Skip to main content

tv   Countdown  Bloomberg  June 29, 2016 1:00am-2:31am EDT

1:00 am
anna: no turning back, as david cameron expresses regret over the referendum, angela merkel says there is no sign of wishful thinking. bashed by brexit, a new bloomberg survey shows the majority of economists forecast a recession after the leave the vote. islamicor in turkey, state is blamed for the attack on his den bowl international airport -- istanbul airport that killed 36 people. ♪ a very warm welcome to countdown. i am anna edwards. 6:00 in the morning in london.
1:01 am
let us get to the state of the overall markets right now. despite the dreadful attack in turkey, the markets are focusing elsewhere it seems. it seems amoment, relief rally we saw yesterday seems to be broadly intact. let us have a look at that. we will have more on turkey later in the show. in terms with the market is doing right now, volatility has pulled back as the clock continues to tick on the brexit story. this is the s&p 500 and the nikkei volatility indices, both taking down. yesterday, slightly more risk entre in the market. are we expecting too much, for a little bit too much in terms of what they can deliver in the wake of the brexit result? we will have a look at that as the weeks and months unfold. looking at the risk radar, underlying we are in markets right now, the msci asia-pacific bouncing very strongly, 1.7% higher. it has now recovered almost half of what lost in friday, which is
1:02 am
interesting. the gold price is also up. do not be under the impression that everything is risk-on, reduce the gold going higher, money going into the yen, the downterm yen now see that by the end of this year. as the gold price going higher, let us have a look at the pound. fairly fat this morning. 1.3337. wti now above $40 a barrel. let us to the bloomberg first word news. here is rosalind chin. rosalind: coordinate attacks at the istanbul airport have killed at least 36 people. the countries prime minister has said the islamic state is like to be responsible for the killing. the attacks, which also injured about 150 people, went in rapid succession at the airport around 10 p.m. local time. european union leaders have told britain there is no turning back after the country voted to leave the the bloc.
1:03 am
angela merkel says there is no time for wishful thinking, but rather to grasp reality. our comments came as david cameron used his last eu summit to express disappointment over his failure to win the referendum that he call. prime minister cameron: it was one of regret. our partners in the european union are genuinely sad that we are turning to leave this organization, and that was very much the tone of the discussions at the dinner tonight. rosalind: in the run-up to the eu referendum, bank of england governor mark carney warned that a vote for brexit would trigger a recession. now it is on its way. almost three quarters of respondents to a bloomberg survey conducted after the vote to leave the european union say the economy will slip into a recession for the first time since 2009. a majority also think the bank of england will add more stimulus, including cutting interest rates in the third quarter.
1:04 am
january 30 1, 2018 on your calendar, that is the soonest the federal reserve will hike rates next. if the narratives are to be believed, traders have been consistently been better at predicting the economy and the fed itself, now fighting a growing probability that policymakers will cut rates and upcoming meetings, rather than raise them. for the third time in as many days, japan's top decision-makers have met to discuss the impact of the u.k. decision to leave the eu. after this morning's meeting, told minister abe reporters that he would mobilize all possible measures following the vote. at the same time, the bank of said governor's juroda they can add money to the markets as needed. global news 24 hours a day powered by more than 26 journalists and analysts. you can find more on the bloomberg top . anan>
1:05 am
na. anna: let us stick with what is going on in asia right now. get up-to-date with the asian market session. details,saly has the a fairly strong rebound. juliette: relief rally is the order of the day. if you look at the regional index, it is now back to the same level it was on thursday. reaction to the brexit though. the best gain on the regional index since monday, june 20. this is all really due to the fact that investors are betting on the fact that we will see central-banks targeted intervention. japanminister abe in saying he will mobilize all deflect thesures to negative effects of the brexit. you are seeing the nikkei 225, that we're also seeing the yen strengthened against the dollar. a good rebound in australia,
1:06 am
commodity prices helping ther, e, and picking up on the hong kong market, the most following the reaction to the british referendum. of course the hong kong market the most closely linked are exposed to britain. but we are seeing a number of the stocks that have been heavily beaten down over the lasttwo sessions getting a rebound. moving there, up by 2.7%. and the shanghai stronger come up half of 1%. the currency market is the other reaction we are seeing. we're actually seeing the yuan strengthen and hong kong's offshore market. this is the first gain in a week. this is very much on speculation that chinese authorities are intervening in the currency market. we are also seeing the high-yielding d10 currency, the aussie and kiwi dollar, getting against the use u u.s. dollar.
1:07 am
the u.s. finance minister saying the country is the most of it stand any shocks from brexit, and we see the kiwi up by one half of 1%. both countries across the board ending higher. we are still sing the pound against the dollar. anna: thank you very much. juliette in hong kong. prime minister david cameron used his last eu summit to express regret over the brexit. he said there was no turning back. there was also renewed pressure to trigger article 50 of the lisbon treaty, so the articles can begin. mr. cameron said that is a job for his successor. prime minister cameron: britain should seek and europe should seek the closest possible relation over trade, over cooperation, over security. while britain is leading the european union, it will not and should not, and my view it will not, anna: turn its back on
1:08 am
europe. ryan chilcote is in brussels this morning. good morning to you. by all accounts, a fairly emotional last supper. probably his last visit. did anything substantial come out of this? we heard a lot about article 50 before of course? ryan: you know, ann, i think something did come out. david cameron also said he thought he lost the referendum, and lost his job effectively. on immigration, he said that he should have yielded more, when it comes to restriction on migration to the u.k. and he said that if the u.k. was to have a close economic relationship with the future, normally people think about it the other way around, that it will have the yield on the subject. obviously david cameron has been very clear that it is all going to be down to the next prime minister to negotiate the deal. but nonetheless, he staked out
1:09 am
the u.k. position. this is a big idea. and in the eu people need time to think about big ideas. i think it was important. it is purely going to be one of us contentious issues, as the u.k. negotiates the relationship with the eu. we heard the french president say the idea of free movement of labor, freedom of movement of labor is key, absolutely essential to the european union. and the u.k. will have to agree to that. i.e. no caps on migration if it is part of the eu. knows what hollande will be. anna: give us a sense of the mood of the dinner, ryan? cameron saidavid that it was kind of a sad dinner, right? you heard a lot of expressions of regret from the other eu leaders. let us not forget, you know david cameron was campaigning to keep the u.k. in the european union. he did not want this.
