Transcripts For BLOOMBERG Bloomberg Surveillance 20160615

I think the conversation on brexit is continuing to shift but im looking forward to seeing whether janet yellen tackles this issue headon or dances around it. Tom i do not think that is a small idea and i believe she has got to. I would be stunned if she did not directly mention it. Day, Michael Mckee and i will do this at 1 00 p. M. This afternoon. Francine i wonder whether she will focus on domestic risks or international. Lets get the bloomberg first word with nejra cehic. Nejra a new warnings from George Osborne on the risks of leaving the European Union. In a speech he will say that brexit would lead to a 42 billion black hole in the budget that would have to be plugged with higher taxes and cutbacks. The eu is june 23 and recent polls show the leave faction is ahead. Hillary clinton has opened up a doubledigit lead over donald trump in the race for the white house. A new bloomberg poll shows clinton leading trump 49 to 39 among likely voters and 55 said they could never vote for trump. He does have an edge on it comes to fighting terrorism. Voters say he would do a better job. After the polls closed and washington, d. C. For the last primary Hillary Clinton met with rival bernie sanders. They released statements about the dangerous threat trump poses to the nation. The orlando massacre has some Senate Republicans pushing to expand the fbis surveillance power. They have a longstanding request to expand the scope of it can electronic records. Legislation could come to the senate floor this week. Global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. I am nejra cehic. Tom thank you so much. Being at the bloomberg terminal, equities, bonds, currencies, and commodities, there is a little bit of fed day stability but still interesting. Futures after a number of difficult days up six. Brian belski to join us and im looking forward to talking to him about what i should do with my 201 k. Oil continues a dampening, a lot of that yesterday afternoon. I thought oil was soggy to say the least. The vix is 22. Even with yields taking a relief, we have curve flattening. In dollar renminbi it was a 6. 0 with a manage beijing weakening rim nimby overnight. Francine european stocks rallied attach. The british pound rebounding ahead of the fiscal policy review and i also want to show because it is nearing a 5 a fiveyear low. A lot of focus on the u. K. Unemployment rate. Eight days to the brexit referendum. Tom our coverage beginning at 1 00 p. M. New york time this afternoon. Heres the fed funds rate prevolcker. What we forget here, i could show this chart literally every day. We do it like once a quarter or whatever. Here is 1994 with a length of policy stability, accommodation and this timeline here puts in scale the massive zero bound combination in this modern crisis. Francine i got a lollipop chart made. Shows the amount wagered on the pound falling to the 1980s levels has more than doubled in the last three months. This is my first circle and this is when the u. K. Was taken by a recession. The second one you can see volatility and how many bet showed the pound would fall was the scottish referendum. Guess what this is . The referendum coming up next thursday, june 23 and which you will be in london to cover. The fed ties back to the referendum, divergence, what yields are doing, and it sets Monetary Policy along with the bank of japan, bank of england, and swiss bank. Simon derrick joins us for the next hour. I do not know who has the toughest job, the fed or when you look at these odds and the risk of a brexit, whether it is the Swiss National bank. Simon i think you are absolutely right to focus in on an open economy is incredibly susceptible to inflows and outflows at any given time, and it goes back to the start of 2015 when we started to talk about qe in the ecb. That was one of the big factors that led switzerland to remove the bank. Look how extreme the have gone on Monetary Policy so the next question is whether there will be fresh inflows enter switzerland, can they really go even more negative than this . This is like japan. Havens in this risk environment do not really have any power to do anything, or do they . Simon i think japan has got more space to do stuff. I think that actually, we have been talking about volatility in sterling. Places weone of the have not focused enough is potential volatility in some of those haven currencies over the next couple of weeks. We know the story in japan, we know the political pressure to not intervene, not to enter more Monetary Policy. We also know that a surge in the yen would have a huge negative impact on local markets and asset prices. Japan, do the bank of you worry about the g20 or local markets . Tom lets go into the bloomberg and look at the bet within the market. Bet in three dimensions on sterling. This is sterlingdollar, not eurosterling. I have never seen this chart, that is how odd brexit is. In the very short term getting up to june 23 there is a bet for a weaker sterling. That is the headline and you can see on this line. There is a bet and then there is stability out critically. If we get a brexit vote and we get sterling weaker out six months, out two years, out five years, do you expect sterling to crawl back to some level or does it stay week . Simon i think you are getting to a really key argument which is exactly where is sterling in the global skiing . Against the dollar in the global scheme . Against the dollar it is fascinating. Fast it has how fallen on a oneday move, the largest individual move in one day. We also know what they sterling crises have looked like in time past. We know about the 1980s, 1992, 2008. Each one of those prices came from a point when sterling was significantly overvalued against the dollar arguably. A 1. 