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Speaker 1: This is Bloomberg surveillance. It's been a market where macro

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Speaker 1: issues can dominate, and the big macro story today is China.

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Speaker 1: There are very very few checks and balances to the

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Speaker 1: president's power to regulate the economy. If you can identify

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Speaker 1: the free cash flow growers, they're going to sustain their dividends.

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Speaker 1: And in this world of yield scarcity, I think you

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Speaker 1: till your portfolio towards that. Bloomberg Surveillance your link to

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

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Speaker 1: Good morning everyone, Michael McKeon, Tom Keane, Bloomberg Surveillance, quiet markets,

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Speaker 1: but the backdrop is a terrific news flow, new leadership

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Speaker 1: in the Philippines. The challenges of Brazil this morning, Mike,

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Speaker 1: Is it true that this may be Russels's last day?

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Speaker 1: The Brazilian Senate is taking up the question of whether

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Speaker 1: to proceed with a trial on impeachment, and under Brazilian law,

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Speaker 1: if they vote yes, then she is for us to

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Speaker 1: at least temporarily step aside until a decision is reached,

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Speaker 1: and that would put the vice president in charge. Now

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Speaker 1: some of the dynamics here, we'll look at this within

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Speaker 1: the foreign exchange space here in a moment Bloomer Surveillance.

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Speaker 1: This morning is always brought you by cone Resnik Accounting

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Speaker 1: Tax Advisory. It can be hard to navigate through econohomic concertainty,

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Speaker 1: your businesses, industry insight and transformative advice. To drive it forward,

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Speaker 1: n R e z n I c K cone Resnick

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Speaker 1: dot com. I put out a chart yesterday. You saw

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Speaker 1: it first at Bloomberg Radio Plus on television today. A

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Speaker 1: Philippine peso some of the dynamics of EM. We've been

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Speaker 1: talking that with Seth Masters and number Asma joining us

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Speaker 1: now uh em or Daily joins us first thrill to

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Speaker 1: have her with us now with the standard Charter bank EMA,

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Speaker 1: Good morning and morning, thanks for having we What is

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Speaker 1: the focal point now within your research? I mean, let

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Speaker 1: me give you I usually don't do this, but I'm

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Speaker 1: going to do it with an with an open question.

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Speaker 1: What's the number one thing you're focused on right now

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Speaker 1: in foreign exchange? UM. I have stake of range ten

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Speaker 1: effects and I think the Brexit vot is probably the

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Speaker 1: number one issue and how it's going to play out

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Speaker 1: in the FX market. Um, well, where where are you like,

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Speaker 1: for example, euro dollar. We've seen a number of house

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Speaker 1: Vannie Quinn noting that UniCredit creeps up away from parody

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Speaker 1: towards one eight team. What is your call on what

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Speaker 1: euro could do with or without brexit? So even um,

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Speaker 1: you know, coming into I guess like a month before

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Speaker 1: break that we are expecting that you could get sometimes

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Speaker 1: high pressure coming onto the euro. Um. I see if

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Speaker 1: you look at the very kind of relevant precedent in

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Speaker 1: this case, which is the UK's exit from the exchange

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Speaker 1: rate mechanism, all the way back in you did see

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Speaker 1: actually some pressure coming up the Deutsche Mark and the

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Speaker 1: two before this happened. So we do think that really,

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Speaker 1: you know, the possibility of the UK exit, you know,

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Speaker 1: especially because it's primarily driven over you know, immigration conferrence,

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Speaker 1: which is something that we've all see also seen you

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Speaker 1: really polarized politics, um, within the Eurozone itself, you would

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Speaker 1: see some giant side pressure on the europlane. Well that's

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Speaker 1: in the run up to the vote. It supposed that

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Speaker 1: the British do vote to leave. Who suffers more people

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Speaker 1: who have pounds are people who have euros. There seems

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Speaker 1: to be some debate or which which government the hunit

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Speaker 1: suffers the most. Yeah, I think just because of the

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Speaker 1: extreme degree of uncertainty regarding you know, trade agreements around

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Speaker 1: the UK, investment deals, regulation, um, just a high degree

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Speaker 1: of uncertainty. I really think that sterling and would would

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Speaker 1: hurt the most. I think you actually recognize that d

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Speaker 1: K still has a current kind of deficit and it's

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Speaker 1: highly dependent on your foreign investment inflows to fund that.

