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Speaker 1: Broadcasting live to New York Groomberg eleventh to Washington, d C,

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Speaker 1: Bloomberg to Boston, BLUEMBERG twelve units to San Francisco, Bloomberg

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Speaker 1: to the Country series SAM Channel one nine, and around

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Speaker 1: the globe the Bloomberg Radio plus Bloomberg dot Com. This

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Speaker 1: is Bloomberg Surveillance. Good morning, seven thirty on Wall Street.

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Speaker 1: I Michael McKay along with Tom Keane. It's financial firm

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Speaker 1: earnings day. Bank of America earnings just out to profit

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Speaker 1: down thirteen percent, and we saw um Or. We're going

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Speaker 1: to see Wells Fargo later today. Black Rock first quarter

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Speaker 1: profit down twenty percent. Blame the global stock market slump

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Speaker 1: Earlier in the year. Net increased income decreasing to six

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Speaker 1: hundred fifty seven million, three dollars and ninety two cents

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Speaker 1: a share from eight hundred and twenty two million or

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Speaker 1: four eighty four a year earlier. A just profit for earnings,

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Speaker 1: you got four twenty five a share that missed the

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Speaker 1: average general and average forecast of four dollars and thirty cents.

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Speaker 1: Burberry shares down five percent, the Okay's largest luxury goods retailer,

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Speaker 1: says earnings this year will be at the low end

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Speaker 1: evental estimates and Oil and Gas Explorer Energy twenty one.

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Speaker 1: We're waiting for frecking casualties filing for bankruptcy protection. Now

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Speaker 1: we want to check out with Michael Barr and get

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Speaker 1: the latest world in national headlines. Michael, Thank you, Mike.

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Speaker 1: Defense Secretary Ash Carter says US ships have started conducting

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Speaker 1: joint patrols with the Philippines and the South China Sea.

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Speaker 1: Carter in Manila also says the US will be keeping

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Speaker 1: about three troops in the Philippines through the end of

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Speaker 1: the month. These patrols will continue to help build our

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Speaker 1: interoperability and improve the Philippine Navy. Even as these patrols

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Speaker 1: contribute to the safety and security of the region's waters,

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Speaker 1: it's part of a military build up that will likely

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Speaker 1: increase tensions with Beijing. Belgium's transport minister is under pressure

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Speaker 1: to resign over a secret European Union report that exposes

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Speaker 1: past lapses and oversigned of security at airports across the nation.

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Speaker 1: An open letter to u N Secretary General Banti Moon

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Speaker 1: says the war on drugs has failed and that there

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Speaker 1: should be a shift in global drug policy from emphasizing

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Speaker 1: criminalization and punishment to health and human rights. The letter

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Speaker 1: was signed by more than a thousand people, including Warren Buffett,

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Speaker 1: U S Senator Elizabeth Warren, and former presidents of Mexico, Columbia, Brazil,

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Speaker 1: and Switzerland. Global News twenty four hours a day, powered

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Speaker 1: by our twenty four hundred journalists. I'm Michael Barr. Mike,

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Speaker 1: Thank you, Michael. Time now for the Bloomberg NBC Sports

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Speaker 1: Update with John Stepsha Thanks by quite a final night

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Speaker 1: of the NBA regular season, the Golden State Warriors won

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Speaker 1: for the seventy third time, most in league history, one

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Speaker 1: oh four over Memphis. As has been the case for

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Speaker 1: most of those seventy three wins, Steph Curry led the

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Speaker 1: way forty six points, twenty in the opening quarter. While

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Speaker 1: that was going on in Oakland, Kobe Bryant his final

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Speaker 1: game in l as a board sixty points. He hadn't

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Speaker 1: scored fifteen a game since two thousand and nine. It

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Speaker 1: helped that he took a career high fifty shots, but

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Speaker 1: it was the final quarter that was vintage Kobe, twenty

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Speaker 1: three in the period to three pointers in the final minute.

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Speaker 1: Lakers any a miserable season came from fifteen down to

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Speaker 1: beat Utah. Playoffs begins Saturday and again last night at

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Speaker 1: the NHL, and the Rangers fell five too at Pittsburgh.

