1 00:00:04,040 --> 00:00:08,360 Speaker 1: Broadcasting live to New York, Bloomberg eleven Brio to Washington, 2 00:00:08,440 --> 00:00:13,480 Speaker 1: d C. Bloomber to Boston, Bloomberg twelve hundred to San Francisco, 3 00:00:13,600 --> 00:00:17,560 Speaker 1: Bloomberg nine to the Country series Exam General one nine 4 00:00:17,960 --> 00:00:21,400 Speaker 1: and around the globe the Bloomberg Radio plus Appen Bloomberg 5 00:00:21,480 --> 00:00:26,320 Speaker 1: Got Gone. This is taking stock. I'm Caffeine Hayes along 6 00:00:26,320 --> 00:00:30,080 Speaker 1: with pim Fox. The focused remains on the UK in 7 00:00:30,160 --> 00:00:33,960 Speaker 1: global markets is the pound falls to its weakest level 8 00:00:34,080 --> 00:00:38,080 Speaker 1: in three decades against the dollars, even lower than the 9 00:00:38,159 --> 00:00:41,040 Speaker 1: hit the lows it hit right after Britain's vote to 10 00:00:41,159 --> 00:00:45,360 Speaker 1: leave the European Union was passed. Why is this unsettling 11 00:00:45,400 --> 00:00:48,360 Speaker 1: markets because it could hit fragile economy at a time 12 00:00:48,360 --> 00:00:50,919 Speaker 1: when the rest of the global economy is fragile as well. 13 00:00:50,960 --> 00:00:53,800 Speaker 1: We're gonna look at some of the currency impacts right now, 14 00:00:53,880 --> 00:00:56,840 Speaker 1: PIM Yes. So we've got Doug Barthwick, I'm managing director 15 00:00:56,840 --> 00:00:59,400 Speaker 1: in the head of foreign Exchange at chap The Lane 16 00:00:59,520 --> 00:01:01,840 Speaker 1: and Company. He'll be giving us more details right now. 17 00:01:01,880 --> 00:01:06,160 Speaker 1: More details from Catherine Cowtery in the Blomberg newsroom. Thank you, 18 00:01:06,160 --> 00:01:08,880 Speaker 1: pamla wall Street. Starting off this holiday shortened week with 19 00:01:09,040 --> 00:01:11,840 Speaker 1: a retreat. Bank of England Governor Mark Kearney warned of 20 00:01:11,920 --> 00:01:14,760 Speaker 1: prospects for a material slowing of the economy on the 21 00:01:14,840 --> 00:01:18,280 Speaker 1: developing risks from Britain's withdrawal from the European Union. Now 22 00:01:18,280 --> 00:01:20,920 Speaker 1: banks are taking the largest losses and energy companies are 23 00:01:20,920 --> 00:01:23,720 Speaker 1: sinking along with the price of oil. The government said 24 00:01:23,720 --> 00:01:27,520 Speaker 1: gasoline supplies on the East Coast reached a record. Jim Paulson, 25 00:01:27,600 --> 00:01:31,000 Speaker 1: chief investment strategists at Wells Capital Markets, on one of 26 00:01:31,000 --> 00:01:33,280 Speaker 1: the reasons why he thinks the market can reach new 27 00:01:33,360 --> 00:01:35,839 Speaker 1: highs over the next few months. I like the fact 28 00:01:35,880 --> 00:01:38,800 Speaker 1: that this rally since January has been very broad based. 29 00:01:39,120 --> 00:01:43,240 Speaker 1: The equally weighted indices are outperforming overall, which tells you 30 00:01:43,319 --> 00:01:45,840 Speaker 1: that a broad array of stocks are doing better than 31 00:01:45,840 --> 00:01:49,480 Speaker 1: the market cap weighted I think that suggests that a 32 00:01:49,600 --> 00:01:53,720 Speaker 1: number of companies are are experiencing earnings momentum. Again, we 33 00:01:53,840 --> 00:01:56,080 Speaker 1: check the markets every fifteen minutes throughout the trading data. 34 00:01:56,160 --> 00:01:59,160 Speaker 1: Industrial averages down one eight points three quarters of a 35 00:01:59,200 --> 00:02:03,080 Speaker 1: percent rating at seventeen thousand, eight hundred ten, SMP five 36 