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tv   Countdown  Bloomberg  July 14, 2016 1:00am-2:31am EDT

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anna: will mark carney cut? to the bank of england reduce rates the first time since 2009? we are live at the bank of england ahead of the most hotly anticipated decision in years. boris is back. theresa may appoints the controversial former mayor of london as her new secretary. and taking off what is expected to be a difficult earning season for the banking sector. ♪ a very warm welcome to the countdown program. this is live from london. i am anna edwards.
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manus: and i am manus cranny at the bank of england. anna, will the bank of england cut rates for the first time since 2009? the governor had a message for the market, markets and economists are less assured. this is a governor who we know acts ahead of the knee. that is what we're going to be focused on, 12 noon, the bank of england back to you. anna: let us but the risk radar, show our viewers what is happening overnight in various asset classes. the rally in equity markets losing steam just a little bit. we have u.s. markets of course nearly all-time highs, waiting for the earnings season to kick off in earnest. the msci asian-pacific treading water, the pound in there because of the focus on bank of england today, and in the wake of theresa may appointing some of her tea cabinets. as wasmany women
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suggested yesterday. there will be more names announced today. 132 on the pound against the u.s. dollar, bouncing 4/10 of a percentage oil in there, rebounding as investors weigh u.s. apply. gasoline inventories rose over barrels. having a good session, let us get the bloomberg first word news. there is rosalind chin. newlind: anna, britain's prime minister theresa may has announced key members of her cabinet. former mayor of london boris johnson become secretary, replacing george osborne as chancellor, and the task of overseeing the negotiations. earlier, may set out her plans as prime minister. prime minister may: the government will be not driven by the privileged few, but by yours. we will do everything we can to give you more control over your lives. london house prices
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have fallen to the lowest level since the height of the financial crisis. that is as brexit sent shockwaves across the u.k. the index compiled from a survey of real estate's by the royal institution of surveyors dropped to -46 in june from -35 the previous month. that is the weakest reading since 2009. responses were received after the european referendum on june 23. merrill lynch cutting private banking industries, managing more than $3 trillion combined for the world's wealthiest people. that is according to a study. morgan stanley dropped one spot in the rankings to number three. as the management straight in all three private banks. and credit suisse has changes to compensation for some of its senior london bankers. according to people familiar with the plan, the company has increased pay while limiting the so-called allowances that have
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come under regulatory scrutiny. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. you can find more on the bloomberg top . anna and manus? anna: rosalind chin, think you very much. let us check the market section in asia. david ingles is standing by. it seems this theme is taken out of the equity rally. david: yeah, first, i think i wore my red tide today. on thee started talking, way up. but not very exciting today. i mean, we are very close to monetizing the valuations, especially across emerging asia. multiyear highs, and you do understand why we are seeing some forward momentum start to come off. but having said though, japan is still in focus as you can see of course, no meaningful moves. obviously the market story is still waiting for details of the
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stimulus. up for a fourth straight day. asia overall still up for a fourth day overall, but volumes have come over a bit, at least compared to yesterday's level. as you think dimension. the employment data out of australia. the the expectation, but fine print when you look at full-time employment, that was encouraging. you look at south korea dok, raising steady, but coming out, starting to cutting the growth outlook and inflation outlook as well for the rest of this year. and is very quickly before i go to singapore, eureka. trading is still suspended. we will be reopening in about an hour's time. they came out with a statement here, this temporary stop was caused by duplicate trade confirmation messages, so they will be reopening in about an hour's time about to be in local time you're in asia. anna: thank you very much, david. we have that trading in
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singapore news, around 35 minutes ago, waiting with interest to see that restarted david amos in hong kong. let us turn our attention to the bank of england in a. we wait to learn if the monetary policy committee is voting in favor of our rate covered manus cranny, a big difference between what economists think will happen and what the market is really pricing in run as to the details. manus: the market is much more aggressive in terms of its belief that there will be a 25 basis points cut from mark carney and his cohorts behind me in the bank of england. there is only one member of here that has only lived in a decision to cut rates, mark carney when he sat down at the bank of canada, he/50 basis points. this is the governor the want to send a message. how do you do that? will 25 basis points really make a dramatic difference in the united kingdom?
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probably not. but reopening quantitative easing, it is critical. this is a government that dealt with a premium crisis. and he had a message for the markets, just the other day. governor mark carney: in the 2008 financial crisis, you have to come straight with people about where the risks are. and then have a clear plan to address them. you can't govern by assertion. you cannot wish things away. that way perpetuates a financial crisis. it reinforces it. manus: so, where is the new lower bound in the united kingdom? the market is convinced near 25 basis points is priced in. my proposition is this, 25 basis points, with sprinkles on top. there has to be something more delivered today in terms of messaging and action. anna: we will keep an eye out for the sprinkles. let's talk about the currency though. more rallies this week, in the pound, but that does not change
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the big size of the move we see since the 27th of june. manus: look, it doesn't change the bigger story. there is a long way to go. this protracted discussion in terms of activating article 50, what is brexit and what will it look like? the volatility, have a look at the volatility and, something we looked at quite often. ratcheting up, coming back from those busy peaks, but i think really what you saw yesterday was policy trumping politics. and in the market was taking opportunity on the relief rally committee get some short positions in. george osborne is gone. those charters he said are gone. hammond is in the driving seat. what does policy made for the pound? what does policy mean for the gilt market? what does it mean for the system applications on the pound, and nna>?
