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Speaker 1: Broadcasting live to New York, Bloomberg eleventh, Rio to Washington,

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Speaker 1: d C, Bloomberg to Boston, Bloomberg twelve unders to San Francisco,

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Speaker 1: Bloomberg to the Country, Series General one nine and around

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Speaker 1: the globe the Bloomberg Radio Bus and Bloomberg dot Com.

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Speaker 1: This is Bloomberg Surveillance. Good morning, Michael McKee along with

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Speaker 1: Tom Keene. Economic indicators brought to you by Commonwealth Financial Network.

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Speaker 1: When it's time to change the conversation, talk with a

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Speaker 1: broker dealer, r I am it's ready to listen. Call

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Speaker 1: FO six two three six three eight or visit Commonwealth

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Speaker 1: dot com to learn more. Here's Vinnie del jed Ice

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Speaker 1: at the First Word Desk. Michael. Revised data from the

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Speaker 1: government on first quarter GDP now up point eight percent. Earlier,

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Speaker 1: the government had reported an increase a point five percent.

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Speaker 1: This is the weakest showing in a year. Again, g

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Speaker 1: d P first quarter. The government's revision a point eight

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Speaker 1: percent increased JE really in line with forecasts, better than

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Speaker 1: the initial estimate. I should add consumer spending, which makes

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Speaker 1: two thirds of the economy roughly two thirds, showing a

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Speaker 1: one point nine percent gain in the first quarter. That

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Speaker 1: number wasn't revised a couple of my first work desk.

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Speaker 1: I'm fany deal, Judi, let's go back to New York.

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Speaker 1: Quick note here business fixed investment in non residential fixed

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Speaker 1: investment down six point two percent. You gotta wonder, um,

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Speaker 1: you know where where the investment comes from. Uh, Equipment

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Speaker 1: spending down nine percent. Obviously a lot of that is

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Speaker 1: probably oil and gas, but it just isn't isn't help

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Speaker 1: in personal consumption. What gets my attention is not a

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Speaker 1: statistic of one point nine percent. It's we've enjoyed that

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Speaker 1: for six months, I mean two point four in the

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Speaker 1: fourth quarter, rather and we come down to one point nine.

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Speaker 1: It's that first quarter items, Mike, believe in first quarter

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Speaker 1: itis it's Uh, it's an interesting question. Clearly there's something

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Speaker 1: going on in the first quarter. Economists and statisticians haven't

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Speaker 1: figured it out yet, but they're they're trying to do it.

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Speaker 1: We note this. You and I talked about corporate profits

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Speaker 1: on Surveillance TV this morning. Profits were up three tenths

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Speaker 1: of eight percent. This is all corporations in the country,

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Speaker 1: probably public, private, large and small, not just the S

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Speaker 1: and P five and and disposable personal income within the

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Speaker 1: gloom is a four percent statistic. Four point zero percent.

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Speaker 1: That's a huge number. There's some unbelievable cross currents right now.

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Speaker 1: Final sales to domestic purchasers up one motor vehicles. Now

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Speaker 1: all right, well let's get some professional analysis. Now that

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Speaker 1: you've heard from the two amateurs here, Andrew Milligan is

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Speaker 1: with us. Now for the good officers of Standard Life Investments,

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Speaker 1: m Andrew, the idea that the US is the engine

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Speaker 1: of growth for the world. How reassuring is that when

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Speaker 1: you see the engine of growth running at only an

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Speaker 1: eight ten percent annual rate. Well, I'm afraid we we

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Speaker 1: have to say that the engine certainly did falter and

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Speaker 1: cough in the first quarter of the year of courses

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Speaker 1: is annualized at any north point to court on quarter,

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Speaker 1: which compares with Europe, for example, which was more like

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Speaker 1: not six or so. I think, looking through some of

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Speaker 1: the details, I would absolutely agree with your far from

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Speaker 1: amateur comments a little while ago about certain aspects. Um,

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Speaker 1: I think we do need to be concerned by the

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Speaker 1: falling corporate profits. It's almost six per cent here on

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Speaker 1: year in the first quarter. That's not a good situation

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Speaker 1: for companies. No, we know a lot of that, of

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Speaker 1: course is temporary to to the dollar and oil, but

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Speaker 1: the underlying trend actually hasn't been great for some time,

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Speaker 1: unit labor costs picking up, wage pressures productivity. She has

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Speaker 1: being talked about a lot. The savings ratio up to

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Speaker 1: five point seven. So again what's interesting here is despite

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Speaker 1: all the back drop of actually quite favorable employment, households

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Speaker 1: are still saving. And it looks like they were saving,

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Speaker 1: if not quite the same extent in Q two as well.

