Skip to main content

tv   The Pulse  Bloomberg  July 11, 2016 4:00am-5:01am EDT

4:00 am
>> the market to bounces. markets rally. outlook.lobal optimism in japan. george osborne heads to wall street in an effort to boost conference. can osborne and carney sue that the markets? of geak to the ceo aviation not at the air show. ♪
4:01 am
francine : welcome to the polls. quarters bloomberg had in london. this is the picture across the board. rebound.equities and a and a optimism for global growth. the stimulus has lifted. .ou can see the bank's still concern about atari and banks but after the selloff, a rebound. euro .6 percent. after the big slide it tuesday and wednesday of last week, at the time there was concern about repercussions over the exit to a ad you can see very quickly pound and is flat compared to how it ended up on friday. straight to the bloomberg first reviews. >> a japanese prime minister
4:02 am
conservative coalition scored a convincing of house election win. apanese shares jumped after repeated pledge for action on a stimulus package. a swift and comprehensive bold economic measures. into a deal worth more than $20 billion. the playmaker could announce a to air up to 100 planes asia for $12.7 billion as early as tomorrow. they say the discussion with go worthdia would be a around $7.5 million. they declined to comment. in firmly expecting the next prime minister will honor the brexit vote and start talking leaving the eu. president obama has echoed that sentiment. president obama: i think we have
4:03 am
to assume, a referendum being passed with a lot of attention, a lengthy campaign, and relatively high participation rates is going to stick. >> president obama warned americans protesting against police violence to remain respectful or risk undermining their message. any violence against officers is being called "a reprehensible crime." the killings of two black men were followed by the murdering of five dallas police officers. bloomberg news, powered by more than 2600 in the lists in more than 120 countries. francine : thank you very much. the latest news. our guest this morning. morgan assets management,
4:04 am
stephanie. first, we have it an exclusive interview out from the air show where guy johnson is talking exit. guy: let's talk to david joyce, the ceo of ge aviation. they make these things. big engines. let's talk to david joyce. of gee -- your boss signed a letter saying that brexit could materially affect future investment decisions. now that to brexit has happened, what is the view. from ge's point of view, we supported the u.k. staying in the eu. we like the common currency and the trade. i believe we, like you, will all adapt to the change.
4:05 am
i do not think it is cataclysmic. i think there will be stability and good trade between the u.k., eu, other trading partners around the world. we are going to continue to monitor the situation and work with the decision that the population has made in the u.k. and i do not think it will be counted classmates. -- cataclysmic. i do not think any of us do. >> the engines look a little bit more competitive now. is that one aspect to deal with? >> yes. with the currency exchange rate where it is, export for rolls-royce is looking more favorable. but for us, we have good market share. in narrow bodies and wide bodies. we have invested in the next iteration and leap, our new thing, goes into service with pegasus in july.
4:06 am
our g nymex engine on the triple seven at in 2020 goes to test and the first test was successful. some.e now delivered we're happy with our place in the industry right now and quite frankly, the industry strong. we're looking at a 7% demand growth in travel after six and a half last year and six the year before. brexit story is in the make, but you don't see any impact? >> no. we do not. look, the cost of fuel 1-yard line is the largest variable cost into in two years it is down 50%. if you look at the demand for them trouble across the regions, china is north of 13. the rest of asia is north of 9%. add 1500d states will aircraft and next three years. europe may approach 5% in terms
4:07 am
of new demand. that is compounded annual growth rate over the next three years. factors are at 80% for the third year in a row. are two times with a 12014. that is because willis twice is low. so we look at a commercial market as bullish. you look at military, u.s. defense budget is essentially flat. but if you look at the other nations around the globe, everyone is beefing up on defense so we see the defense industry is having a surprisingly strong undercurrent to it as well as having a strong commercial market. so we are on the industry in general right now. low,interest rates are bond rates keep getting lower. you have u.s. 10-years at historical lows and may go lower from here. the cost of capital, how does that feed into the story? >> it certainly helps.
