1
00:00:02,400 --> 00:00:05,760
Speaker 1: Global business news twenty four hours a day at Bloomberg

2
00:00:05,800 --> 00:00:08,880
Speaker 1: dot com, the Radio plus mobile, last and on your radio.

3
00:00:09,160 --> 00:00:13,040
Speaker 1: This is a Bloomberg Business Flash and I'm Karen Moscow.

4
00:00:13,080 --> 00:00:15,440
Speaker 1: This updates brought to you bi Sector spider e t

5
00:00:15,720 --> 00:00:17,480
Speaker 1: f S. Why by a single stock when you can

6
00:00:17,520 --> 00:00:20,919
Speaker 1: invest in the entire sector? Visits Sector spd r s

7
00:00:21,040 --> 00:00:24,000
Speaker 1: dot com are called S six. Sector e t f

8
00:00:24,480 --> 00:00:27,280
Speaker 1: u S Stock index futures are a little change to higher,

9
00:00:27,360 --> 00:00:29,840
Speaker 1: with stocks heading for their first monthly gain in four

10
00:00:30,280 --> 00:00:32,800
Speaker 1: after a rally that took the SNP five dred index

11
00:00:32,840 --> 00:00:35,479
Speaker 1: two this year's high. We check the markets every fifteen

12
00:00:35,520 --> 00:00:39,080
Speaker 1: minutes throughout the trading day. On Bloomberg. SNP eveny futures

13
00:00:39,080 --> 00:00:40,960
Speaker 1: are up one and a half points now, Dow even

14
00:00:40,960 --> 00:00:43,640
Speaker 1: A futures up ten, and NASDAC even a futures up one.

15
00:00:43,960 --> 00:00:46,800
Speaker 1: The decks in Germany's down six tenths percent, ten year

16
00:00:46,840 --> 00:00:49,159
Speaker 1: treasury up one thirty second, the yield one point eight

17
00:00:49,240 --> 00:00:52,199
Speaker 1: one percent yield on the two year point seven four percent.

18
00:00:52,640 --> 00:00:55,000
Speaker 1: Nim Ex secret oil of three ten percent or eleven

19
00:00:55,080 --> 00:00:58,000
Speaker 1: cents to thirty eight forty two A barrel Comax gold

20
00:00:58,080 --> 00:01:00,160
Speaker 1: is up eight ten percent. Or ten dollars to well

21
00:01:00,800 --> 00:01:04,480
Speaker 1: sixty announced the euro anther thtight six and the end

22
00:01:04,560 --> 00:01:08,360
Speaker 1: is at one twelve point to seven. Micround Technology down

23
00:01:08,400 --> 00:01:11,000
Speaker 1: two percent this morning after the US is largest maker

24
00:01:11,080 --> 00:01:14,160
Speaker 1: of memory chips, gave a fiscal third quarter forecast at

25
00:01:14,200 --> 00:01:16,960
Speaker 1: miss analysts estimates due to weaker demand for our personal

26
00:01:16,959 --> 00:01:20,400
Speaker 1: computer components. And that's a Bloomberg business flash, Tom and

27
00:01:20,480 --> 00:01:24,760
Speaker 1: Barry Karen, thanks so much. Richard Batley is out of

28
00:01:24,800 --> 00:01:28,240
Speaker 1: the combine at the London School of Economics and Economic History,

29
00:01:28,280 --> 00:01:32,600
Speaker 1: which is exceptionally prodigious. He actually knows the distinction between

30
00:01:32,680 --> 00:01:36,679
Speaker 1: Robbin's and beverage, which is pretty cool. He's with Charles

31
00:01:37,040 --> 00:01:41,160
Speaker 1: Dumont Lambers Research and joins us UH. Right now, Richard,

32
00:01:41,160 --> 00:01:43,720
Speaker 1: you have written one of the smartest notes on Brexit

33
00:01:43,800 --> 00:01:46,360
Speaker 1: that I've seen, and you go right to the euro

34
00:01:46,560 --> 00:01:51,840
Speaker 1: challenge that maybe Brexit is really about Frexit. How likely

35
00:01:52,040 --> 00:01:56,800
Speaker 1: is it that Continental tental Europe does their various shades

36
00:01:56,840 --> 00:02:01,320
Speaker 1: of exit. Yeah, I think that we think the main

37
00:02:01,480 --> 00:02:04,440
Speaker 1: market risk, that sort of investment risk of what's happening

38
00:02:04,480 --> 00:02:07,840
Speaker 1: in the UK isn't isn't related to the UK, It's

