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tv   Bloomberg Markets European Close  Bloomberg  June 24, 2016 11:00am-12:01pm EDT

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close on bloomberg markets. ♪ 30 minutes to go on the trading session in europe. here is what we are watching. the vote no and the vote no one was expecting. after shots in that nation and throughout the globe. every asset classes living after this historic vote has volatility puts investors on and today. vonnie: and a massive shift in power. world leaders went in and plan the next move. ♪ mark: it has been a history making 12 hours in the u.k. -- now the aftershock of the brexit boat.
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sterling plunging to its lowest level since 1985. the ftse, the biggest a klein ever earlier. the fallout has cost david cameron his job. the prime minister stepping down after suffering a massive defeat. states in the united markets reacting negatively. there is some stabilization. the dow is down 2.4%. that's better than the 500 plus points we saw earlier. 2.5% and the nasdaq down 3%. president obama saying in a statement the people of the united kingdom have spoken and we respect their decision. to vote to leave play numeral in the race for the white house. donald trump in scotland today, saying that people want to take their country and their borders back. mark: we will bring youthful coverage in the bloomberg news team today. we have reporters standing by. caroline is in berlin. john is in london.
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in new york, julie has the latest market reaction. let's look at what is happening in the markets today. i will show you three charts that best sum up the mood in global assets. goal is the haven of choice today, earlier rising 8%. it was the most since 2008. the yen up against the dollar by 6%. they crossed 100 yen earlier today. the ftse but the biggest decline ever. it has recovered. it's an international index. it will not be hurt as much as those companies that are dependent on the u.k. economy. the pound, the biggest fall ever against the dollar. down by 11% earlier. down a mere 8% now. down.e got yields coming we have got yields in the periphery coming down. that is why the spread between
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germany and spain is at its highest levels since 2014. . we are seeing credit markets. the cost of protecting european corporate bonds rising the most since 2008. the cost of protecting insurers today, the biggest rise since 2007. all asset classes have been affected by this vote. we are 90 minutes into the trading day in the u.s. julie has the latest. how is it looking? julie: we have got the worst selloff since the january-february selloff that took the major averages for the lows for the year. the nasdaq down 2.8% right now. the nasdaq down 2.8% right now. i wanted to look at the futures. at one point the index here fellas much is 5%. that triggered a circuit breaker. momentarily it was paused.
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we've seen more stabilization that bonnie was referring to. bouncing off of those low levels overnight as the vote outcome was becoming increasingly clear. we have got a broad-based selloff. utilities are trading lower. financials, materials, information technology, energy some of the worst performers. invesco is the worst-performing stock in the s&p 500. we have seen a lot of financial selloff today. other decliners included the auto-parts makers that see europe as one of the big markets. we have a chart of this, as priceline reflecting the declines in trouble stocks today. the ripple effect. the 10 year note in the u.s. is notable. people are looking for safety. that is sending the yield down by the most in a single day since 2009. i-19 basis point move.
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move.9 basis point against theust pound, but versus a broad basket of currencies. mark: let's take a look at what is developing run europe. caroline hyde is in berlin. john joins us in london as well. busy, busy day. how is merkel and the german government reacting to today's brexit? about lunchtime she took to the airways. pragmatic as ever. she has a balancing act on her hand. there is the desire to punish to start toingdom potentially feel the domino effect. the right-wing party only -- already calling for referendums there. head amidpt a cool
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the stifling 34 degrees heat in berlin. she has called for a calm and measured response. you heard from her leader of the finance, the economic minister. disappointment at it from the foreign minister. i spoke to the leader of the foreign affairs committee in berlin and he says it was a catastrophe. what can we expect next? caroline: it happens tomorrow. , 8:00 up right in early a.m. and united kingdom we will see the foreign leaders of the sixth original eu founders. foreign ministers flying over from luxembourg, france, italy, belgium, netherlands. all meeting with a german foreign minister to decide on the next step. we will be at that meeting. and monday we have merkel
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franceng holland from and the eu leader, the eu president to meet on monday. the very fact that the u.k. leaving the eu, he warned this could spell the end of the western political civilization as it stood. we really hope that does not happen. for germany, it is all about business. the u.k. is germany's biggest trading partner. merkel wants to support her german businesses. mark: thank you very much. front seen, what is the mood like on the ground? mood is a little bit surreal, a little bit subliminal. you have a lot of shouting in the background. it's clear there is a sense of resentment from the eu.
