Speaker 1: Broadcasting live to New York, Bloomberg eleventh Rio to Washington,
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Speaker 1: a thirty on Wall Street. I'm Michael McKee along with
Speaker 1: Tom Keane. Economic indicators brought you by Commonwealth Financial Network.
Speaker 1: When it's time to change the conversation, talk with a
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Speaker 1: jedis at the first Word Desk. Michael, we start with
Speaker 1: a glimpse this week of manufacturing. Just out from the
Speaker 1: Federal Reserve Bank of New York. It's Regional Manufacturing Index,
Speaker 1: the Empire State Index coming in at negative nine. This
Speaker 1: is a main number of economists had expected an increase
Speaker 1: of surprise. That sets the stage for two key FED
Speaker 1: reports this week, industrial production and capacity utilization and the
Speaker 1: Federal Reserves Minutes of its prior policy meeting. That meeting
Speaker 1: officials seem to be tilting toward perhaps a rate increase
Speaker 1: this year. Also on the calendar, figures on housing starts,
Speaker 1: building permits, the consumer price Index, and existing home sales.
Speaker 1: At the Blueberg First Work Desk on vid Dell Juda,
Speaker 1: let's go back to New York. Thank you any well,
Speaker 1: then he brings up a very good point. We're gonna
Speaker 1: have a lot of data this week. Last week's concluded
Speaker 1: with the retail sales report coming in much stronger than expected,
Speaker 1: and you start this week with a down number on manufacturing.
Speaker 1: Where is the US economy? Let's ask Simon Frenchi's chief
Speaker 1: economist at Pamir Gordon based in London. The world looks
Speaker 1: to the US, Simon, uh, at this point, how do
Speaker 1: you decide whether the US economy is getting better or
Speaker 1: just sort of treading water? Because then that leads us
Speaker 1: to the questions about what the Fed's gonna do. Yeah,
Speaker 1: good morning, Mike. Well, the Empire State number that has
Speaker 1: just hit the wires, that that sends a somewhat conflicting
Speaker 1: message to very up bid retail sales numbers that we
Speaker 1: had just at the back end of last week. Very
Speaker 1: difficult for a overtly data dependent federal reserve to to
Speaker 1: make sense of all of this, and I think it
Speaker 1: strongly points towards the status quo. There is I unchanged
Speaker 1: interest rates in the US. Why why move policy risk?
Speaker 1: The policy mistake in a world where aggregate demand world
Speaker 1: trade is soft and softening. Further, I think it's uh
Speaker 1: that you need all those lights on the dashboard to
Speaker 1: be flashing green, and to be honest, it's quite a
Speaker 1: mix of green, amber and red right now. And that's
Speaker 1: that's very difficult for policy makers to justify and indeed
Speaker 1: give the confidence into markets when they change policy stance. Well,
Speaker 1: to Wow, we get uh CPI numbers, how important is
Speaker 1: that going to be in your mind? To the markets?
