tv On the Move Bloomberg July 14, 2016 2:30am-4:01am EDT
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?
a london house price index falls to the lowest level in some financial crisis. we will ask you this month's numbers are a sign of things to come. good morning. we are less than half an hour from the european equity market open. caroline, looks like a positive start. european futures, the fair value calculation points to a just over 1% rise. that is what we're expecting. caroline? caroline: the new chancellor of the exchequer saying there will be no emergency budget. we are currently trading higher. up 0.8%. shine a light on the korean won as it strengthens as well. another central bank action today left interest rates unchanged at a record low. the yen continuing to weaken.
the dollar up 1.1% versus the yen. oil is rebounding after yesterday's slump. that is what is starting a bit of a waning in the equity rally. we've got to be talking about the boe later today. guy: we've been hearing from the new chancellor of the exchequer, philip hammond. he is saying that carney is doing an excellent job. is that a green light to cut interest rates today? the market has priced it in. since thefirst cut financial crisis, the first time since the mpc have met since the brexit results. most economists are expecting a cut. member thinks they should go 50. manus cranny is at the boe. the new chancellor says that carney is doing an excellent job. do you think that is the green
light to get on with it? manus: most probably. this is a governor who was at the top of the bank of canada in the storm. his first meeting there, he cut 50 basis points. does carney want to do 25 basis to 0% a littleo later in the summer? i think what is much more prescient is what is in the minutes from the bank of england. points, we25 basis also want to know whether there is the propensity in this institution to return to quantitative easing. pre-lehmanrnor crisis at the bank of canada and he had a very clear message for the markets the other day. >> i was central bank governor through the 2008 financial crisis. you have to come straight with people about where the risks are, then have a clear plan to address them. you can't govern by a surgeon.
you can't wish things away. that perpetuates a financial crisis. for me, it is about policy. which policy is going to drive sterling? is it the politics and policy of hammond? policyt going to be the roadmap that this institution sets out? all the inflation that he didn't want to import comes with potentially this lower sterling. anybody who thinks this rally in the market is sustainable, that is probably a question for many mines greater than mine, but not a smooth road to brexit, never mind article 50. caroline: manus, you've been talking about potentially the rebound in sterling is moving more on politics and policy.
what about the ballistics of qe? manus: that will come, i think, probably later in the year. td securities were just with me. the view is that they will reengage. will they go for something more radical, something more different as people are conjecturing in japan? caroline as far as the sterling is concerned, didi says you are back at 1.20. this political rally that you have, it is interesting that we saw the market shorting cable yesterday into the political theater that went on last night in downing street. what we've got here is a relief rally in sterling according to people i'm talking to, which is going to find it difficult to sustain this on the upside. come way offs
those wretched and eyes you saw on the day of brexit. let's see what the policy is. let's see what the summary is in the minutes from the bank of england. that will help you define where the policy roadmap is going. it is not just about today. there's a long road to travel. i must go because i'm on the radio shortly. guy: you are. get your running shoes on. manus cranny at the bank of england. let's bring in our guest, chief investment officer at restaurants. the new chancellor of the exchequer is speaking this morning. he's indicated that governor carney is doing an excellent job. i would assume, giving the green light for carney to do what he needs to do. how do you think the relationship is going to work? it was very good under the osborne administration. what happens now? >> the same officials will be
working with philip hammond that worked with george osborne. i would expect the relationship to remain good. philip hammond is a very experienced politician, a safe pair of hands, not one to spring surprises on the bank. the point that your commentators have made is relevant. carney has got to be very clear about policy as far as the markets are concerned. that is not just about the cut today, which i think is priced in, but where we go from here on in. that is about where we are considering quantitative easing or something more original. that sort of certainty is what markets are looking for. caroline: we've actually seen some certainty, into the great british pound. we've got the volatility starting to scale back down. it was at a seven-year high around june 15.
