tv Bloomberg Daybreak Asia Bloomberg June 8, 2017 7:00pm-9:01pm EDT
exit polls adjust the u.k. is headed for a hung parliament with theresa may falling short of a majority. speculation sense sterling plunging to its lowest since april. it adds to the uncertainty surrounding brexit. and questions are being asked about the prime minister's future. george osborne says she may not survive. and war of words in washington. fired fbi director james comey accuses president trump of lying and defamation.
we have got the world covered on bloomberg television on this epic day. live in london as we see results from the u.k. polls. here in washington, we're all talking about james comey's testimony. we will have plenty of reaction to that. absolutely. this is bloomberg's continuing coverage of the u.k. election result. it is just after 7 a.m. >> just after 7 p.m. in washington, d.c. i'm kathleen hays. is that shocking exit poll out of the u.k. we are focusing on, suggesting this election could go either way. not what we were expecting when asia went to bed last that. the instant reaction was on 1.9% at the fell start after we got those exit poll results. some of thoseng
declines but as we get the early both starting to come in, certainly it is going to be a very long day for everybody because it could go either way. question is what kind of majority the conservatives and the labour party are going to have an prominent? that is biggest question now -- even ifresa may theresa may retains her seat's prime minister, what if she does not have enough heft there to actually govern? this is why they have already been so many questions asked about theresa may herself. this is weak enough of a showing that people are already starting to wonder if she will keep her job as prime minister and if she does, what it means for her. yvonne: let's get our latest from our reporter, sebastian, tracking the twist and turns out of london. what a night it has been for you. what can we glean from these initial results? seb: quite the drama already. what we're seeing is why we should be careful about that
exit poll. a few results from the northeast of england. i will show you on the map, in the top corner from sunderland and newcastle. the swing is what is interesting . the south. labour held that. according to be exit poll, they should have 68%. 40 short of what the exit polls expected. done substantially worsen as part of the country and this is duplicated across the u.k. we could still see a conservative majority of 80-100 seats. similarly and sunderland central, the doors are up -- the tories are up by 10 points. we heard from george osborne, the editor of the evening standard, talking about the exit poll and saying this -- the p result could be catastrophic and could put theresa may's leadership and up. -- in doubt. yvonne: what do we look for now? give us a sense of the timeline. seb: i want to take it to
wales. these are a lot of labour held seats but they are marginal. the our seats that the tories could take. if the tories do take them. simone is one of those. labour is saying it is forecasting a hold there. they were just ahead by 6/10 of a percentage point in 2015, small margin. they're also looking to hold self -- south. the interesting thing is they voted to leave in the referendum. the question is just how enticing is theresa may's hard brexit. we are looking ahead to london. labour traditionally is the heartland for london -- london is the heartland for labour. they saw lots of gains in 2015 when they lost season other parts of the country. vonne: take a look at the initial reaction from the pound.
talking about how we have been gaining more ground, but we are not nearly recovering from what we saw at the start of the session. 127 for cable. we see the lead in these constituencies coming out a little bit less than what we are expecting. anything can change at this point. we want to bring in our next guest. geoff yu. he is still with us. for starters, what is the mood now. we can talk about sterling and talk about polls but when you talk to people affected by this, is it shock or a sense of my goodness, what is going to happen next? geoffrey: it is shock but i think there will be slightly -- given that some polls heading into the selection were actually tighteining aggressively.
one poll did .2 a hung parliament. hungd point to a parliament. now what does this do for brexit , for corporate tax rates and fiscal policy? a lot of questions need to be asked. the first thing is, what kind of government are we going to get? kathleen: first of all, explain to our viewers, hung parliament. what that means. what is going to cause this election to end up in a hung parliament? geoffrey: a hung parliament is no party achieved the majority. goes over the line of 325. or need to get 326 realistically slightly lower than that would be enough. now, getting the exit poll consolations, basically the tories could even get to the same number of seats as all of the opposition parties combined. they may decide to cobble them together. the u.k. is not be used to colas
and politics, unlike continental europe. was 20,010 when we have can conservatives and liberal democrats and a coalition government. -- last time was 2010. it was bad for the liberal democrats. they have already come out and said, no deal, no coalition. we could be looking at a confidence arrangement. kathleen: look at this knee-jerk reaction in the pound. sharp drop, just about 2%. as the first polls show the uncertainty over this election result in the question of a hung parliament, what happens next. again, what is the logic there? is it just uncertainty, let's sell? is that that there is some concern that brexit won't happen ? knee-jerk reaction from traders or is there real logic here? geoffrey: two things. one is knee-jerk reaction related to positioning. we did see a polls slightly in favor of the tories in the last 48 hours. maybe there were some long positions in favor of -- pointing towards a strong tory
majority. that is the first positioning element. secondly, it is just uncertainty because these numbers, the immediate thing to worry about is theresa may going to stay? are going toe delay having a government and bear in mind, and 11 days time, we begin brexit negotiations. that is the most important thing for the u.k. economy, more uncertainty for that is bad for the pound. yvonne: how do think brussels is watching this, because, you know, they say we are swinging towards the labour, we could be seeing -- a softer brexit. can you imagine a softer brexit? geoffrey: it really depends on the kind of coalition government or arrangement -- if it's going to be a labour led government. labour has said that brexit is brexit. but that position is softer than what the conservatives were offering. at the same time, there does not seem to be a plan, either. at least theresa may has come out with that 12 point plan.
we saw on the day she delivered it, yes, it was a hard brexit but sterling rallied on that day because there is value i n certainty even if it is a bad certainty. yvonne: leading up to this exit poll, the pound really budged, despite the polls continuing to tighten, suggesting that there was complacency among traders. how long is this catch-up going to take? geoffrey: we really have to see the how the night develops. there are one or two swing seats or bellwether seats. some seats will have more influence than others but it will take another two or three hours before we get a clearer picture. for some traders, who may belong positioned and worried, they still want to hold out and see h ow the night development. turnout is very different compared to what was expected.
let'sen: geoff, broadness lp review mentioned the impact on the economy and uncertainty over the economy -- the leadership shifts. how does the bank of england now react to this, if at all? mark carney was very aggressive in august to make sure the initial impact of brexit would not swap the economy down the road. how does the boe, the bank of inland, deal with this? geoffrey: it is probably slightly easier to deal with compared brexit. if we go back to last june, governor carney came out with a statement first thing in the morning. i do not think he will do that today. we stand ready to provide liquidity for the banks. he was worried about the banking sector. that is not going to be the case. the boe a look at household and business sentiment. both have been showing signs of a slowdown, and brexit complicates things. on the business side, on the plus side, they could say it is
going to be a softer brexit there may be certain businesses would like that. but taxation, which is in the labour manifesto, that may not be welcome, either. the boe right now, they are going to be -- quite conservative but they stand ready to act if we see a sudden downturn in sentiment beyond where we are right now. kathleen: so, when you look at the difference between the two main parties, right, the conservatives, the labour party, theresa may and jeremy corbyn, what will markets be watching and investors watching from either one of them that would be so different from the other that it could make a difference in how they invest? geoffrey: so, for theresa may, really a lot hinges on the size of the majority and really right now even that, let's say if the not going towe are get to a crushing 50 plus seat majority she was looking for. her position could be undermined
and businesses would be looking at how much authority she has and what brexit she would pursue. on the labour side, that will be much more interesting because jeremy corbyn is left wing even by labour stands compared to tony blair and gordon brown. aggressiveuite policies contained in the manifesto. a coalition, the hope would be can they drag labour government to the center? but again, it really will depend on the seat compositions and depend how much authority these individuals have. with that, jeremy corbyn went from 20 points on the polls but now he has been -- labour is really staging a remarkable recovery. yvonne: what is the range you are looking for the pound rate now? g#btv9237. these are the forecast. from the top on the red line, that is the point for a big win. the yellow is the small win.