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? anna: good wanted easing be the sprinkles? manus: with cherry on the top, this is about a governor we know is for the market by the scruff of the neck, saying i am in charge here. we have a politics writing itself. look, not much difference between now and 0% rates. that is a given. we know he is a proponent necessarily of negative rates, and indeed there is that backlash against the negative rates syndrome. in the absence of that, we saw the capital buffers from the banks. but for me it is about qe, and that is good to be the most fascinating debate over the next six months, whether he does it today or not, and have to be on the agenda. anna: well, let us turn for insight to someone i know we value on this program. greatvestment bank, paul, to have you on the program is sponsored what manus was talking about what do you expect to see from the bay coming wednesday? paul: i think the chance of a
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rate cut, but it doesn't matter if they do it today or not. they will signal a rate cut, because we do the minutes simultaneously. and a minutes i think will signal a rate cut if we don't get it today. why do a rate cut? it is not going to stimulate credit. the banks, we know that cutting rates is a way of taking income away from savers, and giving it to borrowers. anna: why do you say the banks will not lend to businesses, having this cyclical buffer which is supposed to enable? paul: on the other hand, you just had one of the biggest shocks to the u.k. economy, since the first opec oil shock in 1973. but that were probably way more than ok, tweaking the revelation, i'm not against it. the bank of england has eased by changing revelation. that is an enormous shock in terms of uncertainty. the advantage of doing at interest rate cut and taking
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away from the savers to give it to the borrowers, the effect is a generational transfer. my father is the one with the savings. i am the one with the mortgage. this is a way of me getting my hands on my father's money. that is great. i am in favor of it. the negative interest rate as it transpires, more likely to follow the younger generation. this is a good mitigating factor. ul, consumer sentiment plunged the most in 21 years. i am looking at business the lowest in 4.5 years. this ast ubs see transitory dips? is this a negative feedback loop in terms of sentiment, because that what drives the economy. opaul: absolutely. on the sentiment side for the consumer, we probably have more bad news to come. when we look at the consumer, the increase in food and fuel
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prices have come down as result of sterling, but it has not really started to hit yet. we see the price of coffee going up, which matters a great deal to me personally. we see the price of oil going up but we aretations, not seeing the full force of that. consumers tend to overreact to food and fuel, very sensitive to pricing. and i think the full force of that is not going to come through until september or october. so i think on the consumer side there is more risk around those. anna: let's talk more about that. we learned about your passion for coffee. paul,. about what is happening with the pound. this is pound volatility chart, showing brexit near the lowest since march. sterling swings stabilizing, as minister may major cabinet figured what you expect from the cabinet? is that something that will the bank of england, watching
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carefully, the reaction to any slowdown in the u.k.? paul: i think the pound is something we have to watch. because the drop in the pound is not necessarily positive for the u.k. volume, the amount of stuff we sell overseas, does not really react to sterling anymore. this is very common now. companies see profit margins fluctuate, not the volume of sales. now what that means is that the weakness of sterling is mainly felt commodity prices on the impulse side, which is the damage we have just been talking about. so i think the bank does have to take that into account. of course the issue is sterling is that you have this very, very large current account deficit, how do we fund it? are companies overseas going to want to invest in the way they have done in the past? there is one quirk with this, which is worth bearing in mind. a lot of the time, the media tends to focus on is there a new car plant going up in sunderland? because that is dramatic. it makes for good television.
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but a lot of foreign investment is rather tall, things like retained earnings, and that side maybe a little bit more supported by sterling at this level. do not get me wrong. foreign direct investment is going to be lower into the u.k. no new car plants in sunderland. but you have earnings continuing, it may not be quite as bad as has been suggested initially. paul, we have a new chancellor, mr. hammond. what do you expect to hear from him in terms of fiscal stimulus? do you expect a big infrastructure spending to counteract the recession? are you calling the recession? what can we expect from hammond on the fiscal positions? paul: recession is one of these made up media words that you journalists love. there is no formal definition of what a recession is in the world of economics. if we are saying are we going to
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get consecutive quarters of negative growth, i think we probably avoid that. whilstd that because i think employment is going to rise, we are not going to seek a pretty tiring. i think companies are not going to be firing in this situation. i think we basically sort of get a frozen labor market. again, bad news if you're a school teacher or university graduate trying to find a job, but in a big macro economic sense, it is not so bad. does that mean we need fiscal stimulus? i think you have artie seen an indication that we are not going to get fiscal tightening at quite the same pace. but part of the problem that we have got is that there is less to maneuver fiscally. the economy slows down, tax revenues are dropping, you can do that to stabilize, but additional fiscal stability becomes a problem. immigration into the u.k. has tended to be a net positive for the fiscal position. in other words, migrants bring
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more may take out. if we see the slowdown that is quite widely expected again, it does damage to the fiscal civility of the government in the medium-term. i think they have less room to maneuver. i don't think we will see grandiose infrastructure projects this time around. anna: thank you very much. paul donovan stays with us. interesting what you said about the job market. we will talk more about the job market in the next hour. here are some other highlights of your day ahead. jpmorgan will post second-quarter earnings. and as we were just discussing, a few minutes later the bank of england is due to deliver the first post-eu referendum policy decision baird that 7:00 p.m. u.k. time, president hollande gives a televised interview on subjects from brexit and whether he will run for office again. that should be interesting. up next on the program though,
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why the philadelphia fed president harker sees more than one rate hike this year, as the u.s.. is the brexit fallout. this is countdown. ♪
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anna: welcome back. time in london is 6:20. equity markets pretty flat over in the asian session. let us get the bloomberg business flash. here is rosalind chin. volkswagen plans to recall cars in the wake of the emissions scandal, a potentially costly speedbump. california regulators have rejected the proposal to fix the engines, as quote incomplete and substantially deficient. a substantial solution will be found. the company has reached a $603 million settlement in 44 u.s. states. monsanto is looking for
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alternatives after rejecting a takeover offer from a buyer. people familiar with the matter said the company has survived talks with a german company about a possible accommodation of the agro business. no final decisions have been made. talks to buybe in as much as 49% of paramount pictures. the wall street journal says viacom is seeking a deal that would value paramount at up to $10 billion. estimatescond-quarter and raising forecasts, that is after they performed better than expected in china. and isso own pizza hut, spinning off operations this year. shares rose in extended trading and nintendo's record-breaking rally continues today, was shares rising as much as 18%. the company's value search around 75% since the launch of the pokemon go app, the biggest
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gaming since they started shares in 1983. and that is your bloomberg business flash. anna? anna: roslyn, figuring that. philadelphia fed president patrick harker says they should not sustain much damage from record they will not vote until 2017, and more than one rate hike may be warranted before the end of this year. patrick: inflation return to target sometime next year. now considering the anticipation that it may be appropriate for up to two additional rate hike this year, approaching 3% by the end of 2018. anna: paul donovan, global economist at ubs, still with us. chart of gdp, perhaps a little gdp stuckbut u.s. in a rut of 2%.
