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Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters.
Speaker 1: I'm Charlie Pelot. Stocks for Laurel little changed. This update
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Speaker 1: over to the first Word Breaking news desk for today's
Speaker 1: afternoon call, and here's Bill Maloney. Good afternoon, Charlie. Manus
Speaker 1: averages are quiet today, with the Dow currently lower by
Speaker 1: eighteen points, SEPs are little changed and NAZAC is higher
Speaker 1: by seven. The small cap six hundred is also a
Speaker 1: little changed, and the US ten nield at one point
Speaker 1: five zero percent. Seven out of tennis B sectors are lower,
Speaker 1: led by lasses and energy, financials and the utilities, while
Speaker 1: technology and materials led to the upside down. Transports rise
Speaker 1: ten points and as a by text fall all fifteen
Speaker 1: utilities drop three and the VIX is down by three
Speaker 1: point four percent. Down Leaders to the downside included Disney
Speaker 1: Home Depot and Boeing leaders included Intel, Visa, and Microsoft.
Speaker 1: See if industry is pledged as much as fifteen percent,
Speaker 1: that's Motion's two thousand and eight after earnings. First Solar
Speaker 1: fell well. Harmon gained seven percent after its results, and
Speaker 1: some of the names pointing after the belt tonight include
Speaker 1: Monster Beverage, Geno Therapeutics, Kraft, Heinns, and Price Line. Live
Speaker 1: from the first breaking news ask on Bill Maloney, Charlie
Speaker 1: all right, thank you very much, Bill Maloney, and to
Speaker 1: hear live breaking news over your Bloomberg Time squawk SQ
Speaker 1: you a w K on your terminal. I'm Charlie Pellock.
Speaker 1: That's the Bloomberg business flash. This is taking stock. The
Speaker 1: Fed in focus on Bloomberg Radio Central Banks in focus.
Speaker 1: As we turned to the Bank of England's Hill Mary
Speaker 1: policy passes. Our Bloomberg intelligence in team in London puts
Speaker 1: it a three wronged easing of monetary conditions. Will it
Speaker 1: be enough? Our NEXCU says, depending on what happens with inflation,
Speaker 1: Could it be a little bit too much? It's certainly
Speaker 1: hit the pound hard today. Joining us now is Carl Weinberg.
Speaker 1: He is chief economist Managing director for High Frequency Economics
Speaker 1: So Carl, Now that you've had a little more chance
Speaker 1: to read through everything that the Bank of England said
Speaker 1: its statement, listen to Mark Karney, Uh, think about it.
Speaker 1: How big, how important is this move by the Bank
Speaker 1: of England today. Well, it's a really substantial program, There's
Speaker 1: no doubt about that. So he very clearly saw them
Speaker 1: cut down the cost of borrowing, both directly and indirectly
Speaker 1: by lowering their bank rate, by setting up a program
Speaker 1: to channel funds at the lowest possible cost into banks.
Speaker 1: To make sure that those lower interest rates passed through
Speaker 1: the economy, we saw purchases of corporate bonds and government
Speaker 1: bonds announced. It just doesn't get any more comprehensive than this.
Speaker 1: If they wanted to hit the we're hit the nail
Speaker 1: on the head with a hammer. They certainly hit it hard.
Speaker 1: Did they hit it with a sledgehammer? Does this stuff
Speaker 1: actually work? Or does it just create problems that they
Speaker 1: can't solve that are even bigger down the road? I
Speaker 1: pim Well, you know that's the big question, you know,
Speaker 1: down the road. How do we unwind all of this?
Speaker 1: That's always the question. But that's not the question for today,
Speaker 1: and it's not the question for the next period of time.
