Transcripts For BLOOMBERG The Pulse 20240622 : vimarsana.com

BLOOMBERG The Pulse June 22, 2024

Francine welcome to the pulse or call the pulse. Super thursday has been dubbed the thursday of the year. The bank of england is said to publish a slew of data. The boe decision minute of it meeting are being released at lunchtime as the governor mark carney works to improve transparency. In this torrent of data, how many members are we expecting to call for an Interest Rate hike . That is the big question. The majority of economists do expect a split in the vote. There are nine members. 19 of the 20 economists surveyed by bloomberg expect if it expect a split. More than half expect to members to vote for decision. We have seen some vote for tighter policy, they dropped that in january when they all inflation fall. They will be closely watching to see of any others vote. Francine the strength of the currency is also compensating things for the governor. Absolutely. This is a tight rope he will have to walk as he delivers his press conference. The pound in the past month has been strengthening against most of its closest peers, in the past three months it is the only major currency out of 16 tracks by bloomberg that has actually strengthened against the dollar 16 tracks up by bloomberg that has actually strengthened against the dollar. A stronger pound could way on inflation. It could also affect exporters. U. K. Factories have reported lower export demand. That is what mark carney will have to balance today. Any comments he makes and any voting, any decision, we are expecting the rate to stay anywhere record low. Any voting and comments from carney you will have to watch closely about the effect on the pound. You could see a lot of volatility after the deluge of data at 12 00. Caroline thank you. The bank of england will be replacing releasing a flood of data at midday. What does that mean to analysts . One market pro breaks it down. Youll get that initial reaction boom from the vote. Then they will start coming over saying it is more dovish. You will get a secondary reaction, that is why it is volatile. David are we going to get a plethora of data which will slam into the market. We could get big moves. We will see in the future how important the data is. This is a day that moves markets much like in the u. S. We have the payrolls. I think the main thing to look for is the vote. What is the answer, what is the number . What has happened with the forecast . Have they raised it . The minutes will be about the urgency. If it is 6 3 you go in saying how close are they . You say what are they forecasting . We start getting down to the details. I think this is a people driven day. There is so much information. Can computers compute information faster than a human, of course. An algorithm has to learn from people. I think it will take three or four of these for the algorithms to kick in. All of that brings us to the question, will super thursday helped ease market volatility . Not all are convinced. Some are concerned about information overload. When will the boe increase Interest Rates . Speculation has been growing. Here is what mark carney had to say. Once Monetary Policy normalization begins, Interest Rate will proceed rates will proceed slowly and rise to a level in the medium term that is half as high as historic averages. In my view, the decision as to win to start such a process will likely come into sharper relief into the turn of the year. Francine the next guest believes we will see the rate rise. Mike, great to have you. How would you trade these markets into 12 00 . Mike obviously carney has become more about bush we have been cautious mark carney has become more cautious. We felt we got rich on evaluation. A valuations. Francine how do you look at the pound . We look at the strength of the pound, and the labor market data. I think the argument they will make i am not entirely sure i agree the argument they will make is the strength of the pound fx sterling over the next 1218 month. When you look at the back end of the forecast, that will be the strength of the domestic economy and the labor market which will dominate the inflation forecast. I suspect that is how they will play it. They have made comments on it. I think that is the way they will do it. They have one target, it is inflation rate. Core inflation is below 1 , headline will probably go negative. I personally do not see why they are in a rush. That seems to be the way they want to play it. Francine you are expecting the first Interest Rate rise in february or march of next are next year. Either february or may. The reason we are cautious is not so much about the first rate hike when it comes, it is more we are cautious on the level of intermediate yield. You look at the tenure below 2 . 10 year below 2 . A lot of it is about risk premier as we move into the hiking cycle, rather than when they pull the trigger. We would argue whether there is too little of risk premier weather than betting on the individual month. Francine how many members are expected to be hawkish . If you get three or four does it change the view . Mark we will probably get a couple maybe three. The key is the composition of who votes for what. All of the dissenters are likely to be from the independent on the bank of england. You have five internal members and for external, you need to shift one of those five. My instinct is the governor will be quite keen to manage his block of five as one over this appearance. If we were to give sentencing, it would be a big deal. Francine in june we heard about turmoil in greece, that was the only Factor Holding back some members from voting for an increase. Since the turmoil in china, they must looking at this, trying to figure out what it means for global growth. Mark there is always a part of the world looking in a tougher state. Greece is on our doorstep with the eurozone being our largest trading partner, that is why that worried them. With china they have not been a Major Trading partner. The volatility has been focused on the stock market, rather than the property market. My