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tv   Bloomberg Surveillance  Bloomberg  July 13, 2016 5:00am-7:01am EDT

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as thee: a new era conservative party leader theresa may plans to take over. life after cameron, the pound --lies, the bank of england mass psychosis, jeffrey good dlach diagnoses madness. this is bloomberg "surveillance." tom keene is in
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new york. we need to take stock of the fact that not only is there a president -- a new prime minister and the u.k., the second female, but this is a new era. she will go to brussels to renegotiate and try to extract the u.k. from the eu. tom: you are right, the idea of a new era. she would not -- she was not leave. she?as not a brexiter, was francine: she was not but she was not one that really campaigned to remain. she stood in the middle and was very cautious. one thing that people are saying and she probably has to pick someone to negotiate who was for brexit. it is all about theabinet and we may get some appointments at the time we finished today. let's get straight to the bloomberg first word news. nejra: we are a few hours away
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from a changing of the guard at number 10 downing street. davidh prime minister cameron will face questions and the house of commons for the last time and then we'll go to buckingham palace submit his resignation. the queen will ask theresa may to form a new government. departmenteate a new to supervise the u.k.'s departure from the eu. labor's governing party says jeremy corbyn could automatically be able to stand for leadership in the contest and will not have to support -- obtain the support that her -- in france, the economy minister has declared -- stopped just short of declaring he will run for president. he says he will lead his movement to victory in 2017.
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37% of the french people support france whileed to whole want. -- francois hollande. had no legal basis to more than 80% of its claims on the south china sea. it opposes what it calls other countries illegal claims and occupation. paul ryan says donald trump's running mate should be a conservative. and a town hall he said the party's by's presidential candidate must be someone with a record of advancing conservative principles. favorites, indiana governor mike pence, new jersey governor chris christie, and former house speaker newt gingrich. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am nejra cehic. this is bloomberg. equities, look at
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bonds, currencies, commodities. a quiet day after two risk on days. -- 10r you yield flat year yield flat. looking for sustained and higher oil prices over the next year or so. the fix is turning, weaker yen. even the swiss franc gives it up. francine: i have seen a little bit of a reversal. there is not much of a story here apart from the fact that the stock rally that started in asia overnight lost momentum in the europe. the pound, the probably the mayest story since theresa will be in charge, strengthening before she takes over. tom: prime minister may will have her challenge. let's look at the arch challenge
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that mr. cameron faced. this is united kingdom and inflation adjusted disposable income aspiration over 20 and 30 years. persistently higher, things are good across the queen's england. and then it changes, the blue circle is the beginning of prime minister cameron's tenure. what i would suggest is the flatness is the great challenge versus that missing gap which is the extension of the good years. it has not happened and like a lot of other nations, that is a struggle of economic growth to get the good feeling back to the people of your united kingdom. francine: apart from the saw, itl mess that we was surprising to see george osborne after years of saying, we need more austerity to please the markets, actually going and reversing that. you are doing the u.k. and i
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really think no question about it, it is the story of the day. i picked something to do with yields. u.s. treasury yields yielded less than ever this month and the search for income set off a rally in the price of high-yield corporate bonds. they are in white and you can see the u.s. 10 year yield in blue. this captures the tension in the markets and how we are pricing the risk. let's bring in ruchir sharma. book, theauthor of a rise and fall of nations. when you look at the post crisis of brexit, we will get onto this and a second. when you look at yields, are we mispricing everything? it seems like a crazy year -- crazy world. ruchir: the world has seen
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periods of deflation before. what we have never seen our interest rates are so low so i think that this is a truly exceptional period that even though we do not have inflation per se, yields are still so low. that is leading to a massive mispricing of assets and feeds into this theme about income inequality being turbocharged in this environment, something i cover in the book. you have this extraordinary period were asset prices have done extremely well but wages have not done that well. tom: congratulations on this new thrilling absolutely the way you grab the scope and scale of emerging markets. let's dovetail the rise and fall of nations into the rise and fall of japan. important breaking news, japan not getting it done, sub 1% gdp
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combined with cpi and it is a struggling animal spirit within japan. on page 384 of your book you review abe-nomics and the arrows and the quiver. is abe-nomics a success after you have gone through your book, or does he need to do more and do it quickly to reinvigorate that economy? which: i think one thing is true, it is amazing after all these years one facing -- basic fact is the demonstration -- demographic challenge. they have been growing at barely one half a percent over the past years and is facing an acute labor shortage. that tells you about how difficult it is for japan to grow and its growth rate is only one half to 1%. abe-nomics is misguided a bit at times because they find delete
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do something structural with aligning more foreigners, but that is what they need to do much more of a that is very difficult for them to do. i think the focus is wrong. you cannot have these growth rates when you are trying to grow with a shrinking working age population. tom: for them to be a breakout just as one example as francine has mentioned, women-om ics. do they have the courage culturally to be a breakout japan? ruchir: they are trying to do that. unfortunately it is not strong enough in terms of what they are trying to do to really move the needle. i think this is totally misguided. they tried their experiment last time which ended up hurting real wages even more because of an artificial increase in inflation
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without an increase in wages. i feel it is a bit misguided at times. i appreciate the effort and the fact that they have a new leader who is trying to do something. misguided and the big problem for the global economy, why is the entire global economy feeling a bit japanese? i spent an entire chapter dealing with this, demographics is so important in explaining why the global economy is growing at a slower pace. francine: when you look at demographics in japan, they need more workers and more visas. the yen is another story. this is the benchmark 10 year yield and it is pretty much flat. abe-nomics failing is structural and how much is because it is a haven? ruchir: i think it is really about the fact that it is happening across the world.