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Speaker 1: And this is where we loved Andrew Milligan and I

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Speaker 1: totally agree that it is the paradox. That's a big number,

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Speaker 1: five point seven percent. You know, there's a whole idea

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Speaker 1: of put billboards up, please America spend That ain't happening. No,

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Speaker 1: I don't think it is. I mean, whether it's due

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Speaker 1: to uncertainty about the world, uncertainty about China, which obviously

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Speaker 1: wired people in the first quarter, Whether it's it's more politics,

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Speaker 1: whether it actually is people saving on a pre cautionary

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Speaker 1: basis ahead of the Fed's expected rape rise in a

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Speaker 1: few weeks time. Quite understandably, if you think that interestracts

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Speaker 1: are going up, what I better start saving more? Hadn't

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Speaker 1: I I think there's several reasons why people are saving,

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Speaker 1: and of course you know the figures are revised for

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Speaker 1: some time to come. But nevertheless, it does tie in

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Speaker 1: with relatively weak consumer spending. Think of those departments sales recently.

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Speaker 1: And although Q two looks better than Q one, Q

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Speaker 1: two is not us the quarter, Mike. Here's your six

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Speaker 1: months statistic nomenal g d P cord recorder annualized two

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Speaker 1: point eight for six months, and of course that ties

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Speaker 1: in perfectly with what we're seeing with profits growth. Companies

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Speaker 1: have very little fighting power unless they're in good growth areas,

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Speaker 1: and there are some. Of course, your traditional company across

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Speaker 1: the United States is finding very little top line sales growth,

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Speaker 1: and that of course means that life gets more difficult

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Speaker 1: for them. Hence those investment figures and the core taking, defense, transport, etcetera.

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Speaker 1: The core crew of the goods figures we saw yesterday

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Speaker 1: continuing this weekness companies are very wary indeed about spending

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Speaker 1: more on investment when their profits growth is just not

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Speaker 1: that solid at present. Yeah, and that is holding back.

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Speaker 1: I would assume the economy overall, how long can it

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Speaker 1: continue without a pickup in business investment it's certainly a

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Speaker 1: head wind, and we no doubt about it, and we

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Speaker 1: would agree with the Fate and the wide fed consensus

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Speaker 1: that growth will be better than Q two Q three,

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Speaker 1: if only because as we've just discussed the impact of

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Speaker 1: the energy price collapse and and the dollar is becoming

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Speaker 1: less of a headwind and even more of a tail wind.

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Speaker 1: So we should see some moderate pick up. But if

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Speaker 1: we do want this cycle to continue for several more years,

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Speaker 1: we do need to see companies actually running their very

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Speaker 1: hefty cash balances down and begin to hire more, pay

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Speaker 1: weighting more, and invest more. And for perfectly understandable reasons,

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Speaker 1: many companies are saying, I'm not quite sure if it's

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Speaker 1: my time to do that. Andrew Milligan, with a stand

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Speaker 1: Life're going to come back and talk about investment, where

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Speaker 1: in the place capital and of course we'll get his

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Speaker 1: important inmeral perspective on a small vote coming up later

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Speaker 1: the end of June h in the Andrew Milligan's United

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Speaker 1: I believe it's the United Kingdom. G DPR will have

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Speaker 1: much more summary of that coming up. Futures up to

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Speaker 1: down features up seventeen, the yield one point eight three.

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Speaker 1: This our surveillance brought you by monks Volo. Visit monks

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Speaker 1: volo dot com. Here's Michael Barrow with news headlines Mike Tom,

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Speaker 1: thank you very much. Later wreath and then met with survivors.

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Speaker 1: President Obama visited the Hiroshima Peace Memorial Park in Japan today.

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Speaker 1: The President paid tribute to the one people killed when

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Speaker 1: the US dropped an atomic bomb during World War Two.

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Speaker 1: The President did not apologize, but offered a reflection on

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Speaker 1: the horrors of war and his hope that Haroshima would

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Speaker 1: be remembered as the beginning of a moral awakening. French

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Speaker 1: President Francois Oldlan says he will not back down on

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Speaker 1: changes to French labor laws that he is pushing through parliament.