Speaker 1: And then to Jenny Yarn, Yes, So inflation repassed throughs
Speaker 1: from currency fluctuations are really the key aspect that we're
Speaker 1: looking at. In the last six months, we've been looking
Speaker 1: at core inflationary prints because you know, policymakers in Europe,
Speaker 1: in the US and the UK have been saying, okay,
Speaker 1: we're looking through the transitory impacts of commodities of oil,
Speaker 1: and we're wanting to look what core inflationary pressures are
Speaker 1: happening in wage settlements, trying to get to the bottom
Speaker 1: of these things, and therefore the inflation print is helpful
Speaker 1: from that perspective. But given some of those trends that
Speaker 1: have driven um sterling lower in the US due to
Speaker 1: a strong dollar have started to reverse really since the
Speaker 1: start of the year, which starts to be inflationary through
Speaker 1: the important goods route and stops to be as deflationary domestically,
Speaker 1: You're starting to see a narrative having to shift, And
Speaker 1: therefore I wouldn't put a lot of weight on what
Speaker 1: comes later in the week in terms of the Fed minutes,
Speaker 1: because there's so much behind the current events. Is it
Speaker 1: a monetary debate, simon, or are we finally over after
Speaker 1: a sluggish first quarter and waiting for it to click
Speaker 1: in that it's actually going to be what everybody wants
Speaker 1: to hear about, which is a real economy debate. Well,
Speaker 1: I really hope it moves to a real economy debate
Speaker 1: because um I sense a a global consensus is starting
Speaker 1: to emerge, and probably not in a formal setting, but
Speaker 1: an informal setting between the major central banks recognizing and
Speaker 1: they've been saying this for a long time, but I
Speaker 1: send some of their action is beginning to to to
Speaker 1: knit together that beg of their neighbor currency economics, monetary policy,
Speaker 1: competition is not the way to be to get us
Speaker 1: out of the low growth environment. And therefore, I really
Speaker 1: do hope we start to focus in on capacity utilization numbers. Um,
Speaker 1: we start to look at productivity in a real sense
Speaker 1: and look at the synchronization between monetary policy. See in
Speaker 1: fiscal policy that being that has been sadly, sadly missing
Speaker 1: for most of the time since the financial crisis. What
Speaker 1: the value to leaving interest rates unchanged? There is a
Speaker 1: possibility that the FED is distroying the markets. Now, well
Speaker 1: this this is where the macropodential tool kit comes into play.
Speaker 1: And I think we if we look at the what
Speaker 1: is different you know those famous words in markets? What's
Speaker 1: different this time? Is it ever different this time? Well?
Speaker 1: I think what is different from the perspective of independent
Speaker 1: central banks? Is there readiness to use the macropodential tool kit,
Speaker 1: the regulatory tool kit rather than simply monetary policy in
Speaker 1: terms of demand management and sectual risks that are emerging
Speaker 1: in terms of financial stability, in terms of real estate
Speaker 1: in terms of the reaction to very very low nominal yields,
Speaker 1: and therefore, from from my perspective, the more interesting action
Speaker 1: will be in macropodential interventions. In twenty sixteen, very very
Speaker 1: little action work is really foreseeable in the in Monty
Speaker 1: policy and core traditional interest rate variation. But then then
Speaker 1: they quickly here that gets back to real economy analysis,
Speaker 1: are just going to push that by the wayside, while wait, wait, wait, well,
Speaker 1: I guess it depends you know what is real for you,
Speaker 1: Tom is different for what is real for me is
Speaker 1: what is real for the guy on the high street
Speaker 1: in in and then a also on main street, and
Speaker 1: you very hard to understand the interconnectivity right now between
Speaker 1: dramatically lower nominal yields and what is happening in terms
Speaker 1: of business formation, business creation, zombie for the zombie firm
Speaker 1: debate and the feedback into productivity levels, that's interesting. Simon
Speaker 1: Um Simon French with us for the paymer Gordon, we're
Speaker 1: going to come back. Well, it's a fascinating idea of
Speaker 1: folks about what do we actually focus on as we
Speaker 1: moved to Brexit and as we moved to the June
Speaker 1: fifteen Fed meeting. Is Mike mentioned economic data back and
Speaker 1: for the like, what was your quick interpretation the data? Second,
Speaker 1: nobody really cares about the empire number. That's good, that's
Speaker 1: valuable to know. No one cares. We like that on
Speaker 1: Vinnie Dell Judas Economic Data. This Hour of Surveillance brought
Speaker 1: to you by BMW Kisco is a BMW mot Kisco
Speaker 1: dot com. Here's Michael Barr with his headline, My Tom,
Speaker 1: thank you very much. Donald Trump's latest remarks about Britain's
Speaker 1: Prime minister and the mayor of London raising eyebrows in
Speaker 1: the UK. Appearing on i t v s Good Morning Britain,
Speaker 1: the presumptive Republican presidential nominee said he may have a
Speaker 1: poor relationship with British Prime Minister David Cameron. It comes
Speaker 1: after Cameron's criticism of Trump for calling for Muslims to
Speaker 1: be temporarily banned from entering the US. Trump also calls
Speaker 1: London's new Muslim mayor, City Khan Rude, for calling an ignorant.