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possibly, as much as -- paul: i don't think there would put rates up two times this year. if i were sitting on the fmoc, which i can't because i have the wrong accent. it will work this way, but not the other way. i would be raising rates. because we have a growing inflation problem in the state. s. most indicators are at or about the 20 year average. interest rates are nowhere near their 20 year average. but we look at core service sector inflation, no matter what you look at, except for the headline which is all about oil, we have a tight labor market for skilled labor. we have an increasingly tight labor market for semiskilled labor. wage pressure is building. look at the survey, the index of wages, wage pressure is building. and you say we are stuck rut in it is ais not a rot, trend. that is not an economy that
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needs emergency accommodation anymore. anna: a very trendy rut. manus? paul, the fed says employment in the u.s. continues to grow modestly. wages are modest to moderate. with that in mind, we have heard from harker, i'm seeing the fed decisively split. paul: i agree. this is one of the challenges. of course you cannot divide the fed into hawks and doves and more. that does not work. it is a multifaceted institution. you have someone saying actually we can look at tightening costs, or change regulation or interest rates, you have three different policy leaders now. so which one do you pull? you could be pulling and pushing at the same time. this does give a very confused picture. and you are quite right. there are people saying we should actually continue the accommodation for longer, other saying we should not.
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but i come back to my original point. we are saying ok, the economy is saying moderate tightening of labor market, well, that is fine. policy today is not modest, it is very immodest and in moderate in terms of policy today. and that is were the challenge comes in. anna: you mention we talk about the bank of england that the media perhaps unfairly on the conversation focuses on things that look pretty, like new car parts in sunderland. perhaps the media reporting on inflation focuses on the oil price, the price of filling up your car. is that a reason -- you mention that oil is one of the things that doesn't make inflation look quite as scary as it would otherwise. is a reason to let the economy run a little bit hot, psychologically maybe that matters more to americans. paul: i don't think it is. because the economists are supposed to be looking not just now but two years ahead.
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of course you are filling up the family late of sport-utility vehicles. that matters to americans. but the fed is trying to govern where the fed will be not now, but in early 2018. that is what today's monetary policy is setting. and the oil price is not going to help me adjust for inflation in 2018. what is what to help me judge is the underlying pressure, the tension in the labor market, the fact that service sector inflation is over 3%, the fact that the core pce inflation rates have been continually rising. both the annualized core inflation rate, over 2.5%, those are the things which i, as an economist, have to focus on. and competent central bankers is going to be an economist, obviously. they will have to pay attention. anna: never biased on the subject. paul: absolutely not. anna: paul donovan. when we come back we are going to be talking to the ceo of
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north face. he will be joining us talk about the property sector. we have some interesting news on the property sector just overnight, coming through a london house prices, a seven and a half year low. more and that sector, when we come back. ♪
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anna: it is 6:30 in london. ;: 30 in paris or berlin. a new edition of daybreak is no available on your bloomberg and on your mobile. the function, lets you take a top story look at the daybreak he married manus is still with us at the bank of england to help me delve into the details on the daybreak cover today. we have of course the picture of theresa may going to visit the queen, to be asked to form a new government. i think that is the way around. but manus, she announced the new government, or key measures of the cabinet. we have not have all of them of course. i love the way the daybreak with
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this. we were talking with his earlier. speculating as to just what it would be boris johnson would be left with. a fairly the guardian is saying the same thing, fox will be leaving trade negotiations, perhaps that leaves boris johnson to hand out the ferraro. a feature of many of the u.k. newspapers this morning, you cannot see it but perhaps it is boris johnson, on a wire, waving the union jack. sorry. it could be an interesting political period. also delving into the bank of england story for us, manus. manus: it does indeed. just before we get to what happens here over the next couple of hours, a great story on the terminal today about the one-liners from boris johnson. what i meant to put in charge of your global ambassadorial role. some we cannot repeat on air. go to his bio page.