130. you look at the lower lines, a labour win. the bottom is hung. we are talking about 123 to 170. is that about right? geoffrey: that is about right. even in the best case scenario, a crushing tory majority, we thought that would not push cable above 130. we really get uncertainty for a few months, heading towards 120 is a possibility. kathleen: is there any possibility of a rethink on brexit? one can't help but think one of the reasons people have been electionecome a closer is that even some of those people that voted for brexit -- they associate theresa may in her party with pushing for brexit. maybe they feel labour is the party that didn't so much. is there any way that the u.k. could in any way pullback from brexit? geoffrey: brexit is brexit.
that is in the manifesto's of both parties it the liberal u.mocrats, the most e. party, what they proposes a second referendum. what could happen, what could've happened in the postmortem is really people are going to be looking at the turn up at what caused the massive diversions in the polls of the last two weeks has been modeling of the youth turn up we know that was low for the brexit referendum. maybe that lost vote from the youth, close to a year ago, that has come back and they are sending a message. yvonne: thanks so much for staying with us. i know it will be a long night for guys. the head of u.k. investment at ubs. don't forget for terminal subscribers, follow the account -- count live. e.u. you will find the latest numbers from the constituencies reported
in you can see the maps on the right side. that will show the state of play of how the votes are coming in. e.u. , left side. all the news you need. follow us on top live. let's get you caught up with some of the news heading across the region with the first word news with courtney collins. courtney: let's get you caught up in mario draghi says the eurozone economy has turned the corner but the job market is lagging behind. draghi has finally been saying that threats to growth are balanced and he may cut rates again. he warned that nothing has really changed on inflation and employment and said little about how to taper the ecb's $2.6 billion on buying program can the man once seen as a potential successor to jpmorgan's jamie dimon is leaving after 13 years. co-chief operating officer in july, 2012. his rapid rise saw him in
the running for the top job. diamon did not say why zmes is leaving. he added he respects his decision. is striking a defiant tone is saying it can withstand the pressure for as long as necessary. doha says saudi arabia and its allies have yet to submit any demands to resolve the crisis, which has seen diplomatic ties severed along with land, sea and air links. qatar is accused of supporting sunni groups and shiite militants to destabilize the gulf. and moody's has lost the appeal against the judgment that it broke hong kong's coat of conduct which resulted in a fine. the securities and futures commission has set a report on public companies failed to -- didn't ensure the accuracy of its claims. that ruling raise concerns about
the stifling of critical commentary. news 24 hours a day powered by 2700 journalists and analysts in 120 countries, i'm courtney collins and this is bloomberg. yvonne: we have a big story making headlines today -- comes from washington. kathleen: the former fbi director, james comey is accused the president and the white house of lying. we've been following the drama on capitol hill. we joins us now. very dramatic day in washington 2.5 hours is what we heard from james comey. say theavevave to biggest bombshell came about halfway through went mr. comey actually said he himself was the aeak of his memo to get special counsel appointed. robert that is -- with mueller. let's take a listen to what
comey had to say in his own words. >> i needed to get that out into the public square. i asked a friend of mine to share the content of the memo with a reported. myself for a variety of reasons but i asked him to because i thought that might prompt the appointment of a special counsel. toy: the fact he wanted leave that to the media shows the distrust and doubt comey had in terms of trump and the white house bid. i counted a handful of time when comey used the word a lie to describe what is been happening with mr. trump. comey took notes saying that he wasit because he "concerned that he might lie." trump's criticism of the fbi and its falling morale were "lies, plain and simple." spokefrom that, he also about things we already knew were confirmed, especially in 24 hours ago when mr. comey release that opening letter.
for example, he said there is no doubt the russian government was behind the cyber hacks. he also said trump did not ask him to stop the fbi's russia pro be. he said nobody else, including the do did not direct him to stopj -- or stop the flynn probe. there are still hanging over everything here, the possibility of obstruction of justice. that is what people have been asking, whether mr. trump can be involved because that is an intangible -- an impeachable defense. he does not think it is for him to say whether the conversations amounted to obstruction of justice. geoff: still with us is yu and ub private banking. comey what we saw coming out of thecomey testimony. -- what we saw coming out of the comey testimony.
did we get more out of his testimony than what we saw in his written testimony. geoffrey: how markets reaction, it seems like this was a banana skin. that ultimately it did not prompt talk of impeachment. it didn't accelerate, or on a marginal basis, no change of the status quo. the focus should be back on how the u.s. economy is doing and where the fight is going to go. -- the fed is going to go. what our clients have been asking us is the reflation trade. a lot was promised and a lot was in the price. how much of that can we count on him to deliver? there is so much going on on the side. that is a question that needs to be answered over the coming months and quarters. yvonne: a public servant calling the president a liar. that should be quite significant, right? this probably has a lot more implications than what people
are suggesting at the moment. are we still overlooking some of these risk? geoffrey: i think from global investors point of view, you're speaking to the u.k., it has already been for the last few months a sense of awe in terms of how u.s. politics has actually progress. they are enured to what has been going on. so, the capacity to surprise is not as high as what we could have perhaps have expected in a previous administration. but that has been -- but look at our position. we have taken off our overweight position in the u.s. ongoing fiscal uncertainty has been -- the question again is how much of this news continues before it does damage the u.s. economy? so far, it does not seem to be the case. kathleen: even overnight, we had the ecb meeting and heard from a
dovish mario draghio. . some of the line was when it came to the risk is no longer tilted to the downside. on the other side in asia. we heard from the boj, saying they may recalibrate -- when it comes to acid bond purchases. have we changed at all with a central banks are going or is the fed in the lead? geoffrey: the fed is in the lead. what is the scope for marginal changes beyond where markets are pricing right now? that is what will move things. from the fed's point of use, are we going to see more hikes? by inflation, that is in it just to the upside. if you look at europe, that is why you saw the reaction after the inflation forecast were reported lower. expectations were on a marginal basis, the ecb and the boj were
able to move a bit more aggressively beyond what markets are pricing. mr. draghi is pushing back against that as hard as he can. yvonne: actually, he certainly wanted to make it clear that he made knowledge the fact that the euro area economy has picked up. the risk is now neutral's for the first time since he became president of the ecb. kathleen: he made it clear number one that inflation is not where it needs to need. ir inflation forecast. in his press conference he said, he does not expect to cut rates anymore but could if needed. again, it seems to me right now that what markets are reaction when it comes to ecb is very nuanced. the tiny things are moving markets, even though the fed is getting ready to raise its key rate one more time and reducing its balance sheet. geoffrey: right. it seems like communication from the fed has been clear, the
market knows where it stands. with the ecb, it really has been what the market saw the ecb may be. ready to be more assertive draghi pulled things back. we would expect to see this from the boj as well. when is the yield curve going to be recalibrated? are they going to increase -- four yen appreciation, if it is domestically drive. n. it's a story our investors are not focused enough on. yvonne: what we are showing now from our bloomberg library is v btv -- it shows various european countries showing the same pattern. inflation started to rise. where so many central banks could not get inflation to move towards target, in terms of the g-7 countries, what does that affect
investors? what do you buy or sell? geoffrey: private investors, we are still advocating diversification. we think eurozone equities to the u.k., they are risk strong in earnings beyond what is being priced now. the other thing on the private side, we are trying to shift more risk. cash ratios are very high right now. when people ask, where do you see value? valuations aside, the value aside, you have to look at where markets are under positioned relative to where you want them to be. at the beginning of the year before the french and dutch election, it was tough to get clients interested in a conversation about europe. now they suddenly find themselves underinvested. that already is potentially a trigger that seems the carry environment is attractive. we like u.s. high yield as long as oil prices stay where they there.