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Speaker 1: The hat trick for the Penguins Patrick horn Quest Derek

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Speaker 1: step On both the Ranger goals in the third period.

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Speaker 1: Hendrik lunk Was had to leave after the first period.

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Speaker 1: He took a stick from teammate Mark Stall to the

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Speaker 1: I status for the rest of the series. Not known

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Speaker 1: lunk was was played the last one hundred eleven Ranger

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Speaker 1: playoff games. Tampa baby to try three to two. St.

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Speaker 1: Louis over Chicago one uping in overtime. Yankees lost to

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Speaker 1: Toronto seven to two. The Mets ended their four game

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Speaker 1: losing straight to one over Miami. With the Bloomberg NBC

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Speaker 1: Sports Update, I'm John Stasha, Thank you John. Right now,

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Speaker 1: we are looking at flat futures markets in the United

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Speaker 1: States as they look for a little bit of direction.

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Speaker 1: Europe is marginally higher, with the stock six hundred up

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Speaker 1: by a tenth of a percent, the foot Sea up

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Speaker 1: by three points now about a tenth after the Bank

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Speaker 1: of England went on hold today again, this is Bloomberg surveillance.

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Speaker 1: I'm Michael McKee along with tom Keane. Oil prices have

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Speaker 1: been driving stocks lately, and we did see a big

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Speaker 1: turnaround in futures and European stocks after the International Energy

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Speaker 1: Agency said the global oil glut may be gone in

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Speaker 1: the second half of the year. West Texas was down

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Speaker 1: now up by two tenths three. Brent crude was down

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Speaker 1: now up three tenths thirty on the day time Now

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Speaker 1: for the Bloomberg n j I T Stamp Report, brought

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Speaker 1: to you by New Jersey Institute of Technology, investing more

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Speaker 1: than a hundred and ten million dollars a year and

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Speaker 1: applied research to solve problems and the improved life. Learn

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Speaker 1: more at Stories of Innovation DOT, m j I T

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Speaker 1: DOT E d U John and Taiwan Semiconductive Manufacturer might

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Speaker 1: Go one of the biggest suppliers of chips to Apple

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Speaker 1: forecasting second Quotter revenue well below analysts estimates as demand

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Speaker 1: for smartphones priced above five hundred dollars starts to peter out.

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Speaker 1: A real world artificial intelligence applications popping up and unexpected

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Speaker 1: to places and sooner than you think. Machine intelligence is

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Speaker 1: evolving to the point where it could be used by

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Speaker 1: more people to do more things. That's a four engineers

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Speaker 1: with almost zero knowledge of Japanese were able to create

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Speaker 1: software in just a few months that can decipher handwriting

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Speaker 1: in the language. The promogrammers that Reactive came up with

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Speaker 1: an application that recognizes scrolled out Japanese with ninety eight

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Speaker 1: point six six percent accuracy. And according to Amazon Chief

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Speaker 1: Executive Office Jeff Bezos, commercial exploration of space can advance

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Speaker 1: at the face fast pace of Internet commerce. Only of

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Speaker 1: the costs is reduced through advances in reusable rockets. And

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Speaker 1: that is this morning's bloom n g I t Stam report. Mike,

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Speaker 1: thank you, John Well. It did go according to script

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Speaker 1: at the Bank of England today by a nine to

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Speaker 1: nothing vote, Monetary policy members decided to keep the base

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Speaker 1: rate a half of percent three pounds for q E.

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Speaker 1: Simon French is, chief economist at Penmir Gordon. Nobody really

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Speaker 1: expected them to do anything because they don't want to

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Speaker 1: get involved in tipping the balance one way or the

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Speaker 1: other in the Brexit debate. But they did have some

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Speaker 1: fairly strong language in the minutes of the meeting about

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Speaker 1: what Brexit might do to the British economy. Was that

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Speaker 1: a surprise, Good morning Michael. Yet no, was actually because

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Speaker 1: everything that Governor Connie and the Bank of England says

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Speaker 1: is moving into a political sphere at the moment because

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Speaker 1: there's an intensively polarized debate going on in the UK