00:02:03,080 --> 00:02:05,520 Speaker 1: founded down nineteen points nine tens of a percent to 37 00:02:05,600 --> 00:02:08,600 Speaker 1: two thousand eighty four. Then nastac is down fifty six 38 00:02:08,639 --> 00:02:10,919 Speaker 1: points one point two percent to forty eight oh six. 39 00:02:11,240 --> 00:02:13,359 Speaker 1: West Texas sent a media Crude Oil down two dollar 40 00:02:13,440 --> 00:02:15,720 Speaker 1: thirty two cents of barrel four point seven percent to 41 00:02:15,800 --> 00:02:18,840 Speaker 1: forty six sixty seven. Spout Gold is up nineteen dollars 42 00:02:18,840 --> 00:02:21,720 Speaker 1: twenty cents agains at thirteen fifty eight twenty ten Your 43 00:02:21,760 --> 00:02:24,600 Speaker 1: Treasure thirty seconds with the yield of one point three 44 00:02:24,639 --> 00:02:29,440 Speaker 1: seven percent. Among today's top business maker business stories, it 45 00:02:29,600 --> 00:02:33,200 Speaker 1: marks a revival for the iconic baker Hostess Brands, the 46 00:02:33,200 --> 00:02:35,840 Speaker 1: baker of Twinkies, and Ding Dong's plans to become a 47 00:02:35,960 --> 00:02:40,400 Speaker 1: publicly listed company. And now let's get an update of 48 00:02:40,440 --> 00:02:43,400 Speaker 1: some of the other stories we're following today on Bloomberg Radio. 49 00:02:45,080 --> 00:02:48,160 Speaker 1: Thank you Catherine from the Bloomberg Newsroom. I'm Jil Schneider. 50 00:02:48,360 --> 00:02:51,040 Speaker 1: Home Secretary Theresa May has won the first round of 51 00:02:51,120 --> 00:02:54,000 Speaker 1: voting in the contest to replace David Cameron as the 52 00:02:54,040 --> 00:02:57,640 Speaker 1: next Conservative leader and Prime Minister. Mrs May, who began 53 00:02:57,720 --> 00:03:00,000 Speaker 1: the race as the front runner, got one hundred sixty 54 00:03:00,040 --> 00:03:03,200 Speaker 1: five votes. Minister Andrea leads Something came in second with 55 00:03:03,280 --> 00:03:06,480 Speaker 1: sixty six. Liam Fox Will been eliminated from the race, 56 00:03:06,600 --> 00:03:11,120 Speaker 1: coming in last with sixteen votes. The battle against Zica continues. 57 00:03:11,280 --> 00:03:14,960 Speaker 1: Virginia Senator Tim Caine said today most mosquitoes stay within 58 00:03:15,000 --> 00:03:17,720 Speaker 1: a two yard radius of where they are Borns can 59 00:03:17,800 --> 00:03:19,919 Speaker 1: find the spot of the standing water, and you can 60 00:03:20,200 --> 00:03:24,120 Speaker 1: wipe out standing water or spray there. In that narrow 61 00:03:24,160 --> 00:03:27,880 Speaker 1: geographic zone. You can reduce the density of mosquitoes and 62 00:03:27,880 --> 00:03:31,080 Speaker 1: then reduce the incidents of Zeca. Officials say Islamic State 63 00:03:31,120 --> 00:03:33,919 Speaker 1: appears to be increasing its attacks as the group loses 64 00:03:34,040 --> 00:03:37,800 Speaker 1: territory across the Middle East. Here's Deputy Secretary of State 65 00:03:37,840 --> 00:03:40,320 Speaker 1: Anthony Blinken, territory matter is a great deal because what 66 00:03:40,360 --> 00:03:42,480 Speaker 1: it does is it's the pole of attraction. It's where 67 00:03:42,480 --> 00:03:45,520 Speaker 1: they get their resources by exploiting people within the territory. 68 00:03:45,520 --> 00:03:49,480 Speaker 1: They control oil extortion, et cetera. It also is the 69 00:03:49,520 --> 00:03:52,400 Speaker 1: poll of attraction for jeehatta surround the world who think 70 00:03:52,400 --> 00:03:54,840 Speaker 1: that they see is as succeeding ten feet tall building. 