WEBVTT - 8am-9am ET: Wraith & Behravesh 0:00:03.400 --> 0:00:07.480 This is Bloomberg Surveillance. We're in trouble with these super 0:00:07.560 --> 0:00:13.400 low rates. We are causing financial instability, We're causing risk taking. 0:00:13.520 --> 0:00:16.759 The world has a golden opportunity at the moment to 0:00:16.800 --> 0:00:21.400 achieve what I call a deflationary rebalancing, the proper recession. 0:00:21.640 --> 0:00:26.040 Yet and remember not all profit recessance proceed cats or recession. 0:00:26.120 --> 0:00:30.360 Bloomberg Surveillance, You're link to the world of economics, finance, 0:00:30.440 --> 0:00:34.600 and investment on Bloomberg Radio. Good morning everyone, Bloomberg Surveyna's 0:00:34.760 --> 0:00:37.080 Michael McKee and Tom Keane. We are in New York. 0:00:37.120 --> 0:00:40.800 We welcome all of you worldwide, all of you worldwide 0:00:40.840 --> 0:00:45.960 and of course across this a great nation. Bloomer FM 0:00:46.000 --> 0:00:49.200 in Washington, Good morning, Bloomberg trough hunted Boston, Bloomberg elevens 0:00:49.240 --> 0:00:51.839 Rio in a wonderful really spring like a lot of 0:00:51.920 --> 0:00:55.880 rain yesterday, but gorgeous New York today. And actually how 0:00:55.880 --> 0:00:57.640 the flowers are gonna be with all the rain. Yeah, 0:00:57.840 --> 0:01:01.280 there's a drenching, not not a wrenching like flooding and 0:01:01.320 --> 0:01:02.920 all that, but it was it was a lot of rain. 0:01:03.320 --> 0:01:05.959 Bloombird nine sixty the Bay. Every Good morning out in 0:01:05.959 --> 0:01:10.360 San Francisco right here. The weather has been spectacular recently. 0:01:10.400 --> 0:01:13.200 This morning. Bloomberg Surveillance is always in the eight o'clock hour. 0:01:13.680 --> 0:01:18.080 Brought you by cone Resnick Accounting, Tax Advisory Trust cone 0:01:18.080 --> 0:01:21.880 Resnick for the strategy, the insight your business needs to 0:01:21.959 --> 0:01:24.960 move forward. Find out what cone Resnick thinks. Sign up 0:01:25.280 --> 0:01:28.560 for insights at cone Resnick dot com. C O h 0:01:28.680 --> 0:01:34.200 N R e z n I c kN dot com. 0:01:34.280 --> 0:01:37.160 We have spoken him far too much recently and somehow 0:01:37.200 --> 0:01:39.360 Mike to June he is gonna be like our best friend. 0:01:39.880 --> 0:01:44.319 He is head of Brexit rate strategy at U b S. 0:01:44.520 --> 0:01:48.760 I'm kidding. John Raith has had a UK rate strategy UBS, 0:01:48.800 --> 0:01:52.200 which means he is as much as anybody I know, 0:01:52.320 --> 0:01:57.680 knee deep and thinking about where Brexit goes. Generate once again, 0:01:57.720 --> 0:02:01.280 good morning. Will will Brexit be the only topic of 0:02:01.360 --> 0:02:04.240 the meeting? I mean, is it the backstory at the 0:02:04.280 --> 0:02:08.840 G twenty meeting? Nobody wants to talk about UM. I'm 0:02:08.840 --> 0:02:11.040 sure it will. It will come up. I think for 0:02:11.360 --> 0:02:14.560 some of the countries there it will be a major preoccupation. 0:02:14.639 --> 0:02:18.160 For others perhaps a little less so. We've heard some 0:02:18.200 --> 0:02:21.919 comments today from UM from from Bullard for example, a 0:02:22.000 --> 0:02:25.200 FED officials saying that he doesn't think Brexit, even if 0:02:25.200 --> 0:02:27.480 it does happen, will have a major impact on the 0:02:27.520 --> 0:02:31.200 outlook for the US, but clearly closer to Europe and 0:02:31.680 --> 0:02:35.079 the Eurozone, and obviously in the UK itself it's it's 0:02:35.080 --> 0:02:40.800 a very major event. Is uh have you been able 0:02:40.840 --> 0:02:45.880 to has anybody been able to quantify the impact, say 0:02:45.960 --> 0:02:51.720 GDP basis a national accounts basis or is it too complicated? Yeah? 0:02:51.760 --> 0:02:53.640 I mean that the issue we have really, of course, 0:02:53.680 --> 0:02:57.000 is there's no precedent for this. I think, um, you know, 0:02:57.000 --> 0:02:59.079 I should stress our view is that ultimately the UK 0:02:59.200 --> 0:03:03.280 will stay in EU, and any dip in activity that 0:03:03.320 --> 0:03:05.760 we see in the next few months running up to 0:03:05.800 --> 0:03:08.600 the vote on the sort