:03:03,360 --> 00:03:05,679 Speaker 1: Macy reached a ten of agreement on a new four 50 00:03:05,760 --> 00:03:09,400 Speaker 1: year contract with retail workers. Rite Aids down one and 51 00:03:09,400 --> 00:03:11,800 Speaker 1: a half percent. The drug makers physical first quarter earnings 52 00:03:11,800 --> 00:03:14,519 Speaker 1: and revenue trailer on the Savage Estmates and Bloomberg survey. 53 00:03:14,840 --> 00:03:17,359 Speaker 1: Walgreen's Boots is buying right eight for nine point four 54 00:03:17,360 --> 00:03:21,200 Speaker 1: billion dollars and Walgreen shares down two and a half percent. Kroger, 55 00:03:21,280 --> 00:03:24,320 Speaker 1: on the other hand, up three percent. The grocery stores 56 00:03:24,480 --> 00:03:27,680 Speaker 1: first quarter results showed the company was more profitable than 57 00:03:27,720 --> 00:03:31,120 Speaker 1: analysts were anticipating earnings and sales pretty much in line 58 00:03:31,120 --> 00:03:34,560 Speaker 1: with estimates. On a deal front to Logic up eleven percent, 59 00:03:34,639 --> 00:03:38,240 Speaker 1: the maker of semiconductors using data storage networks excepted to 60 00:03:38,280 --> 00:03:40,960 Speaker 1: take over offer from another chip producer, Cavium. The cash 61 00:03:41,000 --> 00:03:43,680 Speaker 1: and stock deal vaied about one point four billion dollars 62 00:03:43,840 --> 00:03:46,320 Speaker 1: and Cavy and shares really taking a beating in response. 63 00:03:46,600 --> 00:03:50,560 Speaker 1: Stocks down fourteen percent. Envision Healthcare down six and a 64 00:03:50,600 --> 00:03:53,640 Speaker 1: half percent. The provider of healthcare services and physicians agree 65 00:03:53,680 --> 00:03:55,920 Speaker 1: to combine with am surge and a deal valuing the 66 00:03:56,840 --> 00:03:59,560 Speaker 1: Envision at four point eight billion dollars. Now the Wall 67 00:03:59,600 --> 00:04:01,640 Speaker 1: Street and the report the companies were talks on last 68 00:04:01,680 --> 00:04:06,720 Speaker 1: week and Envisioned and prison as Uh. We gotta talk 69 00:04:06,760 --> 00:04:10,920 Speaker 1: about gunmakers uh, Smith and West and up this the 70 00:04:10,960 --> 00:04:13,880 Speaker 1: Outdoor which makes guns enimmunition up four percent. All this 71 00:04:14,040 --> 00:04:18,000 Speaker 1: after US Democrats filombuster for about fifteen hours the force 72 00:04:18,080 --> 00:04:21,840 Speaker 1: consideration of new limits on guns, Republican leaders agreed to 73 00:04:21,920 --> 00:04:25,680 Speaker 1: votes on two gun related proposals. David, thank you so much, 74 00:04:25,760 --> 00:04:27,919 Speaker 1: David Wilson, and he will be through the day. This 75 00:04:27,960 --> 00:04:31,520 Speaker 1: will be very valuable through the day on the equity markets, 76 00:04:31,560 --> 00:04:33,960 Speaker 1: and now they link into all the turmoil we see 77 00:04:34,440 --> 00:04:39,279 Speaker 1: in economics, monetary economics, international economics as well. This is 78 00:04:39,279 --> 00:04:43,920 Speaker 1: a joy, uh, Marianna cultural Lakota change the dialogue of 79 00:04:44,040 --> 00:04:47,440 Speaker 1: our economics as president of the Minneapolis FED now at 80 00:04:47,440 --> 00:04:51,280 Speaker 1: the University of Rochester, and we're thrilled that he joins 81 00:04:51,400 --> 00:04:54,080 Speaker 1: us this morning. We tried to get him on yesterday 82 00:04:54,120 --> 00:04:56,839 Speaker 1: and of course he was gracious and as a former 83 00:04:56,920 --> 00:04:59,200 Speaker 1: member of the FED said, I'm not going to get 84 00:04:59,240 --> 00:05:01,840 Speaker 1: in the way of the dialogue of chair yelling. She 85 00:05:01,960 --> 00:05:04,400 Speaker 1: doesn't need me gaming or I thought that was the 86 00:05:04,440 --> 00:05:09,120 Speaker 1: most graceful, graceful Rather, Professor Kachla Coda, you did right 87 00:05:09,200 --> 00:05:13,000 Speaker 1: for Bloomberg View, and I would respectfully