4:08 am
our customer's best centers and our best interest to have locus of capital for these products so it is certainly a positive tailwind for us as we look at the industry going for. guy: politics is always a big factor. last year, export-impact bank now. are you a hand bowling going to be up to sell airplanes to iran? give us the latest. >> outlook, we're certainly going to be totally compliant with everything that comes out of the federal government of the united states relative to what we can and cannot do. right now, we want to anticipate in iran but we want to do it in a compliant manner with what the united states government expects from us which means we get licensed properly to go sell but you know, they are going to buy a lot of commercial equipment. the question is, will the united states industries be part of that and will we be able to bring those job some.
4:09 am
for both boeing and ge, this is a good opportunity we want to explore. guy: let's talk about product. the triple seven, current version. to do the math, pretty straightforward. versus connection rates. her you talking to boeing about the possibility of sans the production rate down? >> it is their decision, not ours. you can imagine, the number one part -- priority is to fill that. it is important for both ge and boeing so we are working together on all kinds of options including, you know, any kind of innovation or anything we can do to make sure we maintain a good solid as we make the transition which is always an issue in these programs. but you know, it is a great future. we have 700 engines on the triple seven next already on order. .hat program is off and running
4:10 am
so we have to fill this bridge until we go into production and that is a good place to be. guy: will the stretch and can compete? can do it.r we made sure the engine has everything boeing needs to make a full family of airplanes out of the 777x. guy: what about the other markets? small doublesle, aisle. with they comfortable technology we bring to that market. right now, it is all about the business case and everyone is evaluating what the two sides of that is for the two families of airplanes. thy: we talked about around the world. let's talk about the nuts and bolts of your business ramping up to the production levels we are talking about at the moment, it is a challenge.
4:11 am
you can see with the oem's. what is going on with ge supply chain, your capacity to deliver? >> we will deliver 1700 this year. cfm engines. our supply chains in the narrow body is used to these kind of levels of rates. running tests on rate-readiness in the last two years and in fact just got a favorable grade for our air-readiness. we are feeling good with the supply chain. incredibly a line. we recognize and respect the importance of making sure we have everybody in the same focus to make sure we deliver for airbus in for boeing. frontne will we stand in of a hybrid engine? >> we have a big program on hydroelectric. with a name like general electric, we are very much interested in hybrids. you will seen in the unmanned
4:12 am
vehicles sooner than you think. bigger hybrids in that space make a lot of sense and you will us them earlier than any of think. over the time, going into business and general aviation and someday you and i or my successor will be sitting in front of one of them in my chalet for a while. for you will be a long quite a while. thank you very much, and david. francine, back to you. francine : thank you. stay with the pulse. coming up, including george osborne goes to wall street is the u.k. chancellor sets out to reassure global investors. we will talk exit and britain's future place in the world. and 18 billion pounds business their business doors last week. we will talk to a real estate company. the $300 billion boost china's equity markets are about to get a new investor with deep
4:13 am
pockets. we will bring in that story later this hour. this is bloomberg. ♪
4:14 am
4:15 am
4:16 am
francine: let's talk more on the property story. seeing over 18 billion pounds close their doors to prevent business loss. still with us is stephanie flanders from j.p. morgan asset management. stephanie, a quick read from across the property fund freezes. we were asking whether it was a canary in the coal mine or this particular your thoughts? stephanie: there has always been have seen inch we the international monetary fund
4:17 am
and others around, how much money is an asset management in general globally as well. they are responsible for a lot of these big markets close but particularly for the potential for a mismatch between the underlying assets and the sort of presented advertised liquidity of a fund heightening volatility down the road. the example of that miss month mismatch ish -- this. we were confident this was not isolated -- this was in isolated issue for this sector, which is frankly a sector likely to have a large and immediate effect from brexit. so don't think we see a broader problem. but if there is a broader lesson people take at a time when people are going into these liquid alternative investments, is to understand there is a
4:18 am
premium attached to some of these assets even if you're not told about it. francine: what does it tell us about the underlying market, commercial property in the u.k.? >> it tells a sentiment has changed on the back of the brexit vote which is why this as happen. back of people are pulling from real estate to see what the impact on the commercial property market is and i will and go the comments that this is different from 2008 when -- because there is still a lot of activity and demand out there from all different types of investors but not least from ivan equity, who can access to finance and like this transparent market in the u.k. francine: how much is this dropped? it is hard for us to get a number on how much it will rise