71 00:03:54,880 --> 00:03:57,520 Speaker 1: The so called Caliphate authorities now say at least one 72 00:03:57,600 --> 00:04:00,600 Speaker 1: hundred seventy five people were killed and almost two hundred 73 00:04:00,680 --> 00:04:05,120 Speaker 1: wounded after a truck bombing in Iraq. Islamic State claimed responsibility. 74 00:04:05,240 --> 00:04:07,520 Speaker 1: If you watched fireworks in the city last night, you 75 00:04:07,600 --> 00:04:11,440 Speaker 1: likely noticed beefed up security. About five thousand nyp D 76 00:04:11,600 --> 00:04:15,240 Speaker 1: officers were dispatched to oversee the show, the largest detail 77 00:04:15,280 --> 00:04:18,839 Speaker 1: the NYPD has ever assigned. On July four, Global News 78 00:04:18,839 --> 00:04:21,240 Speaker 1: twenty four hours a day, powered by more than twenty 79 00:04:21,279 --> 00:04:24,599 Speaker 1: six hundred journalists and analysts in more than one hundred 80 00:04:24,600 --> 00:04:28,039 Speaker 1: twenty countries. From the Bloomberg Newsroom, I'm Jill Schneider, and 81 00:04:28,120 --> 00:04:32,400 Speaker 1: this is Bloomberg Catherine, Thank you. And now let's get 82 00:04:32,400 --> 00:04:35,120 Speaker 1: a quick check of the equity benchmarks. Down, Industrial leverage 83 00:04:35,160 --> 00:04:38,719 Speaker 1: down one thirty three points at seventeen thousand, eight hundred sixteen, 84 00:04:39,160 --> 00:04:41,480 Speaker 1: smp F I foundered down eighteen points at two thousand, 85 00:04:41,520 --> 00:04:44,560 Speaker 1: eighty four, nastack down fifty five points at forty eight 86 00:04:44,600 --> 00:04:49,279 Speaker 1: oh seven. And that's a Bloomberg business flash. This is 87 00:04:49,320 --> 00:04:53,279 Speaker 1: taking Stock with Kathleen Hayes and pimp Box on Bloomberg Radio. 88 00:04:53,800 --> 00:04:57,960 Speaker 1: In the aftermath of the Brexit vote, the pound plunge, 89 00:04:58,040 --> 00:05:02,520 Speaker 1: global equity markets suffered on's rallying. Things seem to stabilized 90 00:05:02,560 --> 00:05:04,720 Speaker 1: for a while, but today, as the head of the 91 00:05:04,760 --> 00:05:07,640 Speaker 1: Bank of England, Mark Harney sought to reassure investors that 92 00:05:07,720 --> 00:05:09,640 Speaker 1: the Bank of Lincoln is ready to take even more 93 00:05:09,680 --> 00:05:12,160 Speaker 1: steps to shore up an economy that will be hit 94 00:05:12,240 --> 00:05:15,880 Speaker 1: by the Brexit vote, heading for a recession and more. Uh, 95 00:05:16,040 --> 00:05:20,360 Speaker 1: the pound slid again, stocks are under pressure. Where will 96 00:05:20,480 --> 00:05:23,400 Speaker 1: this end? And what does it mean as these uh, 97 00:05:23,520 --> 00:05:26,880 Speaker 1: these asset classes keep moving so sharply. Let's bring in 98 00:05:26,920 --> 00:05:30,719 Speaker 1: Doug Borthwick now. He joins us from Chapter Lene and Co. 99 00:05:30,960 --> 00:05:33,240 Speaker 1: Here in New York City where he is a managing 100 00:05:33,279 --> 00:05:36,599 Speaker 1: director and head of Foreign exchange. Doug, welcome back, Thank 101 00:05:36,640 --> 00:05:39,520 Speaker 1: you very much, nice to be here. So how do 102 00:05:39,560 --> 00:05:42,600 Speaker 1: you assess what is going on in the UK and 103 00:05:42,640 --> 00:05:45,880 Speaker 1: how it's hitting the pound at this point? Well, going 104 00:05:45,880 --> 00:05:48,480 Speaker 1: into this, we we always talked about how this is 105 00:05:48,520 --> 00:05:50,120 Speaker 1: a bit of iceberg. I mean, you were the top 106 00:05:50,160 --> 00:05:52,040 Speaker 1: side was we always thought that was one fifty In 107 00:05:52,120 --> 00:05:55,120 Speaker 1: the downside, we weren't really sure and we've no hit 108 00:05:55,160 --> 00:05:57,160 Speaker 1: this one thirty level. I think that it's it's very 109 00:05:57,200 --> 00:05:59,960 Speaker 1: good that Theresa May today got the hundred sixty five 110 00:06:00,080 --> 00:06:02,159 Speaker 1: votes in the first vote of who's going to be 111 00:06:02,240 --> 00:06:05,200 Speaker 1: the next leader. There's further votes in July seventh and twelfth, 112 00:06:05,240 --> 00:06:07,680 Speaker 1: and then all party members for the Conservative Party will 113 00:06:07,720 --> 00:06:10,600 Speaker 1: vote again for September nine, and that sort of surety 114 00:06:10,640 --> 00:06:12,400 Speaker 1: of who's going to be the next leader and who's 115 00:06:12,400 --> 00:06:15,000 Speaker 1: going to leave the UK through Brexit. I think it's 116 00:06:15,080 --> 00:06:17,359 Speaker 1: very important in the market should adapt to that and 117 00:06:17,400 --> 00:06:19,560 Speaker 1: see through that. But as you can see, that's in 118 00:06:19,600 --> 00:06:22,800 Speaker 1: two months time. In the meantime, the market today is 119 00:06:22,839 --> 00:06:26,039 Speaker 1: really reacting on the back of what Carney said. And 120 00:06:26,080 --> 00:06:27,880 Speaker 1: what Carney said is look, Row, it's going to be 121 00:06:27,960 --> 00:06:30,200 Speaker 1: lower and we're gonna have to cut rates. So the 122 00:06:30,240 --> 00:06:32,720 Speaker 1: expectation is now they'll cut twenty five bases points, so 123 00:06:32,800 --> 00:06:35,440 Speaker 1: around a quarter of a percent in August. But on 124 00:06:35,520 --> 00:06:37,720 Speaker 1: top of that they also may increase que to five 125 00:06:38,360 --> 00:06:41,560 Speaker 1: from three seventy five billions sterling as well. In other words, 126 00:06:41,600 --> 00:06:44,200 Speaker 1: the UK's deciety, we're gonna cut rates, we may end 127 00:06:44,240 --> 00:06:46,640 Speaker 1: up having to print some more money and that's obviously 128 00:06:46,800 --> 00:06:49,840 Speaker 1: negative for sterling. Doug fourth weckome, what if you can 129 00:06:49,920 --> 00:06:54,000 Speaker 1: explain why these round numbers like one dollar and thirty 130 00:06:54,040 --> 00:06:57,239 Speaker 1: one dollar and fifty how does anyone arrive at those 131 00:06:57,279 --> 00:07:00,760 Speaker 1: specific levels? I mean, with a company, you can do valuation. 132 00:07:00,839 --> 00:07:05,120 Speaker 1: You can say X number of shares current market value 133 00:07:05,120 --> 00:07:08,279 Speaker 1: and then compare that to sales as well as net profit. 134 00:07:08,839 --> 00:07:10,480 Speaker 1: But can you do that when you're looking at the 135 00:07:10,480 --> 00:07:14,400 Speaker 1: currency market. No, No, it's very much more of a 136 00:07:15,040 --> 00:07:18,120 Speaker 1: chart watching a charge as opposed to an actuality. I 137 00:07:18,160 --> 00:07:19,640 Speaker 1: think though, when when you looked at the where the 138 00:07:19,680 --> 00:07:24,360 Speaker 1: polls were going into the Brexit vote, when we're training 139 00:07:24,360 --> 00:07:25,960 Speaker 1: around with that one forty eight and we actually went 140 00:07:26,040 --> 00:07:28,040 Speaker 1: up to one fifty, that was when the market has 141 00:07:28,040 --> 00:07:31,360 Speaker 1: decided with certainty that the UK was going to stay 142 00:07:31,400 --> 00:07:34,480 Speaker 1: within the Union, and that's something that the market very 143 00:07:34,520 --> 00:07:36,120 Speaker 1: much had a hold off, which is why we came 144 00:07:36,120 --> 00:07:38,160 