it should not hit the shale sect or. it seems like that single market, those shine to some extent but it does not mean you lose the risk preference because of cash ratios which are very high. yvonne: a phenomenon in the market will receive global equities continuing to hover at record highs. but the bond markets continue to rally. the bond markets are focusing on where inflation goes. who do you think is right in this equation?: geoffrey: you could argue both are right, because the bond prices or yields will be held down by central banks. with a view to keep business sentiment where it is. central banks want to overshoot. been very clear. it is not just get inflation to target. to overshoot the target. that helps banks profitability. you can actually have grr eater pricing power. going back to the ecb, nowhere
along the forecast horizon, they are not forecasting and overshoot. this is liquidity policy, and that is going to be in place for a long time to come. the fed is more advanced but they would rather be somewhat behind the curve rather than -- causing a downturn by hiking or rising to aggressively. yunne: that is geoff joining us from ubs. as we continue to get the latest count on the u.k. election. don't forget your terminal has all the answers. follow the count live on e.u. . there you find the latest numbers from constituents and the latest headlines on the left side. that map right there on the state of play out of e.u. . this is bloomberg. ♪
♪ >> it is 7:30 a.m. on this friday morning in hong kong. we have the latest on the u.k. election. agencies so far reported, it will be a long day here. 30 minutes away from the open. >> 7:30 p.m. in new york city. you can see the lovely look in the sky, things not so calm in washington dc today were james comey testified, basically saying the president has lied to him and the american public about what has really happened so far in the russian investigation. let's take a look at the markets. dow jones industrial average fractionally higher, up. the s&p 500 up 24.33.
the nasdaq rising slightly as well. i'm in washington dc. yvonne: i'm yvonne man in hong kong. and first word news with courtney collins. courtney: james comey has accused president trump and the white house of lying and a deep aiming him. dusty framingham. he said the president is shifting explanations for his dismissal. he said he wrote and kept detailed memos of their conversations because he feared the president would ultimately paint a false picture of their encounters. >> the administration then chose to defame me and the fbi by saying the organization was in disarray, that it was poorly led, that the workforce had a lost confidence in its leader. those were lies, plain and simple. courtney: the trump
administration plans to dismantle financial rules moving for, but house republicans ripping up major parts of the dodd frank act. they approved the legislation. however, the bill with the financial choice act is a seen as having little chance of passing the senate in its current form, as democrats are unimpressed. the bank of japan governor says the economy has escaped from deflation, but has a long way to go to hit 2% target. speaking at oxford, he said the banks had steered japan in the right direction, but the journey is not over. gdp is expanding for a fifth straight quarter, the longest streak in a decade. but 2% remains far out of reach. and north korea has raised regional tension again, saying it will accelerate its nuclear program. the foreign ministry says the development and capabilities
would be intensified until the south and american allies "come to their senses." the report came after the u.s. secretary of state rex tillerson called on neighbors of north korea to step up pressure. global news, 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i'm courtney collins. this is bloomberg. kathleen: thank you. from ouret more now bloomberg reporter in sydney. adam, i do not think we were expecting these exit polls. we could be going into a hung parliament in the u k. yvonne: as we get closer to the votes trickling in, what should we be watching? it seems like everything will be isolated toward the british currency. adam: good morning. i think that is the key important point to notice this morning, that this is all about
specifics of sterling trading. what we do not see, and some may have expected, is the fallout and to other assets. into the bond market or equity market, those kinds of things. what we see at the moment is a pronounced move on the pound. not exactly clear what we are experiencing that. u.s. futures are off a tad. we do not see strength in the dollar-yen we may have expected. at this point it is isolated to just movement in sterling, sterling dollar mainly. it is not a situation where it is spreading to other financial markets. of course, we still have to wait for a lot of the votes to come in, the exit polls are notoriously unreliable. we need to wait until the count come in. so plenty to play for over the last hours, as these count come in. at the moment, investors taking
the view that they want to wait and see until we know specifically how britain has voted in the election. yvonne: i will take it, but i have to ask, we just had a chart showing the sharp drop in the pound is the first poll came out suggesting that there could be a hung parliament, that the conservative party is in jeopardy. after a drop like that, how did the technicals look now for those trading the pound? adam: indeed, from a technical perspective we have obviously, going into the key level of 127 against the dollar, so that is really key. sterling traders pared back some of the initiative -- initial moves. so coming back a little bit against that. in a sense, we still have some way to go before we get to the next resistance level.
of course, this is in the context of expectations relative to know what expecting this kind of outcome. the move is pronounced, but we have pared back from an initial declines. so at this point there is no panic, it is just a clear understanding from the currency market that we have a different situation than we had 24 hours ago. yvonne: we sure do. you are right to point out people have to wait for the final results, but that means more headlines that could be moving the traders tonight. we will bring in our bloomberg executive editor, john. let's get your take. not entirely unexpected, but when you see it happening, the possibility for a hung parliament, it does create some of the questions it feels
different, doesn't it? john:unexpected, but when you st happening, the possibility for a hung yet again, a political shock like so many we have had over the past years. one thing out of caution, everybody involved, even putting together the exit polls, saying it is much too soon that this could translate into a final result. we do see some early results, especially from the northeast of england. and if you are going to read something into them they suggest perhaps it will be not as bad for the conservatives as the exit poll suggested. the man that put it together said he would not rule out a conservative majority. in a best case scenario for them. even if it does transpire, it is still terrible news for theresa may. she called the election with the purpose of increasing her mandate, and it looks like it is not going to happen, even in the best case scenario. kathleen: kathleen: so it will probably go down as one of the worst political miscalculations, at least of the last 10 years. what accounts for the fact that theresa may did not get what she
expected when she called for the election? is it rethinking of brexit? the fact the economy is starting to suffer more as people pay higher prices for imported goods? do the terror attacks figure into it? john: it was a bad campaign for her, but halfway through she had to do a u-turn on a social care policy surrounding care for elderly, for elderly people. and that was talked about. utterly people having to pay more for their own welfare, as they grew older. so that you turn, which played badly. it is interesting to point out that this is really the first time that the voters got a close look at theresa may. for so many years, she was the home secretary, but she was able to take a backseat to the prime minister. this is the first time she was upfront with the voters.