1:10 am
it has cost him his job. i think maybe some people in the room felt like he should never have had the referendum to begin with, why did he do such a bad job of the campaign? jean-claude not provide more in terms of concessions, and why the sort of anti-u.k., pro-european rhetoric? but at the end of the day, you know all the heads of state that i spoke with, they recognize that is all in the past now. they need to move forward. and they recognize that david cameron is also a historical figure. he will not be the guy they're going to deal with when they get down to negotiating the real issues. anna: ryan, thank you very much. david cameron defending his decision to call a referendum, sing the pressure at home was just too great. ryan chilcote joining us from brussels. let us picked up the conversation with peter scha ffrik, very good morning to you. to had a few days now consider the broader
1:11 am
implications of what we saw on thursday and into friday morning. how do you see this playing out at the broad european context? is this an existential threat to the eu and the eurozone? peter: the first thing i was in before we go into politics, what we said before, in the case of the leave boat and has to be hedged on the economy. we not only mean the u.k. economy, we mean the european economy as a whole. and that is pretty much what we think is going to play out. and that will have implications on the bank of england rates, implications on what might or ecb, not happen with the and what happens with market spirit and that is the first thing to say. how it plays out on the political side, that really remains to be seen. all this depends -- these things take time. and your collect the senate. you know, if i may roll out one of the old sayings, big events are typically overestimated in the short run, and i think this is one of them.
1:12 am
anna: fascinating as well that this political story, you know politics often does not really impact on the market actually. it is interesting that is not all that relevant, but this one has been dominating because the markets were expecting something so different. i'm interested in your expectations around when the u.k. actually leaves, or at least what you think the market is assuming? over the last couple of days we have seen lots of talk about whether this really comes to pass. there is a 30% chance that britain does not leave the eu.angela merkel seems to be taking a hard line. at the same time she says need to give britain time to think. is there any expectation in the markets that it does not happen? the reason i ask is that this is important in terms of explaining why we are seeing risk-on appetite. peter: let me address the last point first. what i think is risk-on, because what you said earlier, people are now realizing this is a long and drawn out process. frankly, we do not know what is
1:13 am
one to be at the end of the road. but we do know is that in the short-term it is not going to be where008 and 2009, everything just collapses. and after the initial spike, positions adjusted and what have you, a more realistic a session. going into the politics question, frankly i cannot go in say this will happen. the only thing i can say is that currently, there are huge amounts of uncertainty. it will not go away. i think that is the most genuine thing i can say. this is another reason why the evil we have the risk-on, there will be implications for markets, risky assets in particular. and it will be in locations how central banks will react. and i think that is the most likely thing that is going to happen. therefore, we should focus on this initially rather than speculating on three years. anna: in terms of what the markets are doing at the moment, we had a situation that actually we saw earlier, a rally going on in the msci pacific,
1:14 am
but also money going into goal. people are buying back into the equity story, thinking things are oversold, but they are also buying into gold and safe haven assets. readjustment going on all over the place. not only in goal. let me tackle the question differently. before the referendum, i think the number one question of we received was what is going to happen with the gild market? this is where all the contradiction is expressed the most. typically a risk-free asset, but the epicenter of what is going on. we said at the time, look if all this is playing out, yes there will be an increase in the risk premium that is embedded in assets. but on the other hand, the bank will cut rates, and it will perform. this plays out on a larger scale as well. risk premiums to go up. take a look at the bank stocks. they are severely impacted. but overall, you know it is ok. people can still buy some form of risky assets. if you go to the asian markets,
1:15 am
i can sort of see why they might do that. anna: where you see the gilt story going? mark,down below the 1% the ecb bond is surging, gilt surging for the first time. you are pointing out one person's safe haven can be a risky asset. do you think the nature of those investing has changed? how does the gilt story develop? peter: looking at the chart now, expectations for the central bank, and when you sort of take a closer look at what is really driving it, when you dissect what the drivers are, the gild quite really falling sharply. that of course makes sense. we. have now changed our forecast for the bank of england and we do think they are going to cut rat and a decent chance they might roll out another qe program. but what i think however, when you look at the components, the risky parts, which is the u.k.
