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Speaker 1: This is Bloomberg Surveillance. See overall, you f macro economic

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Speaker 1: outlook right now is very good, and that's why John

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Speaker 1: Allen is moving towards the second rate increase. I think

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Speaker 1: for thil a dangerous place for investors. They're in a

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Speaker 1: proper old fashioned depression with huge political programs. Near termis

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Speaker 1: markets I could remain tight, stay in that forty five

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Speaker 1: or fifty range, but as we moved towards the end

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Speaker 1: of this year, this market is likely to start to

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Speaker 1: stop and again Bloomberg Surveillance your link to the world

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Speaker 1: of economics, finance, and investment on Bloomberg Radio. Good morning,

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Speaker 1: it is seven am on Wall Street and in Florida,

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Speaker 1: where they're getting soaked by Tropical Storm Colin. Hurricane season

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Speaker 1: now six days old. We haven't had a major storm,

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Speaker 1: you know, hit the US in years. It'll be interesting

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Speaker 1: to see what happens this summer. Hurricane Janet turned out

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Speaker 1: to me just sort of a mild rain on the

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Speaker 1: parade of those anticipating the FED won't raise rates until December.

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Speaker 1: She did not rule out moving before that, but has

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Speaker 1: put no date on when the Fed might swing back

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Speaker 1: into action. Yet another Brexit poll out overnight gives the

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Speaker 1: lead back to the remain camp. Put all that together,

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Speaker 1: politics and policy acceptable to the markets this morning, the

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Speaker 1: UK's foot snee will start their up twenty five points

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Speaker 1: four tenths of eight percent. The pound at eight four

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Speaker 1: stronger by a percent today. Stock six hundred in Europe

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Speaker 1: is up four points one point two percent, the decks

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Speaker 1: in Germany hundred and seventy two points higher one point

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Speaker 1: seven percent. Better German economic data this morning. Here in

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Speaker 1: the US it's a six point game for SMP features

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Speaker 1: and they've put on altitude as the morning has go on,

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Speaker 1: three tents of eight percent, three tenths up, we find

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Speaker 1: out evening futures fifty two points in Nasdac onmnies are

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Speaker 1: up by sixteen points three tenths of eight percent. The

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Speaker 1: bond market is still bearing the scars of jobs day,

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Speaker 1: with the tenure note yielded one point seven three percent

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Speaker 1: to five year, one point to five and eighty basis

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Speaker 1: points four year two year note yield. And currency is

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Speaker 1: also taking their cues from Janet Yelling mentioned the pound.

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Speaker 1: The dollar index at six is down just a touch

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Speaker 1: this morning, the yen a bit stronger at one oh

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Speaker 1: seven seventy seven bit weaker rather one oh seven seventy

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Speaker 1: seven to c euro that is stronger this morning sixty

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Speaker 1: oil prices Brent crude strengthening fifty dollars eighty eight cents

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Speaker 1: this morning, West Texas nine ninety nine. We're penny away

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Speaker 1: from fifty dollars for the U S benchmark. Yellin swaffle

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Speaker 1: on when seems to have also reassured emerging market investors.

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Speaker 1: By the way, the ms C i UH Emerging Markets

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Speaker 1: Index is up today by a one point six percent,

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Speaker 1: And if you trace out the index over the last

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Speaker 1: month or so, it went down when everybody thought that

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Speaker 1: the FED was going to raise rates. It's now going

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Speaker 1: up again. The dollar largely lower against emerging market currencies today.