suggest you nailed it. 88 00:05:13,200 --> 00:05:16,040 Speaker 1: This comes down to asymmetry, and it comes down to 89 00:05:16,080 --> 00:05:18,040 Speaker 1: what I call min max theory. There's a number of 90 00:05:18,160 --> 00:05:23,200 Speaker 1: themes here, but it is good institutions. Professor trying like 91 00:05:23,839 --> 00:05:28,840 Speaker 1: crazy to avoid the worst outcome. What is the outcome 92 00:05:29,000 --> 00:05:33,560 Speaker 1: chair yelling's trying to avoid. Yeah, well, thanks for having 93 00:05:33,600 --> 00:05:35,719 Speaker 1: me on, Tom, It's real pleasure to be with you today. 94 00:05:35,760 --> 00:05:39,960 Speaker 1: I um, you know I think that uh the outcome 95 00:05:40,000 --> 00:05:44,360 Speaker 1: I I hear the chair talk about um uh not 96 00:05:44,480 --> 00:05:48,760 Speaker 1: so much yesterday, but in general is concern that the 97 00:05:48,839 --> 00:05:52,880 Speaker 1: FED might have to raise rates very rapidly if inflationary 98 00:05:52,920 --> 00:05:56,120 Speaker 1: pressures were to emerge. UM. I think that that has 99 00:05:56,240 --> 00:06:00,640 Speaker 1: really been a key motivation for understanding UM offense desired 100 00:06:00,680 --> 00:06:03,920 Speaker 1: to raise rates in December and to keep interest rate 101 00:06:03,960 --> 00:06:07,640 Speaker 1: increases on the table UM really at a time we 102 00:06:07,760 --> 00:06:10,040 Speaker 1: here a lot of other factors might be pushing you 103 00:06:10,080 --> 00:06:12,159 Speaker 1: to to be taking them off the table and maybe 104 00:06:12,200 --> 00:06:15,120 Speaker 1: in fact to two cutting rates. But I I think 105 00:06:15,160 --> 00:06:19,440 Speaker 1: the concern is if you if has been that you've 106 00:06:19,440 --> 00:06:22,599 Speaker 1: got to get started on raising interest rates to avoid 107 00:06:22,680 --> 00:06:25,120 Speaker 1: the prospect of raising them rapidly. And I think that's 108 00:06:25,160 --> 00:06:28,640 Speaker 1: been a key key force that's been driving the thinking 109 00:06:28,680 --> 00:06:33,320 Speaker 1: of the committee, the idea of rates of change and 110 00:06:33,560 --> 00:06:35,640 Speaker 1: and the vectors. If you say, folks at rates are 111 00:06:35,640 --> 00:06:37,719 Speaker 1: gonna go higher, and then how do you get there. 112 00:06:38,480 --> 00:06:40,799 Speaker 1: I think that the thing that all of us understand 113 00:06:40,920 --> 00:06:45,039 Speaker 1: away from the complexities of mathematics is they need wiggle room, 114 00:06:45,839 --> 00:06:50,320 Speaker 1: they need some shelter if they have to lower interest rates. 115 00:06:50,600 --> 00:06:53,840 Speaker 1: Do you see a demand efficiency right now where you 116 00:06:53,920 --> 00:06:57,640 Speaker 1: could even frame the idea that this would be a 117 00:06:57,720 --> 00:07:01,280 Speaker 1: central bank that would need to lower interest rates. I 118 00:07:01,440 --> 00:07:06,440 Speaker 1: think that the the the continuous sluggishness of inflation and 119 00:07:06,560 --> 00:07:11,600 Speaker 1: the decline of inflation expectations. UH. So the market based 120 00:07:11,640 --> 00:07:16,960 Speaker 1: measures uh really are close to historical I should say, 121 00:07:17,000 --> 00:07:18,680 Speaker 1: close to the loads that they said earlier this year. 122 00:07:19,360 --> 00:07:22,960 Speaker 1: And then the even the service based measures, we see 123 00:07:23,000 --> 00:07:26,920 Speaker 1: longer term inflation infitations declining. These are real threats to 124 00:07:26,960 --> 00:07:30,360 Speaker 1: the credibility institution. Uh. And then on the just on 125 00:07:30,440 --> 00:07:32,800 Speaker 1: the demand side, as you were you were reciting earlier, 126 00:07:33,240 --> 00:07:35,680 Speaker 1: I think you can look at current inflation and the 127 00:07:35,760 --> 00:07:39,440 Speaker 1: forecast for inflation and see room for for doing more. Um, 128 00:07:39,960 --> 00:07:41,960 Speaker 1: but a lot of it as you're you hit it 129 00:07:42,040 --> 00:07:44,560 Speaker 1: right at the beginning, is really about the downside risk 130 00:07:44,760 --> 00:07:47,080 Speaker 1: that you know, maybe you can make a case that 131 00:07:48,680 --> 00:07:52,360 Speaker 1: the demand on the your modal outlook, you're the demand 132 00:07:52,400 --> 00:07:56,320 Speaker 1: picture looks good, but the downside risk the demand really 133 00:07:56,400 --> 00:07:58,440 Speaker 1: require you to be thinking, Okay, how do we take 134 00:07:58,440 --> 00:08:01,720 Speaker 1: out insurance against those risks? You have a paper from 135 00:08:01,800 --> 00:08:06,640 Speaker 1: twelve years ago, finite memory and imperfect monitoring. This is 136 00:08:06,800 --> 00:08:09,360 Speaker 1: really up to stuff, folks. We're not doing any heavy 137 00:08:09,400 --> 00:08:14,239 Speaker 1: lifting here on a Thursday, but Professor, our finite memory 138 00:08:14,640 --> 00:08:17,840 Speaker 1: as we live in the past, is any Central Bank. 139 00:08:17,920 --> 00:08:21,080 Speaker 1: Now let's not cast dispersions on share yelling, but are 140 00:08:21,200 --> 00:08:24,640 Speaker 1: all of our good policymakers like you, are we fighting 141 00:08:24,720 --> 00:08:29,400 Speaker 1: the last war because that's our finite memory. Yeah, well, 142 00:08:30,000 --> 00:08:33,400 Speaker 1: I'm impressed that, uh, you're digging, digging into my past 143 00:08:33,480 --> 00:08:36,839 Speaker 1: writing to such extent. But yeah, I think that you 144 00:08:36,960 --> 00:08:41,320 Speaker 1: were all prisoners of what we what we what we've learned, 145 00:08:41,520 --> 00:08:45,480 Speaker 1: and what we've experienced. And I think there's two lessons 146 00:08:45,559 --> 00:08:48,200 Speaker 1: at the the from the FEDS history that have been 147 00:08:48,200 --> 00:08:52,040 Speaker 1: really important. One is that nobody wants to go through 148 00:08:52,320 --> 00:08:54,800 Speaker 1: the Great Inflation again to make the mistakes that let 149 00:08:54,920 --> 00:08:58,000 Speaker 1: inflation a rise from blow to percent in the early 150 00:08:58,120 --> 00:09:02,559 Speaker 1: sixties to being into double digits. Yellen doesn't want to 151 00:09:02,640 --> 00:09:06,200 Speaker 1: be Mr Heller. I get that. Continue. That's so that's 152 00:09:06,240 --> 00:09:08,760 Speaker 1: one one piece of it. And the other is the 153 00:09:08,960 --> 00:09:13,400 Speaker 1: idea that setting rates by in a fairly mechanistic way 154 00:09:13,480 --> 00:09:18,880 Speaker 1: according to the rule that Professor John Taylor has described 155 00:09:18,920 --> 00:09:22,880 Speaker 1: in his work, seemed to work pretty well. And I 156 00:09:23,000 --> 00:09:25,880 Speaker 1: think both of those forces are very important understanding the 157 00:09:25,960 --> 00:09:28,319 Speaker 1: thinking of said that that they don't want to be 158 00:09:28,400 --> 00:09:31,360 Speaker 1: caught in the sixties and seventies again. And boy, the 159 00:09:31,400 --> 00:09:33,720 Speaker 1: Taylor rules seemed to have helped them avoid that during 160 00:09:33,800 --> 00:09:38,240 Speaker 1: the eighties and nineties and then uh, well more arguabibiting 161 00:09:38,320 --> 00:09:40,199 Speaker 1: to the two colum very very quickly or with the 162 00:09:40,240 --> 00:09:43,160 Speaker 1: time we've got left to you, professor, the Taylor rules 163 00:09:43,240 --> 00:09:45,120 Speaker 1: shows that we need to get the rate up. Now, 164 00:09:45,440 --> 00:09:49,680 Speaker 1: what are we waiting for? I think that the Taylor 165 00:09:49,800 --> 00:09:54,559 Speaker 1: rule is based on an idea that this uh that 166 00:09:54,880 --> 00:09:56,880 Speaker 1: we had a lot of conversations the press conference yesterday. 