1:16 am
spread, that is going up, not as much as some may have fear. but it is going up. and this is probably the most interesting bit. inflation expectations have been going up on the back of the lower count. friendly i think if we are seeing and indeed to michigan slowdown, whether or not it is a slowdown recession is irrelevant. that would probably slow down as well. in other words, i think there is further downside for the year. anna: we will return about the u.k. economy. one of retailers in the u.k. said some inflation in food would be a good thing. we were returned to the conversation. peter, chief european macro strategist at rbc count markets. we get an economic snapshot from the run up to the referendum today. to what extent will the state to be a little old? we will see at 7 a.m. u.k. time. british house price data from june nationwide. of hours later, the month may, often our after that we get eurozone consumer confidence
1:17 am
data. in a 1:00 p.m. u.k. time, german inflation data. at 9:30 u.k. time, the fed is set to announce the results of the second part of its annual bank stress tests. we get real-time coverage of that on the top live blog. program, central bankers speak out after brexit. why one ecb member says that some market moves were overdone. plus, terror in turkey. we get the latest on the deadly airport attacks that happened late in the evening last night. we are live in istanbul, with the latest. ♪
1:18 am
1:19 am
1:20 am
anna: welcome back. time in london is 6:20 this morning. let us get the latest on what is happening in turkey overnight. terror attacks killed at least 36 people at istanbul international airport, and injured around 150. suicide bombers blew themselves
1:21 am
up after they were spotted by police last night. producerour executive in turkey, joining us from istanbul. good to have you on the program. give us the latest. and how do authorities know who is responsible here? simin: no one has claimed responsibility as of yet. however, the turkish prime minister said that early indications point to the islamic state. now turkey has been dealing with terror on two fronts. the islamic state and the other with kurdish militant groups, the pkk. the attack happened late last night at turkeys largest airport, the third-largest in europe. and we are hearing that 36 people are dead, up to 150 are injured. that there were three terrorist attacks at the took placeere it
1:22 am
outside of the security checks of the arrivals hall. now, according to state-owned news agency aa, flights have now resumed back at the airport. you themin, thank airport update. we will monitor. let us in the bloomberg business flash now. rosalind chin joins us. rosalind: well, nike shares dropped in late trading, after missing estimates. the company's closely watched future orders act as a benchmark, missed the azimuth. nike sales are hurting overseas with increased competition. vodafone is weighing options after the u.k. voted to leave the eu. the company says it will consider moving headquarters elsewhere, left the country negotiate continues access to the single market. vodafone is already beefing up outside the u.k., including brussels.
1:23 am
allergan's says it is in the final stages, and the ceo says it will invest $20 billion on the deal. also weighing in on the deal to leave the decision, and what it means for business. >> we are very committed to both marlowe, the u.k., and to our people there. so no plans to change anything hopefullyoperate, and we can remain committed to our operation in the long-term. rosalind: and that is your bloomberg business flash. anna? anna: how should the central banks respond to the brexit vote? the stock selloff is probably an overreaction, he told bloomberg. >> things are kind of getting a bit more quiet and more balanced, of course markets have been taken by surprise, so there was a very strong reaction. i would say especially with
1:24 am
regard to shares and banking shares, probably an overreaction i would say. anna: meanwhile, south africa's central bank governor said brexit will slow that economy. >> i would not venture into a decision, but no doubt that it will slow down our particular economy from already weak growth that we already have. anna: still with us in the studio is peter, chief macro strategist at rbc capital markets. step away from the european, consider the more global picture, and this is the u.s. this shows the way the bets on fed rate changes is changing in the wake of the brexit story. in the purple you the line coming down. ast is on the fed rate hike, implied by money market derivatives of course. the best coming down, things are all over the place. moving really quickly in terms of the story. what are your expectations? peter: if i can come back to the
1:25 am
fed,, literally one second when you think we just heard, i think this is a very important picture. because we just had a clip from south africa. we have changed our view on places as far-flung as new zealand and australia. so it has an application, basically across the globe. as far as the fed is concerned, they have told us very clearly that they are monitoring international development. what they are really concerned about is credit conditions, how that impacts or might impact the u.s. and if in doubt they are not going to do anything. butave changed that, previously expecting that will move this year, we do not expect it to happen now, very much in line with the market is telling us. the u.s. economy remai down. but there is no urgency for the fed now. and in fact, there is some risk that some slowing might be impacting through the global economy, and the u.s. economy as well, and the fed needs to be cognizant of that. anna:, just as we heard from the
1:26 am
south africans you expect the brexit vote, in some way impacts the global growth story. do you? peter: certainly. very close to home, it will impact u.k. economy. there is no doubt. we heard from president mario draghi just last night that it will have an impact on the red zone economy. that is very clear. it willact europe, impact trading partners. as you obviously go away from the epicenter geographically, the impact will be slightly less important. but nevertheless, it will be felt. the question is where is being fell the most? and you might see reaction there. the u.s. is relatively close economy, and it is relatively strong, so it might not mr. lately to sniffing impact abroad. but it should be significant enough to at least deter the fed from hiking quickly. anna: peter, thank you very much. he stayed with us on the program. in the finalrgan
1:27 am
stages. we get the ceo word from brent saunders. the majority forecasting a u.k. recession. we bring you the details next, early morning, here in london. ♪
1:28 am
1:29 am
e
1:30 am
anna: welcome back to countdown. a time in london is 6:30. let's get the bloomberg first word news. here is rosalind chin. rosalind: well, coordinated attacks at istanbul international airport have killed at least 36 people. prime minister said islamic state is likely to be responsible for the killing. , the attacks which also injured 150 went off in rapid succession at the airport around 10 p.m. local time. european union leaders have told britain there is no turning back after the country voted to leave the bloc. angela merkel says there is no
1:31 am
time for wishful thinking, but rather to grasp reality. her comments came as the u.k. prime minister david cameron used his last eu summit to express disappointment to win the referent of the call. prime minister cameron: it was one of sadness and regret, our partners in the european union are genuinely sad that we are planning to leave this organization. and that was very much the tone of the discussions at the dinner tonight. rosalind: in the run-up to the englandendum, bank of governor mark carney warned that a vote for brexit would trigger a recession. now it seems that it is on its way. three quarters of respondents to a bloomberg survey conducted after britain voted to leave the eu say the economy will slip into a recession for the first time since 2009. a majority also predict the bank of a little ad more stimulus, including cutting interest rates in the third quarter.