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wherever growth is disappointing, you are seeing at collapse. it is happening in core europe as well. francine: but they should have pushed more reforms in japan. ruchir: they should have. i feel that japan cannot grow at to 1% at ane half time when it's working population is shrinking. that is the reality the world has to confront with. francine: ruchir sharma stays with us for the hour. coming up, david cameron sits down from 10 downing street. theresa may moves in. you are looking at live pictures from downing street with the very latest. saw david cameron going to parliament and we know he will go see the queen to resign. that is when queen elizabeth ii will invite theresa may to form a government. this is bloomberg. ♪
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francine: i am francine lacqua in london, tom keene in new york. we go to downing street where the action started to happen this morning. we saw for probably the last time david cameron leaving downing street. he then goes to parliament. that will be his last question time with the lawmakers and then he resigns with the queen, and the queen asks theresa may to form a new government. the u.k. will get a new leader later. theresa may will immediately be under pressure to name a brexit czar. anna edwards is outside 10 downing street. i think there are three slots to
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fill. anna: all crucial positions. whether we get somebody called a brexit czar, they have said they separateet up a department for managing that relationship and crucial conversation with the eu. , the names of the people who led the brexit campaign could be in. philip hammond as foreign secretary now, will he go to that job? liam fox, david davis, all names we have heard. -- amber rudd. francine: are we any wiser on when an article 50 will be triggered? theresa may has said she will wait until possibly next year. would depend on the people around her? anna: yes, she has said that.
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she said that during the campaigning in the process of securing the leadership. she was certainly one of those like michael gove who was not going to be in a rush to trickle article 50. -- trigger article 50. that's an's into motion -- that sets into motion eight two-year time period. that was very much felt that it to trigger ite instantly because then you are constantly running out of time and watching the sands trickle through. anna, how will prime minister cameron be needed -- greeted at the house of commons? this will be his last prime minister's questions. viewers internationally might or might not have seen how it works . shouting, although
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jeremy corbyn is trying to change the tone. he will be given some kind reflects on his achievements. and given some robust questioning, that is always how thing work -- things work. jeremy corbyn under pressure and he wants to leave that conversation behind and put the conservative party under pressure. downing street is much larger then maybe that little door perceives. i believe it was three houses combined. itston churchill called lightly and shakily built by george downing. i would suggest it is better built. when theresa may walks into 10 downing street, what is her first condition to link herself to the brexiteers, the people furious with london and 10 downing street? anna: she obviously has a big job to do in terms of uniting the country and uniting the
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party. that is why we are looking at these key appointments, brexit czar, lead negotiator, and the role of chancellor. we are looking for those to come pretty quickly, as early as this evening. she will have to work hard to unite the party coming from different sides of the argument. francine: anna edwards 4s at 10 downing street. let's get back to rish ruchir sharma from morgan stanley investment management. he is also the author of the book "the rise and fall of nations." what are the 10 roles of change for theresa may? ruchir: i think the key thing here for her is to see what to do with immigration because if you look at the u.k. population and what is going on, the domestic population has not really gone up. the entire increase in working
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age population has come because of immigration. there is a view it is deteriorating the social fabric of the country. how du balance the fact -- how do you balance the fact that the only reason the u.k. economy has been able to grow at a faster populations is because it's working age population increased due to immigration? anti-immigrant that their economy is stagnating. how do you balance this social perspective? the other thing i think she has to figure out in terms of what to do is the fact that, how do you move away a bit from the very heavy hand of the eu? one thing i think the eu has ,aced criticism for is too much
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too many regulations coming out of brussels. is that something she can try and work around? tom: we will continue this. i want to talk about u.s. politics as well. anticipatedhugely by people that loved "breakout nations." next hour we will speak to lakshman achuthan with a different way of looking things -- looking at things. this is bloomberg. ♪
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francine: this is bloomberg
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"surveillance." francine lacqua in london, tom keene in new york. i have picked out a piece from mark gilbert about inflation. if people thought banks or governments might get addicted given boost, it might nothing and economics is currently working out the way textbooks promised. just save the windfall instead. you dedicate an entire chapter to inflation and i worry about it in this country if we are going to be hit by a recession and have to import goods. have beenthink people far too focused on the traditional measures of inflation and one thing we are sort of finding out is that you can get a lot of asset price inflation as well and lose money. the consequences of that down the road, if you look at the big
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recessions of the past 20 or 30 years starting with japan in 1990, a lot of those were caused by as says bright -- asset price deflation turned into inflation. focused on the- old targets and hitting those. easy moneye such policies that is leading to rapid asset price inflation that leads to problems. social problems including income inequality because the people who benefit tend to be the rich, and also the fact that if you get ramp it inflation, if it turns into deflation it has serious economic conflict -- consequences. tom: how does that change the dilemma? if we shift from income state dynamics to balance dynamics, how does currency play in? ruchir: i think the real problem the world is facing from a
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currency standpoint is that the dollar has never been this powerful. it's role in the global economy has never been this strong. if you look at the amount of global -- dollar debt and the global economy, ethics transaction and what percentage are done in dollar, 80%. the foreign-exchange holdings and proportion held in dollars, you put all that together and find the dollar has never been powerful -- this powerful as a currency. tom: ruchir sharma on our exorbitant privilege. coming up on the queen and theresa may, jonathan fenby. ♪
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tom: good morning, everyone. , and from london. the prime minister off to
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parliament, a final visit with his house of commons and the pageantry later today, i believe francine lacqua has a visit with the queen sometime before lunch this morning. that would be something. francine: that would be something. that would be a breaking exclusive. tom: no question about that. with more on the politics of her united kingdom, here is nejra cehic. nejra: theresa may becomes the prime minister today and one of her first jobs is naming someone to take the u.k. out of the european union. she will announce the formation of a brexit department and whoever she picks will be a bona fide supporter of leaving the eu. cameron will face questions and the house of commons one last time before submitting his resignation to the queen. will rise that oil between 50 and $60 a barrel
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until at least 2018, and opec should stick with its policy. they say the markets will absorb the oversupply that led to lower prices. now that bernie sanders has endorsed hillary clinton, will his supporters follow? clinton made a bid for sanders' backers, echoing some of his campaign pledges. congress have not been able to agree on funding for the zika virus and that is likely to delay government research into a vaccine. they are planning to start their seven-week vacation and democrats have blocked the zika bill because it would deny new money for planned parenthood. pressure is mounting on abe-nomics. they have cut their forecast for growth and gdp is expected to compared only 0.9%