Speaker 1: When I first read the program this morning, I thought
Speaker 1: maybe they had been a little bit too aggressive in
Speaker 1: their forecast of marking down their economic growth prospects and
Speaker 1: their inflation forecast. I thought, you know, they could have
Speaker 1: been a little bit more conservative about that. But then
Speaker 1: during the course of the day I've reflected on a
Speaker 1: little bit, and I think that maybe this is where
Speaker 1: they want to be. They would rather hit it too
Speaker 1: hard and then be able to come back, then not
Speaker 1: hit it enough and to be seen chasing after an
Speaker 1: ever receding target. So I think that they've hit it
Speaker 1: overly hard, probably on purpose, and warned us that you know,
Speaker 1: there's more to come if necessary, but unspoken as the
Speaker 1: fact that if it's not necessary, it doesn't have to
Speaker 1: get any bigger than this. Well, Carl, and I guess
Speaker 1: that's one of one of the analysies I've read, uh
Speaker 1: following the and of course there's lots right everyone's trying
Speaker 1: to figure this out, is that that maybe the view
Speaker 1: of the economy the Bank oftving express today lowered it
Speaker 1: by a good margin but it never turns negative, was
Speaker 1: too optimistic, which is one reason they'd have to maybe
Speaker 1: cut more in November. But is Mark Kearney's marketing his
Speaker 1: team figuring that if we are aggressive now and we
Speaker 1: take all these steps, we can avoid that deep of
Speaker 1: a slump in the UK economy. Is that why they
Speaker 1: didn't downgrade their forecast of the economy even further. Well,
Speaker 1: you know, Kathleen, I'm going to answer your question with
Speaker 1: a question, and that question is who knows? All right?
Speaker 1: We are in uncharted territory as far as the UK
Speaker 1: economy is concerned. We don't have a recent historical precedent
Speaker 1: to look back on and say, the last time a
Speaker 1: country west the European Union, this is what happened. You know.
Speaker 1: We don't know what the new terms of business are
Speaker 1: going to be. We don't know anything about how the
Speaker 1: UK economy is going to look two years from now,
Speaker 1: except that it's going to be different. So the Bank
Speaker 1: has staked itself out as being a bearer on the subject,
Speaker 1: and this of course was very controversial during the campaign.
Speaker 1: The Governor was accused of being prejudiced towards the Stay
Speaker 1: side and he had to send himself in Parliament on this.
Speaker 1: But he is very clearly on the view that this
Speaker 1: is a hard hit to the economy, that the risks
Speaker 1: are huge, and he's prepared to forecast that those risks
Speaker 1: turned into realities, and that's what we saw today. So
Speaker 1: this is this is where they are, and they could
Speaker 1: very well be right. And I just don't know enough.
Speaker 1: I'm not smart enough to figure out in this uncertain
Speaker 1: circumstance whether I think they're right or right. I'm just
Speaker 1: along for the ride at this point, Carl, I just
Speaker 1: want to push a little bit on being along for
Speaker 1: this ride. I mean, as we're talking about parallel economies,
Speaker 1: because when you talk about low interest rates and bond buying,
Speaker 1: that's the financial economy. Revolving credit rates, they remain high.
Speaker 1: Down payments for real estate have increased in your lucky
Speaker 1: if you can get the mortgage at three and a
Speaker 1: half percent, at least in the United States, and we've
Speaker 1: got sluggish wage growth in the developing in the developed world,
Speaker 1: How is what they're doing actually feeding into the real economy. Yeah, Well,
Speaker 1: in the specifics of the UK market right now, mortgage
Speaker 1: lending has been the only lending that's been occurring. It's
Speaker 1: been actually at a faster rate than they'd like to see.
Speaker 1: The real estate market has been through the roof there,
Speaker 1: and they've been trying to cool lending. So in a sense,
Speaker 1: this is kind of a stop and start and then
Speaker 1: start again policy on housing to try to keep it
Speaker 1: from collapsing altogether. On their forecast, they're predicting a decline
Speaker 1: in house prices. They're predicting almost no economic growth in
Speaker 1: the second half of this year. This is a much
Speaker 1: more severe circumstance than we've seen before, and you've got
Speaker 1: to believe that if that's what that's what's actually going
Speaker 1: to happen. Lower interest rates certainly can't hurt and whatever
Speaker 1: help they provide would be welcomers. Well, of course, you
Speaker 1: just mentioned, Carl, the fact that they've got this found
Speaker 1: clever corporate lending program and can talk about that more
Speaker 1: in a minute. In ten seconds, though, do you see
Speaker 1: another rate cut in November? Um, I'm gonna say, I
Speaker 1: don't know. Let's go yet to see some real hard
Speaker 1: data on how the economy has performed in this post
Speaker 1: brexit period. Let's look at some real hard numbers and
Speaker 1: then we'll make a judgment. All Right, We've got more
Speaker 1: with Carl Weinberg. He is chief economist high Frequency Economics.
Speaker 1: You can follow him on Twitter at c B Weinberg.
Speaker 1: We've got more on the Bank of England's rate decision,
Speaker 1: the European Central Bank and negative interest rates in the
Speaker 1: future of the global economy. This is taking Stock. I'm
Speaker 1: Pim Fox, my co host Kathleen Hayes. This is Bloomberg.
