WEBVTT - GlobalReach's Mulhall on BOE, Sees Further GPB Strength (Audio)

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<v Speaker 1>Global business news twenty four hours a day. If Bloomberg

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<v Speaker 1>dot Com the radio plus mobile act and on your radio.

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<v Speaker 1>This is a Bloomberg Business Flash from Bloomberg World Handquarters.

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<v Speaker 1>I'm Charlie Pellet. Stocks of paired losses. The SMP five

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<v Speaker 1>hundred index is higher now by two points, a gain

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<v Speaker 1>of one tenth of one percent. Down Industrial is up

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<v Speaker 1>thirty nine points, a gain of two tenths of one percent.

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<v Speaker 1>Nes Stank remains lower. It is down fifteen points to

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<v Speaker 1>drop there of three tenths of one percent. Investors are

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<v Speaker 1>awaiting additional economic data for clues about the health of

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<v Speaker 1>the U. S economy. Oil has been fluctuating up now

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<v Speaker 1>by nine tenths of one percent of forty one cents

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<v Speaker 1>to forty six sixty five for barrel of West Texas

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<v Speaker 1>intermediate crude gold down three ninety the ounce to twelve

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<v Speaker 1>seventy one, a drop of three tenths of one percent,

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<v Speaker 1>and the tenure down ten thirty seconds. The yield there

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<v Speaker 1>one point seven six percent. I'm Charlie Pellett, and that's

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<v Speaker 1>a Bloomberg Business flash. Your something to taking stock with

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<v Speaker 1>Kathleen Hayes and Pim Box on Bloomberg Radio. The Bank

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<v Speaker 1>of England, a rate decision, an upcoming vote on whether

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<v Speaker 1>to remain part of the European Union, all issues that

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<v Speaker 1>investors must taken to consideration and to get more perspective,

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<v Speaker 1>we have Karen Mullhall. He is the chief investment officer

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<v Speaker 1>at the Dublin based Global Reach Securities, joining us now.

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<v Speaker 1>Thank you very much for being with us. Begin by

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<v Speaker 1>giving us your thoughts about the Bank of England being

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<v Speaker 1>drawn into the debate about whether the United Kingdom should

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<v Speaker 1>remain part of the European Union. Yes, good afternoon, Tim.

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<v Speaker 1>Football is well in New York. Yes, and we had

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<v Speaker 1>to put an interesting Bank of England at meeting today

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<v Speaker 1>where it looks like Mark Arney, the head of the

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<v Speaker 1>Bank of England, has finally got dragged into the brit

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<v Speaker 1>exit debase in Europe and they've been trying to sort

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<v Speaker 1>of stay reasonably neutral and I think unfortunately with the

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<v Speaker 1>modestly magnificant slowdown we've seen in the UK economy over

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<v Speaker 1>the last six seven weeks, and he felt it was

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<v Speaker 1>probably time to maybe highlight some of the downside risks

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<v Speaker 1>that would be associated with the UK voting to leave

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<v Speaker 1>the European Union, and I particularly I suspect amongst the

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<v Speaker 1>newspapers in at the UK tomorrow the mention of the

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<v Speaker 1>r words recession was said for the first time, and

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<v Speaker 1>he suggested that there would be some likelihood under certain

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<v Speaker 1>situation you could see the UK economy for them to

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<v Speaker 1>a recession later this year, if indeed they vote to

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<v Speaker 1>leave and in their referendum later in June. Is it

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<v Speaker 1>your analysis that that's an accurate depiction of what would

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<v Speaker 1>happen to the British And yeah, yeah, absolutely, I think

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<v Speaker 1>that the I think that the we've we've seen that

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<v Speaker 1>we've seen a fairly material slowdown just with the uncertainty

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<v Speaker 1>of what would be associated with the referendum coming out

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<v Speaker 1>US in a few weeks time. And I would suspect,

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<v Speaker 1>you know that the likelihood is is that that the

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<v Speaker 1>shock that such a decision to leave would have um

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<v Speaker 1>people would be, you know, somewhat nervous about investing. You know,

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<v Speaker 1>the various trade deals et cetera that would have to

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<v Speaker 1>be renegotiated, and you know, all would suggest a slower

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<v Speaker 1>outlook for growth and and you know, it's not like

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<v Speaker 1>the UK economy has been growing at sort of three

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<v Speaker 1>or four or five percent over the last few years.