and you have to conclude that they did not necessarily like what they saw. and the social care policy that she turned around on was perceived to be uncaring. she was also up against jeremy corbyn, the labor leader, who early on, his manifesto was a popular left-wing manifesto and after maybe 5-6 years of being in the united kingdom, this is something that people, it would certainly have a feel for voters. and with brexit, it is too soon to say. all the major parties say they will respect the result of the referendum, but what if this result carries -- it does raise a question on what kind of brexit we might see. kathleen: john, do you think theresa may can survive this? john: it will be difficult for her. she did not have to call this election. the understanding was, the
expectation was the conservatives would massively increase the majority, maybe by 100 seats are more. but her personal standing in the party right now is severely damaged. and it is going to be difficult right now, again, if the result is play out anything close to the exit polls, it will be difficult to see how she can survive this. yvonne: what could come out of the hung parliament? we already hear from the parties saying we will not form a coalition. they have ruled out a coalition with conservatives. then you have the labour party saying they will not have a coalition, so what are we left with? how can they govern with only 11 days into the brexit talks? gets let's assume no party the majority, which is a big assumption, but certainly with the exit poll is showing. what we might see is a minority government, a government does not necessarily hold the
majority but govern, and hope to put the majority together on each bill as it comes through. you are right to raise the point about breaking negotiations. so we left in a situation and the clock is ticking on the eu membership and they will leave at the end of march. right now, we are in a position where it is not clear who will lead the negotiations or indeed when the negotiations, when they will have a prime minister to leave those negotiations. last time we had a coalition after the 2010 election and it took six weeks to put the government together. really come across the board there are so many different issues. the economic future and constitutional future of the united kingdom are very much in the air right now. kathleen: in it was put out going through the various scenarios and if no working government, it was said, can be formed, the first test with the
queen's speech, there would need to be another general election. how broken down with the results need to be for something like that to happen? john: it would need to be pretty bad. if these were normal times you would say there is a decent chance of a second election. certainly not for me to roll it out. but again, you have a clock ticking over the united kingdom, less than two years to negotiate a deal to exit the european union. so let's say you have another election, minimum from here you are talking about, you would not be able to see those results for six months. that is six-month less they u.k. has to negotiate a deal. it is possible, but you sort of struggle to see, is there a political time for that. you would need to see in pretty bad for that to become a real possibility. yvonne: and you are mentioning about how this election has been
so much about anti-austerity, fiscal spending, but there was little vision when it came to brexit altogether. do you think it was a mistake, looking back now? john: it is an interesting point. this was billed as a brexit election, but brexit did not play that much of a role on both sides really. there was the understanding that brexit will happen, but the debate was very much for the election, it was about fiscal spending, social care policy for the conservatives, and of course we had the two terrorist attacks. so there was an understanding that brexit was going to happen, but you are right, no real big debate about what kind of brexit we will see. this will not confront and center -- come front and center. both sides sort of expected theresa may would be the next prime minister and there would be some, her version of brexit would be the one pushed through. that is in the air now.
kathleen: it certainly is. john, great to have your perspective. our bloomberg executive editor for international government. now we want to talk about this triple whammy. maybe noteresa may keeping the door open. and a press conference from mario draghi. they view as necessary to push the euro area inflation up to the target. kathleen, i know you have been covering this. we saw a very dovish mario draghi, sticking to his guns saying he is not ready to discuss it. kathleen: he is not. he said the ecb and people in the euro area have to be patient, because inflation is still so subdued. i want to call up one of my 32-21, looking, at inflation and seeing what mario draghi is talking about.
because you can see that the turquoise line, that is the number, the headline inflation that the ecb targets. if it is under 2%, it is just there, but back to 1.4%. not just energy, same kind of pattern. this is what mario draghi is watching. europe said, risk in the economy, he has not talked about that since he took over as president of the ecb. he also said on a positive note that the risk of deflation has disappeared. one thing people called dovish is the fact the ecb reduced the inflation forecast for this year, for 2019, and in fact the ecb far from looking at inflation with their target, they say it will be at 1.6%. another chart i want to look at is 8939, the get another sense
of what the forces are that are driving inflation. and it is interesting that while the euro area unemployment is declining, in fact it reminds me of the chart we should of the u.s., confidence is rising and expected to rise up further. we do not see if eating through to the higher prices. not at a level where the ecb feels. it has to be ready. although a somewhat positive thing, mario draghi thinks they want have to cut interest rates this year. but if things do go sour, he said they could do it again. bonds continue to be bought, people saying no taper of that guidance probably until september. yvonne: plenty more to look out for. when it comes to central-bank policy, a lot hanging onto the u.k. election. you can follow live on the bloomberg using the function e.u. . we are looking at a turn in the pound.
in the last 20 minutes, sterling fading again as we see more results coming through. looking at southwest london. labour party is taken the lead at the moment. this is a crucial one. we are looking at a pro-eu seat. we will see if it goes to the labour party. we will continue to watch this and the u.k. election. plenty more to come. ♪
reaction, it seems like the most aggressive reaction has been on the pound. , goingking at futures higher this morning as we count down to the tokyo open in 10 minutes. i'm yvonne man in hong kong. kathleen: and i'm kathleen hays in washington dc. yvonne: to our top story, exit polls suggesting an inconclusive election results, the conservatives falling short of a majority in parliament. and we are going to sydney. great to see you. no seats have changed so far, but what are your initial takes on the exit poll at the moment? >> it is obviously a pretty disastrous results for theresa may. we will see if the exit poll reflects the final vote tally, but it should. it is bad news all around. even if the exit poll is off by
a few seats and theresa may scrapes by with a majority, i would argue her leadership would be imperiled within the tory party and she would lack credibility going forward in the negotiations with brussels. yvonne: one second. we want to bring john fraher back. we were just talking about this, the superlatives we were describing for theresa may leading up to the election, iron lady, difficult woman, those things substantially taking right now. anyway she can come out of the election stronger? john: no. these exit polls would need to be more often than any other polls in recent history. for her to come out of this looking good. she did not have to call the election. this was, you could've argued the government should have spend their time figuring out and
perfecting its negotiation strategy with the european union ahead of the brexit. instead, she chose, it was her decision to plunge the u.k. into uncertainty. do not forget, she rolled out -- election overarly and over again. she made the gamble. and it has blown up in her face. very difficult to see how she will emerge from this strengthened. and as we have been hearing, her credibility is in serious jeopardy and you have to, there are serious questions on whether she will be the next prime minister, even if conservatives do manage to get a majority. yvonne: you know, we are showing a bloomberg chart. 92-33 right here. and when you see the sharp drop in the pound, it is clear that despite the polls suggesting it would be close, the traitor reaction is, this is closer than
we thought. kathleen: it raises questions on so many aspects of the u.k.'s future. start with brexit and the negotiations on june 19, can they begin if the u.k. does have a hung parliament? sorry. yes, i think it does raise a lot of questions. i think we're likely to see a minority government, if anything. i do not think we will see a return to a coalition anytime soon, sibley because the liberal democrats are too scarred by their previous experience and have said they would not enter one with conservatives. if that means they hold onto power, albeit with a minority government, then they will have to revise their mandates essentially and it is unclear already what the sequencing, whether the british side has
established sequencing laid out by brussels for the negotiations, which is mainly that it is a divorce first negotiation, divorce before you can negotiate on trade relationships so you need to deal with the financial settlement first, which is contentious within the conservative party. possibly contentious between parties, but within the tory party and it is unclear who will emerge the stronger part of the party from the election. i think it is a vote of ambivalence against brexit from the u.k. electorate. it may be that the hard brexiteers triumph over the likes of theresa may as a result andhe instability uncertainty. yvonne: you spent 10 years in the u.k. and you have a sense of british policy, obviously. right now the mood of the but as people. what can theresa may do? kathleen: what should she do to
maintain her hold on power? is it possible at this point? herve: look, it will be very difficult for her. i'm sure that she is thinking through her options. in large part, it is not rest on any decisions she makes. the ball is in her opponent's court. so, who are the opportunists in this situation? i think there are many. i think we can discount boris johnson -- can't discount force johnson. -- boris johnson. even george osborne, even though he has made enemies within the party, but he may sense the opportunity is right for him to make a return to the front bench politics. yvonne: what do you think of that, john? could we see the return of george osborne? john: i think he is throwing it in with journalism right now.