1:32 am
january 31, 2018 on your calendar, that is the soonest the federal reserve or hike rates next. have been better at protecting the interest rates than the fed itself, and now pricing in a greater probabilit ty that makers will cut consider race. in the third time for as many days, japan's policy makers have met to discuss the decision to leave the eu. after this morning's meeting, prime minister abe told reporters he will mobilize all possible measures: the vote. oa money governor kurd to the markets of the. local news 24 hours a day, powered by more than 120 countries, you can find more stories on the bloomberg top . anna? anna: thank you very much, rosalind chin there. nejra joins us for a look at the market.
1:33 am
a continuation of yesterday. indeed, and some parts of the market. i want to give you a bit of context on sterling. looking at the bloomberg british pound index because this has fallen some 7% since march 31, about to complete the worst quarter in 7.5 years. because that drop we have seen since 18%e most plunge in the final quarter of 2008, of course following the collapse of lehman. and the bloomberg pound index actually headed for a gain, until last week's brexit shock sent it down 8% in one day. we did see sterling game for the first time since brexit. actually holding the rebound now. it was declining earlier, pretty much flat at the moment. we are at $1.33. we are also seeing the 100 futures higher, up more than 1%. perhaps indication of less concern about the equity benchmark, which of course has a lot of global companies getting
1:34 am
sales from outside of the u.k. and a dusting to be a feeling in the market that perhaps the global fallout from brexit may be contained. speculation that central bankers and governments will blunt the impact. a member, three quarters to the bloomberg survey said the economy will slip into a recession for the first time since 2009. but as i say, global fallout perhaps contain. agent stocks rising the most in the week. looking at the msci asia-pacific index. but we are still seeing money move into some safe havens. the dollar-yen and white, the yen rising after decline yesterday. some of these moves, if we look at gold for example, that is the blue line, driven by the likelihood of a rate hike, .13 is what we're talking about now. a greater possibility of a fed rate cut to come for an increase. so gold trading at the highest level in more than two years, as a result heading for a second
1:35 am
quarterly game. it is only improving the prospect for gold as an investment, anna: the fallout from brexit. thanks very much. we might return to the conversation with mark farber in a minute. doing ready for u.k. recession. that is a story we are talking about this hour. that is a message from almost three quarters of economists in a survey and that it after r britain voted leave the eu. even this year, or next year. markets isc capital still with us. do you concur, do you go along with 71% of economists this is going to put the u.k. in recession? peter: i'm trying to wiggle out of this one. i think it is not actually the most important bit. what is the most important is that the u.k. economy will slow. eu economy, or it
1:36 am
will be a small or zero, i the end of the day that is not the most important bit. and thatee however, would take much more important for how the market will react, what is the reaction going to be from central banks? the reaction from other participants going to be? what is the reaction of investors want to be in this whole thing? i think that is on to be the crucial thing that will drive markets. anna: in terms of expectation inflationd, this is rising at the currency tumbled. we have the currency in the blue coming down, a fallen sterling we saw the end of last week. predominantly. andthe start of this week, here we have expectations of inflateion, the swap rate. so, i mean we heard from one person yesterday, a bit of inflation may be good for the u.k. story. is there anything good about that? peter: first of all, let me
1:37 am
commend you for putting the finger on the chart. if you go into this chart, the five-year and euro and dollar, you see it going down. and the story is somewhat special, of course has to do with town. where i take a sort of a different view is, i do see inflation in the front, some the short term. whether or not we can really have high inflation and sort of the medium-term, as the five-year seems to suggest, i have my doubts. if inflation -- the u.k. economy is slowing sorry -- we might well see a short spike higher, than peter out again. that is more likely. and i would expect those medium-term inflation expeditions come down there and it has expectations were yield is going. because that is a big component of yield. anna: does that mean that the
1:38 am
bank of england will have to cut rates, as inflation is getting closer to the top of the target. may be there is a timing mismatch, that doesn't have to happen. what wehe contrast, know with the short-term spikes, particularly a sharp slump in the exchange rate, is at the central bank is very well aware of where it is coming from. and is perfectly making the argument, that the short-term can be a threat. this is what we would expect to happen in this case as well. as i was just saying earlier when we talked, we do expect the bank of england will cut interest rates. in fact, there is a good chance they might do it twice, putting them down 10 basis point. there is a decent choice of qe, because we do know from previous experience, if you want to go, go early and hard. that is better than wait for a long time, and sort of try to mop up afterwards. anna: they will not be waiting for data to prove? when you think they will move?
1:39 am
peter: it is probably not an emergency meeting. because if that is the case, we would have it by now there and will probably wait until the regular meetings are scheduled. , by that we will have early indications. to play, i just want you a little clip of mark farber talking today. he is the author of the doom and gloom report. this is his verdict on the brexit though. brexit is not actually about the end of globalization. quite on the contrary is about people, that rebel against the arrogant elite and the financial centers. because if you go to england, london is doing well. the financial sector in london is doing well. the asset economy is doing well. -- people are not doing well anna: he went on to talk about the way asset prices have been pushed out by the central banks. you can blame central banks for that. you can blame government for not
1:40 am
acting, to fill the vacuum. who would you say should carry some of the blame? do you think central banks have been left to do too much? the government should be doing more? or the wrong policies, just creating asset inflation, not real benefits for people in the street. peter: i think particularly in a place like the u.k. that is sort of a little bit less obvious. if you ask the continent of europe, should the policymakers have done more to address the problems on the ground? i was a certainly, yes. whether that is true globally remains to be seen. but i can come back to the commons we just heard, i mean one of the things we just heard, the broad data, arctic early in places like the germany and u.k., it is doing well. but we also know however that distribution where these gains really accumulate is very skewed. and i think that is sort of what
1:41 am
marc farber was suggesting. anna: but unemployment is quite low. that is a conundrum for policymakers. if i do one were high, people would suggest we need to focus on policy that would create jobs. that is not the case in the u.k. story. peter: that is true. let it come back to the u.k. if you look at the u.s., even in the euro area, some places doing well like germany, basically the same story. jobs are being created. people are being put in employment. if you look at job creation, they are going through the roof in some places. so that is good. clever on the other hand is that we also know that wage inflation is fairly poor, and even though jobs are being created, the income share is that rising beard that is one of the other reasons why i think growth rates have been relatively low. and the question then is, as a policy maker, how can you -- the gains that the economy as a whole produces, how can you distribute it more fairly? again, i think he is fair.
