Transcripts For BLOOMBERG On The Move 20160614 : vimarsana.c

BLOOMBERG On The Move June 14, 2016

And a big day for china. Will be msci back beijing and include the countrys domestic shares into its benchmarks . U. K. ,the momentum in the the momentum surrounding the brexit story, it just seems to be gathering day by day. These power pulls out overnight, and then theres this. This is britains biggest selling newspaper. For those of you who dont know, this is an influential piece of paper in the u. K. Have . Ch influence will it how much will mr. Murdock influence the debate in the surrounding whether or not the u. K. Should leave . It has certainly had a big impact on past votes in the United Kingdom. Matt, what is the take in berlin . You have your ear to the ground. Is there a sense of nervousness for those that want the u. K. To remain . Matt i have to say, from talking to commissioners in brussels, there was real concern. They want the u. K. To remain, even though each commissioner i spoke with said they put together absolutely no contingency plan. When you talk to the people on the street in germany, they really feel as though being in the eu is somewhat of a privilege, and if britain wants to leave, britain should then leave, but shouldnt expect to have any of the privileges that come with eu membership after the fact. Its more of a political question, and much like it is in england, the politicians think very differently than the people. Guy some do. Some dont. Plenty over here feel they have there is to the ground and that they are on the right side of the story. We have a great set of guests lined up. The former boss of sainsburys will be joining us shortly to give us his take. Usrge osborne tells yesterday that Business Needs to step up on the side of remain. We are less than half an hour away from the european open; lets take a look at Asset Classes and what we think will happen at the getgo of trade. The bloomberg is showing us that we will see another negative story when it comes to the european open. Continuing that is a sterling story you need to keep an eye on. Whats happening in asia is just as critical. Matt yeah. The nikkei is down once again. We didnt have the strong losses in hong kong or on the mainland, a look at the nikkei now. 15,000, more investors fleeing for the safety of the yen as brexit odds rise. Regardless of your feelings on whether or not it is a good thing or a bad thing, it is definitely the case that investors are fleeing for safety when they are concerned about the possibility of a brexit. Recor low yield ford the bund, and brent crude down as well. Lets get to the first work with haslinda amin. Matt, britain appears to be on course to exit the European Union, with four poles from three companies putting the leave campaign ahead of remain. He uks biggest selling newspaper the sun has backed brexit on its front page. Yesterday saw a day of intense volatility in the currency market as the one between losses of 1 and gains of half a percent says the london nightclub killer was in style by extremist propaganda, but there is no evidence he was part of a wider group. He says he was the kind of homegrown terrorists that authorities have long feared. He was interviewed twice a was able to buy a handgun legally because he had no criminal record. 49 people were killed in the nightclub shooting. Heat the last minute, announced allegiance to isil, b ut there is no evidence so far that he was directed. There is no direct evidence that he was part of a larger plot. With less than two weeks to go before the spanish general election, the candidates of the four Major Political parties met facetoface last night in a televised debate. There were accusations of corruption. Were that he presented a package of laws against corruptions, which sanchez ordered against. Global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. You can find more stories on the bloomberg at top. Guy thanks very much. Lets stay in asia and talk about whats happening. The msci makes an important decision later on today, after the u. S. Close. The deputy md, david lipton, who we hope to speak to later, is making some comments that china should cut its vulnerabilities and allow growth near 6 . Vulnerability is still rising, but the midterm outlook, according to the imf, is uncertain on credit and capacity concerns and the nearterm outlook is more poignant with policy support. That sounds like the imf is backing what the chinese are doing, encouraging effective yuan floats. The Exchange Rate is becoming more flexible. You are looking at a live feed. F that event taking place i want to quickly show you the terminal the dollar versus the renminbi. This is a longterm chart that goes all the way back to 2011, approaching this 2015 hi that we saw for the dollar and we are getting quite close to that level. That may be sending a few alarm bells ringing. One of the reasons is because of whats happening with brexit. Lets welcome our guest, the cio of sex oh bank. Good morning. The brexit story is having an impact on a bunch of things. The economy has its own issues to deal with, and that currency has been having issues for some time. Luckily through the world you see right now. If you look at china to start off, which has been the big growth since the financial crisis, clearly they have been in a credit expansion, running credit growth in excess of gdp which means they are building debt. Driven by policy is the ability to create liquidity. Qe is used toall Service Existing debt. We dont have a lot to do Infrastructure Investment so what we see is what china is trying to achieve and when you look at that chart, it is weakening the currency in creating weakness in the chinese system. But the issue remains the same there isnt any fundamental demand. We have exported from china in terms of ppi at cpi, ppi globally as negative and we are in a world where we can to get it started. Guy thats having a big impact on fixed income trade. Matt it is. The bund has had a new low here. 0. 