Speaker 1: out to our clients and said at one eight knows 145 00:07:38,200 --> 00:07:40,160 Speaker 1: maybe the time you should be short sterling because it 146 00:07:40,160 --> 00:07:42,360 Speaker 1: seems like all the good news is priced in. And 147 00:07:42,400 --> 00:07:44,960 Speaker 1: we see that so many times because for example, in 148 00:07:45,040 --> 00:07:47,240 Speaker 1: March tenth and the market thought that the ECB would 149 00:07:47,320 --> 00:07:49,760 Speaker 1: end up doing further CHEWI and they didn't, and you 150 00:07:49,800 --> 00:07:52,040 Speaker 1: saw a huge rally in the euro. You saw the 151 00:07:52,080 --> 00:07:54,120 Speaker 1: same thing in sterling as well. So a lot of 152 00:07:54,120 --> 00:07:56,120 Speaker 1: the time you find that the market gets very fraughty 153 00:07:56,160 --> 00:07:59,640 Speaker 1: and excitative about position when the reality is that the 154 00:07:59,720 --> 00:08:05,280 Speaker 1: actually anality hasn't yet happened. So in terms of what 155 00:08:05,400 --> 00:08:09,440 Speaker 1: happens next. At some point after such a big, big 156 00:08:09,520 --> 00:08:12,480 Speaker 1: drop in the pound, big move up in the dollar 157 00:08:12,600 --> 00:08:15,400 Speaker 1: against the pound, you'd say, well, you know, this has 158 00:08:15,400 --> 00:08:17,320 Speaker 1: got to be just about it. And of course, as 159 00:08:17,320 --> 00:08:19,280 Speaker 1: you mentioned, there are some there are some upsides to 160 00:08:19,400 --> 00:08:22,280 Speaker 1: a weaker pound, which Mark Karney mentioned as well. I mean, 161 00:08:22,440 --> 00:08:25,880 Speaker 1: to a certain extent it helps exporters, although the they 162 00:08:25,920 --> 00:08:28,520 Speaker 1: hit to the to the current account and the cawlow 163 00:08:28,560 --> 00:08:31,560 Speaker 1: flows seems to be of a much quicker impact. It 164 00:08:31,560 --> 00:08:34,400 Speaker 1: has to be dealt with, and the boon to exporters 165 00:08:34,440 --> 00:08:37,160 Speaker 1: seems like a play out over a much longer time. 166 00:08:37,880 --> 00:08:39,920 Speaker 1: I think that if you look at sterling an added 167 00:08:40,000 --> 00:08:41,800 Speaker 1: to value, you can really think of it as going 168 00:08:41,800 --> 00:08:45,040 Speaker 1: from a global nation to isolationism. And when you know, 169 00:08:45,240 --> 00:08:46,800 Speaker 1: I think one of the best charts to look at 170 00:08:46,840 --> 00:08:49,560 Speaker 1: really is maybe sterling in where in the seventies sterling 171 00:08:49,600 --> 00:08:52,079 Speaker 1: in was treating at a nine hundred and I was 172 00:08:52,080 --> 00:08:56,920 Speaker 1: treating on two sterling against the ends drop year to date. 173 00:08:56,960 --> 00:08:59,000 Speaker 1: This year we're sterling against the dollars when we dropped 174 00:08:59,000 --> 00:09:02,400 Speaker 1: by twelve. So the UK as it begins to become 175 00:09:02,480 --> 00:09:04,560 Speaker 1: less of a global nation and much more of a 176 00:09:04,679 --> 00:09:08,080 Speaker 1: singular isolated nation is just losing the value in Sterling 177 00:09:08,080 --> 00:09:10,760 Speaker 1: because fear people really want to be involved with certain 178 00:09:10,800 --> 00:09:12,880 Speaker 1: because they don't have to be anymore because the UK 179 00:09:13,000 --> 00:09:15,559 Speaker 1: becomes more and more irrelevant than on a daily basis. 