4:19 am
or fall by. we don't know where we will be six months from now. >> i think people have not made any decisions. you cannot put a measure on whether demand has dropped that much. what this will mean is forced activity. we will see some disposal of property assets coming onto the market and that will set the benchmark for where values are so it will be interesting to see where it pulls out. francine: a frightening figure that came up was that the u.k. banks have an x or should -- have an exposure. are we in a wait and see mode? stephanie: what is reassuring from that context is a stress test for u.k. banks. a huge fall in property across the board, especially commercial property. which has been identified over
4:20 am
the past couple years as a sector that attracted a lot of flows but had a lot of exposure. i prefer to have a risk identified in the past that has been quantified to be the one on the agenda, not something we have not thought of before. for anyone in the industry, london commercial property had been a question mark for it while in the terms of was their scope for further appreciation relative to other markets. this is not something -- brexit has added a whole different is not something altogether surprising. francine: one thing very apparent from brexit was the pound falling. does the sterling fall? what does it mean for the overseas sale of apartments? >> it could spark renewed interest. that area has been under pressure because of tax increases put on residential's by the chancellor of the last 18 months, so we have particularly in the prime residential area, some cooling.
4:21 am
we do anticipate more interest from asia and the united states back into the london market, but we will see over the course of the summer how that plays out. francine: what is the question you get the most question mark uncertainty? is my property investment safe? >> the most on commercial referees, how far have they'll use decreased westmark everyone wants to know. they want to call it because they want to come in. there is a demand. london property is -- and u.k. property is -- probably the most traded property throughout the world because people like this market and they want to get a bargain. they like the market? are we going to become like a investment? >> not quite. but the market is alive and kicking and still will be five, years time.
4:22 am
it is the most transparent market in the world and when people want to invest in real estate and get long-term returns, they want that transparency. sense forwill it make property taxes 15%? stephanie: you have george osborne in the states today, it is almost -- it almost seems like an outsider's saying, stay here while we get this new trade deal organize. here are a few more things to get you interested, do not switch off get. i think it is that kind of dynamic in this environment where there is a vacuum about what the future trade regime will be. anything they keep 70 question in people's mind, keeps that on hold rather than canceled is helpful. whether that is called a corporation tax anything else. francine: thank you very much. stephanie, thank you. we will talk italian banks.
4:23 am
the insight team heads to wall street to boost confidence. this is bloomberg. ♪
4:24 am
4:25 am
♪ standard chartered has started its first brokerage
4:26 am
business in japan. they will sell in emerging market products with potential for fast growth. the move comes even as the ceo cut cost and sold businesses as he tried to turn around the london-based bank which last sinceosted its first loss 19 89. and divesting the state in india of about 1.4 billion dollars to further reduce debt. the move comes as the world's biggest event company is still struggling to win over some disgruntled investors one year into its mega-merger. and it may lower the threshold in its acquisition. a decision reached later today after parties involved examine a technical issue. deutsche bank investors have until tomorrow to tender their shares. approve the move last week in a near-unanimous vote.
4:27 am
francine: up next, the u.k. is not getting the worlds as george osborne as investors boost bets. can the chancellor tame wall street's exit fears? this is bloomberg.
4:28 am
4:29 am
4:30 am
♪ polls,e: welcome to the live from bloomberg headquarters here in london. japanese prime minister's conservative coalition has called a convincing upper house election when. japanese is shares jumped after he repeated his pledge for action on a stimulus package. swepts he wants the formulation of comprehensive, bold economic measures. in close to announcing deals
4:31 am
worth more than $20 billion according to people familiar. the playmaker could announce the sale of up to 100 airplanes to air asia as early as tomorrow. the company is said to be in discussion with go airlines india regarding the purchase of about 78 planes worth around $7.5 billion. to comment.ned president obama has warned americans protesting against police violence to remain respectful or risk undermining their message. he said rallies were held at many cities over the weekend and were legitimate, but he called any violence against officers a reprehensible crime. murders of five policeman followed the killing of two black men. this is bloomberg. francine? francine: thank you.