1:42 am
chiefpeter schaffrik, macro strategist at rbc capital markets. thank you for joining us. let us move on and talk about the drugmaker allergan, in the final stages of closing a deal with arrival. that is according to the ceo greg saunders. he spoke about the wider strategy. >> you are disappointed about the u.s. treasury involvement in the break of the pfizer deal. but allergan is in a very strong position. we are in the final stages of a, tong our deal with tev sell for about $40.5 billion. and when that is closed, the proceeds will be spent. about $10 billion on a stock repurchase program, about $10 billion on debt repayment. and that will leave us with cash billion tout $20
1:43 am
invest for growth. and we will be looking at buying intellectual property, r&d assets and of course, m&a. looking at more stronger deals, that really support our therapeutic area leadership and innovation. >> you are in shanghai. i have to ask about the pharmaceutical industry in china right now. a few years ago you really wanted to expand in the country. has that changed now in your plans, given the concerns about the slowdown in china? we also have the state campaign drugally bring down the prices that really hit pharma companies pretty hard. yeah, we are very committed to the chinese market. i am thrilled to be here in shanghai meeting with the chinese leadership and of course our colleagues. i will be visiting with customers this afternoon. and allergan in china is really focused on both medical statics and and i care. and the medical aesthetics
1:44 am
business is a cash business. we have a great product flow juviderm. and was the china fastest-growing pharmaceutical company in china this past year. very excited and hope to continue to invest for the long-term, here in china. >> how much of your portion of capital is going to be heading this part of the world, in china for the rest of asia? know, it is hard to determine an exact amount. but very committed to growing here in china and in asia. our business is really primed for these markets, where consumerism is really coming alive, where there is still huge unmet medical need in areas like ophthalmology. , so we are very excited about the region, in particular china. with respect to the $20 billion
1:45 am
that i mentioned earlier that we have, that is earmarked for growth, some portion of that is certainly open for investment in across then asia, board. we just have to find the right assets that really complement our strategy of being a grower and a leader, and of course leading our therapeutic areas like aesthetics, dermatology, i care. anna: that is the latest on allergan. one of the top stories, getting breaking news out of turkey. following the attack at the istanbul airport yesterday evening, turkish airlines say the airport is open for flights. at least 36 people we know were killed. and 150 were injured by the attack. wenext on the program, return to the brexit story. we take a look at how the u.k. decision to leave the eu has and theruined -- housing market. ♪
1:46 am
1:47 am
1:48 am
1:49 am
welcome back to the program. this is countdown. 1:48, bright and early in the morning, maybe last night watching in new york. pacific futures might be joining in with this middle bounce we are seeing in markets, decent bounce in the asian equities session. getting to the european session, we will see what holds. 6:48 in london. that is in a bloomberg business flash. there is rosalind chin. rosalind: anna, brexit may cost carmakers 2.8 million vehicle sales through 2018. deliveries may rise to just under 19 million this year, which is about 200,000 fewer than anticipated before the referendum. that is according to researchers. investor service as lower the outlook on 12 u.k. lenders, after the vote to leave the european union, reducing profitability. the ratings firm cut the outlook
1:50 am
fromrclays, and santander negative to stable. also lowered floyd's from stable to positive. recalled 2.8 million vehicles over a fuel emission control unit. the recall includes the corolla model produced between april 2016 and august 2015. the canister and fuel tanks can crack, leading to leaking. but no reports of crashing, injuries, or death. vodafone is weighing options after the u.k. voted to leave the eu, sent to consider the headquarters elsewhere, left the country negotiates continued access to the single market. vodafone is already beefing up in some areas outside the u.k., including brussels. and coordinated attacks at istanbul's international airport have killed at least 36 people. the prime minister has said the islamic state is likely to be responsible for the killing.
1:51 am
the attacks, which also injured went off inople, rapid succession at the airport around 10 p.m. local time. and that is your bloomberg business flash. anna? anna: rosalind chin there in hong kong. we have breaking news coming out of japan. japan's 10 year yield falls to a record -2.4%. we are seeing longer-term as well, the five-year yield falling to a record minus 3.5%. we see the boj meeting every one of the last working days to talk about strengthening the currency, and the turmoil and markets were generally impacting the economy and what they might do about it. we heard once again from the ready tothey stand put more money into the market if it is needed. that is a way of the quantitative easing story. nevertheless, markets focused on what we might see globally in terms of helping the global
1:52 am
economy in the wake of this brexit though. we are now seeing the five-year -.23ing to a record of percent. going lower still this morning. let us move on to the property sector in the u.k.. how is that sector going to be affected by the brexit, the topic of our next conversation. we are joined in the studio by richard donnell, research director. and bloomberg's team leader for real estate neil callanan. great to have you on the program. getting up so early for us. richard, you first. how uncertain innein a nutshell? richard: the willingness of households to dissipate in the housing market, our analysis of the last 20 years shows that transaction volumes are more incentive, as a shock to confidence. and i think the short-term receipt transaction volumes being affected far more than price. anna: niel, does that tie into what you're hearing in the market neil: curley on friday, we saw
1:53 am
sales fall apart. if you think about that, they have ripple effects that can be on to 2025. that is just one case. it has to have a transactional affect, they never got back to the low they were before the financial crisis. that has big invocation for brokers, which gave a positive warning yesterday. the odds of a two-tier residential market emerging in london over where the central london is very quite. a lot of investors are turning blue, negative. nge, that is were the housing market is still really hard. you see 40% increases in london, probably 20% on the fringe, to be as low as -1% in the center. that is what be interesting to see what happens there out of brexit, because the central in particular is based on overseas investors. anna: the london market looks like two separate stories.