0 a look at my screen 14 is where it had been trading, and it has even been lower. Less than one 100th of 1 , the alltime low yield. I thought it was interesting yesterday we had people saying look, get used to this new world, protection of capital is what you are after. Excepting a 0 rate of return is what you do and you are happy if everybody else except the same rate of return and you make a little bit of money. Its going to be very difficult, especially in a massive liability environment. Ou have infinite liability Pension Funds effectively will be bankrupt if you continue with these levels, so we need Interest Rate to go back up. I will agree with the assumption you made that you have to be very defensive. We have massively overweight the 30 year bonds and the reason is that with everything in the world right now, at the margin, increasing volatility and taking us further away from any structural reform, with the political election, brexit, all of this meaning less clarity to the world which makes you want to belong and the fixed income assets dont forget that u. S. Still paid you in excess of 150 basis points over the rest of the g7. It makes no sense in a world with the biggest Capital Market being the u. S. Guy we will carry on with steve through the program. Up next, we will look at the state of the race. With just nine days to go until the brexit vote, this is one of the u. K. s biggest newspapers. This morning, it is backing the leave campaign. What impact will the sun have, next. Guy britain appears to be on course to exit their European Union, with three polls putting the leaf campaign ahead. , uks biggestlow selling newspaper has backed brexit on its front page. Lets get our thoughts with the ceo does this set with the narrative you are seeing . Absolutely. I dont know anyone in the financial industry in the u. K. Who wants to stay. I think its a narrative that people dont trust politicians. The camp on the campaign has been talking down to people. I dont think it works what works is getting clarity and showing the vision and the eu should be concerned. But they should also be concerned if they vote to stay. Europe is already twotier. It gives you a fresh chance to reorganize and get started. This is a wakeup call for the eu. Its the eu and how its going to work. Guy this compiles and goes through the odds and we know have it at 42 . This chart you can see it climbing over the last month, absolutely climbing. What do you think caused that . Is it that people have woken up and decided this is the way they will go, is it a kneejerk reaction, a wellinformed decision . The process of this move has been incredibly poor the lack of information, the ability to make informed decision incredibly tough. We know that people make up their minds between two weeks to one week before the election. What might happen now, it seems like that is the time people leave ahead of the actual votes. Whats going on is that people feel talk to down to, and they dont feel theres any solution. The state campaign has always been about scaring how does George Osborne know he cant even predict the next six months budget deficit, but he can tell me in 2030 . There is zero ability to be able to foretell what will happen, good or bad. To close not going down trade with the u. K. They run a huge surplus. I think this is about redefinition. Inability, the social contract the brexit comes at a bad time, basically. What thederstand central bank thinks. Why thisderstand negative Interest Rate, because nothing is working. Its not because we are about to turn the corner. The fallacy matt i think a lot of people are concerned that we are at the end of the line. We cant keep drinking the koolaid because eventually you will get the worst hangover youve ever gotten. Not koolaid, obviously. [laughter] matt i want to talk about how its affecting the equity markets. If you look at the volatility, you can see it has jumped 41 in the last three days. Regardless of your take on which way you want to go, leave or stay, it is definitely throwing the markets into a fit. Absolutely. And i think that this chart to show is the risk reversal in sterling and the equity market. Gets,re scared the market the more the market needs to hedge the brexit likelihood, the more down the market goes. Its exactly what you said. If you look at the odds, what i have read is that to win three is being placed on leave, the reverse of what we saw through the lead up to the campaign. I think the momentum is also adding to it, but lets not forget that its still a 5050 road. I think it will be much more narrow than people want it to be, and i think the ratification either way shows that the market feels very threatened. The need something. We need visions, we need the ability to do infrastructure education, basic research, all the stuff that takes a long time to implement. Guy is the market set up correctly . You talk about the risk reversal. People see the asymmetry of what they are looking at. They look at whats happening, and then they derive other assets. Is the market getting set up for this one . As we have seen, the real money has been going into the betting, and you wonder where the real money is sitting in the financial markets. When i talked to fund a week agohey say everyone told me there was an 80 chance of stay, so if i did anything out with applicable. I would look like a fool. I dont think theres a plane be. I dont think theres a plan b for anyone in the industry. Everyone was thinking it was assumed. To weeks ago was a nonissue. Looked at Business People there was a clear consensus. Its going to definitely be a stay, and we wanted to be a leave. And now its two weeks later and everything is on the table and there is no contingency. Whats interesting is in terms of volatility and is still easier to buy at the money, straddles on the european equities than it is to buy on the footse. Guy simple mathematics. But the mathematics, it isnd of matt still trading at 26 times earnings, still relatively expensive. He will stay with us. We are going to take a break, minutes away from the open of trading in europe. We will take a look at the potential corporate movers, including electronics companies. Guy 7 53 in london. A great day anin london. It looks like it will outperform once again; the reason is that sterling is down. It doesnt take a great deal of mathematics to figure out, with the Global