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with the january estimate of 1.7%. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am nejra cehic and this is bloomberg. francine: thank you so much. china is not backing down from its claims over the south china sea. it comes out with a new policy paper after a tribunal said china had no claim to more than 80% of the waters. joining us is jonathan fenby and still with us is recherche arm a. -- ruchir sharma. jonathan, thank you for joining us. when you look at the south china sea rolling, we underestimate how big of a blow to the prestige of the chinese president it is and i was surprised that china found an ally in taiwan. jonathan: taiwan does not want to give up its claims because of reasons of pride it has to stay
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in the game. the ruling was not unexpected. sent out senior diplomats to prepare the ground for it. there's the immediate issue in the south china sea, other china goes ahead and declares some kind of defense zone over its reefs and islands where other countries and planes going into that area would have to tell china, or whether it takes it further. francine: i have not seen this before. germany sells the 10 year bond with a negative year old for the first time -- negative yield. we were looking at news from italy and italy, with all of the problems with the banks fell into negative territory. i just do not know how we are pricing. guests have two esteemed to talk about the effects. jonathan fenby and ruchir sharma, there is the headline of
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the g5, g2, g0 world. what does this mean for china with the real rate that they have? with highhina act relative inflation-adjusted rates? first chinaink it is concerned this is a bit of a reprieve from them. country thatat the would lose the most if the u.s. were to increase interest rate would be china. i think the fact that yields are following in the u.s. and the state is dovish as ever is helping china get a break. i think that is the single most important. tom: jonathan fenby, ruchir sharma nails it, a punch bowl filled to the brim. brim.filled to the help me with how china adapts to that. jonathan: that is absolutely
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right. it is good for china. the worst thing to happen for china would be for the fed to embark on rate hikes. what china wants to do at the moment is certainly gradually manage a depreciation of its currency by the end of this year. all this is actually helping chinese policymakers. -- aine: what happens dollar rally helps china somewhat, right? ruchir: i think it does not help china but what is helping is the losing monetary policy. francine: as long as the dollar is stable it does help china and the pboc. ruchir: right, but you have to look at what is going on. the single most important thing that would save china was when the fed backed off its tightening cycle in february. amount of money circulating
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today in china is greater than that of the united states, even though the chinese economy is a smaller economy. there is a wall of money in china waiting to leave and if they get high interest rates abroad they will leave. the fed backing off has been the important factor helping china avoid a bigger crisis then what they were staring at in february. jonathan: certainly chinese corporate earlier this year were moving against the yuan. their pressure was decided at some point around february, it is not a one-way bet against the yuan. they came back and balanced things up. beyond china, this is also good news for emerging markets. there yields look pretty good. francine: i understand the fed not moving is good for everyone and less they surprise the markets but at some point they will have to take. we are seeing cheap money and emerging markets which means we
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will not see the defaults we might not have had. -- we might have had. are we making it worse long-term? ruchir: we could be. a troubling bit about china is it is taking six dollars of data to create one dollar of gdp growth in china. and the bubble it took three dollars of debt for one dollar of gdp growth in the united states. if the pressure on the currency would resume and if they were not to print so much money and that leads to capital outflows, that would put china in a tough spot. jonathan: this is all the more so because government policy will increase leverage and debt. tom: let me bring up this chart. this is chinese yuan appreciation back to the first
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floating of a renminbi, and the recent weakening. where is this happening? -- heading? is beijing the ultimate currency war? 's currency is definitely uncompetitive because it has depreciated significantly against many emerging market currencies and that is part of the reason why you are seeing capital outflows having an impact on the u.s. dollar. i think the currency is competitive and yes, a devaluation that will lead to a currency war, i do not think we are staring at that but the gradual depreciation has creeped down and it is possible that the currency against the dollar will be 10% to 15% weaker. tom: jonathan fenby, is china rising or falling? jonathan: china is in danger of hitting a stagnant period.
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it will go on expanding, it is not going to collapse or implode, but mainly for political reasons. that is the communist party were venting economic reform china risks getting involved in the middle development. it is using all kinds of mechanisms such as increased leverage in debt which will come home to roost and a couple years time. francine: thank you so much. this is a picture for the markets. we found out that germany for the first time ever sold a 10 year bund with a negative yield. european stocks are pretty much flat. overall, what will mario draghi do next? has he thought about tapering ecb banks? ♪
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francine: welcome back to bloomberg "surveillance." francine lacqua in london, tom keene in new york. we have to talk about the banks. italianerkel and the finance minister have signaled that confidence -- the italian banks can avert a crisis. still with us is jonathan fenby and roush ruchir sharma. i saw the headline that everyone is saying merkel will find a solution but is the solution a bail in? >> the devil is in the details and it is not entirely clear. we were saying comments by an eu
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state a director yesterday saying they are looking more at the spanish model where there was bail in and anyone who was mis-sold any bonds would be able to claim for compensation. not entirely sure that is what italy has in mind. we are also seeing that private measures are being worked on. considering is several ways of reducing the debt load. francine: how week are these banks? a lot of people say they should've done something about it before but overall, this is extremely weak growth. it has been sort of a slow build to bad debt. at the same time we have had a profit environment that has gotten much tougher with record low interest rates. difficult to build up buffers by maintaining profit and the combination of two has weekend
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some of the lenders in particular. metricu go to the growth or the non-growth metric, this chart is stunning. the four-year moving average of non-animal spirit and italy is worst in class. it is not g5, it is not g-7. it looks like one of roush ruchir sharma's emerging markets. can they do a bailout without structural economic change? elisa: i think this is what the european authorities have been pushing for more deeply. other reforms that will help the economy become more competitive. renzi has pushed on a couple of funds, on the labor reform but has brought about some of the deeper changes to the banking agostry just over a year when he pushed through measures that would help lenders tie up
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and ideally become more competitive. romeone of my kids goes to or wherever she was in italy, and she comes back and goes, dad, everybody is a student. if italy is going to solve the banks and its structural challenges, does it do it better within core europe or better outside europe like a brexit? elisa: that is a very charged question. moment, the stock market tells us that people see, the market sees a better outlook for italy within the eurozone. francine: i think investors would freak out. at the same time what you are alluding to is the fact that the pound has dropped so much and if you had a return to italian currency there would be beautiful brands.