of uncertainty and nervousness will 0:03:09.360 --> 0:03:11.839 probably bounce back in the second half of the year. 0:03:11.919 --> 0:03:15.440 But if the UK were to vote to leave, then 0:03:15.639 --> 0:03:17.440 there's a whole range of scenarios as to how the 0:03:17.480 --> 0:03:20.720 situation would unfold, and we've sort of categorized them as 0:03:20.760 --> 0:03:24.800 a softer Brexit, where there's a sort of fairly friendly 0:03:24.840 --> 0:03:28.680 and rapid re establishment of trading agreements and so on, 0:03:29.240 --> 0:03:31.880 um and and all the way to sort of hard Brexit, 0:03:31.960 --> 0:03:35.880 where some tough negotiating and the establishment of trade barriers 0:03:35.960 --> 0:03:38.760 means that the hits of GDP will be larger. How 0:03:38.800 --> 0:03:42.000 did Sterling rebound yesterday? You know, when you talk to 0:03:42.080 --> 0:03:45.440 the experts at u b S about how a bid 0:03:45.480 --> 0:03:48.800 comes in, what's the why that the big came in. 0:03:48.920 --> 0:03:51.760 Was it just the street set enough and they looked 0:03:51.840 --> 0:03:54.800 for a quick scalp or is there an underlying story 0:03:54.840 --> 0:04:00.080 to that? What we saw is today up to well, 0:04:00.120 --> 0:04:02.480 I mean, I suppose you have to see it in 0:04:02.520 --> 0:04:04.200 the broader context that we were up at sort of 0:04:04.200 --> 0:04:06.840 one fifty four not very long ago, that the decline 0:04:06.960 --> 0:04:10.720 is dramatic and there will be temporary corrections. And that said, 0:04:10.760 --> 0:04:13.840 you know at the moment that which is somewhat ironic 0:04:13.840 --> 0:04:17.200 in this debate, the economic data in the UK continues 0:04:17.240 --> 0:04:19.599 to print pretty favorably. So there are some sort of 0:04:19.600 --> 0:04:23.760 fundamental reasons for temporary periods of Sterling strength, but in 0:04:23.800 --> 0:04:27.640 our view, sure to be overwhelmed by this background risk 0:04:27.720 --> 0:04:30.400 all the way through to June generates review for American 0:04:30.480 --> 0:04:35.039 audience the flows of capital and current account within United Kingdom. 0:04:35.080 --> 0:04:36.840 I think we've got a real idea of the flip 0:04:37.160 --> 0:04:40.400 in current account balances in Japan. Tell me about the 0:04:41.120 --> 0:04:45.400 current account surplus deficit flows in the United Kingdom. Yeah, 0:04:45.440 --> 0:04:47.640 I mean that that's that you've hit on something important 0:04:47.680 --> 0:04:52.000 in this debate. There's a large, persistent current account deficit 0:04:52.440 --> 0:04:56.279 in the UK, exacerbated over recent years by the fact 0:04:56.320 --> 0:04:58.320 that the UK economy has been growing so much faster 0:04:58.400 --> 0:05:02.800 than most of those in the Eurozone. Um and often 0:05:02.880 --> 0:05:05.239 when you see a sliding the currency on the scale 0:05:05.279 --> 0:05:08.520 we've seen recently in Sterling, attention turns to the current 0:05:08.520 --> 0:05:11.600 account situation, and when there is a large deficit, it 0:05:11.680 --> 0:05:15.640 exacerbates the risks of a sort of more out of 0:05:15.720 --> 0:05:18.160 control decline in the currency because of the fact that 0:05:18.520 --> 0:05:21.960 external investors are having to fund the current account. The 0:05:22.000 --> 0:05:24.920 odd solution Michael was to send Aubrey and matter and 0:05:25.360 --> 0:05:28.120 Aubrey looks like ROSSI crawl. Send him down to take 0:05:28.160 --> 0:05:34.440 over Barbados again. There used to be uh, the pound 0:05:34.520 --> 0:05:36.880 is so widely used in such a deep currency is 0:05:38.440 --> 0:05:42.440 are we Is there a chance we see a really big, 0:05:42.520 --> 0:05:48.200 disorderly decline. There is a chance, I think you know, 0:05:48.279 --> 0:05:50.679 we would compare this really to the to the financial 0:05:50.720 --> 0:05:53.200 crisis when in the year running up to it. As 0:05:53.200 --> 0:05:57.560 the financial system deteriorated, we saw Sterling weakened steadily, as 0:05:57.600 --> 0:05:59.680 I would argue it has been recently, and then when 0:06:00.400 --> 0:06:03.560 things went really wrong in in