1 00:00:02,320 --> 00:00:05,720 Speaker 1: Global business news twenty four hours a day at Bloomberg 2 00:00:05,760 --> 00:00:08,840 Speaker 1: dot Com, the Radio, plus mobile and on your radio. 3 00:00:09,119 --> 00:00:13,560 Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters, 4 00:00:13,560 --> 00:00:16,720 Speaker 1: Simon Charlie Poloty. Aftershocks of the UK's vote to leave 5 00:00:16,800 --> 00:00:22,320 Speaker 1: the European Union reverberating across financial markets again today after 6 00:00:22,360 --> 00:00:25,640 Speaker 1: a weekend of political turmoil, with the pound extending its 7 00:00:25,680 --> 00:00:29,319 Speaker 1: record sell off, European equities dropping to levels last seen 8 00:00:29,560 --> 00:00:32,760 Speaker 1: in February. Right now, we have got the pound of 9 00:00:32,840 --> 00:00:36,120 Speaker 1: the dollar thirty one seventy four, down three point seven percent, 10 00:00:36,479 --> 00:00:39,600 Speaker 1: Crew down three point six percent, dropping a dollar seventy 11 00:00:39,600 --> 00:00:43,360 Speaker 1: three forty ninety one, Gold up four tenths of one percent. 12 00:00:43,520 --> 00:00:47,000 Speaker 1: It is up five forty thirteen twenty seven front ounce 13 00:00:47,040 --> 00:00:50,400 Speaker 1: of gold. SMP five hundred index down forty one to 14 00:00:50,640 --> 00:00:54,040 Speaker 1: nineteen ninety five, a drop there of two percent. NAZ 15 00:00:54,120 --> 00:00:57,160 Speaker 1: Stack down one twenty points, the drop there of two 16 00:00:57,200 --> 00:01:00,920 Speaker 1: point six percent. CAW Jones Industrial labay it is lower 17 00:01:00,960 --> 00:01:04,560 Speaker 1: now by three hundred and eleven points for the down 18 00:01:04,680 --> 00:01:07,800 Speaker 1: Jones Industrial average, that is a drop of one percent. 19 00:01:08,160 --> 00:01:11,200 Speaker 1: We're brought to you by Hartford Funds Human Centric Excited 20 00:01:11,360 --> 00:01:15,440 Speaker 1: Investing insight number seven for financial advisors. Keeping in touch 21 00:01:15,480 --> 00:01:19,000 Speaker 1: with clients through technology is a great idea until it's 22 00:01:19,040 --> 00:01:21,119 Speaker 1: a bad idea. To find out why, go to human 23 00:01:21,240 --> 00:01:27,319 Speaker 1: Centric Investing dot com, Hartford Funds Distributors LLLC. I'm Charlie Pellow. 24 00:01:27,440 --> 00:01:31,880 Speaker 1: That's a Bloomberg business flash. You're listening to taking Stock 25 00:01:32,040 --> 00:01:36,240 Speaker 1: with Bim Fox and Kathleen Hayes on Bloomberg Radio. The 26 00:01:36,280 --> 00:01:40,839 Speaker 1: political mess in the UK just seems to get messier, 27 00:01:40,880 --> 00:01:44,120 Speaker 1: and SMP Global Ratings is not ignoring it. They just 28 00:01:44,200 --> 00:01:47,680 Speaker 1: cut the UK's top credit rate by two levels, of course, 29 00:01:47,720 --> 00:01:50,800 Speaker 1: as follows the breggsit vote, SMP lowering their rating to 30 00:01:50,880 --> 00:01:53,800 Speaker 1: double A from triple A. That's still pretty strong. Nevertheless, 31 00:01:54,160 --> 00:01:57,960 Speaker 1: they are concerned about a less effective policy framework in 32 00:01:58,000 --> 00:02:01,920 Speaker 1: the UK, the risk of a deterior in external financial 33 00:02:01,960 --> 00:02:05,080 Speaker 1: conditions and even our financing conditions, I should say not 34 00:02:05,160 --> 00:02:08,200 Speaker 1: exactly the same thing. Then there's constitutional issues arising to 35 00:02:08,200 --> 00:02:10,600 Speaker 1: the majority