1:54 am
the whole of the u.k. looks like a number of separate stories. richard: driven by local economy, we see that. homehore price shock, prices falling tempers and in the last year. it is all about what the real economic impact, how much does it really put households all. what we have seen looking back over time, you really need to see an economic downturn, falling gdp, rousing unemployment. because we think we see transactions fall, and i think london does get hit hard on the transaction side. slightly, whereas across the rest of the rest of u.k. it might be as little as 5%. anna: if we start to see an increase on at one of course, if recession, and increase interest rates to put consumers all. very low interest rates, i have a gil chart that shows the 10 yeart yield going below 1% for
1:55 am
the first time, earlier on this week of course. at least that part of the puzzle does not put a strain on household. richard: the fundamentals of housing remaindered there is still demand. we're not building enough homes. the question about who is motivated to transact, there has been a lot of factors, the housing markets tightening up, the suppliers tightening because of inflation eroding more slowly. incomes rising more slowly. two housing market, london and everywhere else. things are picking up. bristol prices are overtaking london now. there is real momentum building and regional cities, but again i think this directive vote is a knock the confidence across the market. anna: you mentioned the two-tier story taking place in london. a lot of focus in central london, as you said, around what foreign buyers are going to do. the weakness in the pound, is that something people would take as an opportunity aspect? oil and gas recently in the middle east, well, london housing looks like a real by right now.
1:56 am
is thatally speaking, some and will see happening? neil: if you have money in your bank account you might be tended to make that trade. but if you're an asian investor who buys more, that is more question. any rental income. so again you are dependent on the economic outlook. they also have a property that is too expensive or london, who are you going to sell to, or by you decide to sell? ifre are a lot of questions, we see an increase and the state. as well as prices about 30% higher than the local markets. so will the investors be willing to do that? anna: that might not change. but many other things my. bloomberg'sell and team leader for real estate, neil callanan paired coming up on the program, james maccormack from fritz ratings
1:57 am
joins us. and later on, blackrock ceo larry fink joins us from the aspen ideas festival. that sounds appealing. you can see that on bloomberg at 10:30 tonight, u.k. time. ♪
1:58 am
1:59 am
?c+sv
2:00 am
no turning back as david cameron expresses regrets over the referendum. germany's merkel says this is no time for wishful thinking. a new bloomberg survey shows a majority of economists forecast a u.k. recession after the leave vote. and terror in turkey. islamic state is blamed for the attack that killed at least 36 people. turkish airlines says the airport has now reopened for flight. ♪ anna: welcome to "countdown."
2:01 am
i am anna edwards. it has just gone 7:00 in the morning here in london. we are getting some numbers through. this is from a retailer of electrical goods on high street. the final dividend will be 6.5 pence. like for like sales increased by 5%. full-year group comparable revenues up i four point 5%. this is a better looking story in the wake of the brexit referendum results. we will see if they have any comments to make about what they will see from the consumer in the wake of that. they say they had seen no impacts of our in terms of the numbers. we will keep monitoring that. also what they have to say for the buying side of their business. hard goods, that is sold by the likes of kingfisher and all the other retailers of electricals. a lot of those are important. if the pound remains at weaker levels, that will have an impact
2:02 am
on the business. , 447year pretax profit million pounds. we will keep monitoring those headlines to see if anything on the brexit story comes through. the june u.k. house price index, .2% rise month on month. 5.1% increase year on year. we have been talking about what is happening in the housing market. lot depends on how the consumer response to the brexit story. buyersends how foreign respond with the central housing market still up against it. dataso have some german coming through. july consumer confidence comes in at 10.1. consumer confidence story in the wake of the brexit conversation as well. let's have a look at how all of the data and the more macro
2:03 am
pictures have been playing into the futures markets overnight. it seems we will be stronger at the start of the european equity trading day once again. we were risk off on friday and again on monday. real turmoil in monday's trading session. yesterday, things seemed to turn around a little bit. we had a change in sentiment and we are picking up on yesterday's trade, it seems. yesterday's trending market is a higher one for equities. that has been the story in asia as well. that index is up by 1.3%. expected to be stronger at the start of the european trading day as well. get to the risk radar to show you where markets are trending. i mentioned the msci asia-pacific. gold is also benefiting. do not before it into thinking everything is risk on. there is money going into gold.
2:04 am
the pound is a little on the back foot, too. pound hasn the increased in the last hour or so. let's have a look at the bond yield for you. we have been touching record lows on the five-year yield in japan. bond yields continue to go lower in japan. is german bund yield unchanged and the u.s. 10-year, 1.46%. let's get the bloomberg first word news. to takerdinated attack down international airport has killed at least 36 people. the prime minister says the islamic state is likely responsible for the killing. the attacks, which ended about 150 people, went off in rapid succession at the airport. turkish airlines says the airport has reopened for flight. european leaders have told
2:05 am
britain there is no turning back after the country voted to leave the bloc germany's angela merkel said. "this is not time for wishful thinking." david cameron used his last eu summit to express his disappointment with the referendum that he called. european central bank governing toldil member has bloomberg that banking shares overreacted to the vote. speaking from the ecb form, he said the central banks should take a wait and see approach before reacting. of course, we observed this very closely, but it is much too early to say if there's anything that we could or should do.