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elisa: that might be a long process. francine: it is an economy that is definitely changing. uzi -- elisartin martinuzzi. myths byxt hour on the tokyo and japan, robert feldman will join us of morgan stanley. this is bloomberg. ♪
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tom: george downing did better than good in the time of charles the second. he had to wait 30 years to build the first property off st. james park. there it is, 10 downing street, a mixture of three units into 100 rooms. much bigger than it looks with that door and the officer out front. we are waiting for the pageantry to continue. francine: it is much bigger but when you're used to the elysee
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palace and paris, it looks very modest. tom: what happens next? francine: david cameron speaks for the last time with lawmakers and then we are expecting him to go see the queen, full of pageantry, and that will be some more substantial than downing street. and then that queen will call on theresa may to form the government. tom: let's go to nejra cehic. nejra: quarterly sales were better than expected at burberry . shoppers in the u k bought more trenchcoats in the final weeks of june. burberry shook up at you management ranks this week replacing the ceo. the fund that was once the biggest investor in volume -- in valeant has gotten out. has gotten out. that is the bloomberg business flash. francine: the french economy
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minister is keeping france busy. fenbywith us is jonathan and roush ruchir sharma. share -- ruchir sharma. jonathan, if he were to run for president when he win? jonathan: he would have a chance if he can get into the second round of the presidential election. he does not have a machine or a party behind him. he comes from the socialist government but is -- his most fervent opponents are in the socialist party so he has a long way to go. france has a habit of finding providential nights in white horses who look good and then fizzle out because they have not got the basic backing. francine: it goes to the heart
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.f what europe well be there was always the triumvirate of the u.k., germany, and france. we see the u.k. pulling out and france being weak. allir: when i summarize it and apply the rules, you may germany still looks good and france looks ugly. s is -- that is the basic tension that will continue to play out in the european union. their economic fortunes are looking very different. tom: you talked about good billionaires and bad billionaires and you mentioned dolce cabal on a. we will go back to france, what does france need to do to be less sclerotic? how did they become more anglo-saxon without doing the unspeakable? ruchir: i think it is clear there is no country in the world where government spending as a
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share of gdp is as high as france with the exception of possibly north korea. i think france has to pull back from the state on government spending. it is out of control. i think that is the basic problem and idea with it at length in a chapter called "the perils of the state." fenby, the you agree france has to find a miracle? jonathan: yes, i have been preaching this 20 years. the left and right equally want more state. it is france's religion. at the same time you have a lot of things that go with that which are notably the labor laws and france, jar a big disincentive to investment and job creation because nobody creates a job. if your company gets into trouble you cannot get rid of the people.
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year by thethis presidential administration to loosen up the labor laws, they took one step forward, another back, one step forward, and now it is all suspended and nobody knows where it is. this is all part of the feeling that the state owes everybody a living. difficultit is very for our global viewers to understand. this is in the fabric of society. i am an, mary to a frenchman. -- i am an italian, married to a frenchman. this goes back historically, i was publishing a history of france since the revolution and it is the idea of the strong state which is integral to the existence of the nation. there is not a division between those two so everybody looks to the providential state to guide
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it through and it cannot anymore. one more point as far as france is concerned, the fact that the population between the largest city in your country and the second largest one more pois france is city, the ratio should never be more than 3-1. in the developed world, country with the most extreme ratio is france. the population of paris is six times larger than marseille. ,his is worse than the u.k. with this country being very london compared to the cities. paris and the second largest city, the ratio is 6-1. tom: in honor of the day roush sharma,harma -- ruchir is the u.k. rising or falling? ruchir: following.
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even when i wrote the -- falling. even when i wrote the book, it drops into the ugly camp. the u.k. is there and there are a couple of positives always in a bad situation. the sterling fall was much needed. the u.k. todaynk it would be unfortunately the ugly camp. tom: jonathan fenby, thank you so much. sharma, thank you. geoffrey dennis will join us. it is an important day for the united kingdom. ♪
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this morning, as margaret thatcher did in may of 1979,
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theresa may will present herself to the queen. she will be invited to form a government and serve at her majesty's pleasure. call it the may rally. a sterling strength and stocks advance worldwide to record highs. meanwhile in the colonies, a messaged trump have to two americas. good morning, everyone. this is "bloomberg surveillance" live from our world headquarters in new york. i'm tom keene. always focused on the pageantry in london, francine lacqua. what happens in this 2, 3, 4 hours? francine: one hour from now, we will hear david cameron as he addresses lawmakers for the very last time. this is when he officially puts out his resignation to the queen. i think a very emotional day because it is the start of a new beginning. the markets are little bit calmer.
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we do not have the turmoil that we had last week, but this is a person that will negotiate to extract the u.k. from the eu. we: and the shock of what thought when mr. cameron announced that he would step aside the morning after the referendum. let's go to first word news with narrative which -- nejra cehic. nejra: he will go to buckingham palace to submit his resignation, then the queen will ask theresa may to form a new government, supervising the u.k.'s departure from the european union. meanwhile, the head of the opposition labor party got a big boost. jeremy corbyn can automatically be able to stand for election in the leadership. he will not have to gain the support. he recently lost a no-confidence valid. in japan, pressure is mounting
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on abenomics. the cabinet cut its forecast for growth and inflation. current fiscal year went from 1.7% to 0.9%. japan's prime minister shinzo abe has ordered his ministers to come up with ace the meatless stimulus package. now that bernie sanders has and/or salary clinton, the question is -- will his supporters follow? echoed some of his campaign pledges, saying she will fight bad trade deals and ensure wall street will never wreck of economy for ordinary americans. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am a rich a hitch -- i am n ejra cehic. tom? tom: equities, bonds, currencies, commodities.