late two thousand and eight, 0:06:03.640 --> 0:06:05.839 it was sterling that suffered the most because of the 0:06:05.920 --> 0:06:09.719 UK's exposure to the financial sector being that much larger 0:06:09.760 --> 0:06:12.840 than anyone else's. I think when the same situation again, 0:06:12.880 --> 0:06:16.279 this sort of gradual weakening of sterling slightly to continue, 0:06:16.360 --> 0:06:20.320 and if on the twenty June the UK has taken 0:06:20.320 --> 0:06:23.120 the decision to leave the EU, then you could see 0:06:23.120 --> 0:06:26.760 a much more significant fall in the following months, although 0:06:26.760 --> 0:06:28.960 as I said before, that's not our central view. We 0:06:29.000 --> 0:06:30.880 still think the UK will be a member of the 0:06:30.960 --> 0:06:34.800 EU beyond the referendum. Well, at this point the currency 0:06:34.920 --> 0:06:42.520 reflecting uncertainty. Is it x Brexit vote? Is it fairly 0:06:42.600 --> 0:06:46.000 vald or are we seeing where you know, moves that 0:06:46.000 --> 0:06:50.599 should be made given the current account? Um, well, I 0:06:50.640 --> 0:06:52.640 think you know that was all factored in before as 0:06:52.640 --> 0:06:55.000 far as currency markets were concerned. I think the only 0:06:55.040 --> 0:06:57.599 new information in the last few months that's coincided with 0:06:57.600 --> 0:07:01.000 this fall in sterling is is the referendum suddenly coming 0:07:01.000 --> 0:07:05.320 into focus. The date being fixed. Um, it's becoming imminent 0:07:05.440 --> 0:07:10.000 in in terms of markets, attention span, UM and having 0:07:10.040 --> 0:07:13.320 and having a big impact. Another said before, you know 0:07:13.360 --> 0:07:15.600 that the data in the UK just doesn't merit this. 0:07:16.280 --> 0:07:18.160 I mean, if you look, just as one example, at 0:07:18.240 --> 0:07:20.960 the UM that the p m I industries, they're stronger 0:07:20.960 --> 0:07:23.360 in the UK than than any of the other major 0:07:23.400 --> 0:07:27.400 global economies. Unemployment slow, retailselves are strong. You know, there's 0:07:27.440 --> 0:07:30.360 no reason for Sterling to be undermined, like well said, 0:07:30.400 --> 0:07:33.720 but does that imply an expectation of a slowing United 0:07:33.800 --> 0:07:38.600 Kingdom real GDP? Yeah? Possibly, But when you look at 0:07:38.600 --> 0:07:43.200 the extent of that implied slowing compared to where we 0:07:43.240 --> 0:07:46.640 are in other economies already, and in the context of 0:07:46.680 --> 0:07:49.600 the scale of the fallen Sterling, I think it goes 0:07:49.680 --> 0:07:52.720 way beyond what what most forecasts are. I mean, you know, 0:07:52.760 --> 0:07:55.280 ours is that the recovery continues at a similar pace 0:07:55.360 --> 0:07:58.440 to the past few years. And I mean I think 0:07:58.480 --> 0:08:01.760 that's pretty much the consensus unless we do get a 0:08:01.840 --> 0:08:04.360 vote to lea the EU, at which point I'm sure 0:08:04.400 --> 0:08:06.280 there would be a lot of downward revisions to GDP 0:08:06.480 --> 0:08:09.920 and and every chance that the recovery stalls at least 0:08:10.000 --> 0:08:12.480 for the balance of this year. Okay, but if we 0:08:12.560 --> 0:08:16.600 get you know, clearly the elite outcome, which is no Brexit, 0:08:16.880 --> 0:08:20.000 and you know everything's do you have a level that 0:08:20.120 --> 0:08:23.760 sterling rebounds to. Well, I mean over the over the 0:08:23.800 --> 0:08:26.400 sort of coming months after that. It will take a while, 0:08:26.440 --> 0:08:29.600 and it will depend on any sort of significant dent 0:08:29.920 --> 0:08:32.440 to activity in the interim. But you know, we still 0:08:32.440 --> 0:08:36.360 see a possibility of of sterling ending this year um 0:08:36.640 --> 0:08:39.720 significantly stronger than its current level. But as I say, 0:08:39.720 --> 0:08:43.080 it will depend on activity indicators beyond the referendum, which 0:08:43.120 --> 0:08:45.679 will tell us how much damage has been done and 0:08:46.080 --> 0:08:50.240 how persistent or temporary it may turn out to be. Well, 0:08:50.320 --> 0:08:54.320 let me ask about that. The the O E C 