4:32 am
let's head to the black board with mark. the sixthng for consecutive day after the jobs report on friday. every industry group is gaining. the big tease of data from china. factory gate deflation easing for the sixth straight month giving fresh evidence that falling prices are turning a corner after four years of decline. the ppi fell in june compared with the smaller jump a month earlier. the smallest since 2014. those are the figures. this is the year every single major currency is rising. not something we have seen a lot of since the referendum in the u.k.. japanese prime minister saying
4:33 am
he plans to add fresh fiscal stimulus after the ruling party won sunday's upper house election. only one major currency has risen against cn this year. that is the brazilian riel. very quickly, this is the bloomberg commodity and rising today. forget brexit is the message from citigroup. it says it is bullish on the outlook for commodities and 2017. brexit will fade, it says. since january 20, right there, the bloomberg commodity index has risen by 19% from an all-time record low since brexit the best performing individual commodity within the blubber 18.7%.ty index is up by francine: iq. u.k. chancellor george osborne heading to washington.
4:34 am
a two-weektop in international trip to shore up investor confidence. george osborne says, my message to the world is that britain may be leaving the eu but we're not leaving the world. friday'safter better-the un-expected jobs numbers. hoping the u.k. bank will said a gash. we are joined by bloomberg simon kennedy who oversees the brexit coverage in and also with us is stephanie flanders of jp morgan. u.k. is putting a sign up saying we are open for business let's see how we can make this work. overall, how frail as the u.k. economy? >> we could of been in worse shape. it is one of the peculiarities of the referendum decision that we were one of the countries
4:35 am
that did not look like it was anywhere close to the recession now having this independent shock not related to anything else in the world. i think the real issue george osborne is trying to address as not necessarily the very short term outlook that the sort of medium-term chilling effect this decision could have on investment decisions and link-ups with u.k. is this is. you have big multinationals all of the world asking what is this going to do to my customer relations, my service supply relationship, my plot i was going to have a new model in, should i think about having that produced and some other european country. that which could because late to the economy further out. if you can't stop those decisions being made with the kind of statements george osborne is making, if you can send that reassuring signal around trade deals and our relationship with the world it even in the wake of the enormous uncertainty, that can be
4:36 am
helpful. francine: we don't even of george osborne will still be in charge and a couple of months, right? because the u.k. is an political disarray. >> absolutely. they may say it is burnishing his credentials for perhaps a shift to foreign secretary. the senate might say that. talking aboutday things the george osborne has not done as much talking about. whereas osborne is talking about austerity, she is talking about the corporate leadership, having workers on the board, talking about how to not everyone feels they are part of the economy. a pivot away from osborne still the favorite to be the next prime minister. stephanie -- ofncine: how much do we know the next prime minister? there are two candidates but it is unclear. stephanie: there are a lot of --
4:37 am
stephanie: there are a lot of questions because she is not widely known internationally or even in some of the financial revisutions she worked at lee. so there are a lot of questions. i think most investors would be more reassured by a familiar face and one that has been a solid and, you know, respectable member of the cabinet all this time. but the questions run deeper than that. it is about what signals a new leader will send about the deal after. what we are looking for, how quickly will we start negotiations, what the tone of that relationship is going to be. u.k.hing this has cost the in the past is to take an arrogant posture in european negotiations and you get the sense this is one time where that would be extremely unhelpful so any signals on that score, many businesses would be interested to hear.