suspicion is they would downplay the risk, having played of the risk of greece just because of the risk being in the eurozone. I do not think they will play china as a big deal. Francine will we close the gap between the tenure guild tenure guild and u. S. Treasuries . Mark that has been stable. It is trading 30 basis points below. I will slip i suspect we will continue to trade below. A lot of that is in relation to what kind of rate cycle we can expect. In the u. K. It has been a hundred 30 basis points 130 basis points. Fed rate cycles tend to be bigger. The u. S. Rate structure will probably stay above the u. K. For the time being. We might see a bit of a convergence, but it relates to how much of a rate cycle we will get. The transmissions mechanism is cleaner. The shortterm variablerate mortgages are either shortterm fixed. Francine outside the u. K. We see so much Government Debt that is in negative rate territory. Why is that . Mark i think one is the ecb is continuing its program until september of next year. This falling commodity price further pressure on headline inflation rates. It relates to Commodity Prices and the ecb, i am not sure that will change soon. Francine thank you so much for that. We will be covering the bank of englands announcement at 12 00. Here is a look at what else is on our radar. Rio tinto has reported a 43 drop in profit after iron or prices collapsed. And 8. 2 billion expansion of the suez canal opens today. Dignitaries are expected to attend a lavish party. The project has been completed two years ahead of schedule. Aviation investigates say the debris washed up on the island is from the missing Malaysian Airlines plane. The malaysia Prime Minister made the announcement validating. That the plane crashed in march of last year. The uncertainty faced by the families during this time has been unspeakable. It is my hope that this confirmation however tragic and painful will at least bring certainty to the families and loved ones of the 239 people on board. They have our deepest sympathies and prayers. Francine millions of londoners are having to deal with the second q strike in a few months. Workers are staging a 24 hour walkout. London is looking at this it is a great deal. It is more jobs, more pay. We deliver a 24 hour tube for london. Francine why there is mining misery for rio tinto. Keep it right here. Francine welcome back, we are live on bloomberg tv and radio. The worlds secondlargest mining company, rio tinto has posted a 43 drop in their first half profit. Rangold reported earnings that came in line with estimates. We are told it is a good result. The profits up slightly. Earnings of 8 of the present. It is a good, solid performance. Francine for more information we are joined by jesse. Jesse, we have had a huge rise in commodities. Jesse rio tinto was 43 down. They also produce aluminum coal, and copper those commodities are also affected. Beating estimates, i fairly strong beat a fairly strong beat. They hit a six low at the end of last month. I think the market is grappling with the bearish forecast. Francine they have to convince shareholders it is worth sticking around. Jesse they have been cutting costs, they did a Share Buyback halfway through. There was an estimate that cost savings could underpin another buyback mixture. Next year. Perhaps that you may gain traction as the year goes on. Francine what are we expecting from bhp . Jesse you can probably expect a similar result. They have exposure to the energy space. It will be fascinating some have a Big Marketing division and they said that will help them offset. The big focus will be on how successful has the Marketing Division been . Francine it is all about china. Jesse thats right. A colleague said intel he market starts to see a reversal in some of these Economic Data points out of china, it will be difficult for Mining Companies to get attention from the wider investment community. Francine thank you. Up next, egypt opened its expansion of the suez canal, we look at the numbers involved next. Francine welcome back to the pulse. Here are the top headlines. Adidas failed to hit the back of the net with profit. The ceo is wearing money into marketing in attempt to close the sales gap with nike. Hiroshima is marking the anniversary of the atomic bomb attack. Caroline kennedy was there with around 100 world leaders. Bells ring out at 8 15 local time. A trial of a man who organized a killing has been adjourned. He is charged with failing to prevent an unlawful hunt. He says he did not do anything wrong. Cecil was a protected lion prosecutors say he was lured out of the safe area to allow the dentist to shoot him. Cecil was seriously wounded by an arrow and finished off with a gun. A 8. 2 million expansion to the u. S. Canal was completed. The project has been completed two years ahead of schedule. It is one of the most important trade routes in the world 150 years after it first opened, it is expanding. In the 19th century the suez canal took 10 years to build, thousands of workers lost to lives. The link allows ships to travel from europe to asia. About 8 of the world cargo passes through the canals. The Suez Canal Authority says the expansion will raise capacity and shorten journeys. It has not said how it plans to recoup the 8 billion spent on the project. Perhaps a bigger problem, shipping has dropped 20 after the global initial crisis financial crisis. According to analysts it would need to drive 9 a year for suez to reach its goal. Francine why eddie does it to score with the latest results. Why ideas francine welcome back to the pulse. We are just getting some breaking data out of the u. K. This is still important nonetheless. Lets go straight to caroline hyde. Caroline this is an outlook on how the economy has performed in june. It is a miss on the industrial front. Industrial production actually falling for the month of june down from 0. 