it then seems to have come down. is the volatility going to start bing away? >> i suspect it won't. we are seeing a sharp rally in sterling based on the politics of the last few days. discussed as has been many times, negotiations are going to be long. they haven't started with the eu yet. probably won't start until the backend of this year at the earliest. i'm sure we are going to get further volatility around the currency. guy: mark carney has a very developed political antenna and will have heard what theresa may said about inequality. many have made the argument that qe has effectively widened the income spread. do you think that effectively
removes qe from the toolbox? >> not completely. i'm sure that mark carney has taken on board those comments from theresa may and philip hammond will be talking in a similar vein to him when they meet after the rate decision. i suspect that mark carney is also a man who likes to come up with some original thinking. consequently, we may have something that people haven't talked about. we will see the helicopter ride at london heathrow. guy: let's talk about what hammond has been saying. he's talked about the idea that he hasn't made decisions on tax rates. can i get your sins on how fiscal policy and monetary policy are going to work? maybe there is an idea that we
play with income tax. how does the fiscal work with the monetary? >> they've got to work hand-in-hand. theresa may has talked about greater infrastructure spending. it is something she's talked about in the past as well. that is a way to stimulate employment. the fear that people will have is the economy slows and unemployment turns the corner, rising. guy: we've never really had austerity in this country. hammond is by reputation a fiscal hawk, but theresa may is indicating that maybe she isn't. if the fiscal policy gets loosened, i wonder whether monetary policy changes. is fiscal spending going to be thater, or do you think monetary policy is going to be the primary tool? >> i suspect the danger is that
we are running out already, as has been handed, in terms of monetary policy. i suspect they won't go into negative territory. we will probably come to the four. depending on the state of the economy, corporation tax is one lever they will be keen to pull. they've got to balance the budget here. they can't go too far in being imprudent in terms of fiscal spending. they've got to have an eye to the currency. guy: stay with us. julian chillingworth, rathbone cio. up next, the philadelphia fed president says the u.s. may carry out multiple rate hikes. more details next. this is bloomberg. ♪
caroline: let's get the bloomberg first word with david ingles. david: thanks, caroline. let's have a look at house prices in london. that has fallen to the lowest level since the height of the financial crisis as brexit sent shockwaves across the u.k. the survey is compiled by a survey of real estate agents. fromopped to -46 in june
-35 in may. were received after the referendum. thanll lynch managing more $3 trillion for the world's most wealthy people according to this annual study by the london based consulting firm. morgan stanley dropped one spot. assets under management shrank at all three private banks. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. caroline: thank you. now looking to asia, equities trading on singapore's exchange remain extended after it missed a self-imposed target. for more, let's get the details from haslinda amin. what is behind this? it has been
frustrating. we know very little. whenng has been said about trading will resume. the exchange said it would be 2:00 p.m., 40 minutes ago. then it came back, saying that will not happen. what we've been told is that the old was caused by duplicated trade confirmation messages. during suspension, orders can be put in. they can be taken out. they can be amended. but they will be matched only when the market reopens. this is the second time in a year there's been a malfunction the system at the singapore exchange. the last time was in august. the technical fault resulting in almost two hours of disruption. guy: thank you very much indeed, haslinda amin talking about singapore. t happy. philadelphia fed president
patrick carter says the u.s. economy shouldn't sustain much damage from the brexit vote. he will not vote on policy until 2017. also said that more than one rate hike might be warranted this year. >> i believe inflation will return to target sometime next year. considering economic projections, it may be appropriate for up to two additional rate hikes this year by that we will approach 3% the end of 2018. guy: julian, a, he's got no vote, and b, i suspect he's got very little credibility if he's talking about two hikes. julian: the market is looking for one hike probably. december has been talked about. i think janet yellen is going to be very cautious. she will want to see what the
effect on the global economy is of the brexit vote and how that is not going to factor into europe and consequently i suspect they will err on the cautious side. caroline: julian, you are saying the market is potentially factoring in a one-time hike. looking at the world interest rate probability, the futures markets don't even see one out as far as 2017. we have just a 49% view on 2017 in september. stand in terms of hikes this year and where this pushes or false the dollar? julian: i think that we are currently factoring in a hike toward the end of the year. and waned has waxed on this. if we have decent nonfarm payroll numbers, i suspect that
number will come back in. our view is that we will put brexit to one side for the moment and the u.s. economy will be functioning pretty well through the second half of 2016, which may well give the fed the incentive to look again at rates. think all central banks are very keen to try and, not normalize rates as we've known them in the past, but begin to get back to more normal monetary policy. guy: why would you raise rates when inflation is doing what it is doing? it isoyment is low, but not producing any wage inflation. julian: at the moment. we can have this debate round and round. until the inflation comes through, it is not producing inflation. i suspect we are seeing more people come back into the workforce, which will begin to