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Speaker 1: Rodriguez is Emerging markets portfolio manager for black Rock, and

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Speaker 1: I guess it just does go to show the Jenny

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Speaker 1: Evans central banker to the world of fat the world,

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Speaker 1: at least to the emerging markets world. Absolutely. I mean,

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Speaker 1: what happens with the FED is very relevant for the

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Speaker 1: emerging markets complex. Overall, US financial conditions determined pretty much

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Speaker 1: the dynamics of what happens in emerging economies now over

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Speaker 1: time and since the paper tantrum, emerging economies have had

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Speaker 1: some time to adjust and to accommodate for UH say,

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Speaker 1: for the next phase of the cycle. In US monetary policy,

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Speaker 1: what has been a bit of a of a head

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Speaker 1: wind for emerging markets has been the strength of the

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Speaker 1: of the dollar. It is a very much through the

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Speaker 1: currency channel by which the Fed monetary policy has been operating,

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Speaker 1: and a stronger dollar creates some challenges for emerging markets

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Speaker 1: in general and for China in particular. Learn the China

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Speaker 1: currency dynamics and all the concerns about say a major

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Speaker 1: movement and the Chinese currency. We're basically a trigger. After

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Speaker 1: a long period of dollar strength, the bag that the

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Speaker 1: Chinese have been managing against the dollar becomes unsustainable to

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Speaker 1: the extent that the dollar continues to strengthen, and that

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Speaker 1: sort of produces the competitiveness position of China. So there

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Speaker 1: are many different angles why which we need to continue

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Speaker 1: to pay attention to what the does. And defect themselves

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Speaker 1: have been struggling in terms of calibrating their response because

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Speaker 1: they know that economic dynamics improved in the US. You

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Speaker 1: want to normalize, but then there is this feedback channel

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Speaker 1: through the currency that comes back to them, So that's

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Speaker 1: why they've been very cautious in terms of how they

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Speaker 1: set the page explain China. Though the dollar hasn't particularly

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Speaker 1: moved in two years now. Uh, it's been basically very stable,

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Speaker 1: and the Chinese have now got sort of two currency

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Speaker 1: pegs going with the dollar and the basket of currencies.

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Speaker 1: So what what do we pay attention to in China

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Speaker 1: and what is reacting what is reacting to the dollar,

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Speaker 1: and what are they reacting to if the dollar is

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Speaker 1: that moving. I'm not quite clear on all the dynamics. Well,

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Speaker 1: it is a very difficult, um say, process that Chinese

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Speaker 1: authorities are going through, which is liberalizing financial markets, opening

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Speaker 1: up their capital account on making their currency more flexible.

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Speaker 1: Over his history, emerging economies have not done that very well.

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Speaker 1: So every time a country goes from a peg currency

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Speaker 1: to a flexible one is has triggered a financial crisis. Actually,

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Speaker 1: countries have moved in general to flexible currency arrangements, not

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Speaker 1: by choice, but basically markets have forced them to do that.

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Speaker 1: So that is why the Chinese experiment is very interesting.

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Speaker 1: And China, as with everything else, is managing the process

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Speaker 1: in a very different manner. And one could think that

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Speaker 1: from a communication standpoint, they haven't done a great job

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Speaker 1: because we don't clearly understand what is the framework under

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Speaker 1: which they're operating. But so far, I mean they've been

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Speaker 1: tasting the waters to see how they can move to

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Speaker 1: a more flicks. I'm gonna make up this chart. I've

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Speaker 1: never seen it. I'm gonna do it right now, the

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Speaker 1: Indian eroupee and the Chinese nimbi as well. Good morning everyone,

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Speaker 1: International economics today on Bloomberg Surveillance or brought you by Investco.

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Speaker 1: Don't settle for averaging your portfolio to invest go The

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Speaker 1: right approach means investing with high conviction. Find out more

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Speaker 1: at investco dot com slash high conviction and we thank

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Speaker 1: Investco for their support. Do you guys with us with

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Speaker 1: black Rock? UM this morning? UM? India to me is

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Speaker 1: a fascinating story and a lot of my reading everybody goes, yeah,

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Speaker 1: but there's India, and they're exceptionally constructive on India, not

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Speaker 1: as a China surrogate, but just somebody that's going to

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Speaker 1: get it right. They're doing it by currency depreciation. Can

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Speaker 1: that continue? Well? The case of India is very interesting

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Speaker 1: and I would say a bit unique. In the e

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Speaker 1: M world right now, India has come a long way

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Speaker 1: in terms of external adjustment since two thousands and thirteen.