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Speaker 1: and the Bank of England's independence political independence um it

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Speaker 1: comes into an uncomfortable friction with their necessity to have

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Speaker 1: to deliver price stability and clearly market action over Certainly

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Speaker 1: since the start of the year with sterling significant depreciation

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Speaker 1: down pretty much nine percent quarter on quarter, has has

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Speaker 1: strong read across to the UK inflation. We're starting to

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Speaker 1: see a pickup in imported goods inflation, which is material

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Speaker 1: for the NPC trajectory. So I don't think they can

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Speaker 1: stay silent, but probably the strength of that language, as

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Speaker 1: you allude to, did take markets a little bit by surprise. Well,

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Speaker 1: they were careful in the way they phrased it to

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Speaker 1: put the onus on uncertainty caused by the referendum rather

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Speaker 1: than the idea of necessarily leaving the EU. Correct And

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Speaker 1: really since Marcarni first got involved in the debata at

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Speaker 1: the back end of twenty fifteen, it was has certainly

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Speaker 1: been from the perspective not of doing an evaluation of

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Speaker 1: the long term impact on the UK economy in a

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Speaker 1: broadest sense from a from a Brexit, but more their

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Speaker 1: ability to deliver price stability, deliver their financial stability mandates

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Speaker 1: and clearly uncertainty and the uncertainty that investors have right

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Speaker 1: now around Sterling denominated assets is material and therefore he's

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Speaker 1: used that the uncertainty language as a kind of his

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Speaker 1: route to be able to you know, not stay silent

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Speaker 1: on this subject, which would be I guess even even

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Speaker 1: worse for for market participants. Well, certainly an elephant in

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Speaker 1: the room that they have to take account of. But

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Speaker 1: supposed the vault weren't taking place, given the improvement in

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Speaker 1: inflation figures we saw in the most recent report, would

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Speaker 1: the Bank of England still be sideline? I think it would.

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Speaker 1: I mean that today's decision was the eighty five straight

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Speaker 1: month of the Bank of England have kept rates unchanged.

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Speaker 1: It's a phenomenal track record of inactivity. But the Bank

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Speaker 1: of England continue with the language of expecting the next

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Speaker 1: rate change to be an increase. But that is in

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Speaker 1: sharp contrast to where future markets Stelling's futures are right now,

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Speaker 1: which have a probability of the next move being a

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Speaker 1: cut at about thirty three percent compared to the probability

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Speaker 1: of a hike at about just seven percent. So it

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Speaker 1: isn't so much that the bank will be ready to

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Speaker 1: move absent to referendum, but it's very much when we

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Speaker 1: get through the twenty third of June, which direction will

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Speaker 1: that move be and and markets and economists are split

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Speaker 1: on this one. Well, there is a debate in the

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Speaker 1: United States certainly about whether or not monetary policy has

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Speaker 1: lasted efficacy and is distorting markets. How about in the UK, Well,

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Speaker 1: I don't think it is distorting markets in the broadest

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Speaker 1: possible sense. But we have seen the hunt for yield

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Speaker 1: push up house price valuations to somewhat extraordinary levels, particularly

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Speaker 1: in prime London property, and a lot of that those

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Speaker 1: those subsectors of markets, and also the increase in unsecured

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Speaker 1: lending credit card lending, loans, auto loans. That is the

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Speaker 1: kind of thing that the Bank of is worried about.

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Speaker 1: But it's taking a macro potential route through the Financial

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Speaker 1: Policy Committee rather than the MPC and interest rates to

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Speaker 1: try and stub out those unintended consequences of very very

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Speaker 1: low interest rates. Simon French chief Aconimistic Pamier Gordon in London,

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Speaker 1: thanks for being with us this morning. The Bank of

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Speaker 1: England on hold the base rate at half a percent.

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Speaker 1: Will continue our conversation with Simon in just a moment.