167 00:09:56,920 --> 00:10:01,160 Speaker 1: The idea of the natural rate the whole the idea 168 00:10:01,200 --> 00:10:03,480 Speaker 1: behind the chill rose. The neutral rate of the natural 169 00:10:03,600 --> 00:10:07,000 Speaker 1: rate of interest doesn't move, and I think there's just 170 00:10:07,120 --> 00:10:09,880 Speaker 1: a ton of forces that have pushed that downward and 171 00:10:10,000 --> 00:10:13,760 Speaker 1: we're seeing them work right even now today in markets 172 00:10:14,600 --> 00:10:17,840 Speaker 1: the flight to safety forces are really forces are pushing 173 00:10:18,040 --> 00:10:21,760 Speaker 1: downward on that neutral rate, and that central banks have 174 00:10:21,840 --> 00:10:24,439 Speaker 1: to be aware of that and just doesn't do a 175 00:10:24,480 --> 00:10:26,720 Speaker 1: good job. Team. We hope to get you on again 176 00:10:26,800 --> 00:10:30,040 Speaker 1: soon with the University of Rochester and Arianna Countral Dakota. 177 00:10:30,320 --> 00:10:33,800 Speaker 1: He's a former president of the Minneapolis Fed. Honor to 178 00:10:33,920 --> 00:10:36,560 Speaker 1: have him on today on short notice after the history 179 00:10:36,640 --> 00:10:39,440 Speaker 1: made yesterday by chair yelling, here's the history you need 180 00:10:39,520 --> 00:10:42,280 Speaker 1: to know Right now in the markets, Yen is rolling 181 00:10:42,360 --> 00:10:44,880 Speaker 1: over a one oh four thirteen. We may get a 182 00:10:45,000 --> 00:10:47,840 Speaker 1: migration to a one oh three handle in a moment. 183 00:10:47,920 --> 00:10:52,520 Speaker 1: Euro one O eleven sixty four. And now to the 184 00:10:52,600 --> 00:10:55,160 Speaker 1: news from New York City. Here's Michael Barr. Thank you 185 00:10:55,280 --> 00:10:58,319 Speaker 1: very much. President Barack Obama and Vice President Joe Biden 186 00:10:58,360 --> 00:11:01,959 Speaker 1: are heading to Orlando floor today. It will offer support 187 00:11:02,040 --> 00:11:05,160 Speaker 1: to Orlando, less than a week after a mass shooting 188 00:11:05,240 --> 00:11:08,480 Speaker 1: at a gay nightclub that killed victims and moved to 189 00:11:08,559 --> 00:11:11,760 Speaker 1: fifty three others. The President and Vice President will meet 190 00:11:11,800 --> 00:11:14,800 Speaker 1: privately with the families of some of the victims. A 191 00:11:14,880 --> 00:11:18,400 Speaker 1: new Bloomberg poll shows a third of Hillary Clinton supporters 192 00:11:18,720 --> 00:11:22,200 Speaker 1: want the former Secretary of State to pick Democratic Senator 193 00:11:22,240 --> 00:11:25,319 Speaker 1: Elizabeth Warren in Massachusetts to be her running mate. The 194 00:11:25,400 --> 00:11:28,559 Speaker 1: poll also shows a third of Donald Trump supporters want 195 00:11:28,640 --> 00:11:31,880 Speaker 1: him to pick former House Speaker Nude Gendrich as his VP. 196 00:11:32,440 --> 00:11:34,800 Speaker 1: The City of Brotherly Love is getting ready to shake 197 00:11:34,880 --> 00:11:38,000 Speaker 1: up its relationship of the soda industry. Later today, the 198 00:11:38,000 --> 00:11:40,960 Speaker 1: Philadelphia City Council will vote on a plan to add 199 00:11:41,000 --> 00:11:43,880 Speaker 1: a one point five cent per ounced tax on soft 200 00:11:43,960 --> 00:11:47,839 Speaker 1: drinks containing added sugar or sweeteners. Global News twenty four 201 00:11:47,880 --> 00:11:51,079 Speaker 1: hours a day. I'm Michael Bark to Michael, thanks so much. 202 00:11:51,240 --> 00:11:57,120 Speaker 1: Sterling one eight substantially weaker Sterling this morning. Futures a 203 00:11:57,200 --> 00:12:06,000 Speaker 1: negative eleven with more data checks Bloomberg Surveillance. The Market 204 00:12:06,080 --> 00:12:08,640 Speaker 1: Driver's Report brought to you by New York Community Bank. 205 00:12:08,760 --> 00:12:12,720 Speaker 1: Asked about there my community interest checking with free New 206 00:12:12,800 --> 00:12:16,840 Speaker 1: York Community Bank, Online and mobile banking. Earned more at 207 00:12:16,920 --> 00:12:18,360 Speaker 1: New York Community Bank