he has a job there and not running in this election, but it is interesting all of the possibilities of who could be the next prime minister. and just a moment ago, one of the favorites to succeed theresa may is the current home secretary, but she herself could lose her seat. people in her constituency say there has to be a recount, it is too close to call right now. it shows you the scale of shock the conservative party is facing. even politicians, top a-list politicians, some of the most prominent in the country, suffering. again, the future is uncertain right now for the conservatives. you are right. you look at boris johnson, who knows. could regard him as an outsider. right now anything seems possible. david davis, i would not rule him out. the main brexit negotiator right
now, he could be the one to garner support of the hard brexit supporters in the tory backed engine. yvonne: we are waiting for the results coming out. these are conservatively held. suggesting it could be going to the labor side, good the tide turned from here? -- could the tide turned from here -- turn from here? herve: let's not forget they start from a low base, the labour party. it is completely astounding expectations because jeremy corbyn was chided as being ineluctable -- uncollectible. -- unelectable. but at the end of the day, both parties, it looks likely neither will have a majority. that is a structural issue for britain as it enters the negotiations.
♪ yvonne: uncertainty in the u.k., exit polls suggest a hung parliament with theresa may falling short of a majority. seeseen: the speculation sterling plunging the most sense january and raising doubt about upcoming negotiations with the eu. >> and if the polls prove correct, the u.k. could be without a full functioning government just days before brexit talks are due to start.. >> questions already being asked about the future of the prime minister. osborne says she may not
survive. this is continuing coverage of the u.k. elections. i'm yvonne man in hong kong. kathleen: and 8:00 p.m. in new york city. i'm kathleen hays. yvonne: and we are taking a look at the u.k. situation so far, i have to go to e.u. with the latest on where things are going right now. sterling taking a turn in the last half-hour on the downside. we are now at 127.36. on the right side, looking at how the counts are reported so far. so far we see constituents reporting 15 out of the 650, so still a long way to go. but 10 of those have been going to the labour party, five of them toward conservatives. seatsn mind, no change in as of yet, but we are waiting on crucial constituencies. some reports from the bbc saying
one district to be swinging to the labour party, which would be crucial. kathleen: we have seen a move in the pound. and this is not over. yvonne: we will go to the latest on the asian side of things. waking up to possibly a hung parliament in the u k, relatively speaking the reaction has been tame so far. sophie? sophie: looks like asian traders can look be on the boat. taking a look at the open in seoul and tokyo, we happy nikkei up. of we are seeing some risk aversion. in the currency space, you pointed out, the pound taking a turn and down 1.7%, dropping the most since the january. we also see u.k. bonds falling and futures indicating a weaker open for wall street as well.
and gold up at 12.80 announce -- an ounce. softness in sydney. down a kind of a percent. taken a look at what is going on with sterling. we see some of the sharp selloff, falling nearly 2%. it is getting to a level of 127. that would be a retracement of the rally in april, calling the early election. but with the tories potentially losing a majority, it could push 23.50 according to analysts. it, politicalg uncertainty, that is the achilles heel for the pound. there are long-term implications for the pound when it comes for the pathway on brexit when it comes to the government being formed. we see volatility jumping for sterling, rising the most since
january. the pound fighting against the end, falling as much as 2.1%, pushing up toward the 200 day moving average. again, as i said, there could be other catalysts that asian traders could look at this morning. we have china inflation data this morning, along with japan home loans. we are watching for the fallout from a short seller attack on stocks. and resuming trading today after tumbling on carson block allegations. kathleen? kathleen: thank you so very much. reporters tracking the drama in london. sebastian, what can we determine from the early results? everybody says it is not over yet, but what can we take away from it? sebastian: just going on 1:00 a.m. and we have our first change, the labour party gaining
over in wales. this is crucial. it was a swing seat. the question is, will they back theresa may or will they go elsewhere? they chose elsewhere. this is really a sign of things moving in their direction. the first change of the evening and really an indication of what may be to come. elsewhere, labour party holding onto these darlings in the northeast of england. chatman holding onto his seat. spells trouble for the conservative parties, it was on the target list. and it was a must win if theresa may was going to increase the majority to around 60. a bit of trouble for conservatives right there. we are waiting to hear from another district, where we are told the conservatives have lost that seat in southwest london. waiting for that. expecting the result at any time. the labour party holding onto
another seat in southwest london. expectations they could lose it because it was quite marginal, the former mayor of london's seat before he left to become the mayor of london. take a look at the pound. we have seen a move downward. bring it up right here. it is lower as we see the labour party holding on to that seat. they should really have done that. but the conservatives were targeting it heavily. we are looking at sterling at above 1.7. kathleen: seems like jeremy corbyn has outperformed expectations so far this evening. yvonne: what will you be looking for next? sebastian: we are looking at key seats. after that, coalition building if nobody gets the majority. nobody expected it at the moment. then if it falls the labor to
form a government, we have a bit of clarity from ms. thornberry, part of the labor cabinet about how it could happen. she says there will be no formal coalition because the dems say they will not form a coalition. they could have a platform that other parties could vote on, but still plenty to speculate on. frankly, anything could happen. yvonne: absolutely. we will get back to you later on. now a good first word news. >> the ecb president says the euro zone economy has turned the corner, but the job market is lagging. mario draghi has been able to say that the threats to growth are balanced and stop saying he may cut rates again, but he warned nothing has really changed on inflation and employment and it says little about how to taper the bond buying program. the man one seen as a successor
to jamie dimon is leaving the bank after 13 years. matt zames was named as coaching officer in 2012. his rapid rise saw him in the running for the top job. jamie dimon did not say why he was leaving or if he will be replaced. he says he is sad to see him go, but respect his decision. tone,striking a defiant saying it would can withstand pressure as long as necessary. saudi arabia and allies have yet to submit any demands to resolve the crisis which has seen diplomatic ties severed. qatar is accused of supporting extremist groups and shiite militants to destabilize the gulf. and many -- moody losing an appeal that it broke the code of conduct in hong kong, resulting in a fine. the securities and futures commission had said that in 2011
report on public companies fail to explain their judgment and did not ensure the accuracy of claims. that ruling raised concerns about the cycling -- a stifling of critical commentary. global news, 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. engle.phen this is bloomberg. yvonne: a big story making headlines today, coming out of washington. the former fbi director, james comey has accused the president and white house of lying. ramy has been following the drama. kathleen: i think for a lot of people it was like watching a political soap opera episode. ramy: other people have said it is a political super bowl. all of the broadcast stations were carrying it, as well is bloomberg television. comey, inner, james terms of 2.5 hours in front of the senate intelligence committee, followed by donald
trump's personal lawyer. in the end what was a he said, he set of lies, liar liar all of the place. james comey said he took copious notes because he was afraid "that he was concerned that donald trump might lie about the nature of their meetings." he also said trump's criticism of the fbi were "lies, plain and simple." the one thing that stood out to me was the bombshell that happened about halfway through his testimony with regard to the whole entire revelation that he said he himself was the leak of his own memo. >> my judgment was i needed to get it out into the public square, so i asked a friend of mine to share the content of the memo with the reporter. i did not do it myself for a variety of reasons, but i asked him to because i thought it would prompt appointment of special counsel. ramyu: a lot of other things we
heard were things we already heard over the past 24 hours. ramy: he said there was no doubt the russian government was behind cyberattacks on the democratic national committee. he also said donald trump did not ask james comey to stop the russian probe, that is crucial. on the issue of obstruction of justice, james comey said he wanted to stay away from that. do not think it is for me to say whether the conversations amounted to obstruction of justice." that is an impeachable offense. on the side of the white house with donald trump's personal lawyer, he said anything that was supportive of donald trump he agreed with, but anything that undermined the standing of mr. trump he actually said was a lie. notointed out mr. trump did pressure james comey from stopping the probe, he said he was already vindicated.