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Speaker 1: There have been strikes and position to the law from

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Speaker 1: Olan's old lawmakers for the third year in a row.

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Speaker 1: There are co champions in the Scripts National Spelling b

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Speaker 1: Thirteen year old j Ram half bar In eleven year

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Speaker 1: old Nihar Jenga went head to head round after round

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Speaker 1: until they ran out of words. In round twenty four

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Speaker 1: is spelling the final word g E S E L

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Speaker 1: L S C H A S T gaza. Both winners

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Speaker 1: will each receive a trophy and forty five grand in cash.

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Speaker 1: Global News twenty four hours a day, Michael bar blank time,

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Speaker 1: what was that word? Gazelle Shaft? All right? Time out

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Speaker 1: for the Land of Parcipity, Bloomberg NBC Sports Update with

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Speaker 1: John gazelle Shaft. That was the sports story. Wasn't all

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Speaker 1: right until the other night. The Warriors had played ninety

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Speaker 1: five games and never lost two in a row. They

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Speaker 1: weren't gonna lose three straight. The Oklahoma City did take

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Speaker 1: a one point in the third quarter, that was brief.

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Speaker 1: He was the only one of the night. Golden State

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Speaker 1: one Game five, one eleven, Steph Curry thirty one point.

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Speaker 1: So the series is now three two thunder with Game

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Speaker 1: six tomorrow at Okay c where the Warriors lost twice

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Speaker 1: where I combined fifty two points to night Cleveland brings

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Speaker 1: a three two lead the Game six at Toronto home

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Speaker 1: teams five and oh. Thus far, the Stanley Cup Final

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Speaker 1: is gonna be San Jose and Pittsburgh. The Penguins competed

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Speaker 1: to come back from a three to deficit, beating Tampa

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Speaker 1: Bay in Game seven two to one. All the scores

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Speaker 1: in the second period of game had two rookie goalies.

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Speaker 1: Both the Penguin goals by a rookie, Bryan Russ. The

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Speaker 1: second won the game winner thirty seconds after the Lightning

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Speaker 1: had scored. Game one of this Cup Final Monday in Pittsburgh,

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Speaker 1: Pitchers duel to Stadium. Toronto's Jay Happle out only a

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Speaker 1: Starlin Castro home run in the first gating. C. C.

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Speaker 1: Savathia gave up only two during runs, but the Blue

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Speaker 1: Jays won three to one over Joe Girardi's Yankees. Um

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Speaker 1: he pitched extremely well and we weren't able to get

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Speaker 1: him any runs, and Um kept his pitch count down.

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Speaker 1: He did everything he needed to do to win the game.

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Speaker 1: We just didn't score. Alex Well real you guys over

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Speaker 1: for four and has returned with disable as Carlos Beltron

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Speaker 1: over for four with four strike as yanked at Tampa

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Speaker 1: Bay tonight, starting a ten game road trip, the Metal

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Speaker 1: host the Dodgers, and the Dodgers are starting. A nineteen

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Speaker 1: year old Julio your Eyes Up from the Miners makes

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Speaker 1: his big league debut way at the Bloomberg NBC Sports Update.

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Speaker 1: I'm John Stash and Jenna, Thanks so much. Bloombergs GA

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Speaker 1: Sell Shift seven O E D like the mind shift,

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Speaker 1: which I've heard of. What does it mean? It means

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Speaker 1: that I can't spell it, You're not cheft G S

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Speaker 1: c l L. And then shift on the back of it,

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Speaker 1: congratulations to shift to the young spellers. I've always been

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Speaker 1: in awe because I am I can't spell Surveillance Small

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Speaker 1: detail that is futures up one D Features up nine

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Speaker 1: with Andrew Milligan, Standard Life, bloombergs des the sports import

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Speaker 1: brought to you by land or Parcipity. If it's in

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Speaker 1: your nature to cast off the every day and seek adventure,

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Speaker 1: the Discovery Sport was built to help your search. Visit Landrover,

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Speaker 1: Parsipi dot com, ord Landrover above and blo Global Business

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Speaker 1: News twenty four hours a day. If Bloomberg dot Com

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Speaker 1: the radio plus mobil and on your radio. This is

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Speaker 1: a Bloomberg Business Flash and I'm Karin Moscow. This updates

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Speaker 1: brought to you by National Realty Returns on cash and

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Speaker 1: rented real estate. Find them at n r i a

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Speaker 1: dot net. The U s economy expanding at a slightly

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Speaker 1: faster pace in the first quarter than previously estimated. Gross

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Speaker 1: domestic product rose at an eight ten percent annualized rate

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Speaker 1: in the three months and again March, the smallest gain

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Speaker 1: in a year, and then it compares to the half

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Speaker 1: percent advanced the government reported last month. Thermo Fisher Scientific

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Speaker 1: buying FEI for about four point two billion dollars, gaining

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Speaker 1: imaging technology for the life sciences and materials science industries.