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i want to blow right through this. oil trying to find a bid. $104.54, a weaker yen. francine? tom, the rally in asia did not really filtered through europe. the pound 13281. this is a different bloomberg than what we had before. this is the idea of japan back 20 years. this is a chart, the slope of the green line is absolutely extraordinary. was the modern, post-world war ii experiment, and there is the malaise that everyone knows -- 15 years of flatlining nominal gdp for japan. i put that chart up quickly.
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we will spruce that up and have it for you later. robert feldman to join us in this hour from morgan stanley, francine. geoffreyfrancine: tom, we have d breaking news out of japan, and hk, saying the japanese emperor wants to abdicate at some point. this is quite significant because the emperor of course, first of all, is one of the main people in japan, but also he has japan for a very long time, i believe over 35 years. of course he was chosen, according to japan's order. tom: you really have got to wonder what the backstory is here. this is of course loaded with history and a tenor coming out of world war ii in all the debates of the people we talked to over the years. robert feldman will join us here in a bit. i believe we will rip up the script here. this is a bombshell from japan. lakshman achuthan joining us
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from the economic cycle research institute. you get lucky and you have jeff denham on the asian watch -- geoffrey dennis from the asian watch with us. i think of all the years i have been with bloomberg, that is one of the most amazing headlines. the family coming out of world war ii, and it is a family, and they are whquiet. i was at the inferior palace the day one of the prince -- i was at the imperial palace the day one of the princes was married. lakshman: of course you are seeing that in the u.k. today with david cameron going out. geoffrey: the fact that the emperor is deciding he wants to abdicate, is clearly, as you say, very big news. someone we think of as younger because we are older,
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like when elizabeth it almost is involved here. geoffrey: no sign of getting on the throne because the queen is not going to abdicate. tom: this is separate on the debate of economic and finance. lakshman achuthan is with us. francine, are you looking? francine: i am looking because i am not familiar with emperors and abdication in japan. they have to make sure they have a good successor and the person who abdicate sassy is 82, so we will find out more. this came as a surprise to everyone, but they did have most of the previous emperors also abdicate, tom. emperor,n, the 125th and we will have more on this for you.
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lakshman octagon is with us, who achuthan -- lakshman is with us, who knows the reign. it is extraordinary. lakshman: absolutely extraordinary. if you look at what is happening gettingt days, with abe a pretty strong electoral result, there is a lot of anticipation of even more of what they have been doing for two decades, and it is kind of amazing, but there is nothing else to try, and that is part of the message we are getting. lakshman ashes on and geoffrey dennis as well. the emperor has been with us since 1989. we now have joining us from tokyo robert feldman of
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morgan stanley. robbie, this is an historic day for japan here and what is the linkage of the japanese people to their emperor? robert: i think the emperor is very widely respected here. he has been and ask a lint emperor. as you probably know from his a beautifulhe had his american experience, and gives a very strong sense of how much -- what fectionright word? -- af people of had for him. the the affection for family is radically different from what we see in the united kingdom. compare and contrast the solitude of the royal family in japan versus what we see in the western world. i think in japan the notion of the emperor as a symbol of the state is very important.
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it is something that people consider part of their identity. is one thing that has helped give people a sense of identity for their country and help them come together in difficult times like the earthquake a few years ago or the economic difficulties that we have had. in that sense, the imperial family has played the role that society has given them, a key element of the society here. view,e economic point of it is good to maintain the social potency. ceremonial,is is right? he is head of state for japan's constitutional, see, but has he ever talked about affairs of state? the monarch here in the u.k., queen elizabeth the ii, is very removed. we also have ceremonial roles across the world, who have stepped in when times get tough. robert: that has not happened in
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japan. it is not the emperor's role under the constitution to do that. the imperial household agency and the emperor himself has been very careful to have immense respect for the constitution and the role it provides him. tom: robbie, we will come back to you, our guests here in new york on the japanese economy. of the about the lineage emperor and the view forward for the family. robert: obviously, this discussion is very clear. there are very explicit laws about succession. there are people in the roles now. there is no really uncertainty about the succession. people can rest assured that the succession line is very solid. francine: all right, thank you so much, robert feldman of morgan stanley, mufg securities. back with us here, geoffrey dennis and laxman ostro lakshmat
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achuthan. pageantry as the u.k. does worry well. this is bloomberg. ♪
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francine: this is "bloomberg ."rveillance tom keene is in new york. i impress a lot i am in london. let's get to business news -- i am francine lacqua in london. let's get to business news with nejra cehic. nejra: demand has fallen far short of projection. airbus will only make one a month. so far, only 193 have been delivered.
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take legal action against american companies that are cutting back or ending operations there. citibank plans to discontinue correspondent banking and servicing some accounts in venezuela. meanwhile, kimberly-clark is closing its operations after years of inflation and a shortage of raw materials. aduro saysm they are attacks against venezuela. that is the bloomberg business flash. francine: theresa may is replacing david cameron. she will immediately be under pressure facing a brexit. anna edwards is outside of 10 downing street. at least we will know who is in charge. she will have three appointments to make in her cabinet -- foreign secretary, brexit czar, and chancellor. will they be pro-brexit or programming? -- pro-remain?