0:08:54.400 --> 0:08:58.080 D among others have been talking apparently a new NOE 0:08:58.080 --> 0:09:01.040 doubt from your competitors. It's DID group. I've been talking 0:09:01.080 --> 0:09:04.640 about much much slower growth around the world. How does 0:09:04.679 --> 0:09:10.880 that affect the UK um again exprexit. Yeah, I mean 0:09:11.080 --> 0:09:14.120 it clearly, if it is a global slowing, it will 0:09:14.240 --> 0:09:16.160 it will affect all to a degree. I mean, I 0:09:16.240 --> 0:09:18.480 think you know, as recent years have shown us, the 0:09:18.559 --> 0:09:23.800 UK has proved quite resilient um to the slower growth 0:09:23.840 --> 0:09:26.640 and the woes of the Aurozone in particular. And I 0:09:26.679 --> 0:09:28.280 think a large part of the reason for that is 0:09:28.320 --> 0:09:33.360 it has been long a service based economy, which is 0:09:33.720 --> 0:09:37.480 more able to perform domestically and more insulated from global 0:09:37.520 --> 0:09:40.960 slowdowns in terms of dropping demand for manufactured goods and 0:09:40.960 --> 0:09:43.680 so on then certain other economies are. So, you know, 0:09:43.720 --> 0:09:46.839 the recovery is somewhat mature, and I'm sure that if 0:09:46.880 --> 0:09:49.959 growth starts it's slow, it might see you know, slowing 0:09:50.040 --> 0:09:52.760 or even an end to the decline in the unemployment rate. 0:09:52.800 --> 0:09:55.640 But um, if there is a sort of genuine slowing 0:09:55.640 --> 0:09:57.920 of growing demand, I don't think the UK is at 0:09:58.000 --> 0:10:00.520 most risk from that by any means. Race with Us 0:10:00.559 --> 0:10:04.400 will continue this discussion. He was with UBS Michael McKie 0:10:04.400 --> 0:10:08.000 the Bank of England Museum with an important tweet today. 0:10:08.080 --> 0:10:12.440 In seventeen twenty three, Sir Christopher Wren died. I've been 0:10:12.480 --> 0:10:15.960 doing a cycle of his churches in when I'm in London. 0:10:16.520 --> 0:10:18.840 It's really something. Most of them were destroyed in World 0:10:18.880 --> 0:10:23.040 War Two and with a lot of courage they were rebuilt. 0:10:23.640 --> 0:10:28.480 It was very, very uh cool. Mr Murdock's father was 0:10:28.600 --> 0:10:32.520 instrumental in helping rebuild Brides and Fleet Street, and it's 0:10:32.559 --> 0:10:36.200 really I really urge people to go see Christopher Wren's magic. 0:10:36.280 --> 0:10:40.080 Outside of our new headquarters in London is his jewel 0:10:40.520 --> 0:10:44.400 right next to Mansion House. Sir Christopher Wren on this 0:10:44.480 --> 0:10:52.920 day died in seventeen twenty three. Futures exactly flat. Let's 0:10:52.920 --> 0:10:55.480 bring in John Taker now with the latest news from 0:10:55.520 --> 0:10:58.000 around the world. John Houston is gonna be the site 0:10:58.000 --> 0:11:01.440 of the night's Republican presidential debate, with Donald Trump rivals 0:11:01.640 --> 0:11:04.400 getting one more chance to try and derail the GOP 0:11:04.520 --> 0:11:07.640 front runner. Uh Santa emergency in Virginia. That's where four 0:11:07.640 --> 0:11:10.880 people were killed after tornadoes damage homes left thousands without 0:11:10.880 --> 0:11:15.000 power across the state. It's official. The natural gas flowing 0:11:15.000 --> 0:11:19.800 out of America's shale formations is now available to the world. 0:11:20.360 --> 0:11:23.719 The liquefied natural gas tanker Asia Vision. It left the 0:11:23.760 --> 0:11:28.160 Shaneer Energy Sabing Pass Export Terminal in Louisiana yesterday with 0:11:28.280 --> 0:11:31.720 the first cargo of US shield gas. The tanker bound 0:11:31.720 --> 0:11:35.480 for Brazil and score one for humans. Mercedes ben says, 0:11:35.520 --> 0:11:38.280 with a growing array of options on its cars, robots 0:11:38.400 --> 0:11:40.600 can't keep up. They were relying more and more in 0:11:40.679 --> 0:11:45.400 human workers on the assembly line reclaiming space there to 0:11:45.480 --> 0:11:51.000 put in those options. Interesting, did the natural gas thing? Yeah, 0:11:51.280 --> 0:11:54.800 look Rod, Mike, look at net gas one point seven 0:11:54.880 --> 0:11:59.760 three five gazillion British thermal units. We'll have to talk 0:12:00.040 --> 0:12:01.920 near with David Wilson, will do that in the next 0:12:01.920 --> 0:12:09.960 hour Bloomberg Surveillance. This news update was brought to you 0:12:09.960 --> 0:12:12.360 by the all new BMW Springfield. Find amazing pricing at 0:12:12.360 --> 0:12:15.480 every certified pre owned BMW vis at BMW Springfield and 0:12:15.600 --> 0:12:22.439 JA dot Com. Financing and Leasing available BMW Financial Services. 