Speaker 1: Bank of England Governor Mark Karney said he is against
Speaker 1: negative interest rates. He doesn't like the idea of helicopter money.
Speaker 1: But as he decides to buy more bonds in the UK,
Speaker 1: is that where he's heading. That's next on taking Stock
Speaker 1: broadcasting live to New York, Bloomberg eleven, Rio to Washington,
Speaker 1: d C. Bloomberg to Boston, Bloomberg twelve to San Francisco,
Speaker 1: Bloomberg nine to the country, SIS at jam General one
Speaker 1: nineteen and around the globe the Bloomberg Radio Plus happened.
Speaker 1: Bloomberg got gone. This is taking Stock. I'm Kathleen Hayes
Speaker 1: along with him Fox. The Bank of England cutting its
Speaker 1: key rate, getting ready to buy more bonds. Most of
Speaker 1: the world is heading in the direction of more stimulus.
Speaker 1: Can the Federal Reserve resist? And are there some signals
Speaker 1: some negative signals about the entire global economy With all
Speaker 1: these central banks. On the March, We're going to continue
Speaker 1: our conversation with Karl Weinberger of High Frequency Economics. Right now,
Speaker 1: let's go to Charlie Kellett in the Bloomberg news room
Speaker 1: for Bloomberg Business Flag and I thank you Phim, thank
Speaker 1: you Kathleen. On mixed picture for stocks right now, little change,
Speaker 1: that is the takeaway here. We've got the down industrials
Speaker 1: down eleven points eighteen pounds than three hundred forty three,
Speaker 1: a drop there of less than point one percent, SMP
Speaker 1: five hundred index unchanged, and nastack is up seven to
Speaker 1: fifty one sixty seven, a game there of two tenths
Speaker 1: of one percent. Mixed corporate earnings offering little direction. Fertilizer
Speaker 1: maker CF Industries seeing its steepest drop since January after
Speaker 1: its results miss analyst predictions. Shares of CF they are
Speaker 1: down now by twelve point three two percent. MetLife tumbling
Speaker 1: nine point one percent after its quarterly profit disappointed Bank
Speaker 1: of England Governor Mark Carney unveiling an exceptional package of stimulus,
Speaker 1: including the Bank's first interest rate cut in seven years.
Speaker 1: Those policy makers slash growth forecast by the most ever
Speaker 1: after Britain's decision to leave the European Union, and of
Speaker 1: the news conference, Carney took questions on a number of topics,
Speaker 1: including last June's Brexit vote. There is a great degree
Speaker 1: of uncertainty. It's entirely understandable that there is there's uncertainty
Speaker 1: about the eventual model that we will have at the
Speaker 1: European Union. There are number of options on the table
Speaker 1: um whichever model has chosen itself will require some degree
Speaker 1: of adjustment in the economy and that brings its own
Speaker 1: effects on growth and uh end productivity for a period
Speaker 1: of time. And whilst we gets the all important July
Speaker 1: jobs are the August jobs numbered, July jobs number tomorrow morning.
Speaker 1: Today we got jobless claims. The number of Americans filing
Speaker 1: applications for unemployment benefits rose last week to a level
Speaker 1: that's still under scores health in the labor market. Claims
Speaker 1: up by three thousand, two hundred sixty nine thousand, ten year,
Speaker 1: up eleven thirty seconds, yield one point five percent, Gold
Speaker 1: up two tenths of one percent. And now let's take
Speaker 1: a look at other stories making news. Thank you Charlie
Speaker 1: from the Bloomberg News room. I'm Jill Schneider. This news
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Speaker 1: Jeans Work Smarter, Connect Better. Some Republicans are angry with
Speaker 1: presidential nominee Donald Trump for refusing to endorse how speaker
Speaker 1: Paul Ryan. Trump campaign chairman Paul Manafort says this should
Speaker 1: not be a concern. Of course, he's going to work
Speaker 1: with Pau Ryan. Of course he's tried to bridge the
Speaker 1: party together with But Ryan is also running against somebody
Speaker 1: who's not gonna win, but nonetheless is a strong supporter
Speaker 1: of Mr Trump's. Meanwhile, another GOP congressman is saying he
Speaker 1: is unlikely to support Donald Trump for president. Adam Kinzinger
Speaker 1: of Illinois says Trump is quote beginning to cross a
Speaker 1: lot of red lines of the unforgivable in politics. Kinsinger
Speaker 1: also says he will not support Hillary Clinton. London police
Speaker 1: say a nineteen year old man is in custody after
Speaker 1: a knife attack last night that left one woman dead,
Speaker 1: although police say at this point there is nothing linking
Speaker 1: the suspect to terrorism. This local resident says it's something
Speaker 1: that's always on her mind. It's living in London, especially
Speaker 1: in central London. There's always that thing, kind of thing
Speaker 1: in the back of your mind, you know, you live
Speaker 1: with terror is. Five people were also injured in the attack.
