WEBVTT - Stifel's Piegza: Could Be Discussing US Recession Again (Audio)

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<v Speaker 1>Broadcasting live to New York Bloomberg eleven, Brio to Washington,

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<v Speaker 1>d C. Bloomberg to Boston, Bloomberg Well Under, to San

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<v Speaker 1>Francisco Bloomberg nine, to the country, US Exam General one

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<v Speaker 1>nineteen and around the globe the Bloomberg Radio plus Zappen

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<v Speaker 1>Bloomberg dot Com. This is taking stock. I'm Kathleen Hayes,

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<v Speaker 1>along with pim Fox. US treasury thirty year bonds sell

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<v Speaker 1>at a record low two point one seven percent. Germany's

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<v Speaker 1>benchmark tenure bund selling at a negative yield for the

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<v Speaker 1>first time ever. This as the Federal Reserve signals that

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<v Speaker 1>the US is growing modestly and traders scratch their heads

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<v Speaker 1>over where central banks around the world are going. Next,

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<v Speaker 1>we'll be speaking with Lindsay Piegza, chief economist at Stifle Nicholas,

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<v Speaker 1>about the Beige Book and about the Federal Reserve in

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<v Speaker 1>the US economy. But right now, let's go to Charlie

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<v Speaker 1>pelevin the Bloomberg Boose Room for Bloomberg Business Flag and

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<v Speaker 1>I think of pim Fox. Thank you, Kathleen Hayes. That

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<v Speaker 1>on smp R higher Naz tak Laura, and this update

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<v Speaker 1>is brought to you this Wednesday by sector spider e

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<v Speaker 1>T S. Why by a single stock when you can

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<v Speaker 1>invest in the entire sector of visits sector s P,

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<v Speaker 1>d R S dot Com or call one sector e

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<v Speaker 1>T F. Philip Hammond has been appointed the UK's Chancellor

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<v Speaker 1>of the Exchequer, tasked with the job of protecting the

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<v Speaker 1>economy from the fall out of Brexit. A meeting you

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<v Speaker 1>Prime Minister Theresa May's pledge to tackle quote burning injustice

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<v Speaker 1>in society. He must now decide how best to stimulate

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<v Speaker 1>the UK economy, which is already at risk of sliding

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<v Speaker 1>into recession, while quelling voters frustration following six years of

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<v Speaker 1>George Osborne's austarity driven policies. Federal Reserve out with its

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<v Speaker 1>paige Book report and it says the U s economy

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<v Speaker 1>expanded at a modest pay since mid May, amid slight

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<v Speaker 1>price pressures and some softening in consumer spending. The rally

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<v Speaker 1>and US shares faltering today, equities fluctuating at all time

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<v Speaker 1>highs as crew plunges amid an unexpected rise in fuel stockpiles.

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<v Speaker 1>Treasuries have halted a two day slide. Laura Rosener is

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<v Speaker 1>Senior economists of b MP poda ba. We're getting more

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<v Speaker 1>easing and more concern externally. It's just increasing demand for

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<v Speaker 1>assets that actually are yielding something positive and so that's

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<v Speaker 1>fueling demand for US Treasury securities and and driving them

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<v Speaker 1>much lower. So no, it's not really fundamentals which are

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<v Speaker 1>are driving US treasury yields. And right now with you

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<v Speaker 1>have gold up seven tenths of one percent, SMP five

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<v Speaker 1>hundred index unchanged, and now we'll look at the other

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<v Speaker 1>stories making news. Thank you, Charlie from the Bloomberg Newsroom.

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<v Speaker 1>I'm Eric Shatzker. Hillary Clinton is talking unity today while

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<v Speaker 1>on the road in Illinois, one day after Bernie Sanders

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<v Speaker 1>officially endorsed her. Clinton spoke at the Old State House

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<v Speaker 1>in Springfield. There is too much and hate in our country,

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<v Speaker 1>too little trust and common ground. An analysis by the

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<v Speaker 1>New York City Council finds that Donald Trump's proposals to

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<v Speaker 1>deport illegal immigrants and temporarily banned Muslims could hurt the

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<v Speaker 1>local economy. The council finds the plans could cost the

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<v Speaker 1>state more than eight hundred million dollars in the city

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<v Speaker 1>more than three forty thousand jobs. British Prime Minister David

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<v Speaker 1>Cameron has left Downing Street for the last time as leader.

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<v Speaker 1>Mr Cameron thanked his political supporters, his children, and offered

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<v Speaker 1>a special thank you to his wife, Samantha, you have

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<v Speaker 1>kept me vaguely saying and as well as being an

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<v Speaker 1>amazing wife, mother and businesswoman, you have done something every

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<v Speaker 1>week in that building behind me to celebrate the best

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<v Speaker 1>voluntary service in our country. You came home. Secretary Theresa

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<v Speaker 1>May has taken over from Cameron as the new Prime Minister.