0:12:22.440 --> 0:12:25.840 Global Business News twenty four hours a day at Bloomberg 0:12:25.880 --> 0:12:28.960 dot Com, the Radio plus Mobile Act and on your radio. 0:12:29.240 --> 0:12:33.000 This is a Bloomberg Business Flash and I'm Cameron Moscow. 0:12:33.160 --> 0:12:36.079 US Dock index futures are little change this morning. Let's 0:12:36.120 --> 0:12:38.400 go to the First Word Breaking news desk for today's 0:12:38.400 --> 0:12:41.720 morning call, and here's Bill Maloney. Good morning Bill, Good 0:12:41.760 --> 0:12:44.439 morning Karen. That's right. US futures are now trading little 0:12:44.559 --> 0:12:48.000 changed as crewe fixtures fade from the highs down. Futures 0:12:48.040 --> 0:12:51.120 hied by eight points, recipes are unchanged and as a 0:12:51.200 --> 0:12:54.840 futures are lower by two Shanghai plunge six point four 0:12:54.880 --> 0:12:59.000 percent overnight as money market rates surged, while upm markets 0:12:59.040 --> 0:13:01.920 are trading higher by two percent gains in France, UK, 0:13:02.120 --> 0:13:05.439 Italy and Spain. On the US economic front. At eight 0:13:05.480 --> 0:13:08.760 fifteen FEDS, Lockhart speaks in Atlanta at a thirty initial 0:13:08.840 --> 0:13:11.880 Jobs claims and Durable goods orders at ten thirty natural 0:13:11.880 --> 0:13:15.800 gas storage change, and at eleven o'clock Kansas City fed 0:13:16.120 --> 0:13:19.920 after Divelos Nights Salesforce boosted your views, trans Ocean beat 0:13:20.200 --> 0:13:24.480 and Restoration Hardware Q four prelimery at just EPs missed estimates, 0:13:24.480 --> 0:13:28.240 shares her down twenty pre market regard airings this morning, 0:13:28.280 --> 0:13:32.240 Domino's Pizza and Visti on beat, Colz EPs beat revenues, 0:13:32.240 --> 0:13:35.040 war in line and best Buy Q four EPs beat, 0:13:35.040 --> 0:13:39.240 although comps sales missed estimates, finding some yearly Welsh upgrades 0:13:39.280 --> 0:13:42.320 and downgrades. Advisory board race, the Bibles sold over at 0:13:42.360 --> 0:13:46.040 Deutsche Bank, Cooper Tire raised to neutral versus Celicalman, Sachs 0:13:46.480 --> 0:13:50.280 Charter raised, ovoid A, JP Morgan, and finally, Restoration Hardware 0:13:50.280 --> 0:13:52.480 cuts a sector way to Key Bank and cut to 0:13:52.559 --> 0:13:55.839 neutral over at Robert Baird Live from the First Breaking 0:13:55.840 --> 0:13:58.920 News Desk on Bill Maloney Karen. Alright, thanks Availa to 0:13:58.960 --> 0:14:01.600 hear live breaking news of your Bloomberg type squawk and 0:14:01.679 --> 0:14:04.200 go on your terminal. Let's ask you a w K 0:14:04.360 --> 0:14:07.400 go and that's a Bloomberg business flash. Tom and Mike Karen, 0:14:07.679 --> 0:14:10.520 thanks so much Bloomberg surveillance this morning, as always bunched 0:14:10.520 --> 0:14:14.760 by invest Goo. Factor based strategies can help investors focus 0:14:15.320 --> 0:14:18.719 on a high quality, low volatility and more. Learn more 0:14:18.760 --> 0:14:23.520 and investco dot com slash high conviction, giving us perspective 0:14:23.520 --> 0:14:26.400 on the United Kingdom economy. All of the uproar over 0:14:26.440 --> 0:14:30.640 Brexit is John Wraith of UBS. John, if you were 0:14:30.680 --> 0:14:33.720 to have a one on one with the Chancellor of 0:14:33.800 --> 0:14:36.880 the Exchequer or the Prime Minister or other elites of 0:14:37.360 --> 0:14:40.840 England trying to keep the nation within Europe, what do 0:14:40.880 --> 0:14:43.480 you think you would hear? What's the number one sales 0:14:43.560 --> 0:14:49.400 pitch from elites to do no harm? Um? Well, I 0:14:49.440 --> 0:14:52.000 mean you know that the the argument has raged in 0:14:52.760 --> 0:14:54.840 one sense or another for many