39
00:02:07,880 --> 00:02:09,880
Speaker 1: what's going on in France. And the fact that you

40
00:02:09,960 --> 00:02:14,239
Speaker 1: have politics in the politics in France today looks very

41
00:02:14,280 --> 00:02:17,440
Speaker 1: similar to what you saw in Britain sort of three

42
00:02:17,520 --> 00:02:20,320
Speaker 1: or maybe four years ago. You've got this sort of

43
00:02:20,400 --> 00:02:24,280
Speaker 1: fringe right wing party in Francis, the National Front that

44
00:02:24,400 --> 00:02:26,800
Speaker 1: has that. You know, it's made one of it as

45
00:02:26,880 --> 00:02:29,560
Speaker 1: one of its main policies, to have a referendum on

46
00:02:29,680 --> 00:02:32,440
Speaker 1: EU membership, just as you had UKIP in the UK.

47
00:02:32,600 --> 00:02:34,200
Speaker 1: And I don't think the risk you know, there was

48
00:02:34,240 --> 00:02:37,560
Speaker 1: never a risk of a UKIP government in the in

49
00:02:37,600 --> 00:02:40,160
Speaker 1: the UK just because there isn't realistically the you know,

50
00:02:40,240 --> 00:02:44,320
Speaker 1: a serious possibility of a National Front presidency in France.

51
00:02:44,320 --> 00:02:47,400
Speaker 1: But it's the center right party takes some of those

52
00:02:47,680 --> 00:02:50,600
Speaker 1: policies on board, like especially the referendum, and makes it

53
00:02:50,639 --> 00:02:53,240
Speaker 1: their own in order to stem the rise of that.

54
00:02:53,320 --> 00:02:55,840
Speaker 1: And I think that's you know, that's why, for example,

55
00:02:56,320 --> 00:02:59,840
Speaker 1: the day after the referendum was announced in the UK,

56
00:03:00,120 --> 00:03:03,480
Speaker 1: sure you saw UK CDs sell off, but you saw

57
00:03:03,600 --> 00:03:06,639
Speaker 1: you saw French CDs. You saw French CDs sell off

58
00:03:07,000 --> 00:03:09,920
Speaker 1: more in response to the announcement. I think, you know,

59
00:03:10,000 --> 00:03:12,520
Speaker 1: some investors do get this and understand that. So so

60
00:03:12,760 --> 00:03:16,200
Speaker 1: Richard for for us ugly Americans that the question I

61
00:03:16,320 --> 00:03:20,520
Speaker 1: keep hearing from people about Brexit is, wait, the UK

62
00:03:20,919 --> 00:03:23,600
Speaker 1: isn't part of the euro Why would it matter all

63
00:03:23,639 --> 00:03:27,080
Speaker 1: that much to the regional economy if they have a

64
00:03:27,120 --> 00:03:32,680
Speaker 1: referendum about exiting the euro Land. I think that's exactly

65
00:03:32,680 --> 00:03:35,000
Speaker 1: the right question to us, because I don't think it

66
00:03:35,120 --> 00:03:38,760
Speaker 1: does matter that much. Actually, it certainly matters a lot

67
00:03:38,880 --> 00:03:42,520
Speaker 1: less than politicians on both sides of the debate is

68
00:03:42,560 --> 00:03:45,520
Speaker 1: sort of like almost willing it to be more important

69
00:03:45,760 --> 00:03:47,800
Speaker 1: than it is. I think there is a risk to

70
00:03:48,120 --> 00:03:51,360
Speaker 1: the referendum in an economic risk related to the referendum

71
00:03:51,400 --> 00:03:53,840
Speaker 1: in the UK, but it's short term and it's cyclical

72
00:03:53,880 --> 00:03:57,120
Speaker 1: in nature. Now unlike this is whether you know, the

73
00:03:57,200 --> 00:04:00,480
Speaker 1: economic situation in the position in the cycle in the

74
00:04:00,600 --> 00:04:03,320
Speaker 1: UK is very different to the US, although there are

75
00:04:03,360 --> 00:04:07,640
Speaker 1: lots of surface similarities between the two economies. The consumer

76
00:04:07,840 --> 00:04:11,360
Speaker 1: cycle in the UK is very mature. It's this is

77
00:04:11,400 --> 00:04:13,920
Speaker 1: precisely the point in a sort of a typical UK

78
00:04:14,080 --> 00:04:17,560
Speaker 1: cycle when you would want business investment growth to be

79
00:04:17,600 --> 00:04:21,440
Speaker 1: replacing consumer led growth that we've had for you for