Speaker 1: Hillary Clinton and Bernie Sanders are trying to get in
Speaker 1: some last minute campaigning before tomorrow's primaries in Kentucky and
Speaker 1: in Oregon. Here's a sentence that can make parents nervous
Speaker 1: with teen drivers, can I borrow the keys? According to
Speaker 1: a new report, teen drivers can drastically reduce their risk
Speaker 1: of getting into a car crash just by agreeing to
Speaker 1: a few simple rules with their parents. Say Kids Worldwide
Speaker 1: says these kinds of grimmits can have a measurable effect
Speaker 1: on how much risky behavior that the teams are engaging
Speaker 1: behind the wheel. Global News twenty four hours a day,
Speaker 1: powered by our twenty four hundred journalists and more than
Speaker 1: a hundred fifty news bureaus around the world at Michael Barr,
Speaker 1: Mike Tom Thank you, Michael. Time now for the Landroverer
Speaker 1: participanate Bloomberg NBC Sports Update with John Stsha, Thanks Mike.
Speaker 1: Another Yankee win of the met loss and a big
Speaker 1: time brawl In Sunday baseball, the Yanks, who started the
Speaker 1: season nine and seventeen, completed a seven and three homestand
Speaker 1: they want all three series. They beat the first place
Speaker 1: White Sox seven to five, Carlos Beltran with a milestone
Speaker 1: home run. Beltro and again only the fourth switch hitter
Speaker 1: in the four hundred home run club, joining Mickey Man,
Speaker 1: Eddie Murray and Chipper Jones Yanks at Arizona tonight. Mets
Speaker 1: are off before hosting Washington, now in third place after
Speaker 1: only nine losses in their first twenty six games, seven
Speaker 1: defeats on this road trip. Swept at Colorado, losing four
Speaker 1: three on Ryan Rayburn's two run pinch at homer seventh
Speaker 1: inning un Assessmitis hit his twelfth homer of the year.
Speaker 1: It was the mets fourth loss in a row. As
Speaker 1: for that brawl, Texas still upset by Jose Bautista's backflip
Speaker 1: in last year's playoffs. Bautista got hit by a pitch,
Speaker 1: then went into second base with a hard late slide,
Speaker 1: and rug net o'door reacted with a shove and then
Speaker 1: landed a punch to Bautista's jaw. I had a hard
Speaker 1: slide at second base. I could have I could have
Speaker 1: injured him. I chose not to just try to send
Speaker 1: a message that I didn't appreciate getting hit. Um, you
Speaker 1: know whatever. There were eight ejections. The two teams do
Speaker 1: not play again this season. Speaking of Toronto, the Raptors
Speaker 1: are into the NBA Zas Finals for the first time.
Speaker 1: They won Game seven from Miami, won sixteen to eighty nine.
Speaker 1: They'll play Game one at Cleveland tomorrow, Game one of
Speaker 1: the NHL's West Finals. St. Louis over San Jose to one.
Speaker 1: Jason Dale and all the way the World One took
Speaker 1: the Players Championship by four shots and won one point
Speaker 1: eight and nine million, the richest prize in golf. With
Speaker 1: a Bloomberg NBC Sports Update, I'm John Stashell. John, thanks
Speaker 1: so much. Appreciate that very much. Michael McKee, it was
Speaker 1: interesting weekend, not much sports. We got the horse Rays
Speaker 1: coming up here this week. You know what today is?
Speaker 1: One years ago today, Mr Sikes and Mr Picos, Oh
Speaker 1: my word, very interesting. Sikes Pico. It should divided up
Speaker 1: the countries of the Middle East and led to what
Speaker 1: we have today. Shout out to the Imperial Worm Museum
Speaker 1: of London, England. I had a chance to see the T. E.