35d be trading at post1985, and that is the key difference. There is another factor that is important. Over the course of the last two years, the yield have moved massively over sterling. I do not know that the market is that long on sterling anyway. Tom it reminds me of Olivier Blanchard appearing with us where he basically said, when everybody calm down, the ramifications are not going to be that great. Witness chancellor osbournes comments yesterday on taxes and i wonder where sterling is one year or two years from now wherever the vote may be. Francine that is something that bloomberg has written a lot of copy on that we may see a downside. If you look at the economic indicator, overall it is not looking that rosie so you could actually argue that it could go either way. Tom it is going to be most interesting. Really looking forward to being with you next week with Michael Mckee. Michael mckee and i this afternoon have a task at hand with scarlet fu. She will lead our fed coverage beginning at 1 00 p. M. Vicerd clarida and the chairman alan blinder, good morning. Francine welcome back. This is bloomberg surveillance. I am Francine Lacqua in london, tom keene in new york. He will be joining me with Michael Mckee to talk about the brexit. Here is nara chi etch. Nejra cehic. Rate the british jobless fell to 5 in the three months that ended in april and wages grew faster than expected. The spanish bizarre clothing 6 . N revenue rose retail rival h m reported sales that just estimates. Stocks are nowc a threetime loser. Has denied time msci access into the benchmark saying that chinese policymakers need to make more improvements to the accessibility of the market. To them to raise the mainland stock. Francine lets bring in enda curran. He joins us from hong kong. Snub is this for the president . How badly is he going to take this for the third time . Enda i think it is pretty clear rejection and it goes to show you how far china has to go before it fully integrates the its economy with the world system. Plansalked about sweeping for opening up to the world but the progress has beens white quite slow. Some say it is a credibility issue for china because ever since they intervened last year and the way they responded on yuan, that dense their credibility a bit and the msci says you must try a bit harder before you join our club. Francine when are they going to review this . Some say it is understandable giving the transparency issues but the msci said they will delay. One year down the line, three years, is it possible to say . Enda the next review is next year but a decision could come sooner than that. He stepped back and look at the optics around chinas market, notwithstanding that some china theyogress is being made are still intervening and the stock market and are a key supporter. The company i mentioned earlier has not returned to chinas market and it is quite fragile. Look at the currency. There is still a lack of certainty where they are going with the exchange rate. Tom you mentioned there intervening into the equity markets and the currency markets we had fireworks lacks tonight last night with a significantly weaker yuan. We are buttressing up against these two standard deviations of the volatility trend. We leg up last night and come in as a stronger renminbi over the next few hours. How managed is managed . Are they literally running their currency and the stock market tick by tic off a desk in beijing . Enda the state still very much has a firm grip on thing that we should remember that the Yuan Movement in somewhat reflects the dollar gained. That is why the fed will be so important today. Signaling from us yellen that they plan to tighten in the next few months would be prodollar. The best gauge for the yuan in the near term will be tonights fed meeting and we will see what miss yellen has to say. Tom enda curran from china this morning. Simon derrick, there is all of these dynamics. What is your call on rim nimby . . Run nimby that the pressures on have been about the market costs relative markets relative position. Significantlyes since yellen pulled back. The question is what happens september in july, in than the Downside Pressure on the rim nimby will significantly decrease. Francine it is about the fed, right . It is all to do with the dollar rally . We are not really going to see a dollar rally, are we . Simon no. Frankly the u. S. Authorities would probably prefer to see a weaker dollar. I think that would work internationally and will help take the pressure off oil that equally going into what looks like a highly volatile second half of the year, it makes things a lot easier for the fed. Tom we showed sterling earlier in brexit. This is a whole different view of that currency map. It looks radically different than brexit. This is the massive bet on weaker yuan out a good five or six years, remarkably different chart than what we saw with rex it. There is a 3 with grexit. Brexit. We will speakadio with Abby Joseph Cohen when Abby Joseph Cohen when about janet yellen, washington economics, and maybe the washington capitals. Tom good morning, everyone. A fed meeting this afternoon. The capital are not focused on janet yellen but we will be at 1 00 p. M. Scarlet fu, Michael Mckee and myself to give you insight on this important meeting. They are distracted by politics and part of the distraction has been at the Washington Post has lost its crest press credentials from the trump campaign. This has caused a modest upward celebration by some Trump Supporters but most people just upset. Alexander petri at the Washington Post takes a more approach. Donald trump is never wrong, that is a good idea. Facts are often biased against donald trump and should be used sparingly and reporting if at all. Think of them as a garnish. Word suffices. Fact checking is that west is worstt gauche and at treasonous. What is fact . Donald trump speaks truth which is bigger than fact. Francine i love that morning mustread and it goes back to how you model the trump presidency, how you model a clinton presidency. Simon derrick, you are reminding me what dollaryen did under bill clinton. Simon the great thing discussed in the currency market is the second half of this year and the fact that this could well be the most politicized president ial race in a long time as far as currencies. To talk about Hillary Clinton or bill clinton, i would point out the 1992 campaign, immediately after that he started on a fairly successful campaign. That combined with easy Monetary Policy. He was all about japan manipulates currency. , onlys race coming up talking about trying to win over those disenfranchised bluecollar workers . Japan, i think actually we could see a lot more of this stuff come back out between now and november. Tom megan murphy will join us later as we talk about Bloomberg Politics. This afternoon at 5 00 p. M. , with all due respect, Mark Halperin and John Heilemann will continue the derby forward. Get ready for the rio Olympic Games by switching to xfinity x1. Show me gymnastics. X1 lets you search by sport, watch nbcs highlights and catch every live event on your tv with nbc sports live extra. Im getting ready. Are you . X1 will change the way you experience nbcuniversals coverage of the rio Olympic Games. Call or go online today to switch to x1. Tom good morning, everyone. Francine lacqua in london, i am tom keene in new york. The german 10 yield is positive after a history making yesterday of a negative yield. And theresident obama Republican House leader paul ryan find themselves on the same side of an issue. In the wake of the orlando shooting both are reject the Donald Trumps called to temporarily banned muslims from the u. S. Ryan says he is still backing the republican nominee. Police say a twoyearold boy was attacked and dragged underwater by an alligator at a Disney Resort while he was partially in the water at an artificial lake. 50sear. Nato is increasing the number of troops in eastern europe. 