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Speaker 1: The queue number three seventy five billion pounds unchanged as

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Speaker 1: well as the bank waits out the Brexit vote scheduled

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Speaker 1: for late June. The foot see right now is up

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Speaker 1: by three points about a tenth of a percent. The

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Speaker 1: pound on trading lower. This is Bloomberg Surveillance, brought you

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Speaker 1: by the New York Community Trust, where donors like you

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Speaker 1: help them make New York better. Global business news twenty

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Speaker 1: four hours a day at Bloomberg dot com. The radio

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Speaker 1: plus mobile lapp and on your radio is a Bloomberg

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Speaker 1: business flash and I'm Karen Moscow. Bank of America down

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Speaker 1: eight tenths percent this morning, the second biggest US lender

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Speaker 1: by assets, saying profit decline on a drop in trading

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Speaker 1: and underwriting revenue and at thirty percent increase in provisions

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Speaker 1: for credit losses mostly tied to souring energy logs. Bank

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Speaker 1: of England officials saying the UK's European Union referendum they

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Speaker 1: already be weighing on growth as they kept their key

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Speaker 1: interest rated a record low. Futurists this morning, they're little

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Speaker 1: changed to lower. The decks in Germany is higher, up

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Speaker 1: about two tenths per cent. So's the CAC in Paris

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Speaker 1: FT one hundred, little changed ten, Your treasury down seven

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Speaker 1: thirty seconds, the yield one point seven eight percent. Nimex

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Speaker 1: screwed oil up three tenths per center, twelve cents to

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Speaker 1: nine barrel comes gold on half per cent or six

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Speaker 1: dollars twenty cents at twelve forty two. Ten announced the

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Speaker 1: euro at all their twelve sixty two. The again one

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Speaker 1: oh nine point to eight Other companies reporting earnings this morning,

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Speaker 1: black Rock, the world's largest money manager, said first quarter

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Speaker 1: profit felt cent is a global stock market slump early

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Speaker 1: in the year crimped revenue and the firm cut jobs.

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Speaker 1: PNC Financial also missed. Delta Airlines first quarter profit beat

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Speaker 1: analysts estimates as savings from low fuel costs overcame softer

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Speaker 1: demand from the Brussels terror attack in week. Foreign currencies

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Speaker 1: and that's a bloomberg business flash. Tom and Mike Karen,

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Speaker 1: thanks so much greatly, appreciate good morning everyone in Bloomberg,

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Speaker 1: a surveillance watched by interactive brokers, investors, marketplace and online

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Speaker 1: service where traders, investors and institutions can meet and collaborate,

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Speaker 1: enhance your trading experience or expand your business. Visit i

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Speaker 1: b k R, dot com slash services. Michael Tom we're

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Speaker 1: talking with Simon frenchi's chief economist, to Pamier Gordon in

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Speaker 1: London today. The Bank of England stayed on hold eighty

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Speaker 1: five months now the base rates days at half percent

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Speaker 1: billion pounds for q E. They did mention Brexit in

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Speaker 1: the minutes of the meeting, putting it in the context

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Speaker 1: of the uncertainty caused by the late June referendum. Uh, Simon,

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Speaker 1: I want to go to your own analysis of Brexit

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Speaker 1: and ask what you think it may mean for the

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Speaker 1: British economy. Yeah, thank you, Michael. One of the interesting

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Speaker 1: things about this is how much post a Brexit should

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Speaker 1: that scenario play out, and actually the likelihood I mean,

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Speaker 1: you know on bluemerg have got it about the betting

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Speaker 1: markets having about thirty three percent, so still a minority option.

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Speaker 1: But should that to pass, I think it's surprising how

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Speaker 1: little economic damage sustained economic damage we would expect, and

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Speaker 1: you may be surprised by that because I certainly, from

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Speaker 1: my own view, see it as a as a net negative,

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Speaker 1: but not as large as you might anticipate, because the

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Speaker 1: economically rational thing for the UK government is to continue

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Speaker 1: with an awful lot of the infrastructure that it currently

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Speaker 1: has as being part of the European Union, be that

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Speaker 1: free movement to workers, be that a lot of the

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Speaker 1: common regulation surrounding product markets, regarding passporting arrangement, financial services.