squeeze. think that we will begin to see some pressure in certain , ass, service sector areas we go through the second half of the year. guy: could have had that conversation a year ago. caroline: i'm sure we will. guy: we are minutes away now from the open. up next, some of the potential corporate movers. home valuations in some of central london's priciest districts are down 8% since their peak in 2014. this is bloomberg. ♪
guy: in london, the new chancellor of the exchequer is making more comments. this is one you want to pay attention to. philip hammond saying the british will leave the single market as part of the brexit process. he is making it clear that he feels that exiting from the single market is part of this story. that is something that many in the financial sector is hoping does not happen, that access to the single market is maintained. the new chancellor of the exchequer saying that he does not see that as being part of the future. this part of the discussion that surrounds the immigration debate
, the eu making it clear bus far that free movement of people and access to the single market go hand-in-hand. we will see exactly how this story debates. it is going to be the brexit cz ar that we want to year from next. what stocks are we watching? caroline: fascinating. keep an eye on the u.k. banks, particularly those that rely on passport inc. and want to do business with the eu. will that no longer be an option? i also want to draw your attention to hays, the u.k. stock set to rise 2% to 3% on the open. it seems that hiring is going great, even despite all this concern, even though we've heard some data showing us that online offerings have come down significantly in the brexit in the u.k. the u.k. public-sector recruitment market remains
challenging. private sector sentiment weakened. watch that stock go higher. watch the likes of basf as we analyze whether this could be in the play with bayer and monsanto. on house builders after that number. guy: more breaking news. angela merkel is commenting right now, talking about the new british government and its various appointments. she is saying that she has invited theresa may for talks in berlin. the whole idea that there will be no talks in advance of the triggering of article 50 seems to be falling apart fairly quickly. she is declining to comment on boris johnson's appointment, unsurprisingly, deciding to keep her cards close to her chest. let's talk a little about where we stand in advance of the
x1 will change the way you experience nbcuniversal's coverage of the rio olympic games. call or go online today to switch to x1. guy: good morning. you are watching "on the move." caroline hyde is alongside me in berlin. we are moments away from the start of market trading and caroline hyde has your morning brief. we are live at the bank of england with one of the most hotly anticipated decisions in years. boris is back. theresa may appoints him to be the secretary. it is confirmed, the u.k. will exit the single market. and cracks appear. the london price house index. lowest levels since the -- the
london price house index falls to the lowest level since the financial crisis. guy: that will be an interesting conversation a little bit later on. blunt talk about how we think markets are going to open. let's show you where the future is our right now. as you can see, a positive picture is being painted. that is the picture. london markets, just beginning to move higher. as you can see, we are now jumping higher. so, it looks like european equities are going to be on the front foot. london looks like it is doing reasonably well in advance of the mark carney rate decision later on. we will have to see wha how the continental markets open. dax, bothnd the expected to point higher. let's get the details with nejra. nejra: we can definitely see a
firmer footing than we were looking yesterday at the open. just looking at the industry groups on the stoxx 600, we can see green across the board. energy stocks are leading, up 1%. crude oil is rebounding from a two month low. telecoms, following, up nine .9%. we are still seeing them up, but they are lagging a little bit there. it is green across the board. risk appetite is coming back into these markets. when we look at the 10 year yield on the u.k. gilts, we have overseas markets opening up. a are, it looks like, moving little bit higher on that, on the u.k. 10 year yield. at theat 78 basis points moment. and then, let's take a look at the stocks we are watching. these are the three we are watching always at the open. i am starting with a couple of
u.k. stocks. this company said that for ur year of hurting profits are ahead of the estimation. hays said the fx is the reason for the difference and actual growth. so, that is up 5% at the moment. it is called higher. also, i wanted to take a look at foxtons because we have that data from the royal institution of surveyors, showing that london house prices fell to the lowest level since the height of the financial crisis. no surprise really, that we can see foxtons down at the open. and then basf, up by more than 2%. we are hearing from people familiar that monsanto has revised talks with basf, regarding a possible
combination of their chemical business. guy: do you like equities? >> yes, i think we consider equities to be the place you want to be overall. guy: why? you are making all of your money in the fixed income space. >> i suspect we are stretching a rubber band there and it could snap it back quite quickly. in the very short-term, it is difficult to predict which way sovereign debt is going to go, but it is not looking cheap. overall, you look at more yield out of the equity markets. that is an increasing yield globally. also, the world economy is going to continue to grow. growth and earnings coming through, particularly in the second half. caroline: give us a sense of the sectors that you like.