Speaker 1: Dozens were arrested today in the latest crackdown on organized
Speaker 1: crime by the FBI and New York City Police. The
Speaker 1: suspects are reputed members of the Banano, Genovesi and Colombo
Speaker 1: crime families. The arrests were made in New York, Newark,
Speaker 1: New Haven, Boston and Miami. The arrests follow a multi
Speaker 1: year investigation. Global News twenty four hours a day, powered
Speaker 1: by more than twenty journalists and analysts in more than
Speaker 1: one hundred twenty countries. I'm Jil Schneider and this is Bloomberg, Charlie,
Speaker 1: and we thank you and again recapping little change for
Speaker 1: US equities twenty six minutes to go ahead of the close.
Speaker 1: We've got the SMP five D indecks down by less
Speaker 1: than half a point. I'm Charlie Paloton Pats of Bloombird
Speaker 1: Business Flash. This is taking stock the FED in focus
Speaker 1: on Bloomberg Radio. We can't heer our conversation. Now. I'm
Speaker 1: taking a look at the Bank of England, what they did,
Speaker 1: what they said, and what is going to happen next.
Speaker 1: Carl Weinbergger's ar guests chief economist, Managing director for High
Speaker 1: Frequency Economics. You know, Carl PM was just raising the
Speaker 1: question about will this work? You know you're gonna buy bonds,
Speaker 1: and I think it's interesting to ponder a point that
Speaker 1: our Bloomberg intelligence team made about the bond buying, which is,
Speaker 1: you know you're sending a signal it's going to be stimulus,
Speaker 1: and that along with the bond buying getting yields down
Speaker 1: on on borrowing costs, right and along with this targeted
Speaker 1: corporate bond buying program where they're really going to try
Speaker 1: to funnel money to real UK businesses right that that
Speaker 1: they're trying to hit this whole question of the impact
Speaker 1: of uncertainty, which has been a big hit to their
Speaker 1: economy already by making sure that businesses can really get
Speaker 1: money and really do stuff. Is this is this a
Speaker 1: clever step by the Bank afy And do you think
Speaker 1: of potentially more effective than some other things central banks
Speaker 1: have done well? I think it's certainly what they hope
Speaker 1: to do, Kathleen, and certainly lending to businesses has been
Speaker 1: a store point. We've seen credit overall in the UK
Speaker 1: go from contraction to a very tepid rate of increase
Speaker 1: in the last few monthly reports, but lending the businesses
Speaker 1: remains flat at best. Most of the lending has been
Speaker 1: to consumers and for mortgages. So businesses do need more
Speaker 1: credit and they'll need it more than ever in this
Speaker 1: uncertain period in the UK, starting as they did with
Speaker 1: yields a little higher than they have been recently in Europe. Uh,
Speaker 1: there's certainly a case to be made that long term
Speaker 1: interest rates and borrowing costs and the cost of bancredit
Speaker 1: can be made cheaper to advantage to bring the economy
Speaker 1: up a little bit at a faster pace of growth.
Speaker 1: You know, of course, ten year yields are only sixty
Speaker 1: four basis points, so you can only get so much
Speaker 1: out of buying, you know, more sovereign bonds and bringing
Speaker 1: down the yield curve. As far as corporate bonds are concerned,
Speaker 1: I personally have a problem with this. It doesn't stop
Speaker 1: the Bank of England or the ECB from doing it.
Speaker 1: But I view corporate bond purchases as more microeconomic policy
Speaker 1: and tinkering with the price of risk, rather than macroeconomic policy,
Speaker 1: which is what happens when they by a sovereign bond
Speaker 1: and bring down all interest rates. But that's my problem,
Speaker 1: not theres They clearly think that lower corporate yields relative
Speaker 1: to sovereigns are going to help, and more power to them,
Speaker 1: Carl Weinberke. If you take a look at commodity prices,
Speaker 1: corn down to about twenty one month lows, wheat hitting
Speaker 1: a nine year low, soybeans down ten percent from June,
Speaker 1: down from the peak, agricultural prices falling, crude trading it
Speaker 1: around forty one about right now, just up about two
Speaker 1: and a quarter percent. Are we going to experience an
Speaker 1: economic downturn as a result of these easy money policies?