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people come up and ask if it is true? is a treat the eu parliament president wants us out as soon as possible? is a true he ceases as infighting with the party rather than the u.k. really deciding whether they want to leave the eu? there is quite a strange story at westminster that was reported by some of the press. there was apparently a record number of people in the u.k. looking up with the eu is. they look at the market reaction and they are trying to figure it out. a highly is parliament. -- behind me is parliament. you see a party divided, the tory party. david cameron says he will resign in october. it is hard to figure who they will put up next i do next leader of the party could be an finding cohesion in the party. and there is rumors that labor might want to overthrow the current leader for some who is a
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better chance of becoming prime minister. is certainly a game of chess at the moment. mark: thanks a lot. the u.k. political system is shaken to the core. john: we have not seen anything like this in a generation. we have not seen anything like this in a generation. there is the conservative party in meltdown and there are a lot of reports about the labour party as well. we will see more attacks on jeremy corbyn. really this is a historic day in the modern history of united kingdom, a data we have not seen in 30 or 40 years. mark: we will come back from you -- to you a little later. a day we have not seen for a generation. much more on bloomberg television's breaking news coverage of the brexit vote. stay tuned. ♪
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vonnie: live from london and new york, i'm vonnie quinn. mark: this is the european close on bloomberg television. vonnie: what it means for investors. we are joined now by the managing director at pimco europe. you had a pretty sleepless night. what was the question the cap coming in to you from clients? key question they want to know is whether this is a systemic event or not. decision --u.k.'s what are the ramifications for the markets and for economies more generally? -- how important is this in the grand scheme of things? vonnie: we did see some
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turbulence throw the evening session and the overnight session in asia and london. my things call my next week? michael: i think our expectation is that things should calm down a little. we have seen big moves today but a lot of the moves today was having come from a position whereby the market went into last night with an 80% shock. back move but taking us to stages we saw in the last month. you look at the size of the moves, our hope and expectation is we will see some call next week. we all have to recognize we do live in a world where these uncertain events to happen. there are risks out there. cautious optimism is a reasonable phrase. one should not be overly complacent given what happened in the last 24 hours. been the trade today has
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investing core european bonds, sell the periphery. this bread on the german-spanish 10 year's 1.69%, the highest since 2014. will the ecb keep a lid on that? michael: we think they will try, yes. they have been pretty active in the european markets today. that gives you a segment of their intent. spain is to some degree the next focal point of attention. we have the elections there on sunday. it would have been very disruptive had we had a bigger move on spain today. back at this up kind of peaks spread we have seen in the last month or so. so far i think the ecb has done a reasonable job of containing a very difficult 24 hours. next from- what is
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the bank of england? rate cuts or rate hikes? michael: i think when the dust settles it will be relatively clear with the bank of england should do. there are two views of what the bank should do. you can be worried about the import price effects of the sterling falling, and you should be worried about the growth. we think they should be more worried about the growth affects and will probably cut the effects of the year down to zero. two.arget is the issue for the bank is going to be supporting the economy. we would say there is a good chance of coverage to zero by the end of the year. a 500 million body block for trading.
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has her outlook changed now because it's going to have to renegotiate some of those? michael: there are two things going on. short-term, we will take a hit on growth. no one really disputes that. the challenge we have got for whatonger term is, arrangements are going to have on trade and immigration? one of the key points and discussion for the whole brexit debate is immigration about it we should lower it or keep the relatively high. it's quite important for trend growth. if we do see a lower level of immigration and some constraints on trade, unfortunately we have to recognize there is a decent chance that structurally growth will be lower. the underpinning of growth is productivity and labor. vonnie: are you tempted to nibble at any assets in europe
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including regular big corporations? michael: if you look at the things we have been buying for a while, of course things -- the by high quality asset happened back -- asset-backed security. you might get some volatility on days like today, but our themes remain the same. growth will be low and vulnerable to shocks. by bonds that stable income stream and can handle shocks. mark: what has changed? we know the midterm themes? what has changed dramatically since yesterday? michael: the growth profile for the u.k. is a bit lower. as we alluded to, the key question for us, and i think i have looted to this earlier, a key question is whether this event is one that becomes
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systemic. i think the thing that has changed today that the focal point is a little bit higher in the bar for buying something today is a little bit higher than it was yesterday simply because we have round of uncertainty. the theme is maybe the same but the bar is a little higher. mark: thank you for joining us today. portfolio manager of pimco. much more on bloomberg television's breaking news of the brexit vote just ahead. ♪
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♪ mark: with from london and new york. vonnie: this is the european