looking ahead, this is only one probe that is happening. the house intelligence committee probe is also happening, as well a special counsel headed by former fbi director. this will be going on for a long time. kathleen: i am sure. i did not stay up to watch all of it. just looking at the headlines, it was riveting. yvonne: breaking news out of japan, softbank agreeing to buy a robot maker from the google parent alphabet. you see the pop in shares. close to one year highs for softbank as it pushes deeper into the robotics technology. and we are looking at this big acquisition spree. terms of the deal not disclose so far. softbank has also agreed to purchase the japanese robotics company shaft, so that is what we are learning about. dynamics has come
out with a series of robots, even when pushed over rocky terrain. softbank pushing further into robotics. straight ahead, we look at commodities in china. kathleen: up next, the pound and euro under pressure as the u.k. election results come in. we have more on where the markets could be heading. we have pictures out of wales, where the first welsh seat is being declared right now. the labour party holding. the second most winnable area for the conservatives and it does not look like they kept their hands on it. a lot more to come. this is bloomberg.
washington dc. yvonne: i'm yvonne man in hong kong. back to our top story, the u.k. election. just getting some lines coming through, the labour party gaining in scotland. this according to our colleagues, saying it may be the most extraordinary result so far tonight. a big swing for the labour party this morning. let's get back to get more analysis from the head of strategy in australia. it will be a long day for us. what is the deal this morning? >> absently. we had the big crunch in all things sterling. right at 7:00 this morning. that was obviously on the exit polls suggesting the conservatives would fall short
of being able to secure an outright majority. we have seen a little bit retracement since the first result came income is adjusting the conservatives -- came income is adjusting the conservatives are doing better than the polls suggested but it is early. i think we are in for a fair amount of volatility. if it does prove to be the case the exit poll is reasonably accurate and we are looking at a hung parliament, at a minimum you have to think that sterling will retrace all the gains it has made sense the prime minister called the election on april 19. i do not think the day is over by any stretch of the imagination as far as volatility for sterling. yvonne: wise words from a man that has watched the markets for a long time. let's go into the bloomberg now and see something showing another big move, relating to the pound of course. just looking at volatility overnight. kathleen: you can see that
overnight volatility is not worst most at certain times of the brexit vote back in of 2015, but boy what a move. does this change the game right now for pound traders? >> i think it does in terms of volatility. it is interesting to note that the volatility levels are still short of what we saw last june and it has implications globally. when we had the brexit vote, i think the reaction was this will have some potential global ramifications and spill into market volatility, but that proved not to be the case. even though we see higher sterling volatility, i think there is less prospect of that spilling into the broader markets. i think this is in the scheme of things a little more like local difficulty, rather than an event
of global portions, so i would not expect the spike we see two necessarily translate into other markets. but for sterling itself, i think the volatility could persist for a good while. even if we have the results, other than the circumstances where does turn out in fact the conservatives have been returned with an enhanced majority, the uncertainty factor will remain high for many weeks to come and i think that is what will keep the levels of the volatility for sterling up. yvonne: if this is something that affects brexit negotiations, if it turns out the results were driven by the fearful sentiment that exists not only in the u.k., but in the eu as well, could that have broader ramifications that will be expressed or reflected in the markets? ray: i think, whether this is going to have bearing on the brexit negotiations remains to be seen.
we are assuming the conservatives have performed less well than expected. we do not know whether the root cause is actually be electorate horrified at the prospect of a hard brexit scenario that theresa may has projected, whether it is to do with the so-called, the attack on welfare benefits basically of the older generation, or whether it is to do with terrorist attacks. we do not yet know. we will have a conservative prime minister entering the brexit talks much more chastened man was likely to be the case and maybe it will play to a change of attitude on the hard brexit scenario, i am to get about single market access and the free movement of people and if that view started to take some sort of hold, you could see sterling improving. again, would have broader ramifications outside the u.k., i'm not sure.