2:06 am
>> january that first, 2018. that is the soonest the u.s. federal reserve will hike rates next if he is to believe. traders who have consistently been better at predicting interest rates are pricing in a great probability that there will be more cut rates. for the third time in as many days, japan's top decision-makers have met to discuss the impact of the u.k. decision to leave the eu. shinzo abe told reporters that he will mobilize all possible measures following the brexit vote. at the same time, the bank of japan governor says it central-bank governor can add funds to the market as needed. global news 24 hours a day. you can find more stories on the bloomberg at top . anna: thank you very much. let's didn't to the breaking news that came through from
2:07 am
dixons a moment ago. they are going on to talk about brexit, saying that volatility is inevitable, but they expect opportunities for added growth post-referendum. more on that in the weeks ahead. let's check in on the markets in asia. >> all looking pretty good. inhave heard from someone japan and they say the panic selling is over in asia. let's hope they are right. we are seeing a very good session. the regional index back to where it was last thursday before asia reacted to the brexit referendum. we are seeing very good games coming through in japan, closing up by 1.6% on the back of prime minister abe saying that they will step in if needed to calm markets. korea adding to those gains after their announcement of
2:08 am
stimulus. reod movement on the a-sha markets in shanghai. the hang seng, which has been the market most battered in asia , also seeing some upside. a lot of those companies that have been heavily battered and have exposure to british retailers are coming back today. there has been some breaking news in the last 15 minutes or so. we are hearing that daihatsu shareholders have approved a share exchange agreement. they want the shareholder action and they were saying that toyota was valuing daihatsu to cheaply. we understand that this deal with ea stop block whereas they 6 of onegetting 2/ toyota share. hsbc is one stock that has been heavily beaten down. seemingly willing to
2:09 am
dip their toes back in equities today. anna: back to our top story. david cameron used his last eu summit to express regret at the brexit results. leaders said there was no turning back and renewed pressure on britain to trigger article 50 of the lisbon treaty so exit negotiations can begin. jobs for his successor. >> britain said that should seek and europe should seek the closest possible relations with .rade and cooperation, security while britain is leaving the european union, it will not and should not and in my view, it will not turn its back on europe. anna: ryan chilcote has been in brussels all week for us. it morning to you. did anything come out of this meeting? it seems as if it was an exchange of opinion on what has happened on thursday and friday.
2:10 am
did anything concrete come out of it? ryan: i think it was a meeting of the minds. david cameron told his eu counterparts that their failure to give him more concessions that would allow him to reduce immigration into the u.k. was what caused not only the referendum, but the job -- but his job. as he said, it will be down to his successor to negotiate a new deal. he did pretty much stake out the u.k.'s position irrespective of who the prime minister is going to be. that is if there is going to be an economic relationship. the eu is going to have to yield on the issue of migration. that is a big issue and gives them something to think about over the next few months while the u.k. gets its political house in order. the 27 eu leaders are going to be gathering again today. david cameron with a big empty
2:11 am
chair at this meeting, i assume. what is going to be on this agenda? ryan: group hug? probably not a group of the. at the end of the day, these leaders agree what the future shape of the european union should be. they feel that britain exiting is a good opportunity to talk about that. there are people that want closer financial integration, like the french. there are people that want an expansion of the union, like that used in countries. there are people who want it to be a political club, like germany. that is all going to get hashed out. there will probably be a fierce debate. it will be a process that will happen in parallel with the domestic political drama in the u.k. anna: thank you very much for the update. ryan chilcote joining us from russell's. let's bring in our guest. great to have you on the program. what are your expectations around the way that this story develops from here?
2:12 am
are you focused on the day-to-day politics or are you trying to step back and say, how does the european economy perform? boss, martin gilbert, said this was a time of thinking rather than trading. people are still try to work out what is going on and how things could develop. it is a time to consider where the risk is and also the opportunities as well. anna: do you see opportunities? dixons car phone saying that you have seen volatility along just around the brexit story. they see opportunities for added growth. that is one specific example. where would you be looking in terms of opportunity? have one have probably day of trading since this happened. we know the impact on their business. looking forward, it is more around companies who have operations and services that might be headquartered here in the u.k. and not globally, which
2:13 am
have been sold down, but where economics might have improved as a result of the decline in sterling or the impact on some of their competitors. those would be the areas that we think are interesting. we are being quite cautious on domestic cyclicals, especially those that have done well and those that are carrying leverage. company based in the u.k. wants to move its a quarter somewhere else, it might matter for the u.k. economy, what not investors. is probably that right. at the end of the day, a lot of these companies could be heading towards a number of places. they want to be part of the single market. they like the legal system and the language. they could be in other places if they need to be. anna: we talk about the banking sector, which has been a center of the volatility of markets, a lot of people are asking themselves, are they going to be able to sell their products throughout the eu? it is too early to say.