we have the banks feeling the pain with the concern surrounding the italian banking sector. is this on a stock by stock basis? >> it tends to be more from the bottom up, stock by stock. i suspect consumer defenses will continue to prosper through what is going to be quite a bumpy period. i suspect that in the u.s., those companies close to the consumer will continue to do well. in the european markets, we have the cyclical.n i think people will be keeping an eye on safety when they are looking for their equity selection. generally, i think the banks still have more work to be done. particularly in europe, we need more structuring to go through, as well as in the italian banking sector. guy: philip hammond says it is going to do what is needed to
make it attractive to u.k. business. how do a play out this story? >> probably the best way to play it out is through those consumer companies that are going to thefit from employment in u.k. so, the consumer related stocks will do reasonably well. guy: why? there is going to be inflation in this country. the u.k. consumer is not used to paying higher prices for food or close. it is going to be a tough pill to swallow. >> in certain areas, you will see inflation to a degree, in food. but we have a long-term trend in now where people are spending more on leisure. if you recall what was said about a shift away from loathing clothing t -- from
purchases to leisure purposes, i think that will continue. caroline: if you are looking at in ftse 100 and ftse 250, pounds. ismy screen, the ftse 100 up almost 8% now. up, 13%is still smashed lower on a dollar perspective. are you getting into the ftse 250, which is more exposed to the u.k. economy? or is the time to focus on exporters with the pound this low? >> i would continue to be quite cautious. there has been a strong rally in the consumer facing cyclicals and they tend to be the 250 stocks. we need some hard evidence to come through. i think it is too early to see how companies are going to cope with the brexit vote, and how the consumer will react in the short-term. i think we need harder evidence
coming through from those companies as they bring results out in the autumn to tell you how they are seeing things. it will be no surprise if people defer some big-ticket purchases in the short-term. guy: but to cameron's point, why not purchase rolls-royce? whether his biggest competitor just got a huge competitive advantage as a result of the decline in sterling. he said, yes, there will be some effects coming through. there will be companies that benefit. >> yes, we were talking about this earlier. i mean, rolls is undergoing a massive restructuring as well. i would say to you, you need to see how that plays out as well. there is going to be quite a lot of change happening at rolls-royce. the depreciation of sterling will give that competitive edge to a number of u.k. companies. guy: are there any other names?
>> defensive dollar owners, mainly. some of the industrials, some of the high-quality industrials that are in the 250. and although obviously, it is no bad news for some of the mining and oil companies as well. again, you have got yield there, and you are looking at creating dollar profits. caroline: less so if you are a foreign investor. guy: up next, jpmorgan releases second-quarter earnings. what will the figures reveal about the sector and how it is faring in the current market climate? we discussed that story, next. this is bloomberg. ♪
guy: you are watching "on the move." it is 11 minutes past the hour. the dax is up 1.5%. the ftse 100 up 55 points. on average though, we are up i went percent. -- on average though, we are up by 1%. i want to show you what is happening with the italian banking sector. are up sharpbly -- those stocks are up sharply as well. here is the bloomberg first
word news. england,e bank of widely expected to cut rates for the first time since 2009. governor mark carney is attempting to deal with the brexit fallout. asked by 54 economists bloomberg predict a reduction in the rates. we expect to see a cut of .25%. beding continues to suspended on the singapore stock exchange. it said this would be lifted at 2:00 p.m. local time, but this has not happened yet. the problem was caused by duplicated trade messages. are ubs and merrill lynch managing more than $3 trillion combined. that is according to an annual study by a london-based consultant firm. morgan stanley dropped one spot in the rankings to number three.
asset management though, that shrank below all the others. global news 24 hours a day, powered by 2600 journalists in more than 120 countries around the world. this is bloomberg. guy? guy: thank you. jpmorgan kicks off the second quarter earnings season for banks today. this season has been dominated by the concern about brexit. i am sitting here alongside our guest, julian chillingworth. is brexit going to be used as an excuse? >> i think it will big used as a future excuse. it is more about the lower for longer. especially with the u.s., it is all about the rates and the impact the brexit could have on the fed's decision-making. this was supposed to be the year when banks finally got a boost in rates. that was mostly 2015 and before that, 2014.