of voters in Scotland and Northern Ireland having 36 00:02:10,639 --> 00:02:13,280 Speaker 1: opted to remain in the EU. Those are the factors 37 00:02:13,320 --> 00:02:16,600 Speaker 1: cited by SMP today. We're joined now by Carston Nichol's 38 00:02:16,600 --> 00:02:20,640 Speaker 1: Deputy Director of Research at TO neo intelligence, He joins 39 00:02:20,720 --> 00:02:24,079 Speaker 1: us from Brussels, Carson, I think the question now is 40 00:02:24,400 --> 00:02:28,200 Speaker 1: where is the leadership. You wrote a piece, uh, just 41 00:02:28,320 --> 00:02:31,600 Speaker 1: in the last couple of days talking about the dismal 42 00:02:31,680 --> 00:02:35,919 Speaker 1: performances and apply to the UK referendum outcome put on 43 00:02:36,120 --> 00:02:40,560 Speaker 1: by some of the EU's top leaders. Yeah, that's uh, 44 00:02:40,600 --> 00:02:43,000 Speaker 1: that's certainly the way we look at it. I mean, 45 00:02:43,400 --> 00:02:47,040 Speaker 1: if you considered the immediate reaction see in Brussels, um, 46 00:02:47,200 --> 00:02:50,399 Speaker 1: from the presidents of the European Council, the European Parliament, 47 00:02:50,440 --> 00:02:54,240 Speaker 1: the European Commission, UM, there wasn't much indication at all 48 00:02:54,280 --> 00:02:57,240 Speaker 1: and about where we're headed next. Um. At the same time, 49 00:02:57,240 --> 00:02:58,640 Speaker 1: if you look at Westmint, say, if you look at 50 00:02:58,680 --> 00:03:02,360 Speaker 1: British politics, there's certainly you know, there's a leadership stand 51 00:03:02,400 --> 00:03:05,280 Speaker 1: off going on within the Conservative Party. There's certainly one 52 00:03:05,360 --> 00:03:08,200 Speaker 1: going on within the opposition, within the Labor Party. UM. 53 00:03:08,320 --> 00:03:10,440 Speaker 1: So you know, all of this leaves us with the void. 54 00:03:10,560 --> 00:03:14,920 Speaker 1: Basically the leadership question is utterly unresolved. And that's uh. 55 00:03:15,080 --> 00:03:17,560 Speaker 1: As so often in the recent past in Europe, it 56 00:03:17,639 --> 00:03:19,560 Speaker 1: seems that it's down to Angela Nack or the German 57 00:03:19,600 --> 00:03:22,160 Speaker 1: Johnsay in Berlin, who was meeting with her French and 58 00:03:22,240 --> 00:03:25,960 Speaker 1: Italian counterparts this evening to give some indication of what 59 00:03:26,040 --> 00:03:30,720 Speaker 1: we're heading next. Angela Merkell, of everyone who has spoken out, 60 00:03:30,840 --> 00:03:33,919 Speaker 1: seems to be the one who, whether you're reading between 61 00:03:33,960 --> 00:03:36,560 Speaker 1: the lines or not, just as hoping for some way 62 00:03:36,600 --> 00:03:41,600 Speaker 1: to preserve a strong, certainly strong trade relationship with the 63 00:03:41,760 --> 00:03:44,280 Speaker 1: UK and the EU, particularly in time when you know 64 00:03:44,360 --> 00:03:47,000 Speaker 1: Italy's economy and markets and banks don't look so good, 65 00:03:47,080 --> 00:03:52,640 Speaker 1: France has problems, EU UK leaves the EU and what 66 00:03:52,720 --> 00:03:55,880 Speaker 1: does she have left. Yes, that's that's certainly true, and 67 00:03:55,920 --> 00:03:59,680 Speaker 1: I think so from her perspective. There's obviously always been 68 00:03:59,680 --> 00:04:02,080 Speaker 1: a strong interests, not just for economic reasons to keep 69 00:04:02,080 --> 00:04:05,119 Speaker 1: the UK inside the u UM, there's also the whole 70 00:04:05,120 --> 00:04:08,320 Speaker 1: political story of you know, strengthening this let's say North 71 00:04:08,360 --> 00:04:14,040 Speaker 1: European liberal minded, pro market planned with an EU policymaking. 