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close. i want to bring in david, the right honorable david miliband. he is currently president of the international rescue committee. course labour- of party politician. david: x politician. vonnie: you are hoping they would remain. has the labor movement and liberal parties worldwide, have a disappointed their constituencies? david: there was a widespread view that they are not mobilizing their supporters and the result is an indictment of the political leadership. i think it's important to say that from my point of view this is a very sad day for great britain and a very bad day for europe. the consequences are going to be greater in the long-term than in the short-term. vonnie: what can those parties
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do? why didn't the labour party leaders in britain make more inroads with constituencies? david: 30% of labor voters remained -- voted to remain. we are reaping the whirlwind today of 20 years of poisonous euro skepticism from the right of politics. the whirlwind of a short period since the renegotiation was done. and a country that is at the heart of globalization and suffering both in inequality and insecurities. that the fundamental point that comes out yesterday. vonnie: these the impact in the u.s. elections? david: and election is a choice between two programs for two candidates. everyone knew the status quo. there was no scrutiny at all of what the alternative of leave meant. that's what i think reaping the
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whirlwind is the right expression. in the months ahead with love lots of time to see the consequences of the decision that was made yesterday. mark: there seems to be a movement within the parliamentary labour party here to oust the leader jeremy corbyn. will he survive? david: i have been focused on the referendum result, not the labor leadership contest. i think the very significant point is this is a big defeat for all three main parties in the u.k. four if you include the scottish nationalists, but there is a silver lining for them. the clear focus for labor is how does it become a credible party that can aspire to government and hold the affection and the confidence of its own supporters and critically reach out beyond its own support. the issue that is now front and center is the consequences for britain and how we say as a great britain, a united britain
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after yesterday's results. mark: you will excuse me if i ask you a similar question on the government. the conservative party, david cameron is stepping down. i would love to hear your view on david cameron and who you think will succeed him. david: i think politics has got itself a bad name. you have to say the prime minister has acted in extremely honorable way. he ran an honorable campaign. i'm on the opposite side of politics to him but it think his decision today reflected a sense of duty towards the country. in terms of his successor, the front runner is boris johnson. leave campaign. he has a lot of support in the conservative party and he is undoubtedly the favorite. as the remain can't shows, being the favorite is not always a guarantee toward success. chance the home
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secretary's name to be thrown to the next. give theoes this perception of britain being a less apathetic country in the world? david: the compassion of the british people is very deep, but it has turned inwards. historically britain has been a firefighter on the international scene. what people around the world are saying is britain has become an arsonist by tearing down a fundamental pillar of a prosperous open global economy and society. i think it is important to recognize the migration issue is butg issue across europe, britain is still 26 miles away from europe. job if he does not change. vonnie: and migrants that would've come into britain. say of your 20 or so miles from europe, crossing was channel, but how damaging is
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this. what is this systemic ramifications of today's vote? will there be other votes? while the anti-populism continue? what the long-term ramifications from today's vote? david: i think what it puts front and center is the case for a deeper core europe. if you talk to german politicians, german business, they always say britain is a great ally of germany on economic questions even if you were out of the euro. that conditioned the way germany works in institutional questions. vonnie: i'm afraid i have to cut you off. ♪
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mark: live from london and new york, you're watching the european close is. there is the millennium bridge in london. london voted to stay in the eu.
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it was very different. you through the market action on this historic day. say is, if you're in the equity market, it was down by 9%. the biggest incline ever for the ftse 100. the biggest decline ever. 2.7% was the decline at the close. dax.iggest decline for the at one stage it was down by 10%. , biggest drop ever when it fell by 10%. the other moving boards. the biggest decline in spain ever. the biggest ever decline in italy ever. red rightd right --
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across the equity spectrum. check out what happened in the currency markets. the biggest ever move for sterling, bigger than the erm debacle in september, 1992, when the pound fell by 10%. today, sterling fell by 8% against the dollar. at one stage, it was 11% lower, 8% down at the close. stage risingne most ever against the pound. ixed income markets, my moving in. the yield on the 10 year yield is record low. german tenure record low as well. i want to finish with a couple of stocks. these are the u.k. centric stocks. i cannot show you, but i can tell you. barrett development, berkeley, persimmon, all down by 10%. julie? julie: let's get an update on
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u.s. stocks. hovering around lows of the session. one thing i noticed is volume is up, volume is up huge, double what it is on average over the last 20 days. a huge surge in europe as well as investors try to figure out what to do now. s&p by 3% as the dow and each fall 2.5%. to may 21, 2015, a level we have been watching, it was a record close. we are down 3.5% from that level. lowest on the s&p since may 23 of this year. a big one-day drop, but we are levels, to record low for example. let's take a look at individual groups we're looking at.