yvonne: we were just talking includingtituencies, scotland, that the labour party was able to get the vote. we continue to see some see changes -- seat changes leaning toward the labor. are we likely to break below 120 for the pound? ray: obviously one scenario that is not look realistic by the exit polls, if it turns out the conservatives cannot form an outright majority or a coalition government, then the prospect of some sort of coalition between the labour party and the scottish nationalists, the liberal to micex and others -- democrat and others, is that does come into play the softer brexit scenario becomes more realistic because we know labor has taken a softer attitude toward maintaining access to the single market, for example. under that scenario you are faced with perhaps the prospect of a safer -- softer brexit,
safer for sterling. you would find businesses would be horrified at the prospect of a labor government replacing the conservative government. so there will be push and pull factors if that scenario plays out. early.it is very it is early in the u k as far as the final outcome is concerned. yvonne: absolutely. we are also focusing on the ecb meeting. the euro lower during the press conference when the ecb talked about their inflation forecast for 2019. i do not think most of us were expecting that big of a reduction, but we did hear a dovish mario draghi. do you think europe will go lower or is this an opportunity to -- ? ray: to be honest i think it will depend more on what happens with the u.s. dollar next week, but you are right the market was
surprised of the revision. i know that bloomberg ran the store suggesting we would see a revision and as it turns out the revision for 2018 was even deeper than the suggested 1.5%. i think that is the key takeaway as far as market reaction is concerned, together with the concern from mario draghi that there would be no interest rate moves until after the purchase program is completed. so i think the negative euro reaction is justified. if the u.s. dollar is able to find support next week, i think the euro will go lower. but if the downward climb continues for the dollar, it will support the independence of the euro. kathleen: i think it will be fun to see the ratings for tv networks that ran the james comey testimony, because it did attract attention from people in the u.s. when it comes to a trading perspective, how are you factoring this as a possible
market mover, or a dollar mover? will you forget about it and see what happens? or will you wait for the investigation, which will take months to play out and see what it means for donald trump? best,ell, months at potentially years. that is the historic precedent as far as these investigations are concerned. it is still seen as background noise from a market perspective, but it is plain to the view that is going to make it harder for the trump administration to work on its agenda, especially with the repeal of regulations, for example. i think that will be a factor keeping expectations of higher interest rates and a stronger dollar to some extent in check, but my broad perspective from here is ultimately whether this will lead to impeachment proceedings or whatever is very
much a political decision rather and a legal decision, unless we see a change in congress, i still think from a personal perspective, the market is still going to assume that this investigation at this stage will not result in anything of it event in the short term that would lead to sharply increased perceptions that impeachment proceedings could be commenced against the president. yvonne: a broad question, particularly ahead of the fed meeting next week, we could get more details on the balance sheet reduction, but people are convinced there will be a rate hike. where do you stand on the recent bond market rally, key to so many bond market around the world, do you see more or do you think it is overdone? ray: i think it is key. all of the volatility can be traced to the treasury market at the moment. we are locked on to the 10 year treasury. i sent is we still have a view
that the u.s. economy, the u.s. economic outlook does not justify current pricing for the fed and what that means as far as bond yields are concerned. until we see hard evidence that the economy and particularly the strength of the labor market is going to produce higher inflation rates, we do not see andthe reviews on the fed, something like 10 year treasuries backing up north of we, maybe near to 75, certainly think the balance sheet reduction will have a small impact on the bond yields. so, the market is thinking the fed could change quickly, but i think it is unlikely that the fed itself will do that. it will probably be that calendar between the june and september meeting, likely to be far more decisive in this respect. yvonne: one more question. how about the stock market in the u.s., some people are
nervous, some people bullish? ray: the ongoing leakage from the dollar and the bond yields have been supported as far as the equity market is concerned. i do not think the balance of shrinkage will have an impact in terms of liquidity and the availability of liquidity in the equity markets. at this stage, i do not see the evidence as far as the macro fundamentals that are concerned suggesting we should be looking for a significant correction in equities. famous last words. i hope not. yvonne: thank you. ray joining us from sydney. of course, we will keep in touch with the terminal and subscribers can follow on the u.k. election e.u. on. this is what we are looking at so far. 30 out of the 650 so far and 21 of them are towards the labour party, with the recent change in
♪ 8:30 in singapore. markets sanguine leading up to the outcome in the u.k. the pound seeing aggressive moves. i am yvonne man in hong kong. kathleen: i am kathleen hays in washington dc. we are watching every headline out of london. we have the latest. >> we are starting to get something to talk about. labor ends seven years of
tory rule. we are getting signals that people are starting to reject theresa may's message. seat,nd, this was the now going back to labor. wiping the board clean north of the border. maybe we are starting to see a reversal of that. curtis. from john he said this result proves the exit poll was right. john curtis.from label held onto one of the tories key seats. mays dwindling for theresa
for her majority. in this situation every vote counts. what is the next constituency you will be looking at? >> london, and i also want to take you through the markets. , theound moving lower lowest level since april, the biggest drop since october 11 last year. , just aboveling 127. the ftse futures opening lower. for a pickup when we get more results. we should get a clear picture of where this country is headed, or whether the coalition building begins. is an uncertainty that when i play well in the sorts of markets. yvonne: great work.
we will come back to you in a bit. the pound is at new session pollsfter the first exit are suggesting conservatives may lose their majority. the prospect of a hung parliament casts doubts over theresa may's future just days before negotiations with the eu are due to begin. james comey has accused president trump and the white house of lying and defaming him. he said that presidents shifting explanations for his dismissal were "lies, plain and simple." he said he kept detailed notes of their conversations because he felt the president would ultimately paid a false picture of their encounters. >> the administration chose to defame me and the fbi, by saying
the organization was in disarray and poorly led, that the workforce had lost confidence in its leader. those were lies, plain and simple. >> the trump administration's plans to dismantle post-crisis financial rules have moved forward, ripping up major aspects of the dodd frank act. theakers approve legislation by 233-186, however the bill is seen as having little chance of passing the senate in its current form. bank of japan governor corrode as says the economy has escaped from deflation. kuroda says the economy has escaped from deflation. he says the journey is not over. gdp expanded for a fifth straight quarter, but 2% inflation remains out of reach. korea raising tensions,
saying it will celebrate its nuclear program, pyongyang saying the development of capabilities would be intensified until the south and its american ally "come to their senses." it comes after rex tillerson called up on north korea's neighbors to step up the pressure. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. it's time to see how the asian markets are shaping up. brink ofon the breaking below 127. we continue to see options for theresa may and the conservatives limited. sophie: the pound under siege, falling almost 2%. and seoul,tokyo korea shrugging off the woes, nikkei 225 getting a boost as the yen swings around 110 dollar.
japanese shares set for a weekly drop of 1%. we are seeing oil prices on the back foot. energy stocks leading the drop in sydney. currencies are getting caught up in that u.k. election crossfire. the aussie is the worst a g10 performer after the pound. is weakerre yuan ahead of inflation data, prices expected to fall on commodities, while ppi rising based on food costs. in tokyo, softbank on the rise after its deal to buy alphabets robot unit. fujifilm sliding as accounting problems have extended to australia. rise, perhaps helped
by the boost in base metals, copper up 1.8%, iron ore up 2% in singapore. ubs upgrading that stock to a able toasian traders look beyond these move so far. kathleen: thank you. ,taying on top of the markets britain's political future thrown wide open after an exi coal and theresa may's conservatives might not win a majority in key regions. it looks like the votes are coming in for labor. for more, here is our london bureau chief. what is the latest and how surprised are you buy what we are seeing so far? >> it is a surprise when you look at what most polls pointed to. three of the important seats
,hat theresa may was targeting she hasn't managed to secure those. poll first came out, everyone was advising .aution in the last few hours, john curtis, who was leading the paul poll isking to -- sticking to his guns and the results back up the exit poll. are seeing the uncertainty of christ in the pound right now, but if we see a sway towards the labour party, this could be a softer brexit, right? there probably would be some kind of delay if there is coalition building.