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the bank of england, the first time since 2009, if. the important word is if. there are only 50 basis point. will they cut by 25? or will they indicate in the minutes, potentially to do more? there is messaging that is coming from mark carney, who was governor of the bank of canada of course, in the eye of the financial crisis storm. this is a man who has delivered messages before. it to be out first and fast, ahead of the curve. the economists, good old economists, a little bit more held back. 30 out of 54 that we surveyed said there will be a rate cut. no doubt about it that this will be an historic moment in terms of what would happen, back in terms of challenging where is the lower bound? anna: manus, i scroll down the daybreak cover, we get to a number of stories we're covering your. looking reviving talks,
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at a possible combination of the agrochemical business. this is according to people familiar with the matter. it will be seen as an alternative to a takeover by the month and took team.they are facing a takeover. how would monsanto shareholders react if they issued shares, instead of saying yes to that takeover deal, that when we will follow. because we know that it would be the largest deal this year. and the biggest ever by a german company, so it does have some significance. that is the front page of your daybreak. go to the go if you want more details. the rally in asian stocks, showing signs of slagging this morning. nejra joins us. nejra: anna, yes the asian stock rally losing steam. if you look at the pacific index, up just some 2/10 of 1%, heading for its smallest gain so far this week. this after rallies in the u.s. and europe stalled last session.
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now one area where we do have some certainty is of course in terms of u.k. politics. we know what a lot of the cabinet will look like, of course as you have been talking about the most controversial appointment being boris johnson as a foreign minister. we saw sterling fall left session, rebounding today. not only that, but i have this chart showing three months implied volatility on sterling. this is where it takes a seven-year high in the weeks before brexit, coming down since we are now near the lowest since march on this sterling volatility. and this of course ahead of the decision from the bank of england later as well. which we should also talk about at length. now investors as you say still waiting for details on japan's stimulus plan. the big issue is around the possibility of helicopter money. we still do not have the details. we are seeing a weaker yen at the moment. 1-4.67, rising to a two-month high as korean central banks cut
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rate. that was no surprise. but i guess the gain is in the yuan, an additional rate cuts decision as it was unanimous. just to show you crude oil rebounding from a two-month low. investors weighing u.s. data that shows crude stockpiles slid and fuel on effectively grown. anna: turkey is attracting new attention with equity markets poised for a turnaround. yousef has more details for us. joining us with a chart of the hour. a lot of people getting us excited about emerging markets once again. yousef: absolutely, anna. and when you look at the struggling rally that we are seeing in asia, you can pay closer attention to what is happening in turkey. that is the emerging market segment, that you can keep a close eye on today. we have put out a chart to really show how sentiment may be changing. other could be even more momentum ahead. turkish stocks have been rallying. we put this up for you.
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this shows you buying and selling signals, based on the convergence divergence measure. you see that the buy signals have increased substantially in the last few weeks. the sell signals dropping dramatically from 57. why are equity investors boosting bets on turkish stocks? they are still trading even at this level, still trading at the steepest discounts to emerging markets since 2009. well, two reasons. on the political front, turkey has resolved disputes with important trade partners like russia and israel. they have been quieting down domestically. but also, the federal reserve likely to keep interest rates lower for longer. and that is seeping into sentiment when it comes to turkish equities. so, keep a very close eye on the market. anna? anna: thank you very much, yousef.
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manus as a guest for us and the bank of england. manus? manus: i do indeed. i have the ceo of north aker, joining me now. thank you for coming down. bright and early. >> thank you. manus: let's talk about your part of the marker. in terms ofrime luxury housing in the u.k. in london, how is the market holding up? have you seen any reaction in terms of pricing, in that run-up directed or afterwards? >> well, i think you had a quite run-up to brexit. we were all concerned about what brexit would bring. what we have seen the last week or so, because it is these difficult because real estate is long-term, the sterling against the dollar has brought a quite a few buyers from foreign countries. if you think about it, we had a 10% change in just three weeks.
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over 12 month. it is substantial creation for these foreign buyers, and if you believe that london is the place to be in a place you want to live in, this is a great opportunity. manus: does london still hold that preeminence in your opinion? we do not know what the new machine will be. we do not know what the new incentives will be for this administration to bring overseas people to this marketplace. for you, in terms of what you want to hear from this new administration, to bolster your confidence by taking on new primed of elements, what do you want to hear from this administration? >> i think we have someone in mark carney that is a very shrewd operator. he has been operating early on the i think even though a rate cut does not really help numbers per se, because a lot of our buyers do not get mortgages and so on, it shows that the authorities are willing to support the market. willing to inject liquidity. and at the same time, you know
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they are looking to keep london as the preeminent place to come and invest. and our shareholders and investors are very bullish in london going forward. anna: anna in the studio. we have a story on bloomberg about hong kong-based great eagle holdings putting on hold a big investment, $330 million, it was what to do in london real estate. saying essentially prices are going to fall. i will not do it now. i have to be in london, but why rush? asian investment in london is so crucial. but if they want to maintain the path it has been on, what you have from asia about appetite? niccolo: absolutely. well, first of all the asian investors are not really investing in the super primary. iat north aker is developing, don't have a lot of data points. what you are talking about on the commercial side, it is true there will be some yield substantial.