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Speaker 1: I do think they we're already seeing actually a slowdown

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Speaker 1: in terms of foreign investment into the UK. You can

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Speaker 1: see clearly in terms of m M and adeals which

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Speaker 1: are coming in. The parent really suffers most in this scenario. Um,

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Speaker 1: do you think you would see You could see a

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Speaker 1: weaker euro on a Brexit, But I don't think you'd

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Speaker 1: see kind of any kinds of moves that you'd be

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Speaker 1: seen in stirring the peripheral countries around the debate, I

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Speaker 1: mean East Eastern Europe, Um, the Swiss, the Danes, How

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Speaker 1: how are they affected by this vote? Um? You know,

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Speaker 1: it's interesting to know actually in Switzerland they are actually

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Speaker 1: coming up to a very similar deal where they had

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Speaker 1: a referendum to basically improved limits on immigration and coming

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Speaker 1: to their borders, which is obviously against U the EUSE

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Speaker 1: Free Movement of People Act. So they are coming up

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Speaker 1: to a February deadline. We'll have to renegotiate and we'll

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Speaker 1: have to renegotiate trade terms potentially with the EU. So

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Speaker 1: I do think that, you know, it is the equite

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Speaker 1: a European concern the effects of immigration. UM. I don't

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Speaker 1: know if you get any kind of direct impact from

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Speaker 1: them on the actual UK Brexit. I just think it

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Speaker 1: highlights the ongoing kind of g political risk in terms

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Speaker 1: of immigration and kind of more right ring and not

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Speaker 1: just holiday. You have a bit of a twisted perspective

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Speaker 1: on this. I know you speak for Chance Standard Charter Bank,

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Speaker 1: but your work is out of Ireland and University College Dublin.

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Speaker 1: What do you gauge as a likelihood if UK does

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Speaker 1: or does not do Brexit, of whether Scotland and for

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Speaker 1: that matter, whether Ireland. How does that dynamic play Um?

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Speaker 1: You know, obviously there is a recent if you have

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Speaker 1: bread that you know a lot of SMP members have

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Speaker 1: highlights a concern that you could have a second Scottish referendum.

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Speaker 1: I don't think it's a foregone conclusion. I think you

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Speaker 1: would have to see how that dynamic plays then, and

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Speaker 1: it's obviously something that we laughed at politically. Um in Ireland,

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Speaker 1: I have you know, there has been a few comments

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Speaker 1: from policymakers there in terms of what do we mean

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Speaker 1: for Northern Ireland. Um, you know, I think there's very

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Speaker 1: strong support actually within Ireland for the Europeans, the European

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Speaker 1: Union and the Eurozone, and they are growing at a

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Speaker 1: very impressive rate. So I don't think it's it's a

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Speaker 1: very near term rate. I think probably the Scottish issue

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Speaker 1: would be um, kind of the greatest, almost the second

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Speaker 1: concern of markets. It's going to be a second referendum

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Speaker 1: in Scotland. What do they would call a new Scottish currency?

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Speaker 1: That yeah, which it could be very creative. Um. This

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Speaker 1: note Tom Macy's cut its forecast for the year and

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Speaker 1: investors are cutting their shares priced down seven and a

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Speaker 1: half in pre market training. Well, time to David Wilson

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Speaker 1: with a really difficult retail elearnings that we're seeing in

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Speaker 1: the United States eve or daily with the standard charter

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Speaker 1: that speaks to low nominal GDP, low animal spirit, damp

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Speaker 1: and consumer do you sense any lift in emerging markets.

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Speaker 1: I mean standard Charter has such a vision of emerging markets.

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Speaker 1: What's the pulse that you see right now? UM. You know,

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Speaker 1: we are generally positive on risk going into the rest

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Speaker 1: of the year. We do think that you know, China

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Speaker 1: kind of more stabilizing if its defects policy and you know,

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Speaker 1: arch dejectory for you kind of am sit you know,

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Speaker 1: a more nuanced dollar dejectory. That yeah, the dollar rally

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Speaker 1: is mature, that it should provide support to UM, to

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Speaker 1: the emerging markets and and particularly in Asia UM. So

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Speaker 1: we are constructive. We do think the group dynamics UM

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Speaker 1: are really good in this region, and we aren't you know,

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Speaker 1: I think we hear a lot of hype overout what's

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Speaker 1: going on in China UM and the group dynamics, but

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Speaker 1: we still believe that there's you know, very strong growth

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Speaker 1: potential there and that policymakers are really kind of in

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Speaker 1: control of their measures at the moment have stabilized growth

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Speaker 1: for the medium term. Uh. The the emerging markets, Tom

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Speaker 1: opened up by talking about Brazil and the Philippines. When

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Speaker 1: you look at emerging market currencies overall, it's been an

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Speaker 1: up and down year, but the Emerging Market Index has

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Speaker 1: been generally higher. UM. Where where do emerging markets go

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Speaker 1: from here? Yeah, we still see a little bit of

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Speaker 1: potential for another kind of leg higher in the dollars.