4000 troops would be deployed in poland and the baltic nations that order russia. Officials in indonesia do not expect a repeat of the forest zeres that led to thick ha last year but that could be forecast by better weather. Global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. I am narrow change. Cehic. Nara jh nejra francine George Osborne says he will have to do an emergency 30 to cover a 30 pound Million Pound black hole is the u. K. Leaves the eu. We are joined by the labour partys largest donor, john mills and with us still is john simon derrick. John, you are probrexit. Explain to our International Viewers why brexit is gaining momentum. Factors, then issues surrounding immigration are becoming more salient. It is becoming more obvious the remain side does not have any answer to the number of people coming to live in this country larger and larger and putting more strain on us. That is part of the explanation and the other is that there was a big drive by the remain side to a front everybody with dire economic consequences, and the remain case has been substantially demolished. Francine the remain camp would of course refute that but do you think there is safety in numbers . The more polls that show brexit is likely to win, the more people who come out and say i . As a closet brexitier john there is a momentous effect undoubtedly in play that acceptable tore be in favor brexit. People are now getting very precipitous about this. Tom john mills, what do you want fm your labour party . I will be visiting next week into london to join in the hoopla, but what do you want from your labour party . What is their best practice over the next week . John over the next week i am not quite sure what they can do. In the longer term i think the Labour Party Needs to have a stronger but critical approach to the eu. I think the mistake is that the Labour Party Leaders and Parliamentary Party and the party as a whole have been so enthusiastic about the european with they have lost touch larger numbers of labor leaning voters who have a different perception. Tom do you risk losing scotland . John i think it is very unlikely that the result of a brexit would be scotland feeling off. There is not going to be a referendum and Less Parliament agrees to it that deans anything, and i think it is likely that parliament would sanction another referendum. If they did, with the smp really welcome this . Bear in mind the budgets they did for scotland becoming independent had oil at 130 a barrel and now it is 40 or 50 a barrel. Simon this looks as though it is going to be a really tight though. Expect there to be serious political turmoil on both sides of the vote in the aftermath . John i think this will be a shakeup for everybody. There is an awkward position in the conservative party and labour party are campaigning for an objective which is not shared in the conservative party, many of their rank and in the labour party, very few. Francine you refute some of the figures the treasury came up with. Do you accept in the next six months of a brexit vote, the political system and investment be a little bit of a mess because we do not know what kind of politician will negotiate and who will ago she ate . If the pound goes down a bit that will make a bouncing in the economy. I think a lot of the projections are very gloomy because if you aed gloomy projections into model, you get a gloomy outlook. This is a siren call of france. Lets drag this these out for john mills. This is the animal spirit of the United Kingdom and france. I have taken nominal gdp and them at thegged financial crisis when they both peaked, nominal gdp in white, france in blue. France has way under performed. If that is the proxy for europe what is the part of the economy that your United Kingdom needs to avoid . John i think the biggest thing to avoid is getting entangled with the euro. The United Kingdom decided not to join the euro in 2005 and i think that was a good decision. Eu,ink if we stay in the there may be some pressure down the track for us to join the euro and i think that would be a mistake. I think what the british economy needs to do post brexit is be as open as possible, trade with everybody, get tariffs down showse all of the models that the economy will perform much better than it has recently. Is there a london equivalent on the continent . If we get brexit, does everybody move somewhere . Where do they move . John i am not sure theyre going to move but the people that have moved will be staying where they are. As regard to new movement, maybe some restrictions on those but my guess is not very much. I think the Free Movement in europe worked very well when all of the countries involved had roughly the same Living Standards but not when you have a huge economic gradient between the west and east. Probrexit ande probe remain campaigners coming on saying this is emotional. What do we actually know with certainty what happens if a brexit goes through . Simon very little. I think the one thing that perhaps has not been discussed we areuld be brought up, possibly not the only eu skeptical nation in the European Union. A poll came out about a month 41 oft pointed out like leave,nch would vote to 48 of italians would vote to leave. Question, maybe the big question is what there be the possibility of further referenda within the European Union . I think that is maybe the question that needs to be fleshed out a little more. Francine john, i do not know if you accept but is there talk thatst the pro brexitiers they would be comfortable being blamed for the implosion of the eu . John it depends on what view you take. I think there is a real problem in europe is that direction the direction of travel is more toward the union. What most people would like to see which is much more prominent for the nationstate, and this junction between the two which is building up that explains all of the protest parties. Europe needs to get to a state class needolitical to have the support of those who vote for them. Francine john mills, chairman of labors leave campaign. We understand that labor as a whole is proremain. All next week we will bring you live brexit coverage live from london. Stick with us from