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and commercial risk will be suffering in the short to medium term. there is no doubt about it or on the central side, manus: we are not seeing that. manus:let us talk about the contagion, the potential contagion. this is all about the psychology of pricing. if you have this retail gauge that is going on a commercial property, people are talking about commercial property, between 20 and 30%. while will that arbitrage continue between your market and the commercial property draw out, because that is what we are looking up. you're looking at the potential of the gulf opening a. uip. >> obviously there is some correlation between the two, but the main difference is that what we are selling is a luxury lifestyle. from the commercial property side, it is much more an equation of anything yield playing. the story is that people come and want to live your they think this is the best city in the world. , and if we continue making london the best video the world
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there is no reason why the gap should be as it is, or widen from the commercial side. manus: you said dollar-based investors are your prime customers. is that u.s. dollar-based customers? middle east customers? where are you seeing perhaps the most interest come from? >> i would say that probably 75% of our buyers are dollar-denominated, or paid to the dollar. we're certain disease middle east the first time u.s. dollars coming to the market, which we have not seen for a long time. we have to forget that the dollar nominees ago was -- not many years ago. now, they are seeing an unprecedented opportunity to buy property in a place they have always loved and will continue to love. anna: again, u.s. investors coming to the market again, since the roug brexit referendum, or has it been a while? >> well, it is a very quiet
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period before brexit. the last 6-7 months, we've always tried to attribute one reason or another why there was an increase, then there was brexit and so on the but the fact we are trying to find an excuse why it was quiet. the fact is it was a 20 year bull market. and it is only helping. what i can say is that that shock to everyone had in terms of the result, people gathered their thoughts, and in the last week is when our inquiry has gone up substantially. and our properties of gone up substantially. manus: one final question, a great deal made out of the changes which went through, the sort of real pushback from george osborne. we have a new chancellor. my question for you is this. does the non-status really matter, does it matter to your market? those incentives for global travelers, global lifestyle people to come to the city? >> i think it does.
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and i think there is more in the early days in the london boom, because you have to start attracting people. london really is based on three things, stability, favorable taxation system, and lifestyle. and looking at the taxation system, you also have to look at the relative. and relative to many other great cities in the world, it is still very competitive. it is worse, slightly. but we are still in a very good place. manus: niccolo, thank you for joining us this morning. bright and early down here in the bank of england. north aker ceo. back to you. anna: manus, thank you. we will see what theresa may and her new government has to say or those uber they were serving up front and center at downing street yesterday. posting second-quarter results in the coming days, but those cuts are expected to be in.
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jpmorgan kicking off what is expected to be a difficult earning session. nejra will take us through that jpmorgan story. nejra: bloomberg intelligence says that the second quarter eps 4%, versus second quarter 2015. that is far less than the 24% medium drop expected for the banking peers. jpmorgan expected to be perhaps better than others. it is the first to report. what will be in focus is of course global growth risk, the impact of low interest rates. but also the potential changes to the european operation, post-brexit. jpmorgan did say that jobs might be moved out of the u.k. and the outlook will be very much focused on the first report as well. anna: it attracts a lot of attention. what the rest of the u.s. banking sector? nejra: i have a great start that really shows that even though u.s. banks have enjoyed the best
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stretch of gains in three months, investors are paying the forest premium since 2011, bank hedging. this shows there is little bit of concern coming ahead of the second quarter earnings. and the reason being that post-brexit, analysts have really trend the forecast, not just for this quarter of the rest of the year. combined net income at the six biggest banks is estimated to fall 80% in the second quarter from a young earlier. and they're predicting combined incomes from the six banks dropped 14%, may only partially recover in 2017, according to these estimates. this is about low rates. it is about that you wrote being of course, interest rates from lending. but it is also because of having m&a, post-brexit. and this is the worst fourth quarter since 2009. this chart interestingly showing that concern. now that being said, look at the
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comparison with european banks. this is how the stoxx 600 -- excuse me the s&p 500 has performed since 2009. versus the stoxx 600 banks index. this really is showing the gap in performance in share prices. so, there might be a hard time ahead for u.s. banks. what you have to think how european banks will perform in comparison. and the other thing of course with u.s. banks, last quarter this year price, a did not perform too badly after earnings because of all the cost cuts that were announced. we have to ask is there for the room for the cost-cutting? and of course you did mention bonuses feared their very much in focus as well. anna: nejra, thanks. up next on countdown, japanese shares push higher, outperforming the rest of the sector in asia. we look at the prospects for the world's third-biggest economy. that is next. this is bloomberg. ♪
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anna: welcome back to countdown. 1:49 in new york right now. at the be fairly flat start of the u.s. trading day in terms of the equity markets a lot can happen before then of course. let us in the bloomberg business flash. there is rosalind chin, volkswagen plans to recall cars in the wake of the emissions scandal, hitting a potentially costly ski bum. california regulators have proposal, as incomplete and substantially deficient. find solutions will continue. they have reached a settlement with 44 u.s. states. monsanto is looking for alternatives after rejecting a takeover offer from a buyer. people familiar with the matter said the company has revised talks with germany about a possible accommodation of the
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agrochemical business, but no final decisions have been made. reportedly in talks to buy as much as 49% in paramount pictures. saysall street journal they are valued at up to $10 billion. yum hasd operator beaten second-quarter estimates, raising the forecast, after the kfc chain performed better than expected in china. they own pizza hut and taco bell, spinning off operations this year. the shares rose in extended trading. and nintendo's record-breaking rally has continued today, with shares rising as much as 18%. the company isn't very thing assertive 75% since the launch of pokemon go, including the biggest gain since the gaming company listed shares in 1983. and that is your bloomberg business flash. anna? anna: phenomenal.