80
00:04:21,480 --> 00:04:23,960
Speaker 1: the last five or six years. In the UK. The

81
00:04:24,040 --> 00:04:27,279
Speaker 1: data this morning showed that the household savings rates in

82
00:04:27,320 --> 00:04:31,880
Speaker 1: the UK and all time low, and you're introducing a

83
00:04:31,920 --> 00:04:36,440
Speaker 1: big dose of business incertainty at the worst possible time

84
00:04:36,920 --> 00:04:39,240
Speaker 1: in the cycle. We you know, we put this through

85
00:04:39,279 --> 00:04:43,640
Speaker 1: our UK model, which we review every quarter, putting a

86
00:04:43,720 --> 00:04:46,880
Speaker 1: number of assumptions about all of the worst reasonable case

87
00:04:46,960 --> 00:04:49,640
Speaker 1: that we could come up with for Brexit, and we thought,

88
00:04:49,720 --> 00:04:53,400
Speaker 1: you know, growth could be half a percent lower this year,

89
00:04:53,720 --> 00:04:57,600
Speaker 1: next year one point one percent lower. The CBI, the

90
00:04:57,640 --> 00:05:00,600
Speaker 1: Confederation from British Industry in the UK, did a similar

91
00:05:00,640 --> 00:05:03,800
Speaker 1: exercise there came up with a range of GDP being

92
00:05:03,839 --> 00:05:07,039
Speaker 1: point eight to one point four percent lower next year.

93
00:05:07,080 --> 00:05:10,120
Speaker 1: So you know, broadly agreeing with that. So I think

94
00:05:10,160 --> 00:05:12,560
Speaker 1: there are these two distinct phases. There's the first phase

95
00:05:12,560 --> 00:05:15,240
Speaker 1: where yes, there is that uncertainty and it does provide

96
00:05:15,279 --> 00:05:18,440
Speaker 1: a big shot to business investments and you do see

97
00:05:18,480 --> 00:05:22,000
Speaker 1: growth lower. But then longer term, you're absolutely right, it

98
00:05:22,120 --> 00:05:26,360
Speaker 1: is difficult to come up with a scenario which has

99
00:05:26,400 --> 00:05:29,120
Speaker 1: a very big or a very a very big positive

100
00:05:29,240 --> 00:05:33,880
Speaker 1: or negative effect on on trend GDP growth. We've done that.

101
00:05:33,920 --> 00:05:36,480
Speaker 1: We think, you know, we would say, you know, if

102
00:05:37,279 --> 00:05:40,440
Speaker 1: you are as as as as positive or as negative

103
00:05:40,480 --> 00:05:43,680
Speaker 1: about this as you could be then in then in

104
00:05:43,760 --> 00:05:47,760
Speaker 1: twenty years time, UK GDP could be two percent higher

105
00:05:47,839 --> 00:05:50,240
Speaker 1: or it could be two percent. Not the trend rate

106
00:05:50,360 --> 00:05:52,920
Speaker 1: of GDP, the level. So you know these aren't you know,

107
00:05:53,000 --> 00:05:56,200
Speaker 1: this isn't the stuff that the economic face of nations

108
00:05:56,320 --> 00:06:01,719
Speaker 1: rests on. Give me an update on the lamber Street

109
00:06:01,760 --> 00:06:06,960
Speaker 1: research called an animal spirit the nominal GDP of the world.

110
00:06:07,080 --> 00:06:10,000
Speaker 1: I mean, we're seeing everybody marked down a J. Roderdaks

111
00:06:10,040 --> 00:06:13,160
Speaker 1: are just down from Barclays. They marked under an optimistic

112
00:06:13,200 --> 00:06:16,640
Speaker 1: three point one, others are way below that. Where are

113
00:06:16,640 --> 00:06:22,920
Speaker 1: you people on global recession? UM? I think that we're

114
00:06:22,960 --> 00:06:26,960
Speaker 1: in a very unusual position in the global economy, NICs,

115
00:06:27,080 --> 00:06:30,480
Speaker 1: very different to what lots of investor what all investors

116
00:06:30,520 --> 00:06:34,599
Speaker 1: have been used to their entire investment careers. Really, where

117
00:06:34,640 --> 00:06:38,159
Speaker 1: we have this unusual situation where there is positive real

118
00:06:38,240 --> 00:06:43,039
Speaker 1: growth globally and of course with especially within the United States,

119
00:06:43,080 --> 00:06:45,880
Speaker 1: positive real goalth. But then you see, you know, big