years in the UK 0:14:54.960 --> 0:14:57.400 about the relationships with the You I mean, I think 0:14:57.400 --> 0:15:00.800 you know that the British people generally want convincing that 0:15:00.920 --> 0:15:04.640 staying in is going to be better economically. Um. In 0:15:04.680 --> 0:15:08.080 the medium and long term, and that's something which is 0:15:08.120 --> 0:15:10.800 an argument that not hasn't always been been clear. And obviously, 0:15:10.880 --> 0:15:14.120 as we've been talking about already today, over recent years 0:15:14.160 --> 0:15:17.040 at least, the UK has been growing much more dynamically 0:15:17.040 --> 0:15:20.240 and rapidly than the rest of the EU and certainly 0:15:20.240 --> 0:15:22.720 the Eurozone, so that that argument is a difficult one 0:15:22.760 --> 0:15:25.680 to make, which I think explains why opinion balls have 0:15:25.800 --> 0:15:28.960 been have been pointing to such a close outcome. One 0:15:29.000 --> 0:15:31.920 of those things like trying to convince people trade is 0:15:31.960 --> 0:15:34.640 a good idea because it's easy to find a picture 0:15:34.680 --> 0:15:36.840 of a guy who's out of work and much harder 0:15:36.880 --> 0:15:43.360 to the dispersion of benefits. Yeah, and you know, again, 0:15:43.440 --> 0:15:45.760 as as with everything to do with this reference, and 0:15:45.760 --> 0:15:48.720 there's two sides to every argument. And there are a 0:15:48.760 --> 0:15:51.640 lot of voters in the UK who feel threatened by 0:15:52.320 --> 0:15:55.040 um the open access to the UK labor markets for 0:15:55.080 --> 0:15:58.480 other EU citizens. But but equally there are some who 0:15:58.560 --> 0:16:02.520 see the of efficient labor that they bring with them 0:16:02.520 --> 0:16:06.520 and the wider economic benefits that arguably are delivered. So 0:16:06.720 --> 0:16:09.520 you know, these things we'll keep raging. And that's one 0:16:09.560 --> 0:16:11.960 reason why we and most people think that the debate 0:16:12.080 --> 0:16:14.160 is going to remain up in the air until the 0:16:14.240 --> 0:16:16.640 day of the vote itself, which will will probably continue 0:16:16.640 --> 0:16:19.880 to undermine sterling among other things over the coming months. 0:16:20.920 --> 0:16:24.200 We always talk about our currency being weak or strong, 0:16:24.240 --> 0:16:28.320 as if strong was good and weak was bad. What's 0:16:28.360 --> 0:16:31.760 going to be the impact on GDP in the UK 0:16:32.120 --> 0:16:38.240 from a weaker sterling? How long is the j curve effect? Yeah, well, 0:16:38.280 --> 0:16:39.880 I mean that's that's one of the ironies in this 0:16:40.040 --> 0:16:42.840 is that as long as the fall in the pound 0:16:42.960 --> 0:16:47.280 is reasonably stable and orderly, it's actually got a lot 0:16:47.320 --> 0:16:50.320 of benefits to bring to the UK. We're in a 0:16:50.400 --> 0:16:55.880 situation where global demand, as we discussed before, is potentially slowing, 0:16:56.360 --> 0:17:00.560 and therefore, you know, for for for trading markets, having 0:17:00.560 --> 0:17:03.560 a more competitive currency might help tap into that lesser 0:17:03.640 --> 0:17:07.159 overall demand. The UK also, in common with a lot 0:17:07.160 --> 0:17:11.480 of other countries, has inflation well below the central banks 0:17:11.560 --> 0:17:14.760 target and and a and a weaker currency should raise 0:17:14.840 --> 0:17:18.000 imported inflation, so that there are certainly some benefits to 0:17:19.200 --> 0:17:22.080 the lower level of sterling, But it does smack of 0:17:22.520 --> 0:17:26.879 a loss of investor confidence and some overseas investors taking 0:17:28.000 --> 0:17:30.600 or slowing their investments into the UK because they're worried 0:17:30.600 --> 0:17:33.320 about the outcome. So you as long as it doesn't 0:17:33.320 --> 0:17:37.200 become a protracted and rapid for starting to call into 0:17:37.240 --> 0:17:41.159 account into question the current account situation, then you know 0:17:41.240 --> 0:17:44.000 there's certainly it's certainly not all bad to see Sterling weaker. 