Speaker 1: Lawrence exhibit a decade ago and they had his map
Speaker 1: of Sikes Pico which he used in fury with his
Speaker 1: leadership long ago went fairly Simon French with us on
Speaker 1: the English economy. It's Bloomberg surveillance. The sports rempart was
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Speaker 1: event is happening now. Visit Landrover, Parcipi dot com, land
Speaker 1: Rover above and beyond. Global business news twenty four hours
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Speaker 1: and on your radio. This is a Bloomberg Business Flash
Speaker 1: and I'm Karen Moscow. This updates brought to you by
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Speaker 1: resolution for over eighty five years. Learn more at a
Speaker 1: d R dot org. Futures are a little change this
Speaker 1: morning after a report showed manufacturing activity in the New
Speaker 1: York region unexpectedly contracted this month. Engauge on home builders
Speaker 1: sentiment is due later this morning. They check the markets
Speaker 1: every fifteen minutes throughout the trading day on Bloomberg SNPE.
Speaker 1: Many futures down to full like Dowey Miny futures down
Speaker 1: twenty and nas vacumny futures up almost two. The tenuere
Speaker 1: treasury is down eight thirty seconds, the yield one point
Speaker 1: seven two percent. Nmex screwed oil up two point one
Speaker 1: percent of ninety eight cents to eighteen of arrow comex
Speaker 1: schoold of one point three percent or sixteen dollars forty
Speaker 1: cents to twelve eighty nine and ounce the euro a
Speaker 1: dollar thirty and thirty eight agen one oh eight point
Speaker 1: seven six were in Buffett's Berkshire Hathaway just closing his
Speaker 1: steak in at an Apple. A regulatory filing shows Berkshire
Speaker 1: held nine point eight one million Apple shares as of
Speaker 1: March thirty feet. The holding was valued at one point
Speaker 1: oh seven billion dollars at the end of the first quarter,
Speaker 1: and Apple shares rising this morning of one point seven percent.
Speaker 1: And that's a Bloomberg business flash, Tom and Mike Karen,
Speaker 1: Thanks so much, folks. It is eight forty eight on
Speaker 1: Wall Street. The following is from Bloomberg View. Opinions and
Speaker 1: commentary from Bloomberg columnists. I'm Jonathan Bernstein, a columnist for
Speaker 1: Bloomberg View. Donald Trump's announcement that he won't really lease
Speaker 1: his tax returns is just the latest example of what
Speaker 1: a difficult challenge he presents to the press. The problem
Speaker 1: for the media is that once Trump refuses, it rapidly
Speaker 1: ceases to be news. It's just another thing that will
Speaker 1: disappear from public view long before voters start tuning in
Speaker 1: later this year. The challenge isn't limited to his refusal
Speaker 1: to release his financial records. The well documented coverage of
Speaker 1: his latent disregard for the truth hasn't deterred him from
Speaker 1: continuing to repeat the same falsehoods. There are also his
Speaker 1: outrageous statements, such as his insult that John McCain and
Speaker 1: other US prisoners of war were not heroes. And then
Speaker 1: there's Trump's demonstrated ignorance of government and public affairs. How
Speaker 1: can reporters convey just how far from the norm Trump
Speaker 1: is as part of their coverage of the day to
Speaker 1: day campaign going forward, Normal cautions seem to me to
Speaker 1: fall short of the challenge Trump poses. It's going to
Speaker 1: take some innovative thinking to meet that challenge. I'm Jonathan Bernstein.
Speaker 1: For more view, please go to Bloomberg View dot com
Speaker 1: or view go on the Bloomberg terminal. This has been
Speaker 1: Bloomberg View. In Bloomberg View. Commentary can be heard hourly
Speaker 1: weekdays at Bloomberg Radio. Simon French, whether from growing We've
Speaker 1: been looking at the US, looking abroad, Let's look at
Speaker 1: the United Kingdom. Simon, give me a scope and scale
Speaker 1: housing statistic for the wackleness the zaniness of the United
Speaker 1: Kingdom housing economy. Some of the valuations tom are absolutely eyewatering.
Speaker 1: It's one of the legacies of unchanged bankreit at norpoint
Speaker 1: five for nine years is that that hunt for yield
Speaker 1: has pushed the price wages ratio, particularly in prime London property,
Speaker 1: but it's spread out wider across the country to ratios
Speaker 1: that we it briefly saw in the Laws and Boom
Speaker 1: of that was the previous chancellor of the Exchequo in
Speaker 1: the UK in the late eighties and then again prior
Speaker 1: to the financial crisis, and some of those ratios are
Speaker 1: way in excess now of of both those two previous peaks.