72 00:04:14,440 --> 00:04:16,520 Speaker 1: But on the other hand, now that this decision has 73 00:04:16,520 --> 00:04:19,800 Speaker 1: been made, I think German policymakers and makers specifically have 74 00:04:20,000 --> 00:04:23,880 Speaker 1: have have to look ahead and they need to balance 75 00:04:24,240 --> 00:04:28,600 Speaker 1: different opinions within the remaining U twenty seven. And if 76 00:04:28,600 --> 00:04:31,320 Speaker 1: you look further to the south and specifically to Paris, 77 00:04:31,640 --> 00:04:34,320 Speaker 1: and you'll see that other number states are already pushing 78 00:04:34,400 --> 00:04:37,080 Speaker 1: for a pretty heartline stands with the vise of the 79 00:04:37,160 --> 00:04:39,240 Speaker 1: United Kingdom. And I think the reason for this is 80 00:04:39,320 --> 00:04:42,440 Speaker 1: quite clear. Many leaders in Europe face their own eurosceptic 81 00:04:42,480 --> 00:04:44,599 Speaker 1: movements at home and they want to make sure that 82 00:04:44,640 --> 00:04:47,240 Speaker 1: they send a strong message to their own electorate that's 83 00:04:47,240 --> 00:04:49,760 Speaker 1: flirting with eurosceptic forces is not a good idea in 84 00:04:49,760 --> 00:04:51,600 Speaker 1: the first place. So it's going to be very difficult 85 00:04:52,160 --> 00:04:56,000 Speaker 1: to balance these positions within the remaining EU twenty seven. 86 00:04:56,880 --> 00:05:01,080 Speaker 1: So we have Spanish bond yields drop in the most 87 00:05:01,080 --> 00:05:05,560 Speaker 1: since twenty fourteen, after the acting Prime Minister Mariano Rojoy 88 00:05:05,680 --> 00:05:10,080 Speaker 1: defied opinion polls to consolidate his position in the country's 89 00:05:10,279 --> 00:05:14,440 Speaker 1: general election, and some have speculated that the Brexit vote 90 00:05:14,880 --> 00:05:17,839 Speaker 1: suggested that the opposition would win. What does this mean 91 00:05:17,880 --> 00:05:21,680 Speaker 1: for the future of the EU? Well, I think how 92 00:05:21,760 --> 00:05:24,440 Speaker 1: strong the the impact of Brexit really has been for 93 00:05:24,600 --> 00:05:27,760 Speaker 1: this um, for this Spanish election result, I think that's 94 00:05:27,839 --> 00:05:32,040 Speaker 1: that's that's an open question. Um. Certainly, what we're seeing 95 00:05:32,240 --> 00:05:36,160 Speaker 1: is that government formation has been difficult in many places 96 00:05:36,200 --> 00:05:39,120 Speaker 1: in Southern Europe of the last couple of years, and 97 00:05:39,160 --> 00:05:41,560 Speaker 1: I think The underlying trend that we see in many 98 00:05:41,560 --> 00:05:44,240 Speaker 1: of these places across the board, in Northern Europe and 99 00:05:44,279 --> 00:05:47,640 Speaker 1: Southern Europe is the rise of political fragmentation, the rise 100 00:05:47,680 --> 00:05:50,520 Speaker 1: of populist forces. Even in places where you don't see 101 00:05:50,560 --> 00:05:53,120 Speaker 1: this in parliament, such as in the UK, you see 102 00:05:53,200 --> 00:05:57,720 Speaker 1: that populism and political fragmentation speak three into mainstream parties. 