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roslyn, thank you very much. on course for the biggest weekly advance since december 2009, investors awaiting details of bernanke met ben in tokyo this week. this led investors and economists to wonder if japan will break the glass or pull the emergency lever on fiscal policy, or other on helicopter money. let us talk about the option for japan. paul donovan is still in the studio. global economist at ubs investment back. paul, we have this intriguing headline coming across the bloomberg a few minutes ago. this is according to abe's advisor honda and japan. perpetual bonds to abe's advisor. what you make of perpetual bonds, bonds and never put your? what are they after the mix? paul: we have seen before. the u.k. famously, the console
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market, it is a perpetual bond. there is nothing terribly unusual. i can only assume that ben bernanke is saying go out and do fiscal stimulus, and take advantage of the very, very low cost of capital by issuing perpetual bonds. where you never have to repay the capital, so that is not such a big problem in terms of the debt to repair, you will have to pay the interest. and since interest rates are so low, that is all great. but it depends on what you do with the fiscal stability. let us face it. japan's track record of doing fiscal stimulus which ends up being invested in productivity enhancing products is abysmal. i think that is a problem. i am far less concerned about fiscal stimulus or monetary stimulus, far more concerned about the absence of reform in japan. that is a real issue i think. manus: paul, let us talk about
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that. there is a line in our story this morning, talking about it is time to reboot abenomics. i have heard everything from reboot, arrows, this is a man who came to power, and he has delivered 50% of the growth of germany and the united states of america under abenomics. it has not worked. paul: i agree. i have to say i have always been somewhat skeptical about abem nomics. one of the selling things i think is that if you look at the foreign directive investment, as a share of japanese total investment, japanese companies basically greeted it with a rush for the exits. japaneses it comes in, companies start increasing relative to domestic investment. that is on a vote of confidence. it is hollowing out. a quarter of a century ago, japanese economies when
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halloween out was a big debt hollowing out was a big story. but it is the value at a production, the high stuff is now serving to go offshore.if you lose the high-quality stuff, what you're left with is middle management. middle management is never productivity enhancing in the economy. anna: just in terms of breaking news, we have been following this for exchange. singapore said it will not resume trading at 2 p.m. local time. there have been expectations they would resume your that is not going to happen. let us get back to the conversation. just talking about dollar-yen have a05 since june, i chart here that shows the yen, the white line. kuroda launching stimulus, this chart perhaps suggesting the need for something new, that it should be helicopter money. from what you said so far, paul, you cannot really mind if they do perpetual bonds or helicopter money. using the focus should be
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elsewhere, on the reforms. paul: i think reform is far more important. helicopter money is an appalling idea. japan is a country which has the highest consumer inflation expectation in the developed world. i will say that again. japan has the highest expectations amongst consumers in the developed world. anna: some say you have to be careful with helicopter money because it can get out of control. i thought really, in japan? paul: what is happening now, the japanese consumer believes that inflation next year is going to be more than twice the target. they think inflation will be over 4%. what is happening is that the japanese consumer is sitting at home sale not buy a car television customer income is going nowhere. they are right on that. and inflation is 4% and collapsing your they are wrong on inflation. but that doesn't matter. that is changing the data. anna: the perception, rather than reality.
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paul donovan, lola calmest at ubs -- global investment bankers at ubs. we watch the details. brexitnext, will there be a \i backlash in hiring? ♪
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manus: will carney cut? could the bank of england reduce rates for the first time since 2009? we are live at the bank of england. boris is back. the controversial former mayor of london appointed as the new foreign secretary. and, jpmorgan prepares to kickoff what is expected to be a difficult earnings season for the banking sector.
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you are welcome. it's "countdown." i'm manus cranny. anna: and i'm anna edwards in the studio. what have you got for us this morning? manus: this is going to be a really interesting day. mark carney and his cohorts may cut rates by 25 basis points. the economists are less assured the detail, or will it be an indication that they are potentially thinking about doing more? it could be a pretty historic day. there's only one person on the ability to cuty rates and that is the governor, mark carney. he was at the helm of the bank of canada in crisis and he cut rates then. will he bring his go around
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today? weus: anna: we will -- anna: will see what the rest of the team has to say. we have news coming from haiti. they are talking about the fourth quarter here. the fourth-quarter total net fees up 12%. like for like net fees up 12%. they see full-year operating profit of 180 million pounds. anybody looking for anything gloomy around the brexit conversation or anything gloomy in terms of guidance, nothing of that nature yet. year-end net cash position of around 40 million pounds. we will get some context around those numbers in just a moment when we speak to the management of hays. let's talk about fast retailing. we're getting numbers from the japanese retailer. fast retailing cutting their full-year net forecast to ¥45
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billion from ¥60 billion. less promising news out of fast retailing. they are bringing down their expectations for how much the profit will be at the full-year level for this business. they've been giving us details for the third quarter as well. they are maintaining their full-year operating profit forecast, but it is the net forecast they are bringing down fairly substantially, talking about the dividend. 20 of detail coming. we will get more on that later on. let's look at where the future stand. we've had a fairly lackluster session in the asian session. the japanese market a standout performer again. will they, won't they give us details on the fiscal stimulus and helicopter money? we talked about that yesterday. euro stocks expected to be 0.2%
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higher. 0.5% on the ftse 100. let's get to the risk radar. the msci fairly flat. rally just running out of steam with the exception of japan. nintendo can't do everything on its own. that stock on a five-year high on the success of the pokemon go game. theresa may gets set to add more names to her cabinet. longer-term volatility on the pound stabilizing as she names or cabinet. oil in there as well. 45.32 on the oil price. that takes us through some of the metrics. let's get to the bloomberg first word news. here's rosalind chin. rosalind: britain's new prime minister, theresa may, has announced key members of her
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cabinet. former london mayor boris johnson becomes foreign secretary. chill of hammond replaces george osborne. aslier, may set out a plan p.m. >> the government i lead will be driven not by the interest of the privileged few, but by yours. we will do everything we can to give you more control over your lives. a measure of london house prices has fallen to its lowest level since the height of the financial crisis. the index them piled a survey of real estate agents drops two -46 in june from -35 the previous month. that is the weakest reading since early 2009. continued to be suspended on the singapore stock
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exchange. it had said the stoppage was temporary. earlier, the board said the problem was caused by trade messages. ubs and merrill lynch have topped the private banking industry. annual according to an study by the london-based consulting firm scorpio partnerships. morgan stanley dropped one spot in the rankings to number three. assets under management shrank at all three banks. according to people familiar with the plan, the company has increased fixed pay while eliminating so-called allowances. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . anna: thank you.