they have been waiting for a while and it looks like they will wait for a while longer. caroline: the only silver lining , give us a sense. jpmorgan is meant to outperform, isn't it? >> they have indicated pretty bullish thoughts, given it was such a bad first quarter. the second quarter looked relatively better, based on some things the banks have said at industry conferences. and activity was very high around the end of the quarter with the brexit vote, both on the rates side, and the equity markets side. it looks like trading might have abou bounced back. on the investment side, there is the thought that a lot of cross-border and european deals will be put on hold because of the brexit uncertainty and what that does for the investment banking calendar will be a big topic. guy: italian banks, u.s. banks.
it is like debating two different industries here. is it as stark as that? two majort is different questions. in the u.s., it is an earnings question. in italy, it is a capital question. that gets you in a totally different mindset. if you are an investor, if you are a regulator, the u.s. seems to be turning along, not spectacular, but not in any crisis mode. guy: the italians on the other hand, they are in a crisis mode. they are very different businesses. the u.s. banks, as michael said, they are turninchurning through. unicredit is possibly having to raise capital as well. differingrough the outcomes that you see in this
story. like, if you were to chart the different outcomes on a bell curve, what would it look like? 's aim all along has been to keep things ticking on, so that the banking -- guy: "ticking on" is horrible. that is not what we mad need. >> what i was going to say is that is his hope, so that growth will come through and solve his problem. but we are seeing it has not solved this problem. so, they are going to have to raise capital. whether they can raise that quantity of capital, time will tell. they have to raise capital and help each other out. there has been much discussion about what deutsche's role will be as well. all in all, it seems to be of
great concern. caroline: let's move away from the italian banking sector. i want to thank micheal moore. he was key for the banking reporting at bloomberg news. i was at a frankfurt event yesterday. this is all regarding basically, the fight that is going on between paris and frankfurt to become the hub of finance going forward. they brought together the great and the good from bundesbank to discuss what might happen in the financial sector going forward, post brexit. hammond said today, we will not be in the single market. does that mean jpmorgan has to move itself to frankfurt or paris? out?ich city will this win >> it will be interesting to see if any comments are made today about the brexit. my suspicion is he will not move
his center to paris or frankfurt. he might move -- it back to new york. vyeh will continuously for a secondary position. because london i think will remain an extremely important center. until we get details regarding government and our new role in europe, it is very difficult to judge what the role of the banks will be in london. we are all aware of the importance of the banking sector and i'm sure the government is being told by the bank of england how important it is to strike the right deal. guy: effectively, then the u.k. could become singapore. what are the other options? you are either in the single market or you are not. if you are not in the single
market, you have a different model. >> yes, but the devil is in the ls, and we don't have the details at the moment. i don't think anybody is naive enough to say, we are just going to walk away. we have to strike the right deals. the banking sector is very important for the london market, as well as for the u.k. economy. saidine: yesterday, he they would have a real problem denominateda euro as that cleared and settled london. they wanted to move to europe. what about the clearinghouses? is that something that you are keeping a close eye on? will this deal actually be processed? of discussionlot is ongoing on this. from philip
hammond today will liven that discussion as well. i think that deal will move ahead. guy: i have to update you with something coming through from philip hammond. we must keep single market access. we must leave the single market, but we must keep the financial services access. this is a confusing picture we are getting at the moment. on that note, we are going to leave it. many thanks -- actually, no. i am completely ahead of myself. julian chillingworth is going to stay with us. a record spending rally in the u.s. treasury. we are going to chart a foreign bond thief, next. this is bloomberg. ♪
caroline: welcome back. we are getting more breaking news. philip hammond said uncertainty is damaging the the economy. but just moments ago, he said we will see an exit from the single market by the u.k. after brexit. mouthful, heme said, we must make sure that financial services have single market access. he is saying, in the short-term, the city is highly resilient. there is no room for complacency though, in terms of protecting
the city. and we must keep financial services single market access. that will be music to the banker's ears. still with us, julian chillingworth, cio of threadneedl rathbones. what is it you want to see coming out of the next few months and years? is it speed? or do you think they need to be taking their time? think, and today is a good example, we need clarity. i'm not in the camp that we need to speed this ahead. i think it is far better we strike the right deal, even if it takes longer, than trying to strike a quick deal. banksms ofb banks, u.k. are going to yo-yo aground. -- they will be
buffered around by consumer sentiment and possible deals we will strike with the eu. so, i think it will be a pretty volatile sector. point of the city's view, do you think the city has confidence that the administration has an idea of what it ultimately wants? >> well, i think the city needs to sit down with the new administration and figure out what they want to say. and that has yet to happen. we are in day one, partly? -- we are in day one, aren't we? let's see what the briefings are that are coming into the city. guy: nevertheless, hammond is saying uncertainty is damaging for the economy right now. how quickly do you think that conversation will happen? >> i think reasonably quickly. guy: do they have an idea of what they want, do you think? are they going to go to europe and say, this is the deal we want? >> i would hope they have some clear headline ideas.