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Speaker 1: I don't see a UK government post Brexit looking to

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Speaker 1: do self immolation of the UK economy simply on the

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Speaker 1: on the on a fairly weak mandate. I think it

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Speaker 1: remains in their economic interest to keep the business environment

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Speaker 1: broadly unaltered, and therefore the damage would be broadly limited.

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Speaker 1: That's a question of how much can they do that,

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Speaker 1: how much influence they have, especially if psychology plays a

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Speaker 1: big role. Well, your point around influences why. I think

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Speaker 1: it's not in the UK's best interest to leave, because

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Speaker 1: you lose the seat around the table when you're when

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Speaker 1: the European Union is deciding going forward, what financial regulation,

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Speaker 1: product market regulation, the response to the migrant crisis. You

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Speaker 1: look across a lot of the public policy areas, those

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Speaker 1: decisions will be made, continue to be made in the

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Speaker 1: European Union, will remain in the UK's economic interest to

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Speaker 1: adopt an awful lot of that and indeed maintain a

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Speaker 1: lot of the infrastructure. So your point around the behavior

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Speaker 1: is key to understanding what the long term impact is

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Speaker 1: of a Brexit. I don't see irrationality from from policymakers

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Speaker 1: ready to manifest itself post a vote. If I assume

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Speaker 1: there's the division of big corporate Britain from small business Britain,

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Speaker 1: where is that dialogue right now? Are they polars apart

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Speaker 1: in this debate? What? Tommy? You make a really good point,

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Speaker 1: which is that a lot of small businesses in the

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Speaker 1: UK don't see the benefits of scale, the benefits of

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Speaker 1: the size of the European marketplace, only see the lack

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Speaker 1: of ability to influence as a as a group of

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Speaker 1: one of twenty eight versus the count The counter factual,

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Speaker 1: which would be where they can influence things directly, Which

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Speaker 1: voice do they have? I mean, are the voices Michael

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Speaker 1: and I for that matter of Fancy McGuire, here are

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Speaker 1: what Mike I'm gonna called big company, big elite fancy

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Speaker 1: people in fancy suits and ties. Do the other people

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Speaker 1: have a voice? They have a much smaller voice. There

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Speaker 1: are a series I mean, contrary to perhaps political campaigning

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Speaker 1: in the US, we don't really go in for the

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Speaker 1: big TV adverts. It's more letter writing of perhaps are

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Speaker 1: traditionally and sightly quirky British effect. And we had a

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Speaker 1: series of letters, one principally from the footy one chief

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Speaker 1: XC and there are a few notable exceptions who have

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Speaker 1: very much pro remaining in the EU. And then we

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Speaker 1: had a smaller group of much smaller chief execs who

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Speaker 1: were about two hundred and fifty who came forward and said, actually,

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Speaker 1: we think the UK is better off outside the European Union.

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Speaker 1: But the voice in terms of the the coalition of

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Speaker 1: business interests behind a a A Brexit is very very

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Speaker 1: very loose coalition. There's about six or seven different formal

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Speaker 1: umbrella groups who were all campaigning on the same side,

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Speaker 1: but no real coherence amongst it, one of which unfortunately

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Speaker 1: says they may challenge the way the election has been

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Speaker 1: set up and push the referend and back. I'm sure

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Speaker 1: the people in the UK would not be looking forward

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Speaker 1: to extra time to have to debate this now. There's

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Speaker 1: no way that the time is going to shift from

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Speaker 1: the twenty three of June. There's that that timetable was

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Speaker 1: very deliberately chosen by the UK government. It was the

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Speaker 1: minimum amount of time post the mayoral election in London

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Speaker 1: and local elections throughout the UK that happens in early May.

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Speaker 1: They had a six week window post that period of

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Speaker 1: time before they could run the referendum and before the

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Speaker 1: summer recess, and it was very deliberately chosen not to

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Speaker 1: have the backdrop of further migrant boats coming across the Mediterranean,

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Speaker 1: which unfortunately is for a lot of voters a very

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Speaker 1: material part of this EU debate. The the debate are

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Speaker 1: not involved not only the economic future of the United Kingdom,

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Speaker 1: but the impact on the political future of the parties involved.