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Speaker 1: You'll see a little bit of weakness coming through UM

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Speaker 1: in e M currencies. UM before you know, basically a

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Speaker 1: very modest trajectory. We don't see you and very heightened

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Speaker 1: moved in e M place. Emma Daily, thank you so much.

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Speaker 1: Greatly appreciated Standard Charter Bank this morning, particularly with an

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Speaker 1: update there on Brexit as well. Mike, another shout out.

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Speaker 1: You've heard me say this before, Michael McKee. Francie Laqui

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Speaker 1: absolutely nailed a year ago, ten months ago. I was like, yeah, yeah, yeah,

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Speaker 1: so it's gonna be a vote. I was so wrong.

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Speaker 1: I mean, this Brexit thing has become a huge deal headline.

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Speaker 1: Tom Kane was wrong, Yeah, massively wrong. Francine just killed

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Speaker 1: its and and uh really really did quite a a

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Speaker 1: good job on that. What else do we see this from?

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Speaker 1: I mean, Staples office depots a huge deal. This Macy's

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Speaker 1: thing is interesting because you don't know whether Macy's is

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Speaker 1: an individual them or it is a retail sales outlook

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Speaker 1: overall problem that could affect people's inclinations to not just

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Speaker 1: invest in unse markets but spend money. Do we think

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Speaker 1: the economy is going to be slower than it otherwise? Would? Um?

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Speaker 1: They're cutting their earnings per shared of um uh forty cents?

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Speaker 1: Rather no, if they made forty cents in the first quarter,

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Speaker 1: they're cutting their year sales. Yeah, We've got lots to

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Speaker 1: talk about it, and it's it's a it's a less

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Speaker 1: couple of days have been interesting, folks, and it speaks

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Speaker 1: to the immense caution we see in so many pundits

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Speaker 1: and experts on equity markets. The I think of Doug cast,

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Speaker 1: the diversity of things to be concerned about. A lot

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Speaker 1: of smart shows coming up, futures negative three. Let's check

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Speaker 1: in with Michael R and get the latest world of

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Speaker 1: national headlines by time, Thank you very much. Brasilian President

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Speaker 1: Joel Maroussof could be out of office by the end

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Speaker 1: of the day. The Brazilian Senate will vote today and

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Speaker 1: weather to Impete Rouseth. Experts say Bernie Sanders West Virginia

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Speaker 1: primary win would do a little to slow down Hillary

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Speaker 1: Clinton on the way to the Democratic presidential nomination. But

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Speaker 1: don't tell that to Sanders supporters. Sanders says he'll fight

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Speaker 1: for every last vote. Meanwhile, Republican Donald Trump went West

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Speaker 1: Virginia and Nebraska with a clean slate of opponents, and

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Speaker 1: he says his list of running mates has been narrowed

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Speaker 1: to about five or six. Global News twenty four hours

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Speaker 1: a day, powered by our hundred journalists more than a

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Speaker 1: hundred fifty news bureaus from around the world. Like o'bar,

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Speaker 1: I'm I gonna thank you Macy's. Um, I looked at

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Speaker 1: I said, yeah, yeah, I was wrong. Macy's down seven

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Speaker 1: point four percent to two and three corps. Big figures

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Speaker 1: here in the pre market, Macy's indicating thirty four the

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Speaker 1: low thirty four level right now down seven point six

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Speaker 1: To look more into that from New York Bloomberg Surveillance

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Speaker 1: Listen News Update brought to you by Bentley University. What

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Speaker 1: do rebooting America's oldest ski shop and crunching numbers at

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Speaker 1: VISR print have in common? An NBA from Bentley University

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Speaker 1: that prepares graduates to innovate and lead because business is everywhere.

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Speaker 1: Prepared Here Global Business News twenty four hours a day.