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Speaker 1: F EI up more than twelve per cent This morning,

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Speaker 1: Global equities are rising, heading for the highest close in

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Speaker 1: three weeks, and the dollar rising versus most peers as

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Speaker 1: investors way to see whether comments from Federal Reserve Chair

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Speaker 1: Jennet Yellen well this roughly comm that's settled over financial markets.

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Speaker 1: We checked the markets every fifteen minutes throughout the trading day.

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Speaker 1: On Bloomberg SNP, EMNI futures of one and a half points,

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Speaker 1: Dow we many futures up, ten NASDAC EMUNY futures up

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Speaker 1: four and a half, the decks in Germany's up a

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Speaker 1: tenth of a percent. Ten year Treasury down one thirty second,

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Speaker 1: the yield one point eight three percent. Nine X screwed

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Speaker 1: oil down one point one per cent, or fifty four

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Speaker 1: cents to forty ninety four of arrol comex gold down

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Speaker 1: a tenth of upper cent or a dollar seventy to

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Speaker 1: twelve twenty nine an ounce the euro at dollar eleven

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Speaker 1: sixty three. The end one oh nine point five three.

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Speaker 1: And that's a Bloomberg Business Flash, Karen, and thank you

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Speaker 1: so much. It is on Wall Street. The following is

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Speaker 1: from Bloomberg View, opinions and commentary from Bloomberg columnists. With

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Speaker 1: Donald T and Hillary Clinton tied in the polls, anxious

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Speaker 1: Democrats are wondering just how they should take him down.

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Speaker 1: They could attack him as a misogynist, but they were

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Speaker 1: that they will compound his advantage with men. They could

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Speaker 1: say he's a fraud, but voters distrust her too. Democrats

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Speaker 1: will be strongly tempted to attack Trump as a far

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Speaker 1: right extremist, but he's obviously not a conventional conservative. Clinton's

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Speaker 1: most powerful message against Trump might be a non ideological one.

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Speaker 1: His lack of knowledge, seriousness, and impulse control make him

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Speaker 1: too dangerous to put in the presidency. This strategy would

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Speaker 1: present Clinton as the candidate of safety. The risk for

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Speaker 1: her is that she would also become the candidate of

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Speaker 1: the status quo when most Americans are dissatisfied with it,

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Speaker 1: but the incumbent president has approval rating, so it may

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Speaker 1: be a risk worth taking if Clinton makes Trumps on

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Speaker 1: fitness for the presidency. The central message of her campaign,

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Speaker 1: what she will be saying to Americans is you may

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Speaker 1: not like either of us, but you should fear him.

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Speaker 1: I'm Remeentmpreneuru. For more view please go to Bloomberg View

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Speaker 1: dot com or view go on the Bloomberg terminal. This

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Speaker 1: has been Bloomberg viewlo. I'm in Terry can be here

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Speaker 1: in hourly weekdays. I'm Bloomberg Radio. The Brexit voe on

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Speaker 1: Bloomberg Radio. We're talking with Andrew Milligan. He is a

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Speaker 1: head of Bobble Strategy, UH for the Chairman of the

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Speaker 1: Investment Committee for Standard Life in Great Britain. And Uh, Andrew,

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Speaker 1: while you may have a personal opinion about Brexit, your

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Speaker 1: job has no opinion and you just have to deal

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Speaker 1: with whatever comes. What are you telling you're the people

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Speaker 1: who work with you and expect you to survive it

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Speaker 1: one way or another. About what should be done in

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Speaker 1: the run up to and the and the post Brexit era.

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Speaker 1: How do you manage that? It's a very important question.