i suspect when we get to detail, the answer is probably no. we don't even have enough trade negotiators at the moment, have we? caroline: how optimistic are you about the other side of the coin, where i sit, her ein e in berlin and your? -- here in berlin and europe? >> they will want speed. they will want negotiations to start. the problem any politician in europe has currently is obviously, you have growth that is beginning to gain a bit of traction, but is still pretty lackluster. and you got this uncertainty over the ongoing brexit negotiations. and also, you are invoking article 50, if that is the method we take. then, that is a real step into the unknown. it has never been done before. on one side, we don't have trade
x1 will change the way you experience nbcuniversal's coverage of the rio olympic games. call or go online today to switch to x1. you are watching "on the move." from an equity point of view, we have a decent session. the dax is back above the 10,000 mark. how is it shaping up below the surface? let's find out. nejra: guy, i'm starting with hays. has risen the most since 2008 today. we are talking about the u.k. theuiter, up 9.4% at moment. we are seeing this gain, actually largely on its higher four year operating profit guidance. it sees this as 180 million
pounds, making it the best performer on the stoxx 600 today. and now, i'm moving on to micro focus. perfour year dividend share, gained. one of the best performers on the stoxx 600. and then, getinge, down. this is one of the worst performers. t sales fell.r nex caroline: thank you, nejra. now, let's return to the britt's favorite topic of conversation, london real estate. a measure of house prices fell to its lowest levels in 2009. data confirmed fears.
say, these numbers show the worst reading on your house price index in seven years, simon. we have buyer inquiries down. the boe might cut rates. is it time to start buying property, or is it still too uncertain? >> it was always likely we would see a little bit of a fallout from the eu referendum. this survey, which was conducted after the outcome, clearly confirms that. also part oft is a trend that emerged at the beginning of the second quarter, particularly the london data. these are also the tax changes george osborne announced, which led to that rush in the first quarter. it became more visible in a
negative way through april and may. it extended into june. given that sort of unwinding, and given the discussions you were having earlier this morning about the comment from philip hammond, there is so much uncertainty surrounding where the u.k.'s place is going to be in europe going forward. i think it is a little bit too early to look at this market as a buying opportunity. guy: that is a 58 basis point cut. but would have an impact on central london? >> i think what you want is certainty. you can look at the london markets being impacted. so, if for example, there was to be a reversal of that, but that provide a boost? it could, but i am not sure it would be the right policy measure. it would add to the sense of confusion. london has had a very good run.