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Speaker 1: If Bloomberg dot Com, the Radio plus mobile lap and

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Speaker 1: on your radio. This is a Bloomberg business flash and

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Speaker 1: I'm Karen Moscow. US stock index futures are moving lower

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Speaker 1: this morning. Let's go to the first Word breaking news

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Speaker 1: desk for today's morning call, and here's Bill muloney. Good morning, Bill,

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Speaker 1: Good morning Karen. That's right, US. You just remain lower

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Speaker 1: amid weakness in Europe and pre market declines in Disney

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Speaker 1: doubt You're just currently lowered by thirty seven points has

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Speaker 1: to be stropped three and NASAK futures followed by five

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Speaker 1: and a half. The use ten yield at one point

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Speaker 1: seven six per cent. On the US economic front, at

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Speaker 1: tent thirty energy inventories, and at two o'clock monthly budget statement.

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Speaker 1: After the bellas night, Disney que to a j EPs

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Speaker 1: and revenue miss estimates. Shares it down five percent pre market.

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Speaker 1: Electronic Arts Q for A j EPs B and Fossil

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Speaker 1: cut year views, shares it down thirty four percent pre market.

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Speaker 1: This morning, Macy's cut its forecast for the year. Shares

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Speaker 1: drop seven points seven percent pre market, and deal news

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Speaker 1: the Staples Office Depo merger was blocked by a judge

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Speaker 1: as anti competitive. Find me some of your wallsheet upgrades

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Speaker 1: and downgrades, knew my mining race to buy over at

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Speaker 1: Goldman Sachs Office Depo and Staples both both cut the

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Speaker 1: whole versus by over at Jeffreys and fit out a

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Speaker 1: national race to buy over at stern A g Live

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Speaker 1: in the first breaking news task Gombo Maloney, Karen, thanks

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Speaker 1: Bill and to hear live breaking news over here. Bloomberg

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Speaker 1: type squaw go and your terminal that's s Q you

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Speaker 1: a w k go. That's a Bloomberg business flash. Tom

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Speaker 1: and Mike Karen thanks so much Bloomberg surveillance this morning.

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Speaker 1: But by Investco, Investco believes it's time to bench the

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Speaker 1: bed marks to consider active management and factor based strategy.

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Speaker 1: He's find out more at investco dot com Slash high

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Speaker 1: conviction I m v s c O Investco dot com

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Speaker 1: Slash high conviction. She has seen it all in retail

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Speaker 1: put on guyall has seeing no heels, four in shields,

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Speaker 1: three in shields, a little heel back to flats, pretty

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Speaker 1: Ballerina at the labo. She's seen it all. She darkens

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Speaker 1: the door here on retail terry Logren is having a

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Speaker 1: bad day over at Macy's. He definitely is he has

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Speaker 1: done this before. No one in retail has experience with

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Speaker 1: tough times like Mr. Lungren of Macy's. What's different this time?

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Speaker 1: For Terry Lungren. I think what's different is that you're

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Speaker 1: not seeing a slowdown in terms of the consumer has changed.

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Speaker 1: So in the past, the consumer shopping behavior was pretty consistent,

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Speaker 1: but it was the macro environment that was dictating how

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Speaker 1: the way they spent. Today, the consumer is entirely different.

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Speaker 1: That's the issue. The consumer is not going to stores.

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Speaker 1: Macy's has eight hundred and seventy stories. So this is

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Speaker 1: Terry Lundgren's problem, not Janet Yellin's problem. Yes, I would

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Speaker 1: say so, and that people are still buying stuff, they

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Speaker 1: just don't go to Macy's to do it. It's not

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Speaker 1: that people are still buying stuff. People are buying stuff,

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Speaker 1: but they're buying differently. They're not buying apparel, So people

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Speaker 1: are not shopping for apparel, and if they are, they're

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Speaker 1: buying it at t J Max. Yeah. That we were

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Speaker 1: talking about that with Oliver Chen from City the other day. Uh,

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Speaker 1: the younger generation, they're going to t J Max, or

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Speaker 1: they're going to H and M or something like. They're

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Speaker 1: they're buying as many things, but they're buying cheaper ones

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Speaker 1: right because they're focused on value. They care about value.