Speaker 1: Okammy is stealing my my report to clients over tonight's
Speaker 1: report and the one that they'll be getting over the weekend.
Speaker 1: At High Frequency Economics, we are writing about a global
Speaker 1: economic downturn. We've been writing about it for a long time,
Speaker 1: and following commodity prices certainly impoverished big parts of the
Speaker 1: world economy. I view the decline in world trade is
Speaker 1: being directly linked to the drop and come moodity prices,
Speaker 1: which makes commodity producers poorer and means they import less
Speaker 1: stuff from US, which means US exports are a week
Speaker 1: part of the US outlook. And we've been linking that
Speaker 1: drop in world trade to an expected slow down impossible
Speaker 1: contraction of the world economy for a long time. Right now,
Speaker 1: I track seven central banks and all of them are
Speaker 1: now easy now have easy monetary conditions, including the FED
Speaker 1: which is not tightening uh and including d c B
Speaker 1: which is easing monetary conditions like MAD, the Bank of
Speaker 1: Japan which is using conditions like ultramad, the BIKE, the
Speaker 1: Bank of Reserve, Bank of Australia, which just cut interest
Speaker 1: rates this week, the Canadians who cut interest rates in
Speaker 1: recent months. All the central banks are doing the same thing.
Speaker 1: They're going full out toward easing, and they're marking down
Speaker 1: their forecast every time they do a new forecast exercise
Speaker 1: to predict even slower and slower growth. I can't help
Speaker 1: but feel that they're telling us what we should be
Speaker 1: seeing in the world right now, which is a coordinated
Speaker 1: slow down in many parts of the world economy at
Speaker 1: the same time, and a possible contraction in a lot
Speaker 1: of places. It's not good carny chance that it's oh
Speaker 1: the balls now and the fiscal court of the UK,
Speaker 1: of the Fed of Japan, every country supposedly the fiscal
Speaker 1: guy's got to carry the ball. Now. Is that going
Speaker 1: to happen? Well, the ball. That's been what the central
Speaker 1: bankers have been saying for a while. We know Mario
Speaker 1: drag said it explicitly. We know that the I m
Speaker 1: F is called for more fiscal stimulus. Whether it's going
Speaker 1: to happen or not, you know, that's a political decision.
Speaker 1: The economics of it, though, in my view are compelling.
Speaker 1: This is not the time for austerity. And while in
Speaker 1: some places like Japan, fiscal policy is misplaced. They're they're
Speaker 1: trying to fight a demographic challenge that can't be overcome
Speaker 1: by any economic policy. But certainly the case of Europe,
Speaker 1: Europe needs a kickstart, and fiscal policy is the way
Speaker 1: to do it. In many countries in Europe have the
Speaker 1: fiscal space to make that happen. The UK has committed
Speaker 1: to fiscal stimulus, that's a good side. The Canadians have
Speaker 1: committed to fiscal stimulut us. That's a good time the US.
Speaker 1: We're not going to see any fiscal stimulus here for
Speaker 1: quite a while. I'm pretty sure of that, just looking
Speaker 1: at the politics of UH in Washington and the prospects
Speaker 1: will come out of the upcoming election. UM and UH
Speaker 1: so who's left, you know, So it's a mixed bag.
Speaker 1: Some people are moving in that direction. I wish we
Speaker 1: would see more, but realistically, I don't think the biggest
Speaker 1: players are going to be at the table for that game.
Speaker 1: Carl Weinberg, thank you very much, Chief Economist high Frequency Economics.
Speaker 1: You can follow Carl Weinberg on Twitter at c B
Speaker 1: Weinberg giving us his thoughts on the Bank of England's
Speaker 1: rate decision and the potential turned down in the global economy.
Speaker 1: Looking for fiscal stimulus, that's what Carl Weinberg says might
Speaker 1: actually be needed. This is taking Stockheim pim Fox My
Speaker 1: co host Kathleen Hayes, this is Bloomberg Central banks around
Speaker 1: the world trying to boost their economies. That fed dragging
Speaker 1: its feet on a raid hike. But what about companies?
Speaker 1: What about their profits? What about their earnings? Jack Rivken
Speaker 1: from Altegris coming up next on Bloomberg Radio