120
00:06:45,920 --> 00:06:49,480
Speaker 1: pockets of severe deflight and of falling prices. And I think,

121
00:06:49,520 --> 00:06:51,600
Speaker 1: you know, when we're speaking to our clients, when we're

122
00:06:51,600 --> 00:06:54,840
Speaker 1: speaking to investors, a lot of the questions that we

123
00:06:54,920 --> 00:06:57,160
Speaker 1: get come down to this. You know, if you if

124
00:06:57,160 --> 00:07:00,800
Speaker 1: you take the essence of the question is basically, you know,

125
00:07:00,880 --> 00:07:02,560
Speaker 1: how can how can this be? How can we have

126
00:07:02,680 --> 00:07:05,320
Speaker 1: real growth and deflation at the same time. One of

127
00:07:05,360 --> 00:07:09,040
Speaker 1: these must win, you know, either the real growth continues

128
00:07:09,080 --> 00:07:12,120
Speaker 1: and ultimately becomes reflationary, or the deflation and causes some

129
00:07:12,200 --> 00:07:14,680
Speaker 1: sort of financial crisis and ends real goals. And our

130
00:07:14,800 --> 00:07:18,160
Speaker 1: point is that you know that that premise is totally wrong.

131
00:07:18,240 --> 00:07:22,880
Speaker 1: That you know that after fifty years of real growth

132
00:07:22,920 --> 00:07:26,840
Speaker 1: and inflation being positively correlated, we now in a model

133
00:07:26,840 --> 00:07:29,720
Speaker 1: of global growth where you have to see deflation in

134
00:07:29,800 --> 00:07:32,880
Speaker 1: some sectors of the global economy in order to generate

135
00:07:32,920 --> 00:07:36,280
Speaker 1: the real growth um in in other sectors. So yes,

136
00:07:36,320 --> 00:07:38,920
Speaker 1: I think a growth figure of around three percent, perhaps

137
00:07:38,960 --> 00:07:41,960
Speaker 1: a little bit north of three percent, is absolutely right.

138
00:07:42,000 --> 00:07:46,000
Speaker 1: That doesn't mean, though, that the global deflationary pressures that

139
00:07:46,080 --> 00:07:48,920
Speaker 1: you know that's so effect nominal investments and in a

140
00:07:49,000 --> 00:07:51,400
Speaker 1: number of ways are going to go away. There aren't

141
00:07:51,480 --> 00:07:55,400
Speaker 1: a critical you know something that an investment implication of

142
00:07:55,680 --> 00:08:00,360
Speaker 1: that change in the growth model is that the Mings

143
00:08:00,480 --> 00:08:04,560
Speaker 1: cycle has become disjointed from the real economic cycle. And

144
00:08:04,600 --> 00:08:06,880
Speaker 1: that's I think, you know, that's what was worrying investors,

145
00:08:07,280 --> 00:08:09,840
Speaker 1: especially in January and February in the time we got

146
00:08:09,880 --> 00:08:11,920
Speaker 1: left with you to rip up the script here and

147
00:08:12,000 --> 00:08:15,480
Speaker 1: out of your LSE economic history. If you look at

148
00:08:15,480 --> 00:08:18,680
Speaker 1: a log chart right now of world trade, it's breathtaking

149
00:08:18,800 --> 00:08:22,920
Speaker 1: how flat it's become and for how chronically long it's become.

150
00:08:23,480 --> 00:08:26,040
Speaker 1: Is there a risk here of the regional blocks of

151
00:08:26,080 --> 00:08:29,760
Speaker 1: the nineteen thirties are the time of Lionel Robbins the

152
00:08:29,880 --> 00:08:33,880
Speaker 1: forties and fifties, Yes, I mean I think this is

153
00:08:34,480 --> 00:08:37,600
Speaker 1: this is this is the fascinating points and this is

154
00:08:37,640 --> 00:08:40,920
Speaker 1: when we're thinking about the risks to you know, a

155
00:08:41,000 --> 00:08:45,840
Speaker 1: small open economy like the UK, the risks aren't you know,

156
00:08:46,400 --> 00:08:49,400
Speaker 1: the big risk to trade is an oween or out

157
00:08:49,440 --> 00:08:52,079
Speaker 1: of the U. There are big risks there. And it

158
00:08:52,240 --> 00:08:55,280
Speaker 1: is absolutely what you've been talking about that there is

159
00:08:55,320 --> 00:08:58,199
Speaker 1: an apparent sort of the appears to be an end