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Speaker 1: The Conservatives brought the referendum to the public and then

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Speaker 1: split over it. What's it likely to mean for David

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Speaker 1: Cameron going forward? What David Cameron is on record as saying,

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Speaker 1: regardless which way the vote goes, he will remain Prime Minister.

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Speaker 1: Um having said that, two things to play into this.

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Speaker 1: Devid Cammon said he won't stand for a third so

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Speaker 1: he won't stand at the twenty general election in the UK,

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Speaker 1: so he is already on a ticking clock effectively towards

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Speaker 1: when there is a successor to him and be It

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Speaker 1: and the two the two obvious favorites that are on

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Speaker 1: different parts of the debate George Osborn on the pro

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Speaker 1: Remain camp the Chancellor of the Exchequer and Boris Johnson,

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Speaker 1: the current Mayor of London at least for a few

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Speaker 1: more weeks, is on the leaf side. And I think

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Speaker 1: the Brexit debate, the Brexit result will dictate which of

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Speaker 1: those two front runners will ultimately emerge as the next

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Speaker 1: leader of the Conservative Party. And certainly, the way the

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Speaker 1: Poles look at the moment, the next Prime Minister of

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Speaker 1: this country, Pennier Gordon, has such an esteemed history going

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Speaker 1: back from the nineteenth century. I'm fascinated by how you feel,

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Speaker 1: just as a younger member of the city, where the

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Speaker 1: city will be a week or two after a successful Brexit.

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Speaker 1: I I don't buy the idea there will be chaos

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Speaker 1: in in in you know Simon French who is selling

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Speaker 1: their bracelets in the street. I mean, what do you

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Speaker 1: envision thread Needle Street will be like where you were

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Speaker 1: I believe in the eight seventy six. What will it

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Speaker 1: be like two days after a successful Brexit? Yet Yet Tom,

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Speaker 1: I'll be keeping hold of my braces. They ain't for sale.

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Speaker 1: And the reality is that financial markets have been so

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Speaker 1: successful because they innovate, they respond, They react to the

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Speaker 1: political the economic environment that they face. And if the

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Speaker 1: UK needs to respond to the democratic will of being

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Speaker 1: outside the European Union, it will forge a model not

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Speaker 1: unlike the Norwegian, the Swiss, the Icelandic model. It won't

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Speaker 1: be an easy journey, and indeed I think the UK's

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Speaker 1: voice gets diminished going forward, but it won't be an

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Speaker 1: apocalyptic vision than men you're trying to present. And I

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Speaker 1: don't think to make the case why the UK needs

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Speaker 1: to remain you need to paint economic risks, play a

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Speaker 1: project fear, and you can make a very positive case

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Speaker 1: and why collective action on it doesn't matter which of

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Speaker 1: the public policy areas you look at, being climate change

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Speaker 1: to be a tax avoidance, to be a financial regulation.

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Speaker 1: The key issues of our time migration. You need the

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Speaker 1: way that good decisions are made, the way affective decisions

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Speaker 1: and make our plurally multilaterally across geographical boarders, getting the way.

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Speaker 1: So I think turning our back on something that prevalent

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Speaker 1: presents a forum for collective decision making would be a

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Speaker 1: huge mistake. Simon French fascinating. Thank you very much for

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Speaker 1: joining us. Well. Will have talked to him definitely before

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Speaker 1: again before the not not a surveillance correction, but a

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Speaker 1: surveillance translation. Braces are suspenders, yes, now they would. Braces

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Speaker 1: are braces, suspenders clip onto your pants. The braces have

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Speaker 1: buttons that go and we dive deeper fashion, we go

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Speaker 1: beneath the fashion report. I thought it was fascinating. He's

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Speaker 1: talking about David Cameron in the election and then he

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Speaker 1: would be a lame duck in if this were the

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Speaker 1: United States, we would already see people running, running, running

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Speaker 1: for officsite. That was fabulous. That was Taylor Riggs. Thank

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Speaker 1: you so much for Simon French. Taylor Riggs. We're atting

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Speaker 1: a lot of our radio coverage here another hour of

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Speaker 1: Bloomberg surveillance