0:17:44.040 --> 0:17:49.639 For sure, this um going to change the calculation for 0:17:49.720 --> 0:17:53.080 the Bank of England at all. Well, they're very careful 0:17:53.080 --> 0:17:55.679 at the moment not to sound to opinionated one way 0:17:55.760 --> 0:17:59.280 or the other. They obviously can't comment on such political 0:17:59.440 --> 0:18:03.399 event as a referendum, other than to say they're aware 0:18:03.400 --> 0:18:05.600 of it, and they did say that they think it's 0:18:05.600 --> 0:18:07.800 one of the reasons behind the weakness of sterling. But 0:18:08.760 --> 0:18:11.679 they will wait for the outcome and they will react accordingly. 0:18:11.680 --> 0:18:14.320 And if, as in our view, the UK stays in 0:18:14.359 --> 0:18:20.120 the EU recovery continues, lost momentum returns, then we think 0:18:20.119 --> 0:18:22.960 they'll very quickly tell the market that it's got too 0:18:23.040 --> 0:18:25.960 dovish and too concerned about the outlook. Fifteen seconds, what's 0:18:26.000 --> 0:18:30.800 your calling Europe when you're just a dovetail that was sterling? Um, Well, 0:18:30.840 --> 0:18:32.800 we're more upbe on the outlook for the for the 0:18:32.800 --> 0:18:35.920 Eurozone than than the consensus. We think growth fair is 0:18:35.960 --> 0:18:38.440 going to be a bit quicker um as far as 0:18:38.440 --> 0:18:41.359 the sort of euro sterling exchange rates concerned, we see it, 0:18:41.440 --> 0:18:44.679 you know, potentially ending this year not far from current levels, 0:18:45.200 --> 0:18:49.160 but being fairly volatile in the interim. January is exceptionally valuable. 0:18:49.160 --> 0:18:51.399 Thank you so much. What a primer and all that 0:18:51.520 --> 0:18:53.119 is going on, you know, the Kingdom. And only to 0:18:53.160 --> 0:18:55.960 give a shout out to Francine Laqui, who was way 0:18:56.000 --> 0:18:59.080 out front of this, Michael. She told me in Dava's 0:18:59.119 --> 0:19:01.080 before Davas to this is gonna be a huge deal. 0:19:01.480 --> 0:19:05.000 You Americans don't get it. She was totally right, come on, 0:19:05.880 --> 0:19:10.159 big deal. Not sure Americans didn't get people, excuse me, 0:19:10.320 --> 0:19:13.159 I didn't. But then I didn't get red socks. I mean, 0:19:13.160 --> 0:19:14.720 it's almost a time of year where I have to 0:19:15.040 --> 0:19:16.959 try to gauge am I done with the red Sox 0:19:17.240 --> 0:19:20.160 in late April or early day. I'd give them till May. 0:19:20.200 --> 0:19:25.960 They maybe have fixed gotten the team better. That's the 0:19:26.960 --> 0:19:31.600 pound euro cross euro sterling. We'll quote that some more. 0:19:31.640 --> 0:19:33.760 I'm so I've been remiss not to quote that. What 0:19:33.840 --> 0:19:37.600 I can quote flat euros yields are infractutionally one seventy three. 0:19:37.600 --> 0:19:40.360 I'm gonna call it a quiet tape. Oil Churrance, you're 0:19:40.440 --> 0:19:44.919 thirty two on American oil Brent curteen right now downy 0:19:45.000 --> 0:19:50.639 seven uh since Michael mentions euro sterling uh point seven 0:19:50.640 --> 0:19:55.439 eight nine four pence. It's like Michael Pence and Nobel 0:19:55.520 --> 0:19:58.919 Laureate they had one twelve fifty three. Stay with us. 0:19:59.160 --> 0:20:06.439 We're pun friendly. On Thursday. Bloomberg Surveillance coming up there 0:20:06.480 --> 0:20:08.479 with all due respect highlight brought you by Landrover. If 0:20:08.480 --> 0:20:10.000 it's in your nature to cast off the every day 0:20:10.040 --> 0:20:12.240 and seek adventure, the Discovery Sport was built to help 0:20:12.280 --> 0:20:14.800 your search. Visit Landrover chie state dot com for special 0:20:14.800 --> 0:20:18.040 offers during the only Adventure Sales event. Lander Over Above 0:20:18.160 --> 0:20:27.720 and Beyond broadcasting live to New York, Bloomberg eleventh to Washington, 0:20:27.800 --> 0:20:32.800 d C, Bloomberg to Boston, Bloomberg twelve hundreds to San Francisco, 0:20:32.920 --> 0:20:37.359 Bloomberg n to the Country Series Exam Channel one, and 0:20:37.480 --> 0:20:41.520 around the globe. The Bloomberg Radio Plus happened Bloomberg dot Com. 0:20:41.560 --> 0:20:46.200 This is Bloomberg Surveillance. Welcome back Michael McKee along with 0:20:46.320 --> 0:20:49.520 Tom Keane. Economic Indicators and we've got a lot this morning. 