the latest perspectives from Global Leaders and anchors. Up next, we talk banks, currencies, and possible impact from brexit. Francine i am france in the clot in london, tom keene in new york Francine Lacqua in london, tom keene in new york. A british exit from the European Union could have varied implications for u. K. Banks. Mostays could feel the pain. Michael moore covers u. K. Banks for Bloomberg News. We are starting to really get a lot of notes out, who would be winners, who would be losers. You think u. K. Banks have the most to lose but you also have swiss banks. Michael there does not seem to be a lot of winners in the case of brexit among the banks. You may have europeans pick up a little bit of share in the shortterm but it has contributed to a bit of a risk off feeling which you have seen across the continent in the banking shares. Among the u. K. Banks, there is a couple of different elements to the pain, the cost element of having to move people and set up potentially outlets in europe. The other one is the impact on the u. K. Economy. A lot of people are calling for price declinin the event of brexit. The challenger banks have done a lot of Real Estate Lending and they could suffer. Francine talk to me about standard chargers. I brexit were to happen imagine they would be largely unscathed and lest they get part of the selloff we see in u. K. Banks. Michael they seem to be the least impacted and that is why bernstein came out and said as a hedge against brexit you can go long Standard Charter or short to play the differential. Tom i want to make clear we are very balanced thats at torveillance. We are forced have you on from duke. Bring up the chart of european banks. I did not realize how miserable this chart was. Michael moore, the market is voting. At what point do the banks start sweating over low equity valuations, whether they are Deutsche Bank or unicredit or some bank i do not know in poland . Michael i think they are already sweating. They are coming out and trying to push through the costcutting, talking about one or two years down the line with they are going to look like. Think theire, i market value is the same as it was in 1996 before they had internet banking. It is pretty dramatic some of the declines we have seen. Tom what do the regulators say about that . A given bank within the euro stoxx 600, how does their regulatory body respond to a stock chart going off a cliff . Is why youthink that are starting to hear a little bit more chatter about the capital rules not going further than they have been. There is talk of finetuning the requirements and that has led to some fears from the bank that there will be Additional Capital requirements, and you are starting to see people in europe say, we cannot have that because the banks are already capitalizing. Tom as a general gas, this would not happen in the as a general guess, this would not happen in the united states. The fed and other regulatory bodies would be more vocal than i believe what i perceive in europe. Francine if you go back to the regulatory hurdles and the fact that u. S. Banks were put in order a lot quicker, we are lagging behind by five or six years. Banks,u look at european how much does it form the stock price . How much does that have to do with negative rates and how much to do with investor angst . Credit suisse, ubs, Deutsche Bank, we do not know what these banks will look like because they are downsizing so much. Michael that is part of toms point of the fed stepping in. Because it has been a slow bleed , over the course of the fullyear slowly declining, i think that is part of it. I think it is a combination of the risk off feeling, the questions about the individual banks and their stories, and the outlook whether it is because of rates or because of the trading environment. The outlook for revenue keeps declining. Francine we have heard about job losses at banks and also murmurs of banks being moved to cheaper places in europe. How does that play with brexit, do we know that will happen or is it speculation . Michael while a lot of banks are forming their contingency plans for brexit they are looking at the cost base and where they could potentially move people. If you are looking at ireland, we may have move some people to dublin. Even if brexit does not happen, could we move some people as a cost reason . You have seen that over the past couple of years. There is a chance whether brexit happens or not that could accelerate. Michael moore with Bloomberg News watching the Financial System of europe. It is a fed day data check. 1 00 p. M. This afternoon, we will get more action in the 2 00 hour. Yield 158 21 63. Dollar is weak or this morning. Stay with us from london and new york. Tom good morning, everyone. Francine lacqua in london, tom keene in new york. And especially rich day for opinion today. Christopher maams and martin wolf i thought was really quite different an exceptional in the financial times. He was scathing about those that with mike brexit to leave. Like brexit to leave. Nejra three private equity groups are into the final round of editing for yahoo . According to people familiar the they finalists are are joined by at t, verizon, and dan gilbert. Bidseds range up to 16 range up to 6 billion. Vws ceo is trying to bring europes largest carmaker out of the emissions cheating scandal. Among the assets that could be sold, the motorcycle brand ducati. Disneys new resort says construction has begun to make attractions in the shanghai park bigger. It cost 5. 5 billion and is disneys largest Business Investment ever. Francine this is what were watching for the rest of the week. Today the fomc will release its Rate Decision at 2 00 p. M. New york time followed by a News Conference from chair janet yellen. We get decisions from the bank of england, bank of japan, and Swiss National bank. On friday, mario draghi speaks in munich at 11 00 eastern time. Talked a little bit about the risks, about brexit, the u. S. Election, how the Swiss National bank has maybe the toughest job in trying to protect itself. I brought in a yen chart. This is the forecast. We do not believe the forecast anymore. It is the other way. As more risk comes on the table, what can governor kuroda due to start stop this . Simon clearly there was a huge amount of criticism. A question mark over whether negative deposit rates work. You have seen more increased volatility, not necessarily currency weakness. Francine i was always told if you structure it right like they did in japan, they should limit the so how much a psychological . Simon it is about not passing it on to retail because that politically is so sensitive. It is