we are looking at two different scenarios. the conservatives could form of government with help from the northern irish parties, al for labor could form an alliance with smaller parties, still leaving them short of a majority , so jeremy corbyn does back brexit, but favors remaining inside the single market, and all the allies whose votes he would need have a post-brexit or want to remain in single market. help but i can't wonder if theresa may who called the snap election to bolster her position as she got ready for brexit negotiations, maybe she doesn't feel like hillary clinton did win election that should gone in her direction looked like it was completely slipping away. it is hard not to see the
parallels. preparehing we have to for is what tomorrow will bring for theresa may's career. she called the election early. she did not need to. we reported that there are senior tories furious with the way the campaign went. they felt there was hers to lose and there was a series of missteps and u-turns, and that is why the result is less good than she hoped and what the tories thought was possible. yvonne: thank you. our london bureau chief joining us from london. let's get more market reaction to the early u.k. results. mark cudmore is joining us live from singapore. we are seeing the tide of sentiment turned for sterling, a hung parliament, so what does that mean? >> this is looking like the worst case scenario for traders. not only is the exit whole
looking like it is right, it might be airing for conservatives, so it looks like we may be going for a coalition government. will be know whether it a conservative or labor led majority government, but it does pushback negotiations on brexit, but there will be uncertainty through tomorrow, so it will not only way on sterling, but could weigh on other assets outside the u.k. and europe. there is just too much uncertainty and no one knows what it means. you were talking about this move in the pound, 1.8% lower. it's nothing like we saw in brexit and the june referendum, so what is the difference between that are common the one we could be seeing here in the next couple of hours? >> brexit was a monument to us
event -- monumental event for britain. it means changing trade deals, the i'm currently at the moment, we are in that sweet spot of uncertainty, basically the worst case scenario of not knowing which government will form. if you'reparticularly jumping on that town trade in the right direction quickly. we don't know what the final results are. once the final results are in, then you could see even a much sharper move in the pound,
particularly if this result of a weekend theresa may and new prime minister becomes a reality . it seems to me it is too early to say why this move is not as big as rags it. -- as brexit. are right. there is still confirmation needed to come through. look like ang to outright conservative majority is extremely unlikely. chance of all a coalition majority, but that is looking like a best case scenario. so we are having a massive shift. in the next couple of hours, we should get more certainty about the result and sterling will be weighed down. at the moment, people will still bet on the chance that there is a chance that results could swing the other way, but it is unlikely given the results we
have seen so far. people always live in hope. no into whiche is you can do with your bloomberg. let's jump into the bloomberg and look at #8795. we can talk about swings in currencies, but also swings in the u.k. betting markets. line showshe white the odds that labor might win. look how low they were, then as the polls change, that take. now what you can see -- that take up. -- picked up. this is quite a reversal. .his chart has a limited life we won't know in a few hours how this turns out.
-- we will know in a few hours how this turns out. scenario under a possible jeremy corbyn prime minister, that may's leadership and the conservative party get challenged? hyperse case, the fast modi base case, was a conservative majority. what people are negotiating is now the worst case an area, a slim coalition majority for the conservatives come and the best case would be a landslide. it was not seen that theresa may my step down as leader and jeremy corbyn might need the next prime minister. that uncertainty will weigh on sterling, u.k. assets, and seep through two other assets. not sustainably, but an elevation in risk aversion. yvonne: take a look at the nikkei and kospi, still seeing
solid gains. be looking, and are you focused only on the pound or other fx pairs? >> you are starting to see s&p futures lower, and that is despite the dodd-frank will that passed. risk on trade, a and the global economics of good. the global economy is ok. yields are low and there is a lot of capital chasing returns, so overall markets are looking good. yesterday, i would have said the u.k. election will not spill over to other markets, however, this scenario with maximum uncertainty is the one case where perhaps there is negative sentiment hitting other assets. serious way, but in the short-term, that will be weighing on assets everywhere. global when you watch
markets as you do and stay in touch with so many people, besides the pound, it this is the road the u.k. and electorate is going down, what other place are you are aware of where people might say this is a uy or --- another bo buy or sell? not wantrozone does the week u.k. economy. it is still linked economically, so it does seem to be weighing on the euro, so you are seeing ,he euro lower, with the euro , andackdrop in the yuan the yen strengthened, which you see is that dollar strengthen and the yen strengthened, so this will be one of the
dynamics, can the sterling and euro weakness see through to a turnaround in the broad dollar index? the dollar index has been weakening all year, but could we see a base, even short-term, in the dollar? you know what? treasury yields are low and pricing little beyond the weeks fed hike, so what happens after that? can treasury yields fall lower? the market is starting to consider what is the next stage the dollar. it might be positive for the dollar, and slightly negative for the euro. u.s.,: politics in the james comey testimony, little impact on the markets because it feeds into a sense that things will be tough for donald trump in terms of pushing the agenda through congress on anything that has to do with tax and spending. out andsomething comes
relatively quickly not only from what james comey has testified, the closed-door meeting today, and robert mueller's investigation of the whole issue of russian meddling in the u.s. election? is that the potential for another move down in yields? >> completely. if there isown risk a smoking gun and something a littlet sets trump bit more vulnerable to a possible impeachment call. there is no point speculating on that. the investigation is ongoing. we need to be aware more developments may come out, but there is too much speculation involved in the meantime. and last something serious enough to actually start a path towards impeachment, it will probably be passed over and be irrelevant. the expectations for trump stimulus has been pushed so far back, it is not a driver at the
moment, which means it needs to be something drastic on the downside for a big market impact. then?: where do yields go several analysts have said a 1% handle is possible. while that is possible, we may dip down. i think it is unlikely to stay below 2%. runawayot seeing inflation in the u.s. commodity prices lower, that is another disinflationary pressure. yields can calm lower, and especially we can see capitulation at some point, however, speculators are now long treasuries, which means it is unlikely that any move lower will sustain at that level, especially as we are expected to get a fed hike next week.
given where benchmarks are at the front end, it would take a lot for yields to go down to 1.5% or stay below 2% for long. yvonne: thank you for your perspective p joining us live from singapore. plenty more to come -- your perspective. thank you for joining us live from singapore. plenty more to come. these are live pictures out of the u.k. s results come in. plenty more to calm, but we are seeing some swing votes coming in and leaning towards the labour party. this is bloomberg. ♪
yvonne: i am yvonne man in hong kong. kathleen: i am kathleen hays and washington, d.c. we have the latest from london. this is such an exciting process. >> it certainly is. practicing my pronunciation. we are off to wales. it was the third most winnable seat for tories, but labor has held onto it. they also saw gains in london.
the toriesese seats were targeting, labor is gaining or holding onto. there was a conservative win in putney as they hold onto a seat there, but and narrow win. we continually see the swing towards the labour party. it is show you how playing out in the markets. the tories are unlikely to win the outright majority. that creates uncertainty. #70 62 and shows sterling overnight volatility brazing. this -- raising. this is on the night of the brexit vote. it is beginning to create a spike down there. about: we were talking
this, it seems like the base case is switching. now it seems like we are heading towards some type of minority coalition, but how is that possible? also come the labour party does not seem like they want a coalition, so what are we left with? >> that is where this uncertainty comes from. there was talk of a chaos coalition, and that may be what we will see. they are not keen to partner with the labour party. the labour party saying it one partner with the snp. what we heard from the shadow ,oreign secretary of labor shadow cabinet member, there will be some sort of policy put
forth by labor, so that seems like an early indication of how this will be done. it could be several days before we get any clarity on that. we still have to wait and see what voters say as they come in and we get these results. yvonne: thank you with the latest as we track the moves on sterling. it really goes to show how much of this snap election has backfired for the prime minister. thateen: i keep thinking if i am theresa may right now, i have to be saying to myself, what did i do? why did i do this? strengthen she would her hand as prime minister, and here is what we see. it is a sharp move down in the value of the pound. then somerebound, rethinking as the results came in, really opening the door to what is next.
depending on how these results come in come the decline in the pound may not be over. yvonne: this might start to feed of the otherme asset classes, gold in particular, climbing to highs amid the uncertainty. you can look at all the latest u.k.at ye eco--- the election on your bloomberg. 68 constituencies reported, still a long way to go. rishaad and heidi have the latest coming up. this is bloomberg. ♪
♪ the middle of what is turning into a dramatic night. indications with the pound dropping as it looks like a honk parliament. hung parliament. at the moment with the way things are going that, well, theresa may after trying to get a mandate for strengthening her hand in order to leave the european union, certainly not got that.