Income stream at a weaker denominated currency, those assets should be worth more. Other markets look like they will open a little bit softer. Lets talk about the stocks we need to focus on. Corporate news this morning lets go to caroline hyde. Caroline amidst all the brexit concern and volatility and uncertainty, we are still willing to splash the cash on the u. K. Stock. Its a u. K. Listed Company Electronics component which has been bid for with a juicy premium of 61 . The offer has an enterprise value of about 792 million pounds. Volatilityat brexit is not pawning off volatility. Interestingly, one u. K. Stock could be on the downside by the it operatest 5 . Coaches, buses, trains. One area of that franchise is very challenging. Watch this stock fall very challenging for industrial and it affects many commuter outlets. Then swiss outlet managers could plummet 10 of the open look how much is already lost. Down 30 of the last 12 months and giving us another profit warning that the overall conditions are eroding. Guy great stuff. Thank you very much. The market open is next. Guy good morning. Youre watching on the move. We are right here in the city of london. Im right beside matt miller at moments away from the start of european trading. Matt has your morning brief. Matt four polls with the u. K. On course to leave the eu. Should we believe the numbers . We asked one of the countrys leading experts. Britains biggest selling newspaper, the son, backs a brexit. Is mr. Murdock on the right side of history guy will ask a justin king. A big day for china. Will the msci back beijing and included the countries the mystic shares into its domestic shares into its benchmarks . Guy lets took about what we are expecting at this european open. We are down on the euro stoxx by 1 . We are going to see all softer start. Ca softer this is the ftse 100. London predicted to outperform today. But as you can see, we are already starting to fall. This is the london market open. This is the ftse 100. That is a flat line. Were moving into negative territory in terms of the other markets. Lets take a quick look at where we stand. London market is down by. 9 . Lets run in the weei function. 1. 2 . Ch iran jumping up a soft open for the European Equity markets. The market is open in paris and london which is down by. 6 . Where waiting for the german markets to open. A softer start to the day we are waiting for the german mark to open. A softer start to the day. Caroline risk aversion plaguing the european markets. You got the Federal Reserve meeting today. You got the bank of japan later this make test later this week. All eyes later this week. All eyes on brexit. This is the imap function digging into what sectors are the most on the move. Energy being hit. Weve got more u. S. Data production on stockpiles later today. The financials are falling. Top banks up by. 9 . What are the ramifications if the u. K. Were to leave the European Union . What does that mean for the United Kingdom banks . Clearly concerns among the equity buyers. They are getting out of this risky asset. They are getting into havens. Tumble. Ontinuing to and new record. We got record lows, japanese debt, australian debt. 1. 182 is where we are currently opening. The yield falling, prices rising when it comes to u. K. Bonds. Youre getting into havens, the japanese yen. Getting out of the volatility trade. There are concerns. This is volatility jumping at the moment when you dig in on the bloomberg, 41 jump in three days. Kingdom. Or the united keep an eye. Thes have a look at some of tops on the move. I have a couple of u. K. Players. M a andnder and resolutely unmoved at the moment. 51 . It meet the ahead and dam holding. Gam holding. Tycho a couple of things we need to talk about. Guy a couple of things we need to talk about it we got u. K. Guild opening at a fresh record of 1. 17. The boat is on the move the boot is on the move. 002 i have seen a drop to percent. 002 . E have come so close. 002 is what you get if you loan your jump if you on your money to germany for 10 years. Zero t any closer to i guess we will likely go negative if we get more of a brexit lean in these polls. A couple of really fascinating lines over the last couple of minutes. William hill, the bookmaker in the u. K. , says leave will be the favorite brexit that by the weekend. We got comments coming through from the imf. Beis saying a brexit would unhelpful. To who . You have to ask. I want to show you what is happening on my bloomberg. This is the dollar versus the polish losee. Big move there. The markets seen is racing to racing is racing to catch up. Matt there is not a plan b or c. Everyone has been playing it safe saying i dont want to do anything. It would be expensive. Now i think everyone is scrambling. I think we have to put into perspective. As matt said earlier, we are in a world where we need change. This is the change. Exit becomes a catalyst. If you look back to 1992, it was very good for the stock market. The next six months could be very volatile, but this is good. Europe needs to be redefined. U. K. Has the worst productivity of any country in the g7. You have the twin deficit. Part of the reason a newspaper like the sun boeing comes out the sun comes out we need to change it i think this is going to be extremely positive for the markets. For the inability of Central Banks it is a huge wakeup call to these politicians who continue to talk down to us. What the market gives them is lowInterest Rates. Brexit to some extent to be quite liberating. Matt by the way, i was wondering following this european football story, is it true that england has never won a european cup . Is that maybe where the hard feelings come from . Is it because they have never been able to win a championship . I am kidding. Seriously, take a look at this chart that ive got over the last five years for the stoxx 600 index. The price action in white. In yellow, the priceearnings ratio. We are at 26 times earnings. We are trading still fairly high , close to a fiveyear high with the exception of this earnings. If people are selling off european stocks in worries about a brexit, they have not be

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