highly sensitive on the global stage. I think you have to come back to qe. The problem with qe is they are already so into the jgb mark you start to get questions of liquidity. Topic come back to this time and time again, helicopter money. I believe mr. Kuroda said it would not be allowable but maybe there is a way we could change their initiative of the jgb or hold them to maturity. The question is, can they do something more extreme on that particular front . Simon, help me out and help chair yellen out. I know she watches us early in the morning. Are we doing something kind of like negative rates . To me it is almost like pretend negative rates because it is not transferring down to the depositor. Simon that sounds fair. I look at the problem the fed has in looking at and they are going to go, and we have this issue that everybody is playing the same game in trying to end up with a more competitive currency. Will come out about Dollar Strength. If it is a race to the bottom. Tom thank you so much, simon derrick. Thenext hour we will drive conversation forward with Jim Osullivan and brian belski. Stay with us. Get ready for the rio Olympic Games by switching to xfinity x1. Show me gymnastics. X1 lets you search by sport, watch nbcs highlights and catch every live event on your tv with nbc sports live extra. Im getting ready. Are you . X1 will change the way you experience nbcuniversals coverage of the rio Olympic Games. Call or go online today to switch to x1. Tom this morning, stability in the markets. This afternoon, a fed meeting and 18 Yellen Press Conference and a key Yellen Press Conference. Leading theis polls. You give pauls, a Bloomberg Politics poll shows clinton up ,nd truck speaking of polls a Bloomberg Politics poll shows clinton up and trump down. This is bloomberg surveillance. Im tom keene. With me, Francine Lacqua. Here. E is everybody in cant today . Why is this chancellor going to chancellor . Former what is it about kent . Kent is in the southeast of england, one of the home counties. This is where the chancellor will get together with the labor former chancellor, talking up the reason why u. K. Should remain in the you. Yuv u. K. Should remain in the eu. Flotilla have you ever heard that word . It is very british. We will get you pictures of that. That is the flotilla, five or six barges going through, shouting probrexit. Get to bloomberg first word news. She is not on a flotilla. Here is nejra cehic. Nejra a new warning from british chancellor of the exchequer George Osborne on the risks of leaving the European Union. He will say in a speech today that leaving brexit that a brexit would be left with higher taxes and cutbacks. Recent polls show the leave faction is ahead. Democrat Hillary Clinton has opened up a doubledigit lead over Republican Donald Trump in the race for the white house. A new Bloomberg Politics National Poll shows clinton leading trump 49 to 37 among likely voters. And 55 of those surveyed said they could never vote for trump. Trump does have an a 20 comes to fighting terrorism by a 50 to 45 margin third voters say he would do a better job. After polls close in washington, d. C. For the last democratic primary, clinton met with bernie sanders. They spoke privately for almost those go hours. Afterwards, they released statements about the dangerous threat trump poses to the nation. A Spokesman Says sanders will not concede before the democratic convention. The Orlando Magic are has Senate Republicans pushing for surveillance power. Ofanding the scope electronic records it could sweep up in a terrorism investigation without a court order. In france, president francois orange it would take a long time to defeat terrorism. He spoke after two Police Officials were stabbed to death by a follower of islamic state. The attacker was later killed in a battle with police. Three suspects are being questioned. Global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus i am nejraworld, cehic. Tom lets get to the data check today. Less fireworks today. Typically on a fed day you see that. Futures rebound. Oil is still sagging. Lets get through this. To 22. Was up it has come in nicely, 19. 92. The curve flattening over the last 18 hours. Francine, what do you have . Francine european stocks are rebounding with the pound. Jenny retreating. There you go. I did it under 10 seconds. Tom you can see the sausage getting made here as i go in to find my bloombergs green. This is a different want to find my bloomberg screen. This is a different one. This is the twoyear, the lollipop chart. Down we go. Here is the disappointment, the latest disappointment that janet yellen is never going to act. I say forever, she is going to do nothing forever. What do you have, francine . Francine i have another lollipop chart. We could call it the panic attack. This was back when, for the first time in recent years, it was 2008 that we actually saw the u. K. Entering a recession. You can see the pound collapse. This is actually how much it costs for people to insure against the fall of the pound because of this referendum. Lets get back to this brexit because i do not want to alienate anyone. I want to talk about the flotilla. These are pictures, the flotilla. There are eight or nine of these boats, led by nigel farage with celebrities,list with no disrespect. They are trying to get people engaged, making sure people turn out. On the left box, we are expecting George Osborne. He warns today about a tax poll. He will be flanked by Alistair Darling. Tom francine, that is not a flotilla. I thought this was a medial g with judy dench and francine this is the u. K. Flotilla. We need to make sure that they the 10s. O back from this is a wide shot. We will see about eight or nine of them. We just need to wait, tom. It is a big operation. Alistair darling may talk about a black hole. A theme for the day, the phrase blackhole. Mr. Osborne and mr. Darling will be speaking together here, driving forward the main topic. Is james oost today sullivan. Jim osullivan, working with carl weinberg, has been absolutely brilliant on a measured view of the American Economy. What be a blackhole what would be a blackhole in the American Economy today . What wont she say . What will she avoid like the plague in that press Conference Today . Abouthe will talk uncertainties and policies not on a preset course. That is one of her expressions one of her favorite expressions these days. You can come up with all kinds of possibilities what could go wrong. Read Larry Summers and you can see possibilities on that. She will stick to the optimistic baseline but with all kinds of caveats and uncertainty and nervousness, so how much conviction is behind that is up for debate. Tom i believe your run rate is a 2. 