103 00:05:58,040 --> 00:06:00,919 Speaker 1: And I think the bottom line the outcome for for 104 00:06:01,040 --> 00:06:03,400 Speaker 1: policy making endure is that it is getting more and 105 00:06:03,440 --> 00:06:07,479 Speaker 1: more difficult to find centrist majorities for pragmatic policy choices 106 00:06:07,720 --> 00:06:10,800 Speaker 1: here in Brussels. So the political center is becoming more 107 00:06:10,800 --> 00:06:13,280 Speaker 1: and more constrained and that makes it more and more 108 00:06:13,279 --> 00:06:16,960 Speaker 1: difficult to push for policies from you know, closer integration, 109 00:06:17,400 --> 00:06:21,040 Speaker 1: to economic reform to more trade. So that's certainly warrying 110 00:06:21,080 --> 00:06:24,200 Speaker 1: development for policy making in Europe. Well, what is the 111 00:06:24,279 --> 00:06:27,159 Speaker 1: chatter in Brussels? Are people looking over the shoulders people 112 00:06:27,160 --> 00:06:30,120 Speaker 1: whose livelihoods have jobs with you know, the EU and 113 00:06:30,760 --> 00:06:32,719 Speaker 1: it because a lot of people are wondering, is this 114 00:06:32,760 --> 00:06:35,440 Speaker 1: the beginning of the end for the EU? No? I 115 00:06:35,440 --> 00:06:38,039 Speaker 1: don't think so. I think what it is or it 116 00:06:38,160 --> 00:06:42,719 Speaker 1: feeds into a longer standing development towards more inter governmental solution. 117 00:06:43,120 --> 00:06:44,720 Speaker 1: I think that has always been the question here in 118 00:06:44,720 --> 00:06:46,760 Speaker 1: Bluff of how do you want to design this European 119 00:06:46,839 --> 00:06:50,640 Speaker 1: project in a way where Member States government play a 120 00:06:50,680 --> 00:06:55,520 Speaker 1: crucial role. That's one option, or by really integrating sovereignty 121 00:06:55,760 --> 00:06:58,960 Speaker 1: in Brussels and strengthening European Commission. And I think the 122 00:06:58,960 --> 00:07:01,680 Speaker 1: trend that we've already during the Eurogote crisis over the 123 00:07:01,720 --> 00:07:04,919 Speaker 1: last couple of years is that Member states government continued 124 00:07:04,960 --> 00:07:07,680 Speaker 1: to play a very strong role in the European progress. 125 00:07:07,920 --> 00:07:10,400 Speaker 1: So I think the outcome here in Brucos is that 126 00:07:10,440 --> 00:07:12,080 Speaker 1: what we're going to see over the next couple of 127 00:07:12,120 --> 00:07:16,400 Speaker 1: years more and more at hoc Field incremental pro progress. 128 00:07:16,480 --> 00:07:18,640 Speaker 1: If there is a crisis that needs to be resolved, 129 00:07:18,840 --> 00:07:21,200 Speaker 1: we see member states coming together. It's going to be 130 00:07:21,320 --> 00:07:24,120 Speaker 1: more of a step stop approach to Europe. Well, that's 131 00:07:24,120 --> 00:07:28,200 Speaker 1: certainly the optimistic view for the European Union itself. Remains 132 00:07:28,240 --> 00:07:30,640 Speaker 1: to be seeing what it means for the UK as 133 00:07:30,680 --> 00:07:33,440 Speaker 1: they prepared to leave the European Union. Carson Nichol, thank 134 00:07:33,480 --> 00:07:36,040 Speaker 1: you so very much. He's deputy director of research at 135 00:07:36,040 --> 00:07:41,360 Speaker 1: to Nail Intelligence. Joining us from Brussels and Kathleen Hayes. 136 00:07:41,440 --> 00:07:47,960 Speaker 1: This is taking Stock on Bloomberg Radio. Brexit reverberating through 137 00:07:48,120 --> 00:07:51,440 Speaker 1: businesses and companies around the world. What does it mean 138 00:07:51,640 --> 00:07:56,160 Speaker 1: for luxury travel? We're going to find out next as 139 00:07:56,200 --> 00:07:58,280 Speaker 1: taking Stock continues on Bloomberg Radio.