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Speaker 1: You may remember that they were part of a fragile

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Speaker 1: five back back then. But from an external standpoint, India

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Speaker 1: has basically strengthened its position. Yes, the currency appreciated significantly,

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Speaker 1: but over saying the past twelve months, where the e

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Speaker 1: M complex continues to depreciate against the dollar, they the

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Speaker 1: Indian currency has remained somewhat stable. So you put h that.

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Speaker 1: Then on top, you have some reform momentum going for

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Speaker 1: the government, which is basically making economic growth to accelerate

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Speaker 1: at the margin. There is not many examples out there

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Speaker 1: in the e M world where you have a strong

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Speaker 1: external position, you have accelerating growth, and then you have

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Speaker 1: also some policy lead way for interest rates to come

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Speaker 1: to calm down. So the three things together make India

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Speaker 1: are really interesting investment opportunity over say the next nine

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Speaker 1: to twelve month horizons. India has, however, some medium term

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Speaker 1: UH challenges as as well, But but say over the

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Speaker 1: nine to twelve month horizon is one of the most

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Speaker 1: attractive investment opportunities. Well explained to us UH. How this

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Speaker 1: is happening. Is it just the indias untapped potential, or

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Speaker 1: is Prime Minister Mode actually doing something to change the

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Speaker 1: dynamic there. He's obviously speaking before Congress today in the US.

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Speaker 1: Does he get the credit or is it just the

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Speaker 1: natural um potential of India. I think that there are

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Speaker 1: two two things going on in India. Clearly, Prime Minister

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Speaker 1: Model has energized the government after a very long period

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Speaker 1: in which not much was happening there. So he's been

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Speaker 1: turning around the world. He's strengthened relationships around the world.

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Speaker 1: He's come along a way just here in the US

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Speaker 1: from not being able to enter the country to addressing

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Speaker 1: a Congress in a few years. That's a very sort

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Speaker 1: of interesting evolution. But aside from that, you have one

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Speaker 1: of the best central bank governors in the Reserve Bank

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Speaker 1: of India, not only sort of modernizing their framework and

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Speaker 1: the financial market, but also a very strong communicator that

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Speaker 1: has brought to the table um confidence that had not

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Speaker 1: been in India. And a strong confidence blows interesting growth

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Speaker 1: dynamics at the margin, again, making the one of the

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Speaker 1: very interesting cases out there around Regent. Well, that brings

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Speaker 1: up a follow up question that we're not gonna have

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Speaker 1: time for We're gonna have to wait until we can

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Speaker 1: do that. We can come back. Herodo Rodriguez with us,

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Speaker 1: with Black, a lot of other good guests with us

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Speaker 1: this morning. Also Michael McKee on his conversation with Dennis

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Speaker 1: Locker yesterday, and of course Cherry Yellow and coming markets.

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Speaker 1: I guess is that right, Mike, commun Is that the

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Speaker 1: right word? She seems to have coming markets. We'll see

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Speaker 1: how long it was that last green on the screen.

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Speaker 1: Futures up six down, futures up fifty three. The yen

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Speaker 1: one of seven seventies seven weaker yen. This hour of

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Speaker 1: Surveillance brought you by mont Kisco Volvo Kisco Volvo dot com.

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Speaker 1: Here is John Tucker with news head and Michael and

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Speaker 1: Tom with Democrats in six states still to make their

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Speaker 1: choices in primary voting today. The APE says its count

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Speaker 1: shows Hillary Clinton has secure the number of pledged delegates

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Speaker 1: and super delegates required to claim the Democratic nomination. President

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Speaker 1: Obama could endorse Clinton as early as this week. Meantime,

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Speaker 1: Bernie Sanders is vowing to fight on a car BOMBA

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Speaker 1: attack that targeted police see in East End, bol today

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Speaker 1: killed eleven people. No claim of responsibility and Tropical Storm

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Speaker 1: Collins seems to be bypassing South Carolina. No rate across

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Speaker 1: the state this morning, although rain earlier. Broad Street flooding

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Speaker 1: to downtown to Charleston, and the Pacific Northwest kicks off

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Speaker 1: a massive earthquake and tsunami drill. Today, twenty thousand people

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Speaker 1: will take part Global News twenty four hours a day

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Speaker 1: from our hundred journalists around the world. I'm John Tucker,

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Speaker 1: Tom and Michael John Tucker, Thank you so much. Fifty

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Speaker 1: dollars a barrel in West Texas Brent crude fifty one

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Speaker 1: point oh five per barrel. Michael Key and Tom Keene.