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Speaker 1: They want to deal, they want to quick, and they

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Speaker 1: want fast fashion. They want newness. In other words, Uh,

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Speaker 1: their their value investors. Uh. You can say that, well,

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Speaker 1: are there other department stores in the same boat, even

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Speaker 1: if they haven't announced uh cut. So I think I

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Speaker 1: think the bulk of the department store space is probably

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Speaker 1: going to see weakness in the first quarter. We get

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Speaker 1: non cash point of sale data from first Data, and

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Speaker 1: if you look at the trends, their sales have been

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Speaker 1: down for the whole quarter. So the only outlier I

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Speaker 1: think that there could be is j. C. Penny and

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Speaker 1: that's because the company has company specific issues that they've resolved,

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Speaker 1: which will probably allow them to post better results in

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Speaker 1: the co perform. Yeah. The magic of Macy's. You go

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Speaker 1: to the women's page and you begin at the top

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Speaker 1: of of clearance. Except we've all seen this before. What's

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Speaker 1: different in the inventory now than we've ever seen? Is

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Speaker 1: there just too much stuff? I would I think retailers

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Speaker 1: have become a little better at managing inventory, which is

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Speaker 1: why their margins are holding up. So even if you

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Speaker 1: look at just Macy's gross margins were actually a five

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Speaker 1: basis points even the sales were down, And that's proof

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Speaker 1: that they're actually managing their inventory better. They're ordering less,

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Speaker 1: they're promoting it to clear it out, they're not piling

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Speaker 1: as they would have done in the past. So that's

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Speaker 1: good that they're being disciplined. But that said, you need sales.

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Speaker 1: You have to drive the top line. And as you

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Speaker 1: said off, that's kind of become a norm. Now what

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Speaker 1: happened to the bargain basement at may Seast. I mean,

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Speaker 1: it's like the whole industry is a new filings basement.

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Speaker 1: It absolutely is. That is where they're going. They're going

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Speaker 1: to add back seat stores to their stores. So where

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Speaker 1: is the consumer going to go first? Probably about the

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Speaker 1: back seats facial I mean, one of the problems I

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Speaker 1: hear Michael McKee is Sean Jean Girls Fashion jogger pants

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Speaker 1: originally thirty two dollars was now and you get another

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Speaker 1: promotion on top of the Probably who takes that hit

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Speaker 1: Sean Jean, maker of leggings, Terry Loundgren, Who eats it?

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Speaker 1: It's so depends it's part manufacturer and party company. I

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Speaker 1: think it's a shared cost, but I think the burden

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Speaker 1: is on Macy's for the most part. Macy. I mean,

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Speaker 1: you gotta love the creativity of retailers. When the weather

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Speaker 1: is bad, they blame whether uh, whether it has been okay,

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Speaker 1: So Macy's just blaming the dollar. But they're not blaming

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Speaker 1: the dollar for their input prices. They're blaming the dollar

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Speaker 1: because they say tourists aren't coming to the United States

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Speaker 1: and going to macs. You know, it's funny people joke

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Speaker 1: about this soft and the weather doesn't matter. The tourists

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Speaker 1: tourism declining matters. It's actually true if you think of

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Speaker 1: yourself as a retail business, if it's really hot outside

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Speaker 1: and you're in in the winter season, you're just not

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Speaker 1: going to sell the coats. And Macy's the way it

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Speaker 1: sets in the businesses, the bulk of the clothing that

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Speaker 1: itself is actually seasonal, so it's for the season. So

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Speaker 1: if the weather doesn't cooperate, they will miss and then

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Speaker 1: you know, in terms of tourism, of their sales are

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Speaker 1: about come from the flagship itself. So if we do

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Speaker 1: see fear of tourisms, I mean, I'd give them the

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Speaker 1: benefit on that part. I think they are right, but

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Speaker 1: there's more weakness than to wisom here Mike McKee, Macey's

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Speaker 1: down six point five percent, a little bit, a little

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Speaker 1: bit lower, cutting cutting the forecast. It was three dollars

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Speaker 1: and eighty to three dollars and ninety cents this year

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Speaker 1: and they're down to three. What's the stock performance? Tell you?

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Speaker 1: Bear market down a nice rebound here this year and

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Speaker 1: now a new rollover. Do we get to revisit recent lows?

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Speaker 1: I think for the apparel space, there's still more challenges

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Speaker 1: ahead of them, and that includes the department stores. It's

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Speaker 1: really a structural change that you're seeing in retail, and

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Speaker 1: the retailers just have to better evaluate their fleet to

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Speaker 1: make wise decisions because online, while it's growing for them,

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Speaker 1: it's just not big enough. This has been fabulous. Can

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Speaker 1: you come in more often? Absolutely any time shopping getting

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Speaker 1: some good deals on ladies shoes. You know we talked

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Speaker 1: luxury and Macy's and non luxury, I mean a retail

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Speaker 1: spaces is fascinating with Bloomberg. Thank you Intelligence, stay with

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