180 00:09:16,080 --> 00:09:17,880 Speaker 1: I think that that's what we're seeing in this movement 181 00:09:17,880 --> 00:09:20,439 Speaker 1: in Sterling today is that Sterling has taken us out 182 00:09:20,480 --> 00:09:22,200 Speaker 1: from sort of one of these global leaders with a 183 00:09:22,320 --> 00:09:25,160 Speaker 1: huge sphere of influence to becoming one that really is 184 00:09:25,200 --> 00:09:27,280 Speaker 1: only going to be managing itself. And if it's only 185 00:09:27,280 --> 00:09:29,199 Speaker 1: managing the United Kingdom, it could be that could only 186 00:09:29,200 --> 00:09:31,280 Speaker 1: manage that for a year or two before Scotland ends 187 00:09:31,360 --> 00:09:34,640 Speaker 1: up leaving, And so you're dealing with the currency now 188 00:09:34,720 --> 00:09:38,000 Speaker 1: that is being less used globally and has less sphere 189 00:09:38,000 --> 00:09:39,840 Speaker 1: of influence and so is having less of an impact 190 00:09:39,840 --> 00:09:44,679 Speaker 1: on the world. Doug Borthwick, Uh, not only is political 191 00:09:44,720 --> 00:09:48,280 Speaker 1: news in the United Kingdom dominating headlines, but also in 192 00:09:48,320 --> 00:09:50,720 Speaker 1: places such as Australia. I wonder if you give us 193 00:09:50,760 --> 00:09:54,040 Speaker 1: your outlook for commodities for currencies that are tied to 194 00:09:54,080 --> 00:09:59,320 Speaker 1: commodity producing industries. Certainly Australia is tied to commodity um 195 00:09:59,800 --> 00:10:02,080 Speaker 1: in the streetes, but it's also very much tied to China, 196 00:10:02,679 --> 00:10:05,000 Speaker 1: and what we're seeing is obviously you seen dollar China rally. 197 00:10:05,040 --> 00:10:07,360 Speaker 1: There's been a lot of discussion about how China's devaluing 198 00:10:07,440 --> 00:10:09,679 Speaker 1: their currency in the background and no one seeing it. 199 00:10:09,800 --> 00:10:12,760 Speaker 1: Certainly China's been devaluing their currency against the yen and 200 00:10:12,920 --> 00:10:15,680 Speaker 1: versus the euro or at least uth until lately, but 201 00:10:16,480 --> 00:10:19,320 Speaker 1: against the dollar, China's only moved by two percent on 202 00:10:19,360 --> 00:10:22,120 Speaker 1: the year. I think that as long as there's weakness 203 00:10:22,120 --> 00:10:24,320 Speaker 1: in China, or perceived weakness in China, that will be 204 00:10:24,360 --> 00:10:27,800 Speaker 1: perceived weakness in the Australian dollar and in the Kiwi dollar. Obviously, 205 00:10:27,800 --> 00:10:30,360 Speaker 1: the Australian dollar is added to by the fact that 206 00:10:30,400 --> 00:10:33,000 Speaker 1: there's no clear leader, let in the leader yet in 207 00:10:33,000 --> 00:10:35,320 Speaker 1: the general elections, and that's causing heaviness there as well. 208 00:10:35,800 --> 00:10:38,880 Speaker 1: Thank you very much. Douglas Borthwick is managing director in 209 00:10:38,880 --> 00:10:41,960 Speaker 1: the head of f FX at Chapter Lane and Company, 210 00:10:42,040 --> 00:10:45,840 Speaker 1: speaking about the British pound, which currently trades against the 211 00:10:45,880 --> 00:10:48,160 Speaker 1: dollar at one thirty in the Japanese Yenna one on 212 00:10:48,280 --> 00:10:52,240 Speaker 1: one point five too. This is taking Stockheim pim Fox, 213 00:10:52,320 --> 00:11:01,520 Speaker 1: my co host Kathleen Hayes, and this is Bloomberg a 214 00:11:01,720 --> 00:11:06,920 Speaker 1: brewing Italian banking crisis. This is another important part of 215 00:11:06,920 --> 00:11:09,880 Speaker 1: the fallout from the Brexit vote. Will be looking at 216 00:11:09,920 --> 00:11:12,720 Speaker 1: that and what it means for the EU broadly. This 217 00:11:12,920 --> 00:11:13,599 Speaker 1: is Bloomberg