4:38 am
francine: are we expecting animosity? could be understandable but it does not make for the best combination when you are doing a trade deal. are we seeing animosity? being no one likes divorced and that is what you do. toy not like other forced negotiate with brussels. you have the technocrats who now run the european commission. or do they get to be in the room with angela merkel and appeal to the sense of politics. britain will also have an impact on what will happen to germany. francine: what can mark carney do to keep dish on the road? we are expecting the rate to cut into expecting him to be fighting fires. stephanie: we have already had the strong signal from him and see the banke will of england loosening and why not
4:39 am
do it this week if you're going to do in the summer? i think, having previously sent signals that half a percentage point was the low point for the policy rate, we are in a different world now not just because of brexit because of intohe other things going negative territory. so that is likely to happen more than it has been in the past but it is clear you will need protection on other fronts and i think the monetary committee is aware of that and i won't be surprised if we see more in the funding for lending or easing qualifications. it is better to do it now than wait. francine: are we none the wiser about this financial pass porting or accessing the market? say, who is int charge? francine: we will find out by september 9. it feels a long way off. thanks, stephanie.
4:40 am
and simon kennedy. we will be talking italian banks and janet yellen next. the $300 billion boost chinese equity markets are supposed to get. a new investor with very deep pockets. i will to you about that next. this is bloomberg. ♪
4:41 am
4:42 am
-- y
4:43 am
>> the playmaker could announce the sale of up to 100 airplanes as 12.75 billion dollars early as tomorrow. the country is said to be in discussion with go airlines indio regarding the purchase of about 78 planes worth around $7.5 billion. airbus declined to comment. deutsche bank says it may lower the threshold for approval. a decision will be reached later today after parties involved examining technical issue. investors have until tomorrow to tender their share. euro zone finance ministers meet in brussels later ostensibly to talk italian banks and the situation. but the regions finance chiefs have been in a room together for
4:44 am
the first time since the referendum. that is the bloomberg business flash. francine: let's get some final thoughts from stephanie flanders from j.p. morgan asset management. you spent a lot of time talking about brexit. but look at italian banks. something happens they need to bail in creditors and cannot use subsidies. would it be worse than brexit? the final nail in the coffin for the eu? >> i think it is striking that the european market has fallen more than the u.k., fallen about the same as the domestically oriented index in the u.k., the 50 to 50. and that is because of concerns around european banking, particularly italian banks. you had a warning sign last year when you had a bail-in of retail investors who are not really thought they were taken on any kind of risk investment, but there are just putting money into a savings account. they got bailed in to support an italian bank then. so we think we know there are
4:45 am
risks that come from the kind of things the european commission is suggesting the titans will have to do as part of their support for a tyra banks. has put pressure on that decision and highlighted their support for italian banks. i think italy has always been sort of the massive mover in this if you really question it european banks and debt then that is a big issue for europe. we are not there yet but it does loom 30 large. the underlying economy has been week for so long they cannot produce any productivity growth. they did not have the growth in the good years of the eurozone, either. we have known about these nonperforming loans being a burden on the european banking system for a long time but there is a worry that if this is not dealt with in a clear but flexible way, you know, it could
4:46 am
be something which danced to the contagion and you are right in many ways. it poses more risks for the onopean economy the in exit its own. francine: let's talk china. a war chest of $300 billion ready to buy into equities as asset managers seek better returns. let's talk to our chief economic correspondent. this is huge. this is a big figure. what is behind the move? francine. morning, the idea here is that pensioners and china, pension funds have not and getting a great return on their investments in bonds and deposit and the government once to make sure there is a better safety net for an aging population so one of the ideas is to channel some of the savings and pension runs into a government fund which has a track record of investing in doing ok in equities and they can go about it on their behalf in the net result will be for
4:47 am
the pensioners a better return. along the way, by doing something like this, you are supportering additional . as you remember well from last year, one of the things we saw was the government quickly brought together funding and public liquidity into the stock market so it will not do any harm at all to send a message to the world that the chinese pensioners and the aging population are looking at heading into the stock market. francine: is a make this investment shifts, with signals is it sending? enda: it is an interesting time to be going into the stock market after the year china had. it is a big week for chinese economy. getting a lot of data on lending and production. on friday, it is a take it or number. a lot of investors treat it with skepticism.