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Speaker 1: I mean, I think the first thing to do is

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Speaker 1: to actually carry out quite a lot of scenario analysis,

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Speaker 1: not actually just on the scenario of does the UK

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Speaker 1: decide to leave or not decide to leave, but also

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Speaker 1: even if the UK does decide to leave, there's of

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Speaker 1: course varios scenarios after that, because what what is bexit?

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Speaker 1: How would one define it? What sort of time scales

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Speaker 1: we're talking about, what's the policy responses by various arms

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Speaker 1: amongst your policy committee of the European Central Bank or whatever.

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Speaker 1: So the first thing to do is quite a lot

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Speaker 1: of scenario analysis. The second is to look at the probabilities,

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Speaker 1: as with you know, the u S election. We get

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Speaker 1: heard the little advert just now you know it's it's

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Speaker 1: a probability is to whether an event will happen. Currently,

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Speaker 1: you can look at the probabilities through looking at the

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Speaker 1: opinion polls, or you can look at them through the

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Speaker 1: betting sites. The the betting sites are currently suggesting that

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Speaker 1: there's probably about an eighty percent chance that the UK

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Speaker 1: will stay within the European Union, and therefore chance that

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Speaker 1: it won't. So a combination of scenario analysis and probability

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Speaker 1: analysis and then of course doing some work about which

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Speaker 1: financial attics would initially be most affected. It's difficult to

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Speaker 1: think of the second or third rounds. Then you're getting

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Speaker 1: into feedback loops. But Sterling is the one that if

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Speaker 1: one has been seizing from as the most likely asset

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Speaker 1: that would be affected one way or the other, you're

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Speaker 1: dead on. I get all that we've been looking at

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Speaker 1: euro Sterling versus cable, and I think euro Sterling seems

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Speaker 1: to be a much better proxy is would be presumed.

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Speaker 1: What I want to know is do I buy straw

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Speaker 1: hats in winter? Preferably a straw made in the United

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Speaker 1: Kingdom HSBC, B A t Royal Dutch, Blaxo Smith BP

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Speaker 1: Royal Dutch again, Vota Phone, Astra Zeneca diaggio. These are

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Speaker 1: footsie stocks. Do you wake up in Edinburgh and say,

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Speaker 1: my word, the United Kingdoms on sale? Well, I think

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Speaker 1: the thing there which I perhaps you have been pulling

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Speaker 1: out is that the UK stock market contains an awful

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Speaker 1: lot of global companies and therefore the feedback loop from

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Speaker 1: Sterling into the earnings of those companies or But in

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Speaker 1: another way, the strength of the rest of the world,

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Speaker 1: irrespective of what happens with vexed, matters very considerably. Indeed,

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Speaker 1: so we know that we've got a lot of global players,

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Speaker 1: and those global players are partially affected by Brexit, but

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Speaker 1: affected by a whole series of other matters too. So

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Speaker 1: a lot of the discussion about what sorts of stocks

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Speaker 1: to buy in the UK are do you want very

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Speaker 1: domestically exposed companies, do you want companies exposed to Europe

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Speaker 1: importing or exporting research and development links or whatever. Or

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Speaker 1: are you looking for companies that have got actually a

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Speaker 1: lot of business completely outside Europe? And you can find

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Speaker 1: all of those within a market as large as the UK.

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Speaker 1: Of course, stop picking helps well, like in US dollars

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Speaker 1: in the last twelve months foot down because because we

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Speaker 1: have a much heavier waiting, of course than all of

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Speaker 1: gas and commodities in the UK. And it actually if

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Speaker 1: you look at the Ethan it's a peculiar chart. If

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Speaker 1: you look at the relationship between the emerging markets and

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Speaker 1: the foot sea, we've we've performed about the same because

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Speaker 1: of course the Commons. But forget about Brexit. It's a

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Speaker 1: is a foot scene. Is your big UK visible stacks?

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Speaker 1: Do you wake up in Edinburgh and say these things

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Speaker 1: are cheap? They are cheap as long as we are

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Speaker 1: of the view that the world economy can continue on,

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Speaker 1: which requires the Federal Reserve to be sensible in terms

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Speaker 1: of the speed with which it tightens, and no more

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Speaker 1: policy emas from China and no unfortunate decisions by the

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Speaker 1: Bank of Japan. If policymaking is relatively gradual sensible over

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Speaker 1: the course of the next few courses, Yes, the world

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Speaker 1: e colony will continue to grow and therefore core pop

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Speaker 1: profits for the UK and other parts of the world

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Speaker 1: are worth buying. There's the dividendield in the UK still

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Speaker 1: attractive as long as that dividendield is sustainable. So sustainable

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Speaker 1: yield is a phase that we use a lot with clients.