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Speaker 1: cyber risk volume. Pharmaceuticals cutting its sixteen profit forecast as

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Speaker 1: its new chief executive begins his attempt to turn around

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Speaker 1: the embattled drug maker. Stocks are rallying with emerging markets

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Speaker 1: as feder reserved here attended and put investors at ease

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Speaker 1: over the outlook for the US economy. U S DOCK

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Speaker 1: Index futures are higher, with SNPE many futures up five

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Speaker 1: points now even the futures up fifty and nasdac emity

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Speaker 1: futures up fourteen and a half. The acts in Germany's

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Speaker 1: have one point eight percent ten year treasury up to

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Speaker 1: thirty seconds, the yel to one point seven two percent,

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Speaker 1: non mex screwed oil up eight ten percent or forty

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Speaker 1: cents to fifty nine cents of arrel COMEX goal down

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Speaker 1: three tenths per cent or three dollars eighty cents at

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Speaker 1: twelve forty three sixty ounce, the euro A dollar thirteen

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Speaker 1: fifty four the end one oh seven point seven six.

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Speaker 1: As a Bloomberg Business flash, Tom and Mike Cara Mosco,

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Speaker 1: thank you very much. We are talking with the Toronto

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Speaker 1: Rodriguez from black Rock Emerging Markets Group. But we were

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Speaker 1: talking about India and just before the breaking we're talking

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Speaker 1: about the A lot of the credit for India's economic

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Speaker 1: renaissance lately has gone to Rock Ram Regin, the governor

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Speaker 1: of the Reserve Bank of India. Story out today, I

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Speaker 1: mean it's been an ongoing story. Does he stay or

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Speaker 1: does he go? Uh? The local language newspaper in India

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Speaker 1: last week reported he wanted to leave the position. Um.

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Speaker 1: Nobody's commented on that in particular, But he's out today saying, UM,

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Speaker 1: he's enjoying watching the press speculate and he'll let the

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Speaker 1: process play out. His three year term ends in September.

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Speaker 1: What happens if he goes? What's the reaction in the markets?

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Speaker 1: Um to to India if regent either turns down the

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Speaker 1: job or, as some report, does not get reappointed. Well,

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Speaker 1: as far as UH say, people understand he had expressed

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Speaker 1: his willingness to to remain at the job if he

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Speaker 1: was offered a you know term. He's clearly one of

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Speaker 1: a very important peelers of the recent positive dynamics around India.

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Speaker 1: So if he was no longer at the job after

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Speaker 1: September of this year, clearly reality and he would be

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Speaker 1: very much a function of who as he's appointed, But

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Speaker 1: you would no longer have on your side one of

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Speaker 1: the best, one of the best central bank governors in

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Speaker 1: the e M world. And I would say in a

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Speaker 1: general so that cannot be positive for the Indian economy.

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Speaker 1: The stacks went down and the Ruby sold off on

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Speaker 1: the rumor they didn't want the job. Do we have

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Speaker 1: a major sell off if he's not re appointed. Well,

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Speaker 1: it would depend very much on the circumstances, but this

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Speaker 1: would be say, a major negative for the Indian economy,

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Speaker 1: just because of all the things that he represents. Financial

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Speaker 1: markets in general tend to function much better when there is,

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Speaker 1: uh say, a context of confidence, when there is an

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Speaker 1: environment in which policy makers established clear framework and then

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Speaker 1: the lever around that. That's how credibility is built, which