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anna: we understand there will be interest in bringing the party together, people from both sides of the remain and the pro grexit side. in addition to the appointments, we have been talking about whether somebody from the exit side will begin in the eu key negotiating -- the brexit side will be given the eu key negotiating role, someone like philip hammons, who seems to be the front-runner, of course the foreign secretary right now. could he be chancellor? so many key appointments of progress. we will see which side of the camp key appointments. look for women as well. theresa may is known for someone has been campaigning to get more women at the top table. she will be doing something about that later on today. francine: anna, how much do we
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know about her negotiating style? isthe end of the day, she the one who will face angela merkel and all the others when she goes to brussels. anna: yeah, well, she is somebody who described herself as being led by only one ism -- conservatism. that gives you a clue of how much she may rub off against a fairly pragmatic german leadership. she had religious parents when she was young. we will wait and see what kind of combo she creates for the negotiating team that ends up going to brussels. ask the rudet me american question. i am good at that. what is george osborne going to do? well, we do not know, essentially. i mean, some people are arguing that there is a continuity candidate. he can either be left where he is or do some kind of job swap with the current foreign
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secretary, maybe take on that kind of brief. he did say at the time when he was talking to the media just after the brexit referendum, he said he wanted to hold a key role in the negotiations that are going to take place on the eu-u.k. relationship. we will see whether there is a key role for him. we do know he has trade and negotiation skills. the u.k. is looking to hire some 300 trade negotiators to hold the conversations went to have nationally. tom: anna edwards at 10 downing street this morning. jeff edwards -- geoff dennis with us. we can fold in japan and the united kingdom into this, but when we talk about getting to that 3% global gdp and the idea of a global recession, do you buy it? geoffrey: i do not buy any of them right now. lakshman: pretty much every a major economy around the
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world is slowing, so we are in a despite anywdown month-to-month gyrations in the data. the cyclical factor is crystal clear. some of them have started the slowdowns a little earlier, like the u.s. -- it is about a year and a half old, our slowdown. in europe am a maybe it harder on the ending of last year. , maybe it-- in europe started at the end of last year. in japan, around the recession, which begets more stimulus. it is very topsy-turvy. tom: but geoff, a gets gloomy. let me tell you, folks. we are ripping up the script in spades with the news out of japan and the united kingdom. a shoko modi, optimist, they -- by holdingic fire, governor carney can send an added message of strength providing the best stimulus for now. there is a lot of gloom out
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there right now. when you synthesize for the u.s., are you like lakshman? geoffrey: not entirely. emerging markets, which i cover, we are not so much slowing down as we are in a very up our glory -- a very subpar growth environment. 4% growth in emerging markets. that is for a number of reasons. there is a lot of overhang in countries like china, brazil, korea. well that debt overhang explode? geoffrey: we do not think at this point. there is a risk it will, certainly in china and down the road, but it is just a dampener on growth as far as we're concerned. on our view, you put the u.k. and the voters into that content, we have cut our numbers in the u.k. and europe. we think the major impact of this vote has created a huge
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amount of uncertainty about investment in the u k and consumer spending in the real estate market. tom: francine, what have you got? francine: we have heard from the first minister of scotland, nicola sturgeon, saying the brexit does not apply to scotland. we look at the spectrum, very traditional for leaders such as barack obama, angela merkel, who will get on the phone first? asset classes, when you look at the pound, is still gaining, the markets welcoming a little bit of stability as we move to u.k. politics. european stocks also a touch higher. this is bloomberg. ♪
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francine: i am francine lacqua, this is "bloomberg surveillance ." to thet me bring you terminal screen, germany sending 10-year bunds with a negative yield. let's get back to our guest host, geoffrey dennis, the head of global energy markets strategy, and lakshman achuthan, economic cycle research institute, a cofounder. is something that good luck calls a market psychosis. is he right? i'm not sure about psychosis, but i do know with and trenderm decline
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growth in all the major economies around the world, it is consistent with what we call low inflation, and even if there is a cyclical upturn here and there, it is not really going to go anywhere. we are not going to get back to normal or back to 3% growth or anything like that on a trend basis, which is completely consistent with falling rates. i think you see that across the board. i mean, there is relative strength in one place over another, but the euro zone on a cyclical basis, not a structural basis, is also slowing down since the end of last year, which is also consistent with lower rates. francine: this is either cheap money or a story of no growth anywhere. should we not price differently? geoffrey: um, the markets will eventually do that. what markets like, if you do
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have a soft growth environment, is they like the liquidity that comes with that. our view, and we put this in a reported couple of days ago, is that the impact of the u.k. vote above all was to ratchet down dramatically around the world, and indeed emerging-market bond yields as well. 135. yields at $1. everyone was pushing out there fed calls. what investors do is they run to yield. that is giving us a big liquidity ride, but that cannot go on forever. francine: it certainly cannot. also some breaking news, tom. we spoke a lot about aberdeen assets, lifting the expansion. we will be back and talk gold. this is bloomberg. ♪
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this is bloomberg "surveillance." tom, i want to recap some of the top headlines we have heard from aberdeen. we understand aberdeen has
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lifted the suspension on the property fund. as they say investors will be able to submit trades after 12:00, in half an hour, u.k. time. they will be able to trade shares. for our global viewers, of course, it is commercial property and funds investing in those that were frozen last week. it's put vulnerability on the specific u.k. investment industry. let's get to the bloomberg first word news. nejra: theresa may becomes britain's prime minister today and one of her first jobs is naming someone to take the u.k. out of the european union. her office says she will announce the formation of a new brexit department. whoever she picks will be a bona fide supporting of leaving the e.u. may will take office. david cameron resigned. he will take questions one last time in the house of parliament. in japan, the cabinet's office inflation.ecast for
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the outlook for growth went from 1.7% to 0/.9%. japan's prime minister shinzo abe has order his ministers to come up with a stimulus package. emperor akihito has says he in someo after kate i point in the future. he has been emperor senses father hero he died in 1989. -- hirohito died. macron told a rally in paris he will leave the political movement to victory in 2017. a poll shows 36% of french voters supporting macron, compared to 14% for president hollande. paul ryan says donald trump's running mate should be a conservative. in a town hall ryan said the
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party's vice presidential candidate must be someone with a record of advancing conservative principles. favorites, mike pence, new jersey governor chris christie, and former house speaker newt gingrich. dayal news 24 hours a powered by more than 2600 journalists and analysts and 120 countries. this is bloomberg. tom: thank you so much. it has been an extraordinary morning, folks. with the news flow. which means we have to get back to some foundations of things and for many that is something called gold. our single best chart shows you the history of gold. i call that the mepass chart. here is 60 years of gold. the blue circle is the nix release. the surge of the 1980's of the great deflation. up we go again.