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let's check on the markets in asia. david ingles is standing by. the japanese market pulling its weight, but it is not all the nintendo story. more generally, the markets looking for. david: everything but japan. the last time we talked, things have picked up a little bit. japan is closing up shop right now. you guys were talking about the breaking news that ben bernanke is floating this idea for petrol to one of the advisors of shinzo abe. that seems to have spurred the spike in dollar-yen. here. above 105 as you can see, this really spurred the rally into the close in japan. strong finish, 1% gains. let me move on to singapore. they are basically saying, wait for an update.
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that is the last level. we were just talking about this. apart from japan, no real meaningful moves. volumes are on the lighter side. investors in asia are weighing these two key risk events. i'm sure you guys will be all over this. the bank of england decides. tomorrow, the big one out of china, gdp, retail sales, factory output as well. given that valuations are at multi-year highs across some of these markets, you do understand that we are seeing momentum tumble slightly. anna: david, thank you. seesitment company hays its full-year operating profit ,t about 180 million pounds ahead of expectations. will brexit have an impact?
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joining us is the finance director of hays. just looking through these numbers, you are talking about being ahead of expectations for the full year operating profit. what about your statement is backward looking. >> it is until the end of june, so it is not that much backward looking. i've been doing the job 10 years now. this is one of our most uniform set of results. that is more than 3% higher than markets were expecting. consulting productivity was up 5%. we've had a stunning catch performance. not only are we now net cash, the first time in six years, we've actually generated 130 million net cash this year, about 10% of our market capitalization. clearly some mixed performances across some countries. anna: how much are you shielded
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from weakness in the u.k. by others outside the u.k. market? >> our u.k. is our largest business, but germany is our second largest. it is up 23%. when you are the number one player in germany, and you are up 23%, one of the benefits of all of this is this nice geographic mix, but also this contracting recruitment. no recruitment company is completely resilient, but what avevery clear, we h completely beaten our competition. anna: what do you see in the u.k., fees, hesitancy to hire? >> we were down 4% in the u.k. when i was on the show about three months ago, we expected to -- 4%n between four p
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and 5%. there should be no surprise. feeelivered the kind of performance we expected, and as we will show when we get to september, our u.k. profits grew this year. pretty solid performance. anna: can you tell us anything about what is happening now in terms of the businesses? we are trying to gauge where this goes from here. how much are businesses putting on hold decisions to recruit? >> i've been doing the job 10 years. whether it has been good times or bad times, i never talk about one or two weeks trading. i don't think it is meaningful. we've got a very experienced management team in the u.k. when we come to your show on the first of september, i will talk until the whole of july and august trading. the u.k. has uncertainty now. the real question mark is how
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deep and how long. i have no view on that today. what i am clear on is we will continue to outperform our competition. the importance is, one, experienced management team, second, beating the competition, and third, this nice mix around the world. the good bit is germany is up strongly and australia, one of the markets being difficult, has returned to growth. that is the benefit of a diverse business. anna: are you preparing for weakness in the u.k.? are you changing the way you do things, decreasing emphasis on the u.k.? >> what you never do is take preemptive action. that is a great way to destroy your business. last year, our fees were down 4%. we've already taken corrective action. we've made more profits this year in the u.k. despite a
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tougher market. we run this like a retailer. we10:00 on monday morning, know what happened last week and we can take corrective action. we are still very confident in our business in the u.k. for the long-term. we may have a difficult one or two years. the minute i come on this show and i'm talking about the bottom or returning to growth, our share price won't be 105, which is about 30% down before brexit. it will be a lot higher. we know what we are doing and we've got some diversity. anna: we spoke to paul donovan from ubs. he was saying that maybe we won't see masses of redundancies in the wake of the brexit, but maybe just not much hiring. i accept that you don't want to talk about the week's trading, but what is your expectation? if you are in that position,
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and there's a surprise, you make everything discretionary. you continue to replace important roles. that always happens. the real positive is it is not lehman's. when lehman's happened, when i got to work every morning, i looked at which banks our money was and decided where i would keep our cash. i've had no need to do that. we are going to go through an uncertain time. it may be difficult. but we are not in a financial crisis. the authorities know what to do. we've got a beautifully diverse business. if the u.k. is going through a tough time, in europe, we grew 21% in this quarter. we may have some more difficult times, but we will continue to do a good job. anna: i'm going to keep asking
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about the u.k. in terms of the brexit opportunities, theresa may says we will make a success of it. sidepeople from the brexit have been calling on businesses to look at the opportunities. what opportunities do you see here? are there opportunities for your business? does employment ownership become less onerous? >> making a really blunt point, i've seen more restrictive legislation introduced by the u.k. than anything coming out of europe. companies, yout are looking to see what happens. the quicker we can get through this uncertainty, the quicker we know what the trading arrangements are going to be, what is the tariff structure going to be, the better for everybody. if you have that tomorrow, then businesses can plan with a great
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deal of certainty. until that, businesses will be more cautious. as much as anything, the opportunity for hays is a whole burgeoning digital economy. i think we've got a good opportunity. one of the beauties of a moment in time like this is we will sit down as a management team and start the discussions to say, if we are going to have a couple years, it might be more difficult. what are we going to do to make our business better? when lehman's happened, we did a complete refresh across the world. we went into a couple other countries. when we came out, we accelerated our growth. manus: thank you very much for joining us. paul venables, hays financial director. next, a lead brexit here lends a new job. mark carney prepares for his
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first post-referendum rate decision. that is next.