4:48 am
whatever it is, it will come in somewhere between 6.5% and 7%. these lowest since the financial crisis. the bigger issue will be to see what kind of ratings were getting on how to transition. the great transition continuing in china. services andew consumption is holding up ok and whether they can fill the gap left by the heavy industry sectors. that transition has been relatively on track but we have a long ways to go. and if we see any slowdown on the consumption side of things, that will probably be a low and expect more talk of stimulus. francine: and it, thank you for the update. correspondent, enda. made note great
4:49 am
about wanting to develop the financial system as a sort of global center. we know they won 12 global currency and developing the domestic stock market is a key part of that. i guess the question is always going to be, can they had that kind of upside of building the stock market and may be giving support to prices but still also do that difficult coming which the banking system, the debt that is sitting there, there is a fear with china that they like to see this development and do offshore trading and they want to do, you know, build up the stock market, but they are not maybe working on the infrastructure, the underlying weaknesses fast enough. and if you have a fast developed market, if the stock market continues to grow and more money goes into an and you have not done that hard work, that restructuring underneath, you know, the risk is that would exacerbate a crisis down the road and maybe increase the
4:50 am
effect on the global economy because it would become more integrated. i don't think we're there yet. but the hard work seems to proceed on a slower path than the sort of more exciting, opening up, getting into the market risk. francine: we have not talked janet yellen. how is she looked at the risks? she had a pretty good jobs market number on friday. stephanie: if you're looking at the potential risk that could come out of the brexit decision, one that i think is becoming risk thatent is the we have pushed investors into expecting quite a sort of extreme expectation when it comes to interest rates. that all of these rates we expected at the start of the year now off the table. but that is actually wrong, if we are going to see, you know, strengthening or still quite strong u.s. economy, it if these
4:51 am
job numbers suggest we're taking it on nicely. might even see productivity increase in the second half. if all of that falls into place and the fed thinks we need to have rate rises, we are heading are self off for a bigger shock for market expectations they end if we had not had this move into bowl markets and pricing out of interest expectations of the last couple weeks. it is a little bit tortuous, but the whole of the world has outputted off of their agenda because of brexit. if that turns out to be in overreaction, we could of a move that is quite sharp. francine: thank you, stephanie flanders, j.p. morgan asset management staying with us for the top of the next hour. we'll will talk about u.s. treasuries and depth. coming up next, global turbulence. david cameron is said to speak at an air show shortly. can he reassure britain's big business? we are live on the ground in london. this is bloomberg.
4:52 am
4:53 am
4:54 am
francine: so the airshow, one of the biggest events for the aviation industry open. under the brexit cloud. toid cameron is scheduled speak in a few moments. what exactly are we expecting for the prime minister to say? >> i think he is going to try to
4:55 am
calm everybody down. ofhink it will have a number effects, slow down the global economy, make investments into the u.k. more difficult. thes trying to calm situation down. in some ways, the story of the morning is what is happening with sterling. the u.k. industry just got more competitive. i was talking to david joyce at ge they compete with rolls-royce. the engine just became a little bit more cheap and that is the competitive situation he will have to try to calm down. this is a big u.k. export sector and it needs to be talked to them told that things are going to be ok on impact. i am looking forward to an interview with the boeing ceo. what do you think he will say about that weakening pound?
4:56 am
>> the flight is cutting and. it is going to get noisy. he is going to agree. the brexit story is front and center for him as well. he also has his own issues to deal with domestically. whether or not he can next warplanes to iran. 10 he manage congress? what is going to happen if mr. trump wins. much at thevery front for boeing and politics as well. are they going to stretch the triple seven aircraft? what will happen in terms of the narrow bodies? will they build a replacement for the 757? front and center every time, that is dominating the story. also what is happening with central banks and the oil prices. back to you. francine: thank you. looking forward to the
4:57 am
interview. guy johnson there at the air show. surveillance is up next. tom keene will join me. we will talk about banks, consolidation, janet yellen, stephanie flanders will be here. we will also be talking brexit. ♪
4:58 am
4:59 am
5:00 am
francine: the market bounces. markets rally after u.s. data brightens the outlook. heading to wall street in a bid to boost confidence in the u.k. can osborne and carney sues the markets -- sooth the markets? burning with the ceo of -- boeing at the farnborough airshow. we have a busy


info Stream Only

Uploaded by TV Archive on