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Speaker 1: Make that really helps us because we're we're sensible. It's sensible, surreal,

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Speaker 1: let's go for it. From from the Brexit outlook to

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Speaker 1: the FED outlook, you say they they they need to

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Speaker 1: be sensible with their their path going forward. That assumes,

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Speaker 1: it seems to assume that they are raising rates. You

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Speaker 1: believe so, I think they will. I mean, I think

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Speaker 1: they've made it clear in the course of the last

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Speaker 1: couple of months. It's it's almost the logic if then

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Speaker 1: that so, if the US continues to grow dred and

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Speaker 1: fifty two hundred thousand pay rolls. If growth remains about

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Speaker 1: two two above, if there is no major financial stress

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Speaker 1: watch any of the standard innsseries, then the Fed will move.

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Speaker 1: It will then assess the impact of that second round

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Speaker 1: feedback loops, and then move again. So we can see

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Speaker 1: the moving, say in July and again in December, but

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Speaker 1: it will be very gradual, indeed, because they've learned their lesson,

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Speaker 1: as has the people's Stank of China. If you allow

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Speaker 1: the currency markets to get to volatile at presents, you

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Speaker 1: get up some nasty feedback loops. Supermmodities, an emerging market,

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Speaker 1: it's the very hefty amount of dollar denominated depth that

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Speaker 1: there is in the world are present, and that's the

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Speaker 1: market you start to worry. Yet again, we've had two

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Speaker 1: enormous shocks July of last year and then January February

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Speaker 1: of this year. You know, they were very nasty episodes

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Speaker 1: in the time, and it was largely because the policymaker's

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Speaker 1: loft control of the fine exchange markets. Now, can that

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Speaker 1: happen again, of course it can, and if so, then

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Speaker 1: will be very cautious, indeed, very quickly. Here before we

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Speaker 1: let you go, Andrew Melligan Can you buy consumer dividend

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Speaker 1: growing stocks in America or are they just gone so

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Speaker 1: far so fast and even a long term guy like

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Speaker 1: you can't hold them. Yes, one can, but your the

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Speaker 1: the your question is absolutely right. The number of these

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Speaker 1: stocks are expensive. The problem is that as long as

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Speaker 1: interest rates remain so low, the relative attraction of buying

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Speaker 1: yield is still very very present, and we're seeing that

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Speaker 1: with a flappening of yield curves all across the world.

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Speaker 1: So yes, but cautiously has to be these are not cheap.

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Speaker 1: So they are. They are not for a long term portfolio.

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Speaker 1: They are for a portfolio that's thinking to itself. I

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Speaker 1: might have a few more years at best, but not

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Speaker 1: for something that's came to be holding Milford the state

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Speaker 1: spent your thirty years. They are more expensive. Most stocks

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Speaker 1: around the world are expensive. Andrew Milligan, thank you so much.

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Speaker 1: With Standard Life from I think it's George's squire saying

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Speaker 1: George's square in Edinburgh. I don't have it in the

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Speaker 1: front of me, Michael, but beautiful officers granted Dickensie and

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Speaker 1: that that was fascinating. I I don't have an opinion

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Speaker 1: on owning the UK stacks, but certainly they're in the

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Speaker 1: news and that's where opportunity. Everybody would say it's all Brexit,

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Speaker 1: but it's interesting, he pointed out the heavy weighting of energy. Yes, World,

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Speaker 1: Dutch and the rest of it as well. Flat on

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Speaker 1: the futures give it back. This is it just a

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Speaker 1: churn to the market. It's not as dead as fat

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Speaker 1: day or job's day, but away to it. Brent crude

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Speaker 1: really gives it back from above fifty. We're not down

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Speaker 1: two dollars, but over forty eight hours, forty eight dollars

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Speaker 1: seventy cents on Brent. There's a moment here where West

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Speaker 1: Texas was actually priced higher than Brent, American oil higher

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Speaker 1: than European oil. That's odd where you put it euro

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Speaker 1: one fifty six, sterling thirty six. Michael McKee and Tom

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Speaker 1: Keen bonus round before a three day weekend. Another hour

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Speaker 1: of Bloomberg surveillance