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anna: welcome back. this is "countdown." the pound is stronger against the dollar as theresa may has named key members of our cabinet and we wait for a bank of england rate decision. let's go to the shadow of sir paul, almost. manus cranny is there, outside. the question is, which policy is driving sterling? is it mpc policy or political policy? one man joins me now. one thing carney is good at doing is jumping ahead of the
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curve. the senior strategist over at td securities, thank you for joining us today. let's get right to it. today we have a decision. the market says 25 basis points. is that your thinking? >> i think that is right. mpc will be looking at cutting today. they want to send a signal to markets that they are ready to act. as they move into august, they will have a chance to reassess the full economic forecast. manus: some people would argue that he is going to wait until they get the new data. you would say it comes down to the summary in the minutes and what the tone and intonation of that summary is about. what do you want to hear? what is going to tell us? >> i think the summary is very important, the minutes as well.
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we are going to see a bit of thinking about how the mpc has been looking at the situation. they've spent the last couple months thinking about the possibility. liquidity, i'm being told, is not the issue. the issue is about lending and making sure the real economy continues. does 25 basis points really matter? >> at the end of the day, i think what the mpc will be doing is sending a signal that they are ready to act. it has already happened. speaking, they are looking at controlling inflation. this is a shock that has now happened and they've got to react quickly. it is about reassuring the general public that they are ready to help and boost confidence? manus: the question i've asked many people, business sentiment at the lowest level in four years, consumer sentiment
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plunged the most in 21 years. translate that for me in terms of growth. not a bad second quarter, but probably a pretty paltry third quarter. do you expect recession? is it just a slow grind as the reality of brexit negotiations which haven't even begun yet begin to take form? >> it is a very slow grind. oft said, a couple quarters negative growth rates are on the cards. we see a 60% chance of mild recession. what we're talking about here is very slight declines in the economy. it changes whether it is a recession or not, but you have to keep in mind the counterfactual is much stronger. this is a big hit. consumers and businesses are feeling it. manus: what do we know about this mpc?
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there is one member, he was governor of the bank of canada, he gave a message to the treasury committee. you have to come straight with people. where are the risks? do you get a sense that his are ready toe mpc act? cohorts, are they going to be on the same sheet? >> i think they will be. they've experienced the crisis. the canadian story is one of success. i think they will look at the moves that carney did during the crisis in canada, that sort of reassurance to markets and the general public was a helpful factor. manus: is this just a temporary reprieve? >> we think it is a temporary
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reprieve. if the bank of england comes out with a 25 basis point cut, we think that sterling will fall on that. our base case is for rates to be taken to zero and qe to be launched. if that is the case, we see 1.20, 1.25. to manus: so therefore we import all the wrong kinds of inflation, the very thing this group were supposed to achieve, but the wrong kind of inflation. >> so you've got an inflationary environment with weak demand. this is a huge challenge for central banks. you know, i think at the end of the day, they have to look through this inflationary shock. you've seen other banks like canada and norway where they've had the same types of depreciation and they are able
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to focus on the medium-term. manus: do you expect an emergency budget? >> i don't. he will be a steady pair of hands. you so much, thank for joining us today. there you go, mild recession, cable back at 1.20. no shopping trip to new york for me. back to you in the studio. anna: don't ruin all my holidays, manus cranny. thank you very much. manus cranny enjoying the morning sunshine. that is it for "countdown." "on the move" is next. a quick look at the futures suggests we will be stronger. lackluster session in asia. in tokyo, we saw some strength. it is not all about the pokemon game. euro stocks up by 0.6%. ftse 100 perhaps in line with that kind of move. watch out for shares in hays.
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we spoke to paul, who was describing their best ever. that is it for "countdown." this is bloomberg. ♪
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guy: welcome to "on the move." we are counting you down to the european open. i'm guy johnson alongside caroline hyde in germany. cleanthony early reduce rates for -- could the boe reduce rates? we are live at the bank of england. boris is back. theresa may appoints the former mayor of london as her new foreign secretary. how will your of react to these announcements?


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