5 gdp. Is that secular stagnation . Jim i dont think so. I think it is not just how strong growth is or not in terms of a trend. Trend growth is weaker than it used to be. My understanding of secular stagnation, the way it has been described by people like Larry Summers, is that the equilibrium Interest Rates are so low that it is almost impossible for policy to stimulate the economy without causing bubbles. A lot of it comes back to the equilibrium of Interest Rates. Part of thesecular secular stagnation theory. I am skeptical it is negative. I see the Unemployment Rate coming down, thank lending booming. I see pretty accommodative Monetary Policy. Tom let me show you this chart, francine, which we showed earlier. This shows how unusual it is for governor carney, for janet yellen, and for mr. Draghi. The length of the zero bound is extraordinary. Francine and when you speak to Olivier Blanchard, this could last for a very long time. My question is, how should janet yellen view the u. S. Jobs data . Is it a blip, and mistake, or is it something that is more unnerving . Jim i think she dealt with it pretty well in her speech last week, and i would expect something similar today. She did not entirely dismiss it, but she is quite skeptical of the degree of weakness that it implies. I would personally start with jobless claims as a key trendsetter. The chair mentioned that last week when she was providing counterpoints to that data point. She mentioned jobless claims and surveys of consumer opinions of the labor market. She was referring to the jobs market point of the survey. Jobless claims are not signaling any weakness in the labor market. Clearly it is a reason not to go today because there is uncertainty being raised i that number. We will see where we are in july and september. Tom the primary francine the primary reason for not going today is brexit. How many times will she makes will she it mentioned brexit, and how many times will she mentioned china . She is asked, she will acknowledge that that is an excellent an extra source of uncertainty. If other data were supporting them to go today it is moved after the employment report and the manufacturing survey. Hopefully we will have more clarity by the july meeting on that. On the margin, it would have been a reason perhaps to delay. I do not think it would have stopped them. Tom on the margin, the bloomberg poll last night on the politics of this nation, it was really something. Megan murphy will join us in a moment on an important poll showing clinton up and trump down. We will do that in a bit. Later today, 1 00 p. M. , scarlet fu and Michael Mckee have asked me to come aboard. I am thrilled to be there for our fed coverage, 1 00 p. M. With richard clarida. We kick it off with ellen zentner. This is bloomberg surveillance. Live pictures from ashford kent, once again warning about the potential risks of a brexit. The campaign to keep the u. K. In eu is you do not see him on screen, but he is flanked by i guess the opposition, mr. Alistair darling, a former chancellor of the exchequer for the opposing party. It is there a significant that both men will give a speech, one after the other. The main question we have been trying to answer is, where has labor been in all of this . It is significant that Alistair Darling will take it to the , after being opposing on diplomatic stances. Nejra staying with the u. K. , the unappointed rate has unexpectedly dropped to its lowest level in almost 11 years. The british jobless rate fell to 5 in three months but ended in april. Wages grew faster than expected. Stocks are mastic now a threetime loser. For the third time, msci has denied chinese stock entry. Chinese policymakers need to make more improvements to the acceptability of the a share market. It is a blow to resident xi jinpings efforts. A fascinating to is in the saga of Sumner Redstone and his media empire. According to the new york post, his daughter has talked aboutbaba founder jack ma pictures. Jeffrey katzenberg to see if he was interested in running viacom. There is no word yet from anyone involved. That is the Bloomberg Business flash. Tom the Bloomberg Politics poll is always important, with Great Respect for and seltzer for selzer and her ability to get it right. Megan murphy joins us. Congratulations on the impact of your poll. When i look at this, my first question is, did trump go down, or did clinton advance . Which is a . Megan it is both, which is what is so fascinating about this poll. What we saw, that margin really blew off in terms of a 12point gap. What is most fascinating is that we see that hillary supporters are becoming more committed to her, more devoted, more enthusiastic, which has always been the most important thing for her. On the converse, trumps comments about a judge, hispanic heritage of the judge, really hurt him. 55 of people in that poll said they would never vote for him. Tom in your 55 and generally within the poll, what did you learn of independent voters . Megan those people who he may have attracted are actually moving away from him. Anyannot take too much from one poll, especially this far out. But of the people that he needs to swing over to his side, those people are not migrating to him anymore and we will see if the dynamic changes. We were in the field when the tragedy and orlando happened and we got in some questions about who people felt was better positioned if a situation like that happened again. He still has a small lead, but it is not as wide as he would have expected, or as people need to have if he is going to be a credible threat to her in general. Francine when we talk about donald trump trying to unify the party, it is clear that in the you follow the party line and therefore you support the party candidate. Will donald trump go too fark . Are we going to see many more republicans voting for Hillary Clinton . Megan the point we have seen in the past day or so, with republicans and paul ryan continuing to put a stance on muslims entering the united stashed continuing to put a ban on muslims entering the united dream, shows this elusive for the Republican Party remains just that an elusive dream. As we almost limp onto the Cleveland Convention remember, the Republican Party wants to get all its ducks in a row. They would normally he getting behind who is going to be the person they want the next up and comer to have that prime speech in cleveland that sets the tone for the next four years. They do not even have their ducks in a row where the speaker of the house of representatives can get behind their candidate. I think you will