160
00:08:58,480 --> 00:09:01,440
Speaker 1: to that process of global zation, which again has been

161
00:09:01,640 --> 00:09:04,520
Speaker 1: you know, is all we've known, really all everybody is

162
00:09:04,559 --> 00:09:07,280
Speaker 1: known for the last fifty or sixty years of trade,

163
00:09:07,679 --> 00:09:10,959
Speaker 1: of trade growing at a faster rate than g d

164
00:09:11,080 --> 00:09:14,600
Speaker 1: P and the and the global economy becoming more more

165
00:09:14,760 --> 00:09:17,840
Speaker 1: globally that that seemed to end almost you know, with

166
00:09:17,960 --> 00:09:22,920
Speaker 1: a with with a bang, with the with the financial crisis,

167
00:09:22,960 --> 00:09:25,680
Speaker 1: I think to an extent, why is that? Well it well,

168
00:09:25,679 --> 00:09:30,040
Speaker 1: it exposed the very fragile, credit dependent nature of the

169
00:09:30,120 --> 00:09:33,880
Speaker 1: lord of that trade. But they're more worrying looking forward.

170
00:09:34,200 --> 00:09:38,280
Speaker 1: It's it's thrown up. Politicians are all around the world,

171
00:09:38,280 --> 00:09:42,240
Speaker 1: and of course particularly prominently in the United States. Politicians

172
00:09:42,240 --> 00:09:46,520
Speaker 1: that that that that are opposed to you know what

173
00:09:46,720 --> 00:09:49,760
Speaker 1: has been that accepted wisdom of globalization now over the

174
00:09:49,840 --> 00:09:52,320
Speaker 1: last fifty or sixty years that yes, like he saw

175
00:09:52,360 --> 00:09:57,319
Speaker 1: a drift toward economic nationalism in the mid thirties, that

176
00:09:57,760 --> 00:10:00,880
Speaker 1: you know, with something of a bag compared to when

177
00:10:00,880 --> 00:10:04,120
Speaker 1: the depression occurred. Are you seeing the same thing happen

178
00:10:04,440 --> 00:10:06,960
Speaker 1: today again with something of a lag too, when the

179
00:10:07,040 --> 00:10:11,240
Speaker 1: actual happens. Let's leave with the Richard Badley thank us

180
00:10:11,320 --> 00:10:14,640
Speaker 1: so much with Charles Dumons Lombard Street research. Um really

181
00:10:14,800 --> 00:10:16,920
Speaker 1: to give you some different perspective, folks here end of

182
00:10:16,960 --> 00:10:20,199
Speaker 1: court of the surprises now the first quarter of it particularly,

183
00:10:20,440 --> 00:10:23,240
Speaker 1: they look forward very global Wall Street, as we were

184
00:10:23,240 --> 00:10:25,080
Speaker 1: talking with Bob Sinch about has got to be one

185
00:10:25,120 --> 00:10:27,679
Speaker 1: of the themes the cover of the f t today

186
00:10:27,679 --> 00:10:30,600
Speaker 1: the many articles Christine Harper and Michael Moore are doing

187
00:10:30,600 --> 00:10:35,120
Speaker 1: for Bloomberg News. This state of employment, that's a core audience,

188
00:10:35,840 --> 00:10:38,800
Speaker 1: that huge deal, that's absolutely key, and we're gonna find

189
00:10:38,840 --> 00:10:42,160
Speaker 1: more information tomorrow about the state of the U S employment,

190
00:10:42,760 --> 00:10:47,240
Speaker 1: especially after those strong ADP numbers yesterday. I'm looking forward

191
00:10:47,280 --> 00:10:49,960
Speaker 1: to hearing what Bill Gross has to say after we

192
00:10:49,960 --> 00:10:53,080
Speaker 1: get non farm payroll and his note as well. After

193
00:10:54,080 --> 00:10:58,400
Speaker 1: the discussion of payrolls, we will address Mr Gross's basic idea,

194
00:10:58,440 --> 00:11:01,560
Speaker 1: which is general, get going because the markets are gonna

195
00:11:01,600 --> 00:11:03,719
Speaker 1: get going for you. It was a terse note from

196
00:11:03,720 --> 00:11:06,800
Speaker 1: Bill Gross, Jim Glassman and Bill Gross joining us tomorrow

197
00:11:07,400 --> 00:11:12,520
Speaker 1: in two hours. Kathleen Hayes and Charles Evans of Chicago.

198
00:11:12,840 --> 00:11:14,120
Speaker 1: It's Bloomberg Surveillance