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our "surveillance" authority is james steel. news thisl, the morning is of japan. japan were short-term is 10 years.you've talked often about india and china always demanding gold. does japan demand gold? james: historically, japan was a good buyer of gold. in the 1980's, 1990's, the gold accumulation plans built up considerable stock. since a large proportion, the largest proportion in the western world is over 65, we have seen japan is the only that non-producer of gold has been an exporter and the last two years, and that is because the over 65 population has been selling off their gold. because if you extrapolate that to 10 or 20 years ahead of where
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we are now, we will be in that position in the u.s. and china will be in that position. tom: so, will the demand come from the younger world? i think of africa, the middle east is being a huge demand. james: precisely. and those of us that, who have gold and have retired are likely to run the -- francine: what is your take on inflation? where does it go from here? tod is slo linked inflation. james: this is a curious thing. the rally we have been experiencing since the financial crisis has been the only one to my knowledge that has occurred in the absence of inflation. it is very interesting that gold has been able to trend higher without germanic increases in prices -- dramatic increases in prices. not react so much to
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inflation as to the anticipated monetary response to economic, to inflation data. that's to say that when you get something like the bank o f japan saying inflation is going to be very low, the market looks and says, does that mean more stimulus? that tends to boost gold. sometimes it can be counterintuitive. francine: how much is there in terms of actual demand coming from india and china? this is also a factor. does it get dampened as the price goes up? james: it does. you are talking about price-sensitive economies. and most of the physical demand there is retail, not institutional. consequently, we have had very poor demand in india. in fact, we have a steep discount to price, to world prices in india. tom: interesting. geoff on india.
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geoffrey: india got hit by the taper tantrum. india had a current account deficit. the government banned the import of gold. that played a rather one-off role -- the leaving as the head of central bank, what is the state of the indian economy? geoffrey: it is growing at 7%. everyone got to worry about what happens post the departure of mr . rajon. the is concern that said new rbi governor could be more dovish. this is a good growth economy and a world which we have heard already is not growing rapidly. so, they've essentially removed the current account deficits. they are in much better shape, the currency is more stable. we can survive the end of rajan. aancine: james do you see
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correction in gold at any point? let's say there is a policy mistake, correction in equities or yields. is there a direct linkage, or do you expect gold go up the matter what? james: no, i think we are in the midst of a correction now. that has been our issue over the last couple days. there are a couple of things that -- one is a record high net long speculative positions -- they are open 34 million ounces, very high. we have very few short, a low number of short gross positions. we are open to long liquidation there. we have had a reduction in risk with the speedy successor to david cameron. and we've seen the equity markets come back, tick up in bond yields. that very much argues for a reduction in risk. that is why i think we've seen such a big decline in gold yesterday, which could very well continue short-term.
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tom: let me ask the dome question of the day. what is the best way to buy gold? -- krugeranns? bars: the coins and small if you want to keep him at home, those would be your major choices. if you are bigger trader, the futures market and etf's, of course. tom: gold under the bed is the james steel approach. if you're very worried about the situation, be a you probably wanted at hand.that would be an unusual thing to do these day. we have digital gold now. tom: this show has been extraordinary. it gets better. we are going to come back with lots. on bloomberg radio, on american banking. will speak of
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governance and the idea of owning your future cash flows. from new york and london, this is bloomberg. ♪
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francine: tom keene is in new york. tom, we have to, of course, look at everything all around the world, it's politics and the economy. i have not seen the link in a long time. tom: extraordinary show with the announced intent of abdication by the emperor of japan, and of course the pageantry in london. jeffrey dennis with ubs. and patiently awaiting to speak of the american economy lakshman -- of the economic cycle research institute. bring up the chart, anthony. it's my pretty chart.
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it is the color of chrysanthemums. the pink link is real u.s. gdp. the sort of, what is that olive line, is nominal gdp. there has been a compression. you talk of japanese data today. this is u.s. do we ever get back to the middle of that chart, the 6%? lakshman: if you want to go there because we want to get back there for good reason, all of our research -- we have been looking at this trend since the summer of 2008. that i comes down to ist you're going to need policies that are going to move demographics. not an easy thing to do. or truly move productivity growth. and that has been pretty bad for the last five years, and a lot of the policies we have, it is unclear how they will help that. tom: within your research notes
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there is weekly dynamics of what we make, wages and the cycle of earnings. what do you indicate right now? lakshman: the weekly indicators are relatively positive. and this is largely because of a risk-on attitude in the markets. it is not very pervasive in terms of other non-market leading indicators, which is why at the beginning of the year, we were saying slowdown continues but no recession. and now -- we're saying, we are not -- when youwere a pinatta are calling for recession of people go no, no. but you absolutely nailed that new slowdown we feel. is this stagflation the new recession? lakshman: stagflation like. back in 2012, the data has been revised, second half of the year there shows growth a one quarter of 1%.