continue to see less donald trump regain momentum unless donald trump regains momentum, people would question his candidacy. Francine Hillary Clinton named bill clinton her economic advisor. Will that get her votes . Megan she will use him as best as she can. We will see how much she deploys them on the trail. Tom i have to ask you very quickly here are you working this morning to get yourselves press credentials . Did somebody screw up so that , theuld get the press Washington Post . Megan there is always going to be the risk that when you run a story or something that this is something new we have never seen , where these organizations like the Washington Post are being denied credentials. The issue is that when you are in this sort of norule cycle, you never know tom megan murphy, thank you so much. For joining us this early in the morning when i cannot speak. I cannot speak at 11 00 a. M. Either. Hopefully they will speak tonight. Mark halperin and John Heilemann. You think they could do a fourhour show tonight . I think they could. Maybeall due respect. They will be banned by the truck campaign. By the trump campaign. Francine you can see these are live pictures from ashford kent, where we are now listening to mr. Darling, the former chancellor of the exchequer. He is on the labor side. Just a few minutes ago i guess we were listening to his archrival. They are united on one thing, the fact that they do not believe the u. K. Should remain in the eu. George is saying that a vote to leave could create a fiscal and they are trying to pull at the heartstrings of u. K. Businesses. A lot of things are made in kent. Tom explain this moment for your United Kingdom. John snow and jack lew secretary lew, getting on the stage together. Francine it is significant because we have not seen them on stage actually promoting the same thing, which is they both believe it would be significantly damaging for the u. K. Economy if the referendum next thursday on june 23 were to side for brexit. It is significant because we have seen in the last couple of days, the labour party has come under extreme criticism for not being there, not having the right spokesperson. Where has jeremy corbyn, the leader of this party, been . He has been trying to push forward tony player, now trying to push forward a former chancellor of the exchequer, alastair darling. Tom do you presume we will have more polls on friday and saturday and into the weekends . Francine yes. I spoke to a bookmaker from william hill. Tom why am i not surprised . Francine it is clear that in the last three days there has been a shift in opinion, both the bookmakers and the polls are suggesting that there is a very the leavetiment with campaign. I do not know if it is there is safety in numbers, or the sovereignty immigration issue is pulling at the heartstrings. Tom eurosterling,. 7902. I will call that a churn. Am i right, that in no way are the markets where they were a week ago . They have shifted, right . Francine we have not seen the referendum in this country on this kind of large issue, since 1975. It is difficult to understand and to model what happens. People do rely a lot on the polls. All of next week, tom keene, you will be joining me with Michael Mckee, and we will bring you live coverage of the brexit debate. The referendum reminder on june 23, next thursday. Stick with us for the latest insights on brexit. Francine i am Francine Lacqua in london. Tom keene is in new york. Tom will be joining me for the full referendum that for golf for full coverage of the referendum next week in london. Nejra china has a warning before the u. S. Before today passed meeting between president obama and the dalai lama. The Chinese Foreign ministry told the u. S. Not to support any separatist activities. China says the dalai lama wants to split tibet from the rest of china. The chinese leader has pushed for more tibetan autonomy rather than for complete independence. In florida, a twoyearold boy was attacked by an alligator and dragged underwater at a Disney Resort. 50 Police Officers and two boats are involved in the search. Nato says it is sending a clear message to russia by increasing the number of troops in eastern europe. A Multinational Force of 4000 troops will be deployed in poland and the three baltic nations, all of which border russia. Officials in indonesia do not expect a repeat of the forest fires that led to thick haze over singapore and other parts of Southeast Asia last year, but that may be due to the forecast for better weather. Fire patrols are not considered to have done a lot to stop the fires. Global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus i am nejraworld, cehic. Tom . Tom thank you so much. A blistering headlined by the former chancellor of the exchequer, alexander darling. I do not believe i have ever heard this language from mr. Darling. He is quite a guy, done some things with him over the years. It is really Strong Language campaign peddling fantasy economics, deceit. You are a bull, a resilient bowl. I am taken by the number of doom crew that are out there right now. Not to pick on george soros, someone that you and i respect. But how would you respond to the gloom of the moment . The would say that tis season, the last seven or eight years, to tell a scary story. Fear has been driving Investment Decisions for the better part of a decade, and it is unfortunate because i think that, for all intents and purposes, we have forgotten how to create wealth and invest, and nobody thinks longterm. Now trying to parcel out the market, and the next three or four months will be negative and bumpy. The next six to 12 months will be pretty good, the next few years, very good. But people are just going to focus on the negative headlines. Tom how our institutions responding to bond prices up, yields down, some nations negative . Grower the new yield on . Brian dividend growers are going to be the income sleeve from a longerterm perspective third however, if you take a look at sector performance, it is kind of like two different stories. Energies and Material Energy and materials are everything in between is not doing so well. We are telling two different stories with respect to the equities universe. We believe that cannot continue. As we see growth and earnings and all that stuff improve, we will get back to fundamental investing. Right now it is reactionary investing. Francine reactionary investing that can last for how long . Until some of the risks are off the table . Brexit, u. S. Election, and china getting a handle on their debt . Brian we thought that 20152016 was going to the ape toe of rinse and repeat was going to repeat. Iod of