Speaker 1: What is sustainable, however, is the mortgage interest bird, which
Speaker 1: remains of the order of twenty five to thirty percent
Speaker 1: of net household income when those stress points previously at
Speaker 1: cycles were north. So there's not an imminent pressure on
Speaker 1: household finances, but it will not take much movement both
Speaker 1: within the rates market and also within the labor market,
Speaker 1: which is absolutely key here for being able to service mortgages.
Speaker 1: That's the thing that we're watching to see whether those
Speaker 1: valuations are sustainable over the medium too. It's a debate
Speaker 1: and selected parts of America, the solution being built higher,
Speaker 1: taller buildings for residential Where is that debate in London
Speaker 1: or The debate in London has been fervent around building
Speaker 1: more houses. The the recent mayoral election that source that
Speaker 1: he can replace Boris Johnson as Mayor of London was
Speaker 1: absolutely dominated around housing. And this off the backdrop of
Speaker 1: about twenty six to twenty seven thousand units per per
Speaker 1: year being built in London when wirements based on population
Speaker 1: growth something of the order of fifty thous We need
Speaker 1: a doubling and housing starts by the end of this
Speaker 1: decade just to keep pace with population growth. So the
Speaker 1: conversation undoubtedly shifts to higher and also a lot of infilling.
Speaker 1: You compare London with a lot of other metropolitans centers
Speaker 1: around the world, it's actually quite It's not as densely
Speaker 1: populated as a lot of areas. There are a lot
Speaker 1: of green spaces. Of course, there are the public interest
Speaker 1: debates going on constantly to try and balance the requirement
Speaker 1: for for green spaces versus the requirement for property. But
Speaker 1: I mean planning law is at the very forefront of
Speaker 1: this debate. How much is the Brexit debate contributing to that,
Speaker 1: because there's talk that we're seeing process start to fill
Speaker 1: in London as people may be anticipate decline in financial
Speaker 1: sector employment, should people want to leave the EU? Yeah,
Speaker 1: we spoke five six weeks ago, didn't we about the
Speaker 1: Brexit debate? And I think it's important to not over
Speaker 1: state what is going on right now, not just within housing,
Speaker 1: but within the broader UK economy, which has been slowing
Speaker 1: really since q on way before the referendum was announced.
Speaker 1: Brexit is an additional factor, or additional risk off factor,
Speaker 1: but it isn't the most material impact on what we've
Speaker 1: seen in terms of weak housing prints. There's been a
Speaker 1: significant amount of tax and regulatory burden added into UK housing,
Speaker 1: an additional three percent stamp duty on on additional properties
Speaker 1: for trying to address the bitallet sector which has got
Speaker 1: carried away in recent years, and that government intervention to
Speaker 1: try and cool the market is the type of thing
Speaker 1: that is pushing back transactions and prices right now. Well,
Speaker 1: that's what's valuable is the guy idea of what can
Speaker 1: government do we're having that and a few geographers again
Speaker 1: I think of San Francisco, New York and Washington. Is
Speaker 1: any of it proving successful? Well, I would say that
Speaker 1: the recent tax um changes established by the UK government
Speaker 1: has actually taken a lot of the froth out of
Speaker 1: the market. But you're absolutely right there is there is
Speaker 1: a limit on which government or what government intervention can do,
Speaker 1: given the prevailing demographics, given the rate of household formation,
Speaker 1: given the fact that the UK has current net migration
Speaker 1: levels at about three per annum, that's adding an awful
Speaker 1: lot of demand in and ultimately government's most effective way
Speaker 1: at ensuring that all those people have places to live
Speaker 1: is to increase and actually accelerate the speed with which
Speaker 1: homes are built. We need nationally about two hundred, two
Speaker 1: hundred and fifty thousand. We're running in about a hundred
Speaker 1: and forty thousand at the moment. So at this point,
Speaker 1: how concern should we be about the UK economy and
Speaker 1: what the Central Bank does it? Is there any way
Speaker 1: to tell until June, Well, there'll be no action from
Speaker 1: the Central Bank. So let's go back to what tom,
Speaker 1: what we were talking about before the break in terms
Speaker 1: of the real economy, here in the UK and the
Speaker 1: I I've I've written quite extensively about the fading of
Speaker 1: the E numbers, those E numbers that gave artificial stimulus
Speaker 1: to the UK economy. The extrange rate sterling was very
Speaker 1: strong in fourteen and early parts of fifteen. Energy costs
Speaker 1: were falling the second E and then also earnings, real
Speaker 1: earnings were recovering after six six and a half years
Speaker 1: of internal deflation in the labor market. Actually we saw
Speaker 1: wages started to return. Now all those three factors, those
Speaker 1: E numbers have started to turn in the opposite direction.