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that is as close you can get to recession. haveorst non-recession we had. today, at the beginning of this year, when everybody got free doubt, we didn't see a recession because of the weekly indicators. however, because we had a good job support, because things are calm her and britain have because japan is going to do stimulus, does not mean that the vector of growth has changed. tom: but it's not calmer in britain. francine's upset. francine: you know what? you talk about asking the american question. i want to ask the european question. if you have been brave enough to model a trump president, trump comes into power, this is what happens to fiscal spending, this is what happens to that dollar. who shall i ask? youhman: i think anybody comes in, no matter how you slice it is going to do something. they may phrase it in a different way, but what ever
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a fiscal you've got spend coming after the election is settled, just like you have in japan. japan is again prologue here. francine: do you agree? lakshman seems to insinuate that the u.s. may become the next japan. geoffrey: beyond my pay grade. there is no doubt that the u.s. economy is not very strong. we're not calling for aggressive fiscal easing. the way i'm looking at it is in terms of emerging markets. there is a huge amount of stress and emerging markets about the present election -- the presidential election. one that is affected is mexico which has slowed down to 2% growth number. and we are getting concern that, because of the uncertainty, that has been generated by the u.s. election, it is about uncertainty once again as opposed to knowing what will
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happen once the election is over. of askingi'm scared this because i sit in london. if you think the u.s. could become japan, what does this leave the e.u.? ways, we in various are obviously structurally very different, but as developed economies, we have the same problem. weak demographics and weak productivity growth. and those are the fundamental building blocks of real gdp growth. policy prescriptions that have been suggested that may not address those issues. when you have a central bank doing what they are doing, it is a short-term fix. it does not fundamentally fix those issues, which is why we keep sliding back. francine: thank you so much. tom, this is the picture for the german 10-year. negative. this is the first time germany sold a 10-year negative yield at auction. it means there is a sign of
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length but investors are willing to go to to hold that benchmark in fixed income assets. plenty more next. this is bloomberg. ♪
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tom: good morning. bloomberg "surveillance" in new york and from historic london today, francine lacqua. we will get to that moment. the forex report for prime minister may in a bit, a few hours. sterling doing better than good, 1.32. yen weaker. the news of the request for abdication by the emperor in japan. euro-yen showing the strong euro and very weak yen of the last few days. francine: coming up shortly, it is bloomberg . david joins us now. i know you'll be looking at assets. markets and politics. david: starting with markets. we have neil duane. they are responsible for several
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hundred billion dollars in investment. we will talk with him and others about how to invest in this market with record s&p numbers for the bond market turning around. we will also be joined by you. interviewing michael,, the head of the german banking association, talking about european banking post-brexit. finally, we lead with david cameron, about to be the former prime minister of the u.k., having his last question time in front of parliament. that will be fascinating. tom: this is urgent right now. i have got an e-mail, a tweet from ted in connecticut. he says "you have not mentioned the cat." that is what he said. would you please explain what the cap means? francine: the cat is larry the cat. there has been quite a lot of newspapers focusing on larry, because this was a cat brought in by david cameron and his family. he's leaving the cat behind. you can look at it and say, poor
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david cameron leaves larrry the cat at downing street anne theresa may will take care of them. cat hashink larry the the privilege of being the only one not being booted out of downing street and less than 8 days. tom: am i correct when prime minister may, she moves in tonight, right? is that right? geoffrey: change the drapes. tom: pick up our coverage in london. francine: today is a significant day because if you think about it from a market perspective we want to hear two things. first, we are expecting theresa may to choose her or her closest allies. she will have to choose a new chancellor or an old chancellor. but there is a man in charge of finances, a foreign secretary thethen the brexit cxzar, person to be negotiations with
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the e.u. you're looking at live pictures of westminster. be interested is finding out is who is the first fellow leader that speaks to theresa may? again, this is a country that someone say is in turmoil. a country that has to renegotiate trade relationships. be significant who she accepts the first call from. tom: what will be the distinction, francine, and geoff as well, of mr. hammond as chancellor of the exchequer versus george osborne? with that would be -- would that be a big shift in the way business gets done? francine: if you think about it from a negotiation point if you for the u.k., you need to have a whether the foreign secretary has a bigger role to play in negotiations. it's unclear when you renegotiate the u.k. extracting itself.
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maybe the foreign secretary has a bigger role. geoffrey: very often you get when the prime minister changes a lot of the members change. and so, it's entirely possible george osborne will move on. what they about he said post this vote is that some of the fiscal targets george osborne put in place are going to be abandoned. they told us fiscal policy will be eased. right.e is dead you may find in this environment, it is the minister negotiating with the e.u. on leaving the e.u. that is going to be the more important player. we know fiscal policy is going to be eased. mr. carney is dealing with monetary policy. tom: you've a great team at liverpool station with bus. what is theirs -- with ubs. what is their feelings about scotland and northern ireland? geoffrey: i'm not a political expert so it is very hard to make a call. there is no doubt the situation whatwhether scotland or
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they want to do because they voted so firmly for remain is going to be interesting how that plays out. it's a tough one to call. northern ireland, similarly. tom: anthony, bring up sterling. this is a chart we have shown many times in the last few days. this is the weaker sterling overtime. the basic idea of where we go, that half circle. that applies -- implies a strong u.s. dollar. prime minister mail will have to bel with -- may, she will euro-sterling centric. a strongere'll have dollar, relatively speaking at however, you also have back here on this side of the pond, the ped giving up on the rate hike cycle -- the fed giving up. look, everybody has to weaken
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their currency. you see the chinese doing it, the japanese want to. they are having a tough time. so, that i think reflex is going to continue. and everybody has to take turns. so: gentlemen, thank you much as we see the beginning of the pageantry and the moment in the house of commons. francine, that is mrs. may sitting behind the gentleman. francine: i would urge everyone to listen in. tryst interesting last ministers questions from david cameron. on: we will continue television with david westin and company. bloomberg radio as well. tomorrow, olivier blanchard. good morning. ♪
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e jonathan: david cameron closes out his final hours as prime and easter. theresa may plans to take over. david: autonomic's under pressure.
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the government considers another stimulus package for the world's third largest economy. alix: mass psychosis. ss hasagnosis -- as madne 10-year debt for a negative yield for the first time ever. jonathan: a warm welcome to bloomberg i'm jonathan ferro alongside david westin and alix steel. a historic day in the u.k. ra begins today as conservative party leader theresa may prepares to take over as prime minister. before that, david cameron will face questions in the house of commons one last time. later today he goes to buckingham palace. jonathan: we listen to the prime minister as he addresses parliament. prime mini

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