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transportation stock being hit airlines.icularly the down 5.6%, the biggest one-day drop going back to 2011. there are always some buyers in the market. where are they today? they are getting defensive. gold has been rallying today as well as metal and mining stock. , interesting, drug stocks have not been trading like they are defensive, but oday, eli lilly catching a bid as people look for safety marks. vonnie: thank you. joining us on the phone is kate barker, former member of the
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bank of england monetary policy committee. thank you for joining us. what should the bank of england's response be? kate: the first thing that bank ensuring is of course we keep financial stability. liquidity flows through to the banks. we are in a much better position than we were during the financial crisis because of two reasons did one is that the banks themselves are in a much stronger position. bank of england is much more used to deploying credit tools. 2008, 2 thousand nine, lots of policy measures have been taken since then that are new. -- that were new. they're not new anymore. ithink they might stick to and not have an emergency meeting. meeting, the likely tolls in the monetary policy committee docs they reach for our
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quantitative reasoning. vonnie: they must be watching the pound a very carefully, dipping substantially. all the trade agreements will have to be review negotiated -- renegotiated. that will affect the pound. kate: that is obviously right. we have different moves in different directions. pound isthink of the being an easing of policy, you think it will help exporters. , peopleshort term exporting to europe are not facing anything difficult. it will be a couple of years before they know how much that will change, if at all. on the other hand, equity markets are falling quite is aly, which means that sign of economic weakness. they also have to think about confidence. there was difficulty in the
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run-up, economists said if we vote for brexit, it will be a disaster and the economy will be weak. politicians have to pull themselves together and say, actually we can do this, this, and this, so it will not be so bad for the economy. economists have to pull themselves together. they all said it is going to be a complete disaster. they have to work out how to make it not a disaster. mark: you did say the most likely policy option that will be made by the bank of england is quantitative easing. they entered it, 375 billion pounds. will kind ofnd assets could the bank of england buy? kate: they will be concerned to keep the yield curve down. it is down today, but clearly
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there are concerns about and fiscalblurring deficits rising. my sense is they will probably, at the moment, stick to government bonds. bond marketrate shows signs of distress, they might step in. why is qe preferable to a rate cut? could it come in conjunction with qe kate:? ? kate: it could come in conjunction. the reason it is preferable is rates are half. that forf course financial intermediaries, the closer that you get to zero, the more difficult it is to just
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lending rates. rate cutso me don't give you very much. central-bank models tend to or halfcuts of quarter gives you only modest economic stimulus. his is quite a big shock to the economy. qe is a more natural thing to go for. the days that we said we know what a rate cut will do, we don't know what qe does, you don't know if the rate cut will be positive but you will get it back from qe. vonnie: at what point does the gdp become affected? kate: quickly, we know some businesses have put their investments on hold and i expect that to carry on through the second half of the year. i want to be clear. i'm not depressed as some people
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are. some people talk as if a recession is a certainty. i'm not sure that is right. nothing has changed except we has uncertainty. vonnie: kate barker, thank you. taylor riggs has more. taylor raikes: republicans to keep a new tax plan companies from seeking offshore addresses. paul ryan outlined the plan and it would give corporations largest federal tax cut in history and their profits would not taxed in the u.s.. proposal also cuts tax rates on individuals. it was a political earthquake in britain and the aftershocks are the world.around british voters decided to leave the european union. the leave campaign one with 52% of the vote. local stock was plunging.
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stocks plummeted from london to tokyo. the vote was a huge political davidro desk for cameron who has resigned saying the country needs fresh leadership. a new conservative leader will be in office by october. global news 24 hours a day, powered by our 2400 journalists in more than a 150 news bureaus this ishe world. bloomberg. more on bloomberg television, breaking news coverage after the exit mode. howard marks will talk to bloomberg tv. do not miss it.
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vonnie: you are watching "bloomberg markets." taking a look at the brags that impact on the markets. erik schatzker joins us and is speaking exclusively with howard marks trad. erik: thank you for taking time to talk to us on this historic day. there is talk of a recession in the u k and talk the eu will have challenges if not outright difficulty hanging together. do you have a view on what is going to happen? howard: i am no economist, i do not claim to be. i do not believe much in forecasts. likenk at a point in time today, it is extremely hard to think you know what the future holds. i think it is -- the most important thing in our business
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is to know what you do not know. i do not think anybody knows what the long-term implications are of this. confuse ourselves on that. mohamed el-erian there are lots there are-- erik: lots of people telling us they know what will happen. howard: it does not make them right. there always are. walter conch right once famously -- ifif you do not you're not confused, you do not know what is going on. know how anybody can be itfident that they know what means. isaac economies will slow down. -- i think economies will slow down. there will be a slowdown in membership and they will do less onch could
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their own. there will be a psychological effect as people spend less. erik: why do you say that? howard: are people going to live differently? are they going to produce l ess and buy less? even if there are crashes in the stock exchange, people outside are still buying hot dogs. psychological contagion, which should not be underestimated, i don't think this is a fundamental
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catastrophe. i think there will be very strong societal and political and geographic ramifications, that i just -- i have trouble viewing it as a financial catastrophe. if things are going to be confusion, which i will translate as uncertainty, should be the order of the day. what is the logical thing to do? howard: there is an old saying i have heard for many decades, as long as i have been in the business, that the markets of abhor uncertainty.