0:20:49.520 --> 0:20:52.280 Brought to you by Commonwealth Financial Network. When it's time 0:20:52.320 --> 0:20:54.480 to change the conversation, talk with a broker dealer r 0:20:54.560 --> 0:20:57.200 I A that's ready to listen Call eight six six 0:20:57.280 --> 0:21:01.320 two three or visit Commonwealth dot com to learn more. 0:21:01.440 --> 0:21:04.960 Here's Vinnie Dell Judas at the First Word Desk, Michael, 0:21:05.000 --> 0:21:09.000 perhaps a bit of a respite for Manufacturing Commerce Department 0:21:09.000 --> 0:21:12.560 telling us durable goods orders up four point nine percent 0:21:12.600 --> 0:21:16.000 in January, the most and almost a year topping forecast. 0:21:16.040 --> 0:21:21.600 Departments decline not as sharp as previously reported, excluding transportation 0:21:21.760 --> 0:21:25.359 up one point eight percent, a measure of business investment 0:21:25.480 --> 0:21:28.280 up three point nine percent. We also have figures on 0:21:28.400 --> 0:21:31.959 initial jobless claims up by ten thousand to two hundred 0:21:32.040 --> 0:21:35.639 seventy two thousand last week, roughly in line with forecasts. Again, 0:21:35.880 --> 0:21:38.880 durable goods orders up by the most and almost a year, 0:21:39.320 --> 0:21:41.959 jobless claims creeping a bit higher. At the Blue our 0:21:42.000 --> 0:21:44.199 First Word Desk on Videl Judas, Let's go back to 0:21:44.200 --> 0:21:46.600 New York. This is really interesting to be looking at 0:21:46.600 --> 0:21:51.240 the durable goods breakdown and there were no categories that 0:21:51.320 --> 0:21:54.159 decline during the month. Let me explain what I do 0:21:54.240 --> 0:21:55.880 on this. I'm not going to put the chart out 0:21:55.880 --> 0:21:58.720 because people will drive off the road. It's too complex. 0:21:59.320 --> 0:22:01.200 I take, Michael, and this is off of the good 0:22:01.200 --> 0:22:06.720 work of Janatzi, Goldman, Sachs, inventories, durable goods, whatever. I 0:22:06.840 --> 0:22:09.720 take a three month, a six month, a twelve month 0:22:09.880 --> 0:22:13.560 moving average, so I smooth it all out, and then 0:22:13.600 --> 0:22:17.520 I look at the slope the derivative of those three 0:22:17.560 --> 0:22:22.119 moving averages. All you need to know is all three 0:22:22.119 --> 0:22:26.840 moving averages are moving in an up direction. That's the 0:22:27.040 --> 0:22:31.680 massive headline. I'm eyeballing here, Michael. When the last time 0:22:32.160 --> 0:22:37.520 that occurred? I'm back to May of two thousand fourteen 0:22:38.440 --> 0:22:41.200 and then somewhere in the vicinity of November of two 0:22:41.240 --> 0:22:46.600 thousand thirteen. It is rare and distinctive. Neverman Varavish is 0:22:46.640 --> 0:22:49.800 chief economist at the consulting firm I h S. And 0:22:49.920 --> 0:22:53.159 he is joining us now to talk about rare and 0:22:53.480 --> 0:22:57.760 distinctive movements in the US economy. Um, what are we 0:22:57.880 --> 0:23:01.720 to make of this? Is this uh a turning point 0:23:01.960 --> 0:23:04.639 in the economy? Are we out of the slow patch? 0:23:04.880 --> 0:23:09.480 I'm not saying we're gonna go gangbusters? But um, are 0:23:09.520 --> 0:23:12.639 we looking in the rear view mirror at the fourth quarter? No, 0:23:13.000 --> 0:23:16.560 I think Tom's right, and looking at these longer term trends, uh, 0:23:16.600 --> 0:23:19.000 and and I think one way to look at what's 0:23:19.000 --> 0:23:23.399 having manufacturing and especially durable goods and you know, capital 0:23:23.480 --> 0:23:26.000 spending in a more general sense, is that I've been 0:23:26.119 --> 0:23:29.240 hit by three things. Um. The first is an inventory 0:23:29.359 --> 0:23:32.640 cycle that's gonna end this year, and it's already ended, 0:23:32.640 --> 0:23:34.119 you could argue, and I think that's what some of 0:23:34.119 --> 0:23:38.600 these numbers today suggest. The second is that huge plunge 0:23:38.720 --> 0:23:43.480 in energy sector capital spending. Also uh, less of a 0:23:43.600 --> 0:23:47.960 drag now on on growth because oil prices are leveled 0:23:48.000 --> 0:23:50.480