2:14 am
there are other reasons why the banks might decide to stay here and not go to dublin or paris or frankfurt. ben: absolutely. it is probably diminishing headaches more than anything else. i think they would want to benefit from the expertise. the legal system is also important. i am sure they are looking at their options if it turns out that certain european credit markets develop outside of the u.k. for now, i do not think that is going to happen anytime soon. anna: and you are talking to businesses that you are invested in, what do you want to hear from them? it is a bit too soon to expect much more. ben: we want a bit more than that. companies need to understand what are the potential risks of that business and the issues
2:15 am
they might face in terms of regulations and supply chain. clearly, the outcomes are uncertain. under a range of different scenarios, they should give us a reasonable degree of certainty about how they should perform. i think it is not unreasonable for investors to be asking that right now. you can identify the supply chains that will be disrupted if the u.k. is out and if there are some kind of worsened trade conditions between the u.k. and the eu. is it to do with the car sector? ben: if you are a retailer and purchasing entirely in dollars, your economics are looking a little more tricky than they were. it is that kind of thing. it depends on what sector you are operating in. your ability to put prices, your balance sheet. it is a number of different things. we would be quite cautious when we see substantial currency mismatches. and also where regulation could come into play that could affect
2:16 am
business. we need to be aware of that. there are a lot of businesses where those things work in the other direction. opportunities to expand come up. anna: are you assuming the pound stays at the levels we are staying at now? ben: i think that is right. you are likely to see economic performance suffer at the moment. i think you will see foreign investment into the u.k. halt. you look at foreign account deficits relying on investors from overseas, it is likely that like wehe pound looking see now. anna: thank you for joining us. 7:16 in london. twoext, after not one but in the u.k. this week, we will speak to the sovereign head of global ratings. ♪
2:17 am
2:18 am
2:19 am
2:20 am
anna: welcome back. this is "countdown" live from london. coordinated terror attacks have killed at least 36 people at international airport. suicide bombers blew themselves up after they were spotted by police last night. i resented a producer for bloomberg tv in turkey joins us now from this terrible with the details. good morning to you. what is the latest. do we know anything about who is responsible officially here? >> no one has claimed responsibility for these attacks , but the turkish prime minister says early indications point to the islamic state. turkey is dealing with terror on two fronts one with the islamic state and the -- the other with kurdish military group the pkk. seeing flights resuming at the airport, which is a major hub.
2:21 am
it is turkey's biggest airport. .nd the third largest in europe the stock market is due to open in 10 minutes. after the explosion yesterday, ared its gamesra p against the dollar. it is currently strengthening against the dollar, like most emerging-market currencies. anna: turkey has been dealing with terrorism for a number of years. at the airport? ?t is a major hub, isn't it >> that is right. it is a major hub. because turkey has been doing with terror for the past year, security is very tight at the airport. you need to go through your security checks and your baggage gets checked as well. , --as these terror attacks because of these terrorist attacks, the airport has been
2:22 am
majorly impacted. it is the 10th consecutive month of declines in the biggest on record. thank you very much for the update. we had live pictures coming to us from brussels. the eu leaders summit taking place there. angela merkel just arrived on the red carpet over there in brussels. 27 of them are due to attend today. david cameron, for 2 of this meeting, his name is no longer down on the list and there will only be 27 liters in attendance. no doubt the topic of conversation will be the latest on brexit and to do with the u.k.. not one but two agencies downgraded the u.k. earlier this week. we will talk a little bit about what is happening global rates. we will talk about the rate story now with the global head of sovereign ratings at fitch.
2:23 am
since cut the u.k. credit rank by one step. he joins us for his first interview of the day. james, very good to see you all the way there, live from beijing. i wanted to pick up on a couple of things from your comments around the u.k. this was an off schedule update. give us a sense of the scale of the change you have made and how unusual it is to make this kind of off schedule update of a sovereign's rating. james: it is very unusual for us. we have regulations in europe that require us to follow a pretty strict calendar where we identify two days on each year. on those dates, we will announce our rating decisions on countries that are covered out of the eu and that includes the u.k. we have to have a reason for
2:24 am
deviating from that calendar. we thought the referendum outcome was a good enough reason for us to deviate. i think that in terms of the economic growth outlook and the subsequent changes to public finance, -- anna: you are talking about an abrupt slowdown in the short-term gdp growth. is this just abrupt and it lasts not very long, or does it have a longtail? what is your expectation around u.k. growth? james: it depends on how the negotiations go. the negotiations are going to be going for a wild. we have adjusted our growth forecast not only for this year, but the next two years. we don't know if the negotiations will be completed in two years or not. what we see over the next two years is we previously had growth rates of 2%. now we have growth rates of less than 1% in our forecast. it is based on the uncertain
2:25 am
outlook for the regulatory environment and the legal environment and the trade relationship with europe going forward. we think that will take a very severe toll on domestic investment inside the u.k. consumption as well. domestic investment will be the primary route through which this will be sold. consumption and investment together we see as contracting next year. we think it is quite a severe decline in growth that we are going to see. it is going to feel a lot like recession even if we have not got one in the numbers. anna: what do your numbers say? .9% forur numbers say next year and the year after. when we look at it on a quarterly past, we do not see any session get close to that. the only reason the u.k. stays out of recession in the projections we have is that there is a positive contribution from net trade and that comes from the weaker pound.
2:26 am
the exchange rate depreciation is going to have an effect on the net trade contribution to growth. the domestic demand contribution to growth is actually going to be negative. it is going to feel a lot like a recession in the u.k., even if the headline growth numbers are positive and less and 1%. anna: how important is it that the european -- that the u.k. stays in the european single market as these negotiations get underway? james: it is difficult to assume anything at this point. we have not made any assumptions at all about what the relationship with europe will be after the negotiations have been completed. we simply don't have the information to make those kinds of judgments. not part of any kind of preferred trade eu, wement with the would probably be looking at bringing our growth numbers even
2:27 am
lower going forward because that is the kind of thing that would contribute to companies that have started to think about leaving. anna: thank you very much. we are just out of time. "on the move" is up next. ♪
2:28 am
2:29 am
2:30 am
guy: welcome to "on the move." we are counting you down to the european open. i am guy johnson and i am alongside caroline hyde in berlin. this is what we are watching. no way back. merkel says this is no time for wishful thinking after the brexit vote. david cameron tells european leaders it is their fault and theyean leaders look like are negotiating great it is hard to gauge what is going on here. they

0 Views

info Stream Only

Uploaded by TV Archive on