you have almost got to sit back now and except that there is a bit of a process of unwinding some of those gains. it probably is not going to go back that far. look at the scale of the rise in prices we have seen there. some investors were moving away even before the brexit vote. this will not be pivotal moment in the hlondon house cycle. guy: what do you think perceptions look like? there is some concern about the economy. i wonder if that really registers. it is obviously, ever present for us. we see the numbers tick by tick and look at high-frequency data. that is not the story for the rest of the country. what is the rest of the country looking at when it is making his decisions? >> clearly, the debate about grexit and the economy -- the does notd th economye
have the position it does in the london debate. but the sort of move the bank of england might do today, the fact that bnkanks are being encouraged to lend, i think it is going to resonate more with the wider market. so, short-term, i think there will be a little bit of uncertainty there. our members are certainly feeding that back to us. but if the economy does hold up reasonably well, partly because of the actions of the bank of england, then you will see a more solid and resilient market in some parts of the country, particularly those parts further away from the capital. caroline: simon, talk to us about the supply and demand dynamics as well. there was so much ferver before this brexit uncertainty that supply was the issue, there is not enough new housing coming into the market. and now we see from the numbers,
in fact, we have the worst reading on record. will construction be so rattled that we don't get any supply leeway either? simon: well, i think yesterday's statement tells us something. they are not rushing to sort of acquire new land at this point. that does not mean they are abandoning their developing plans. but it does mean the are keeping a watchful eye. and the very fact that they are not looking to acquire new land at this point means the idea that you are going to get -- be able to ramp up new developments and get the sort of numbers that certainly, the government was talking about , tore the brexit referendum try and ramp up the new delivery of housing, i think that will be quite challenging over the next few years. i don't think construction development companies are going to be moving ahead in the same
way they were. that in balance -- that imbalance between supply and demand will remain in the future. let's be honest. it is not just in london. house prices have risen dramatically in many places, which has led to this challenge regarding affordability. the real issue for the housing market is to make sure the transaction level are sustainable, not so much the pricing. i think a flat lining in prices is not a bad thing for a period of time. let's be honest. what we really want is to ensure the lending environment does not gum up. guy: you want people to be able to move homes, move jobs. >> in a real economy stems -- and a real economy stems form tharom that. guy: do we have sufficient
people to be able to build a lot of houses, as well as a lot of infrastructure? simon: i think without drawing on migrant labor, the answer must be no. i mean, the evidence is very clear. with the people talking about the preponderance of eu workers on their construction sites. it is clear, we need labor. we do not have all the skills we require in this country at the moment. it isne: simon rubinsohn, great to have you on. up next, we are sticking with the u.k. will carney cut ahead of the first post brexit rate decision. this is bloomberg. ♪
guy: welcome back. you are watching "on the move." 41 minutes past the hour. equity markets are on the front foot. what we are watching carefully as well to see what is happening in terms of the bond market, the bond is up 3.6 basis points. the u.s. 30 year is up 3.2 basis points. the market is moving out of the doveish trades. but central banks, still ever present, caroline. caroline: they certainly are. and of course, all eyes are on
the bank of england today as we wait to learn if it will cut rates for the first time since 2009. anna edwards is at the boe. there is a difference between what the economists think and what the markets think, isn't th ere anna: absolutely. the markets seem fairly convinced we will get a cut from the bank of england. that is priced in to the extent of 81%. the only 51% of the economists surveyed expect they cut. the interest rate decision is due at noon today. it will be the first cut we have seen from the bank of england since 2009. will they decide to go today, or on august 4? that is one of the biggest questions. and they will have a little bit more data to play with because right now, we do not have much. the data right now is incredibly
limited. we have seen some market impact, some of that more short-lived than other. iesr has seen contraction across the board. the most in 21 years. at fourloade lloyds bank and a half year lows. we have all of these clues, but we do not really know the extent of it. the bank of england perhaps, the have the data to move on just yet. and amongst all of this, things are changing. we have heard from philip hammond today. they will be no emergency budget, but they will continue to cut to the budget. guy: anna, great stuff. barker, thein kate former bank of england committee
member and if either at credit suisse. you think they should not be cutting rates. why? >> there are some people who think they will wait until august because they don't have enough data. i don't think that is a good argument. we won't know how the economy is reacting to the brexit until autumn. we do know however, that this is bad news. i don't think they should cut rates today because i am not in the this convinced that that will help the economy. it does not help savers. we often forget the damage to savers. the argument for cutting rates is borrowers react more than savers. we don't know much about that at these low rates. in addition, we have had a very big fall in sterling. we don't want the pound to fall o further, because that will reduce household incomes and in the short-term, it is more bad news for the economy. for those reasons, i would not be cutting rates today. i do think we need economic stimulus. we have had some from the bank already.