4 . The estimate had been for slight growth. Disappointment on the industrial reduction side. Oil and gas had been the bone in previous months. Maybe that area slowing down. Meanwhile, manufacturing on the flip side has slightly beaten animist estimates. The estimate had been for half of that month for month. Looks as though the pound is reacting in terms of disappointment from the industrial front. Ill show you the pound against the dollar, down in negative, having been higher today. So much anticipation ahead of super thursday, the Monetary Policy committee results. Will we see any hints that they will be looking to raise rates . This is what the pound is doing versus the euro. Still higher. Francine caroline, thank you. Caroline hyde with the latest on this breaking data out of the u. K. Tesla has cut its fullyear sales forecast. The company now aims to deliver 50,000 to 55,000 cars this year. The ceo also says tesla is facing challenges on the model ask, while shares fell in afterhours trading. Rio tinto as reported a 43 drop in firsthalf profit after iron ore prices collapsed. Profit fell to 2. 9 billion from 5. 1 billion a year earlier. The bank of england will announce its Interest Rate decision later together with minutes of the meeting and Quarterly Economic forecast. This is the first time the central bank has scheduled simultaneous publication of all the data. Governor mark carney believes this will make the process more transparent. Our next guest is not expecting a lot today. He manages 86. 3 billion pounds. Great to have you on the program. Bank of england this is revolutionary. It is also revolutionary because this is when Interest Rates could start creeping higher. If you are a traitor, or and in a trader or an Investment Officer, this is a lot to digest very quickly. It is. Probably why hes picked august to do it. It is a relatively quiet month. Most people are not expecting a rate rise. We dont expect a forecast rise today. I think the more interesting thing will be to see whether the asset purchase is adjusted at all. If you think about how the fed responded in terms of dialing down qe before a rate rise, what the market hasnt thought about is why we continue to pump up the system and raise rates at the same time. We might look to see if theres an indication of an early move in that area. What i would say is that, we do think there are increasing inflationary pressures in the u. K. Economy. Thats partly a reflection of a year on year run rate of a Lower Oil Price and the effect that feeds through to consumers. A Rising Oil Price is a tax in developed markets. We see that benefit starting to feedthrough. One unusual index we follow white closely is the income tracker. It is an interesting index. It basically measures disposable income that consumers have to spend on nice things. What that shows is a 10 rise year on year in terms of personal Consumer Spending potential. Also, the thing we would watch at this point for the bank of england is, wage inflation. That has been the last domino to fall from yellens perspective and carneys perspective area perspective. Francine when are you expecting an Interest Rate rise . Does it mean i will be a little worse off and does it mean that as chief Investment Officer you may stay out of discretionary funds . All indications have been that we expect a slow rise in rates. That has been the clear steer. In terms of providing nasty surprises to markets, broadly speaking, yellen and carney have been careful to provide some gardens some guidance. What i think we expect is, what we will start to see indications of a rate rise. What does that mean for you . I dont think it means that much in the shortterm. If you look at Mortgage Rates most consumers have been increasing their fixedrate mortgage. Theres a variable element, but a small rise, given my point about the rise in disposable income, people probably wouldnt notice a Material Change in a quarterpoint rise. Francine what does it mean for the markets . Gilts have already started to price in expectation of rate rises. Depending on which way you choose to measure that, some go for march, some go for may, we think there is an outside chance of a rise at the backend of this year. We still expect the fed to go first. Our economist has been more bearish. The rest of us think near the back end of the year. I think carney follows thereafter. Francine thank you so much for now. Piers stays with us and we will be talking about stock next. Adidas has missed estimates. They are struggling to match the mans from last summers world cup as the company tries to close the sales cap. Hans nichols has the latest from berlin. The bar was set quite high. Hans the expectation was for a big profit. Profit came in just one million short. Not a huge miss. Stock is trading up this morning in part because they had good overall revenues but also they are talking about a plan for tailormade. This has been leading some of their losses. When you look at their brand, you see just what a problem golf is for adidas. You have id, the actual brand, even reebok has had its struggles, but then you have the tailormade unit down 26 on the year. They are talking to an investment bank, exploring options about what to do possibly sell that unit. The question is, how much is it worth and what do investors think . This is a company that is in transition. They want bigger market share in the states. You look at where they are in the states. They are clearly in second place. They are in danger of falling to a thirdplace in some categories. Their strategy, they do want to focus on six trendsetting cities. We are a couple months in. It is almost too early to tell. The cities, not berlin. Francine not very cool runners but at least you are runners which some people arent at all. Adidas also announced it has acquired a mobile app for an enterprise value of 220 million euros. Why . Hans they are getting a bunch of users, 70 million users. But adidas is linked to this game. Under armour went on a shopping spree last year and bought 560 million in different apps. Everyone says you need to connect your shoes with your heart with your wrist. That is what these apps do. It looks like adidas is at the table down. They are late to the game. Weve had al

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