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<v Speaker 1>Cameron Sterling is calling on protesters to protest the right way,

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<v Speaker 1>protest in peace. He's the fifteen year old son of

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<v Speaker 1>Alton Sterling, a black man who was shot and killed

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<v Speaker 1>by white police officers outside of convenience store in Baton Rouge,

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<v Speaker 1>Louisiana last week. There are extensive subway delays across the city.

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<v Speaker 1>Officials say of power outage at a rail control center

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<v Speaker 1>has caused major backups on the one, two, three, four, five,

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<v Speaker 1>and six lines. Global News twenty four hours a day,

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<v Speaker 1>powered by more than journalists and analysts in more than

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<v Speaker 1>one twenty countries. I'm Eric Shasker, this is Bloomberg, Charlie,

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<v Speaker 1>and we thank you and again recapping a move higher

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<v Speaker 1>for the down Jones industrial average up by two tenths

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<v Speaker 1>of one percent, s and P up by less than

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<v Speaker 1>half a point. Little change there. Nazdek is down two

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<v Speaker 1>tenths of one percent. I'm Charlie Pelican. That's a Bloomberg

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<v Speaker 1>business flash. He's taking stock the FED in Focus on

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<v Speaker 1>Bloomberg Radio. The FED in Focus reports from the twelve

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<v Speaker 1>Federal Reserve districts indicate that economic activity continued to expand

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<v Speaker 1>at a modest pace across MO regions from mid May

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<v Speaker 1>through the end of June. Here to tell us more,

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<v Speaker 1>Lindsay Pieza, chief economist at a Stifle Nicholas, joining us

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<v Speaker 1>from Chicago, and she can be followed on Twitter at

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<v Speaker 1>Lindsay PA. All Right, Lindsay, so, tell us a little

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<v Speaker 1>bit about your reaction to the Beige Book. Well, it's

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<v Speaker 1>pretty much in line with expectations. The Beige Book has

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<v Speaker 1>consistently painted a much rosier picture of the US economy

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<v Speaker 1>than the data would otherwise suggest. Remember, at the start

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<v Speaker 1>of the year, with a very flow start out of

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<v Speaker 1>the Gage, the Beige Book continued to emphasize that economic

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<v Speaker 1>activity expanded at a moderate pace, a very similar tone

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<v Speaker 1>that we continue to hear in this morning's report. Well, actually,

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<v Speaker 1>what I really see in this Beige Book is the

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<v Speaker 1>word modest amid slight price pressures. To me, this is

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<v Speaker 1>a very very cautious view of how the economy is growing.

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<v Speaker 1>That doesn't seem to me there's anything that suggests, oh

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<v Speaker 1>my gosh, we're seeing a big spurt of growth here. Well,

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<v Speaker 1>I think the idea is more stability, the economy continue

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<v Speaker 1>to grow to modest or moderate pace. What I'm really

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<v Speaker 1>looking for is an acknowledgement that the U S economy

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<v Speaker 1>is still on very fragile footing. Now, of course they

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<v Speaker 1>did mention that manufacturing activity was mixed, consumer spending showing

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<v Speaker 1>some signs of softening. But what's so interesting is that

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<v Speaker 1>they talked about the labor market remaining stable, and of course,

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<v Speaker 1>as we know, May employment virtually non existent, followed by

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<v Speaker 1>a very large uptick in June, the exact opposite of

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<v Speaker 1>what I would describe as stable. Lindsey, take away all

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<v Speaker 1>the politics, takeaway Brexit, all of the extraneous events. If

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<v Speaker 1>you were just to read this Beige Book and then

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<v Speaker 1>add into that the release of the previous f O

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<v Speaker 1>m C minutes, can you tell me what your position

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<v Speaker 1>would be about raising interest rates, Well, I think right

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<v Speaker 1>now it's a matter of so so economic growth, and

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<v Speaker 1>it really depends where your bar of expectation falls. For me,

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<v Speaker 1>I'm looking for strong, solid, robust growth in order for

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<v Speaker 1>the Fed to feel comfortable to give us that second

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<v Speaker 1>rate increase. But for many sitting at these low low

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<v Speaker 1>levels for years now, so so we're modest is good enough,

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<v Speaker 1>and some of the Fed will certainly push for a

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<v Speaker 1>second rate increase within the confines of It's hard to uh,

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<v Speaker 1>you know, sort of all out at times, isn't it.