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<v Speaker 1>You know, in in a broadly low growth environment, any

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<v Speaker 1>of those kind of shocks that would that that would

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<v Speaker 1>any kind of shock that comes at you can easily

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<v Speaker 1>tip you into the interfession, even if it's only a

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<v Speaker 1>short lived one. How do you characterize the British economy

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<v Speaker 1>right now? Give us the details if you can. Yeah, well,

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<v Speaker 1>it had been one of the best of the o

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<v Speaker 1>E c D countries and along with the United States

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<v Speaker 1>over the last two to three years. But we've seen

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<v Speaker 1>the p m I numbers particularly as a kind of

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<v Speaker 1>a leading indicator of growth and trend lower, the manufacturing

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<v Speaker 1>number being contraction for the first time and for April,

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<v Speaker 1>and I think that's again it's it's it's been very

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<v Speaker 1>similar to the United States in the sense that employment

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<v Speaker 1>has remained that the strong point consumer spending, it has

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<v Speaker 1>held up reasonably well. But the UK still runder rather

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<v Speaker 1>large current account deficit which tends to be funded by

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<v Speaker 1>mainland Europe and you know foreign fig multinationals, particularly with

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<v Speaker 1>capital coupital flows into the UK. And again the concerns

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<v Speaker 1>around brig eggs at et cetera, you know, might bring

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<v Speaker 1>in the question and the continuation of these flows, and

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<v Speaker 1>I guess in that context currently mentioned today that that

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<v Speaker 1>one of the one of what what he felt was

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<v Speaker 1>one of the larger negatives associated with with a vote

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<v Speaker 1>to leave would be that we would have a situation

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<v Speaker 1>where Sterling would weaken quite materially, and given Sterling its

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<v Speaker 1>already weakened significantly in the last few weeks, um would

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<v Speaker 1>excuse me over the last few two to three months,

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<v Speaker 1>and that would be something I think to be avoided

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<v Speaker 1>from from the Bank of England's point of view, Well,

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<v Speaker 1>the Prime Minister of the UK, Prime Minister David Cameron,

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<v Speaker 1>I mean he has worked through a renegotiation of Britain's

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<v Speaker 1>relationship with the European Union, correct, I mean he did, yeah,

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<v Speaker 1>And I think and and to be honest with you him,

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<v Speaker 1>I like the book He's over here if you if

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<v Speaker 1>you're looking for odds on on the referendum, and the

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<v Speaker 1>bookies are about seventy five percent, stay go. And I

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<v Speaker 1>always tend to trust and the bookmakers before I trust

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<v Speaker 1>the opinion posed. And I think that that the broader

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<v Speaker 1>UK population of maybe appreciating a little bit more warned

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<v Speaker 1>what Cameron was they able to achieve in terms of

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<v Speaker 1>renegotiating the overall their overall relationship with Europe, but also

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<v Speaker 1>as well maybe some of the downside risks associated with leaving.

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<v Speaker 1>And I think when I spoke with you in March,

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<v Speaker 1>we talked a little bit about some Sterling strength, and

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<v Speaker 1>we have noticed Sterling over the last particularly over the

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<v Speaker 1>last three or four weeks, begin to trengthen a little

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<v Speaker 1>bit now, particularly against the euro coming back from above

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<v Speaker 1>eight down towards the seventy seven seventy eight area. And

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<v Speaker 1>at our base case, would would would remain that the

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<v Speaker 1>likelihood is that it's going to be a stay, a

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<v Speaker 1>vote to stay, and that you know, like the US,

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<v Speaker 1>the the UK, if we can get past this, will

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<v Speaker 1>probably re accelerate in the second half of the year.

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<v Speaker 1>And to be honest again Carney, Carney would have been

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<v Speaker 1>highlighting that that that that that a vote to stay

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<v Speaker 1>and and and no shock to the UK economy should

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<v Speaker 1>lead to you know, back the trend growth at some

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<v Speaker 1>point either later this year or in the first quarter

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<v Speaker 1>of next year, which would probably have a situation with

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<v Speaker 1>the with the Bank of England will probably move on

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<v Speaker 1>interest rates and towards the first the end of the

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<v Speaker 1>first quarter of next year, maybe into the second quarter,

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<v Speaker 1>with a vote, let's say to stay in the European

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<v Speaker 1>Union on June the twenty three, at that national referendum

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<v Speaker 1>in the United Kingdom. If the vote is to stay,

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<v Speaker 1>will that change the carr of the current Conservative Tory government.

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<v Speaker 1>Um No, where I don't think certainly often the short

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<v Speaker 1>term and it would certainly it would and certainly strengthen

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<v Speaker 1>Cameron's position as Prime Minister. And you know there would

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<v Speaker 1>be certainly that think the's three or four prominent cabinet

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<v Speaker 1>members who are looking forward to leave. Um. I would

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<v Speaker 1>what tends to happen in these situations is there have

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<v Speaker 1>been a bit of time, will pass and assuming they

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<v Speaker 1>do vote to say I would imagine Cameron Cameron will

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<v Speaker 1>do some sort of cabinet reshuffle and that might We've

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<v Speaker 1>got to leave it there. Karen Mohall, he is the

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<v Speaker 1>Chief investment Officer at the Dublin based Global Reach Securities.

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<v Speaker 1>On the United Kingdom and the referendum for the European

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<v Speaker 1>Union coming up on taking stock, will be speaking with

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<v Speaker 1>David Novak. He is the founder of Oh Great One,

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<v Speaker 1>but he also happens to be the co founder of

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<v Speaker 1>Young Brands we've got details on his new book and

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<v Speaker 1>recognizing employees