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Speaker 1: is a very important issue for effective monetary police. Is

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Speaker 1: the credibility of EM Has it changed? I mean, they

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Speaker 1: just took a hundred nine thousand people just took the

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Speaker 1: c f A exam. And I remember when you read

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Speaker 1: three books on EM and six articles in your Genius

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Speaker 1: on EM and everybody went on their way. Boy, if

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Speaker 1: things changed with a huge success of EM, the g

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Speaker 1: d P of GM, the per capital growth of EM,

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Speaker 1: does it escape the cyclical patterns that we associate from

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Speaker 1: decades ago. Well not necessarily, because I mean you saw

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Speaker 1: that now with commodity prices going down, the E M

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Speaker 1: complex suffering the consequences. So there is a bit of

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Speaker 1: a cyclical story going on there, but that's happening within

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Speaker 1: a longer secular improvement of emerging market plamics. When you

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Speaker 1: look at GDP per capital over the pasta I would say,

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Speaker 1: twenty five years, you have many different examples in which

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Speaker 1: sort of emerging economy is moving from poor to middle

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Speaker 1: link mind, what happens is that economic real really becomes

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Speaker 1: much more complex. And as you said, you needed to

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Speaker 1: look at the three things in the past. Now the

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Speaker 1: M consumer and the economy is more from manufacturing to services.

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Speaker 1: You need to say a lot of more homework to

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Speaker 1: get a handle of what's going well. Yeah, and I

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Speaker 1: was remiss not to ask this question after Mike mentioned

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Speaker 1: the India in your Mexico. You have a Roger I mean,

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Speaker 1: you have a rug Ro Rogin in Mr Carsten's out

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Speaker 1: of Chicago studying with Michael musa years ago. I mean,

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Speaker 1: there's another dominant E M banker that provides immense credibility.

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Speaker 1: Give us an update on Mr Carston, Augustine Carston's uh

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Speaker 1: place within Mexican society in Mexican economics. Well, fortunately, in

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Speaker 1: the case of Mexico, Governor Casterans was reappointed for a

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Speaker 1: six year term only last year, so we have a

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Speaker 1: Carston still for the for the next five it will

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Speaker 1: be like a decade there so the second six year term.

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Speaker 1: But I mean, when you think about the emerging market reality,

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Speaker 1: I think that the common uh say, the common driver

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Speaker 1: of these personalities which become policy anchors as Governor Rajan,

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Speaker 1: Governor Carstons, and we could bring up a few other examples.

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Speaker 1: Here is difficult periods in which these economists developed, both

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Speaker 1: academically and as practitioners, and that makes them unique in

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Speaker 1: the world because they've been able to manage difficult circumstances

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Speaker 1: and at the same time they were able to go

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Speaker 1: to Chicago and get the best sort of possible exposure

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Speaker 1: to coordinage um academics. So the combination of those two

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Speaker 1: give you this type of personalities. I think that's a

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Speaker 1: good way to understand what's at stage in the case

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Speaker 1: of the reappointment or not of government, right. And it

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Speaker 1: is very difficult, and a similar conversation took place around

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Speaker 1: the discussion for Augustin Carston's back at the end of

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Speaker 1: last year. In order to make a case in which

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Speaker 1: you can have the flexibility of not reappointed these type

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Speaker 1: of personalities, it's not easy and you would need to

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Speaker 1: construct that scenario and clearly we don't see that in

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Speaker 1: the case of India. Gerardo Rodrigez, thank you very much

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Speaker 1: for joining us this morning here surveillance Um, interesting story

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Speaker 1: just crossing here, Tom, your own Creviel who was fired

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Speaker 1: from Societated General for allegedly cooking the books, now wins

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Speaker 1: four hundred twenty euros claiming he was fired unfairly. Wow. Yeah,

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Speaker 1: but will will continue to follow that story of an

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Speaker 1: eight years that Global Wall Street will be interested. Good morning, Bloomberg, Saveillans.

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Speaker 1: Brought you by Ancient Block and Ancient named the best

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