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<v Speaker 1>But I think we had a trivick story on the

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<v Speaker 1>Bloomberg today pointing out that, uh, in terms of the

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<v Speaker 1>odds of the December interest rate increase, they're back up

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<v Speaker 1>to which is almost where they were before the Briggsit vote.

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<v Speaker 1>It still doesn't indicate that people are betting on a

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<v Speaker 1>rate hike this year, at least not traders, because our

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<v Speaker 1>economists more and more, I think, once again, who are

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<v Speaker 1>seeing the December hike? Uh? Your your your view? Will

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<v Speaker 1>they hick at all this year? Lindsay? And is it

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<v Speaker 1>better if they do or they don't? I think at

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<v Speaker 1>this point the Fed is going to remain on the

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<v Speaker 1>sidelines through and most likely the better part of I

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<v Speaker 1>think right now it's very fragile out in the economy,

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<v Speaker 1>and I think the Fed really learned their lesson from

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<v Speaker 1>lifting off in December based on expectations of further improvement,

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<v Speaker 1>which we're still waiting for now six months later, and

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<v Speaker 1>so I think a good portion of the committee is

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<v Speaker 1>going to err on the side of caution, waiting for

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<v Speaker 1>realized improvement rather than expecting improvement down the line. It's

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<v Speaker 1>all us about your thoughts having to do with the

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<v Speaker 1>Bank of England. Will they cut rates? I think there's

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<v Speaker 1>a need for additional stimulus. There's a significant amount of uncertainty,

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<v Speaker 1>there's a significant amount of volatility out in the marketplace,

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<v Speaker 1>and I think additional support from the Bank of England

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<v Speaker 1>will at the very least begin to calm some of those, uh,

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<v Speaker 1>those uncertainties in the marketplace. So I do expect another

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<v Speaker 1>rate cut, additional stimulus out in the marketplace. Okay, of course,

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<v Speaker 1>that's were almost evenly divided among economists between tomorrow, July fourteen,

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<v Speaker 1>Thursday or three weeks from now, and as you and

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<v Speaker 1>you point out, they probably will move pretty quickly. But

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<v Speaker 1>you also to comment on the negative bond heals the

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<v Speaker 1>thirty year bonds selling at a record low two point

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<v Speaker 1>one seven percent Germany's tenure bune now with a negative yield. Uh,

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<v Speaker 1>if you're a central banker, do you just say, well,

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<v Speaker 1>we've bought up so much sovereign debt that there's nothing

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<v Speaker 1>left to buy and they'll take any kind of yield

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<v Speaker 1>they can get, or would you be concerned? I think

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<v Speaker 1>it's a little from column Ay and a little from

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<v Speaker 1>column by. Certainly central banks have gone around buying up

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<v Speaker 1>all substantial amount, I should say, of debt, but at

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<v Speaker 1>this point it's also a concern. It's a flight to

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<v Speaker 1>quality trade as investors are looking out in the marketplace

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<v Speaker 1>and we're experiencing three four five standard deviation events, particularly

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<v Speaker 1>surrounding the Brexit, and there's a rush to be safe haven,

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<v Speaker 1>be that German bonds, be that the yend, be that

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<v Speaker 1>the dollar or gold. And I suspect that we will

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<v Speaker 1>continue to see these capital flows into these safe havens

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<v Speaker 1>during this time of uncertainty. If these capital flows into

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<v Speaker 1>these safe havens continue on the institutional and corporate level,

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<v Speaker 1>then what is an individual supposed to make of all this? Well,

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<v Speaker 1>I think individuals are very concerned at this point, and

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<v Speaker 1>I do suspect that we're going to see a lot

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<v Speaker 1>of individuals hoarding cash, pulling their money out of the marketplace,

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<v Speaker 1>with a big question mark of where we headed from here.

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<v Speaker 1>Now again, the big books got officials. They're telling us

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<v Speaker 1>the economy is on relatively moderate footing, but there is

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<v Speaker 1>a big concern that we could be discussing the R

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<v Speaker 1>word recession sometime in the near future. And of course,

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<v Speaker 1>the fact that the yield curve gets ever flatter as

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<v Speaker 1>the yields continue to drop on long term treasuries and

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<v Speaker 1>long term deating around the world. Typically that is has

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<v Speaker 1>been in the past a signal that that our word

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<v Speaker 1>recession could be coming. It's a little bit more complicated

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<v Speaker 1>these days, though, Lindsay p St thank you so very

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<v Speaker 1>much for joining us chief economist as Stiffil Nicholas and co.

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<v Speaker 1>We're gonna be continuing our look at the markets later

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<v Speaker 1>in the show, will be be speaking with Jack Ablin

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<v Speaker 1>from BMO Private Bank in Chicago. This is Bloomberg Fed

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