Speaker 1: Really since as I say, Q Q one and you're
Speaker 1: seeing slowing p M eyes that are challenging whether the
Speaker 1: government can deliver what is at the moment tend to
Speaker 1: be the most significant austerity and fiscal consolidation program anywhere
Speaker 1: in the G seven. Indeed you can widen that to
Speaker 1: anywhere in the G twenty. It's quite a big task.
Speaker 1: It's a significant headwind for the government. Governments, like like
Speaker 1: Napoleon's generals, they need to be lucky, not necessarily bright.
Speaker 1: Thus far, George jos Bonne has been a lucky chancellor.
Speaker 1: Certainly in recent years he's had the broader macro economy
Speaker 1: in his favor. That's starting to turn against him and
Speaker 1: he therefore he needs to be responsive to that. Simon,
Speaker 1: Thank you so much. Simon French with pamerg and what
Speaker 1: a clinic that was on London real estate, Mike, I
Speaker 1: am told from outstanding reports from our surveillance London team
Speaker 1: expert on this. I think Breed Taylor said she's gonna
Speaker 1: live in Dublin community something like you're you're not investing. Yeah,
Speaker 1: I don't know. It's your weekend to get away play. Yeah,
Speaker 1: I'm looking to time share. I get a place on
Speaker 1: the Thames for four minutes, you know. But seriously, very
Speaker 1: interesting and of course some huge social consequences within the
Speaker 1: United Kingdom, and you can bring that over not to
Speaker 1: all but parts of the United Certainty is just the
Speaker 1: the overriding issue in all of um, every every G
Speaker 1: four country. You know what with our abbeynomics in the
Speaker 1: Bank of Japan, what's going to happen in the U
Speaker 1: S presidential election? Uh? Is China going to you know
Speaker 1: slow so much it hurts the rest of the world again, Yeah, well,
Speaker 1: we're trying to do folks with a with a slow news,
Speaker 1: slow to be perfectly honest, to stay abreast of what's
Speaker 1: going on each and every day Venezuela over the weekends,
Speaker 1: one example, but also brief you across economics, finance, investment,
Speaker 1: and international relations on the themes that will get us there,
Speaker 1: certainly to brexit. And before that the June meeting, Mike,
Speaker 1: what is the July meeting? I don't even know you're
Speaker 1: taking off the month of July, right. I think I
Speaker 1: will have to be here for July. July is always
Speaker 1: important meeting, which is July twenty seven, the decision days July.
Speaker 1: Probably the week before that, you'll have um Janet Yellen
Speaker 1: giving her Humphrey Hawkins test and that will be extraordinarily
Speaker 1: widely um followed interestinging in around that will be GDP.
Speaker 1: I think after July will probably see that. Is well,
Speaker 1: the market this morning and one big churn yen one
Speaker 1: O eight seventy nine euro one thirteen thirty nine euro
Speaker 1: yen showing stronger Euro weaker again. That's a that's a
Speaker 1: reversal from the recent days, but a churn all in all,
Speaker 1: one twenty three thirty six futures are just flat. There's
Speaker 1: no other way to put it. Equity Future Flat, Michael
Speaker 1: McKee and Tom Keane bringing you another hour worldwide, coast
Speaker 1: to coast Bloomberg surveillance