you might have some qe, which i think would help. i don't think rates getting cut would help. caroline: what do you think would be the impact of the rate cut? viewpointlmost an 80% for today? is there a risk that the pound could come charging back? and will that risk equities? >> we have had a very large fall in sterling, as i have just said. the effect of the fall in sterling is a squeeze on household incomes at a time when households are already feeling under pressure. i'm not sure that is a very helpful thing at this stage. i am a little bit more worried about moves in interest rates for other down the curve, further out two years. we must remember, a lot of people have two year fixes. so, you don't get the big kind of pick ups you gotten a pass
from people having flexible mortgage rates adn the rates c falling. the banks might decide to use qe either today, or in august. and it depends a lot on what the bank says. if they say clearly why they are doing what they are doing, that will often have a positive affect on the market. biggerlay tax cut have a -- will a tax cut have a bigger effect than a rate cut? >> i would rather see action on the fiscal side. i think it would have more effect. but what is going to have the most effect is not these things. it is confidence in how we are going to handle brexit, how we are going to tackle staying in the single market. that is what is worrying companies. trying to offset that by a rate cut does not seem to be very useful. guy: that clarity is not coming anytime soon. philip hammond is talking about
all kinds of things this morning. we are going to leave the single market, but we will have access to the single market through the financials. >> that is right, but that will just squeeze us further. guy: my point is, that is a very confused picture. we don't understand how that will be resolved. and we don't understand how angela merkel and the rest of the eu will react to that. what can be done to alleviate short-term concerns? is there anything that can be done? byi am slightly surprised people who think it is a good idea to put these negotiations off and prolonged the uncertainty? i suppose i am arguing with the europeans who think we should start the negotiations soon. businessese can give the clarity we need. business is not investing because they don't know the circumstances, that is what will damage the economy. i also think it would be useful
to see some fiscal measurs. an emergency budget does not sound quite right, but an early idea of what the new chancellor wants to do on fiscal policy, i think that could be very helpful. you were just talking about the housing market, we could see action there from the fiscal side. that would also help to keep that moving. hammond has been taking to the airwaves today, giving his blessing to what mark carney has been up to. what do we need to see in terms of a single market? and what damage could be reaped upon the financial services in the united kingdom, and in the rest of the eu? howare you formulating banks will react to what is currently happening? >> banks are having to think hard about where they want to be. i don't want to comment on the specific position credit suisse is in. the banks are having to think
really hard on where they want to be. my view very strongly is the government would be well advised to keep good access to financial services. and i am confident that is what they will do because nobody wants to see the financial services in the city of london seriously damaged by brexit. guy: what about infrastructure spending? what can be done again -- i am just trying to understand what policy moves you would be putting forward at this stage. many big insurance companies are very clear that they want to invest with governments in big infrastructure. mabye with the purse strings being loosened over the treasury, what is the result of this? >> we are going to have a
certain pain as a result of brexit. of course there is an opportunity for infrastructure spending. extent, it is because the government has difficulty in setting up a set of policies going forward, which gives pension funds and insurance companies confidence that they will not be policy changes. it would be great if philip hammond could break that lockdown, but we should not kid ourselves. infrastructure spending does not come through quickly. we should have started this two or three years ago and frankly, it is a missed opportunity. guy: very nice to see you this morning, kate barker, the former monetary policy advisor and senior adviser at credit suisse. this is bloomberg. ♪
televised interview at 7:00 p.m. he will discuss whether he will run for office again. caroline: let's bring it to this side of the channel. merkel has invited the newly appointed uk prime minister theresa may to berlin. she declined to comment on the appointment of boris johnson, that is according to the german press. meanwhile, germany's foreign borister, fo johnson's counterpart, called the latest developing from the u.k. preposterous no less. for more we are joined by our head of german coverage. he made those comments before he knew that boris johnson would be appointed as the foreign
minister. how are they going to be digesting the new cabinet here in germany? say, theresa may, for example? >> the basic fact is merkel, the de facto leader o ftf the eu, theresaeal with teres may. this first meeting will happen very soon because we are about to approach the european summer break. the first meeting will be important because they have to sort of feel each other out, including possibly, some real policy issues, like where are the red lines? yes, go ahead. guy: you think these two women weilill get on? is theresa may the angel a
merkel of britain? >> there have been many of these comparisons. there is always something to it, right? i think they just have to get along. the thing you have to remember, merkel, and much of the german political establishment, very much wanted britain to stay in the eu. they also want these negotiations to succeed. although of course, not handing over the store to theresa may. so yes, they will be evenly matched. caroline: will they trigger article 50 by the end of the year? >> the latest signal we got from merkel was well, we have to give britain time to sort itself out. and if you look at what is happening in london, maybe that was not a bad stance to take. many people in the eu, including
cook's will carney cut? will the boe cut rates for the first time since 2009? it is the first that -- it is the most anticipated decision in years. markets welcome relative u.k. political stability. day one at number 10. brexit britain continues to emerge. prime minister may begins her first morning in office. we will discuss britain under may. ♪