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they do. it is not mean that they are correct in their abhorance. i don't see why increased uncertainty makes selling the right thing to do. it is always a matter of what you are selling, at what price, what are the things that might happen, what are their probabilities? the fact that uncertainty has increased doesn't mean cell. erik: people selling right now or who have sold earlier at the lows, are they going to regret their decisions? howard: it only means they might, not that they will, they might. i just don't see the math in which increased uncertainty means they should sell, and sell at any price. the clever people who were the first to hear the news and said,
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i will get ahead of everybody else by selling, they sold and thethe ftse down 8%, at opening, 8% or so. tse is downthe f 4%. that means they are wrong. now, the people who are selling moment, theythis might be right or wrong. , the ftse isom now down by 6%, they can pass themselves on their back and say am so glad i sold at 4%. will they buy back? in a year or two? that is the important thing, not where it is in a month, where it is in a year or two. you have to know what you are buying, why you are buying, if the price is there, these are things that should determine
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your actions. erik: resisting the 10 station to sell takes nerves of steel, a strong stomach, and furthermore, liquidity. -- what if you -- on paul on the liquidity? every investor has to get through the low points. the people who went out on margins and took on debts they could not post more capital if prices went down, they maybe sold out. that it will go out over the weekend. we're talking about short-term phenomenon. it is a short-term phenomenon if you are an onlooker, if you're
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the person who sold out, it is long-term. erik: the reason you have been successful is as you take a long-term view. i'm afraid we have to and that here. howard marks, cochairman of oaktree capital. bringinghank you for that wonderful interview with howard marks. much more breaking news coverage of the brexit vote just ahead. stay tuned. ♪
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mark: live from london and new york, i am mark barton. vonnie quinn. this is the european close. hoursrmoil of the last 24 , we have alberto with us. what happens to the eu
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integration in the next 6-12 ?onths? does it become stronger it could get stronger. the u.k. was the member with the most exceptions. there could be -- it is a hit now, but it could be a stronger eu in the future. it is not all negative for the eurozone in my view. it is actually very negative for the u.k.. it is going to have to engineer its growth model. marco: very negative for the u.k.? elaborate. you unleashed a political process that will go a lot beyond exit in the eu. night have scotland that wanted to stay in the you and wants
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northerneferendum and scotland that wanted to stay in ants motheroncw referendum. you have old people against young people, london against the rest of the country. even though there has been a good recovery, the gains of not been shared by most people. this government wanted to engineer the u.k. cross model six years ago, it did not do that. you have the 1% of the population that is really doing well, the 99% is not doing well and we as investors tend to underestimate this phenomenon. it comes back to hit. alberto, there are divisions across the rest of the eu as well.
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why do you think it is truly negative for the u.k. and stop the rest of the eu? particularly is negative for the u.k. there are other decisions across the spanish elections, the constitutional referendum in italy, we will see how that goes. it depends on the reactions of the eu leaders. they have an opportunity to react and make a stronger europe if they use fiscal policy and use the bazooka of the ece. it is worse for the u.k. in this particular case. these are risks we are seeing all over the world, from the asia, a europe and result of the monetary policies that have not cure the patient's, they just greeted
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anesthetic for the patients. we see rising social unrest everywhere. vonnie: alberto gallo , thank you. special coverage on bloomberg tv this weekend with updates throughout the day starting at 4:00 a.m. eastern, 9:00 a.m. london. alive special show at :00 eastern, 5:00 london time. on sunday, we have a full day of coverage. ♪
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kingdom isited adapting and adjusting to a most
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historic day. brexit begins and a prime minister resigns. markets find a bid after a heroic early morning. sterling plunges. scotland, we have a problem. mr. trump walks the back nine. good morning from our world headquarters in new york. fu and alixcarlet steel. it has been an extraordinary 24 hours as you can see as i stumble through the opening. alix: the market action we have seen was incredible. it was all over twitter when the yen surged below 100. twitter exploded. scarlet: why don't you get us


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