rinse and as we said, we think the market has been in a pretty wide range. We said at the beginning of the hit that the s p would 1800. We did not know it would happen in january, but at the end of the day, we thought this number in terms of our price target was pretty good. Tom i want to go to this chart. This is for both of our guests, and let me start with the patience of economics. This is the equity market. You have three quality stocks that went nowhere for years, and then off the bull market, the blue circle, up we go. Mr. Roberts outperforming mr. , but that patience, Jim Osullivan, is part of what we have to have with janet yellen. How do you describe the patience that economists and the public have to have with our central bank . Are almost seven years into this expansion, and it has been weak in terms of gdp but fairly impressive in terms of the labor market. Inflation is a little too low. My hope is that we can draw it out longer. In terms of tightening, obviously they are looking toward tightening. , they economy proceeds will clearly moved to tightening. Now there is a lot of uncertainty over the next month or two. Tom we have three things going on in brian belskis world. Eachave first of all idiosyncratic story of why these stocks churn for a long time. Then you have an idea of a pop to the right of the screen, which brian belski, because of janet yellen and easy money then you have the fact that they are just developing free cash flow. What is going on to the right of the screen there . Ascribe all of that to janet yellen and ben bernanke . Butn that is part of it, at the end of the day, this is about companies rebuilding their Balance Sheets, driving earnings with their cash flow. There are three separate stories. At the end of the day, these are also three companies that are paying evidence as well. These are big, brandname companies that when mom and pop come back, they will look at them. Tom these stocks were given up for dead in 2007, 2006. Francine and it only takes four or five years to turn something round like this. Is there pressure from giving back dividends, also buying back stock is there a concern that these equities will then go down because at some point we realize they have not invested in real growth Going Forward . Brian we would say the impetus to go back and buy back stock is going to be declining as Interest Rates hopefully slowly go up. The impetus for companies to borrow will slow down. The economy is improving. There is going to be more growth, and ultimately you will see more revenue and Earnings Growth. And multiples as a result will tobably flatten as we start see that type of expansion with respect to growth through investing in the last few years is about looking for stocks with big Balance Sheets and paying dividends, but the next part, we have to prepare for the next part. What is coming next is Earnings Growth and revenue growth. That is why we think Dividend Growth is going to be a part of it. . Rancine jim equity market the goes, it has been interesting in the last couple of weeks there have been some jitters associated with brexit, but you ask the but you reference the unemployment report. It gave the equity market a little bit of a list a little bit of a lift. The hope is that the economy is weakening enough for the fed to start the economy. My question would be, if we start seeing stronger numbers again and said tightening is back on the table given a stronger economy, is that good or bad for the equity market . Brian i would say this. Hedge fundold manager who has not been through a real cycle they want the skittles from the fed. At the end of the day, we think increasing rates would be taking away stimulus as we have tried to normalize. It is not about hiking rates, it is about becoming more normalized and taking the stimulus out of the system. The economy is going up because the economy is going up and things are improving. Stocks are going up for a reason. We have to believe that again. Tom excuse me. Remembers the vikings winning. We are going to come back with brian belski and Jim Osullivan on this fifth day. We will give you a briefing toward the 2 00 hour. Before that, Abby Joseph Cohen of goldman sachs. Looking forward to that. Thatnd brian belski agree equities are a good place to be. Francine this is bloomberg surveillance. Lets get straight to the Bloomberg Business flash with nejra cehic. France, a convicted rogue trader is back in court over his record 5. 5 billion trading loss. The issue at the civil trial, how much does he own his former employer . He says he was not responsible. Report another another report ruled in kerviel s favor. Norwegian air shuttle is expanding flights, linking europe with north america. That market mix up 70 of Virgin Atlantic operations. Rollsroyce has told employees it would be better if the u. K. Stays in the European Union. In a letter, the ceo wrote that staying in the eu is best for workers, customers, and suppliers. Has putthat rollsroyce decisions to invest on hold until the vote. Francine, you have more on brexit . Francine i do. I am trying to see the link between brexit and what it does for the banks. Barclays could feel the most pain. Michael moore covers u. K. Banks for Bloomberg News. Great to have you back on. Opinions differ on who will be hardest hit, whether we will see winners or losers in any event. Talk about barclays. Bernstein makes the point that that they will be hit while their European Focus will be in jeopardy. How much of the operations would they have to move . If you are barclays and some of your competitors are not dealing with this as greatly as you are, do you lose some business in the meantime while you are having more operational questions of moving people and moving activities . Tom looking at the chart on barclays, mr. Stanley call it the diamond era. We roll over. It has not been pretty for any of the european banks, and most certainly for barclays. Michael, what you are good at with your team is the urgency of the ceo debate. What is the urgency right now of staley, cry and, and the others . Michael i think they feel a lot of urgency right now. In early march he laid out his strategy. Since then, he has been kind of defending it here it is strategy is to stick with the investment europe needs. Europe needs an investment in the banking world. A couple have to stick around. He has made his bet on the Investment Bank. There have been a lot of investors who would have rather shrunk the Investment Bank and stuck with that. But he thinks it is going to turn around, and they had a good First Quarter relative to their peers in what was a tough environment, so if he can show a little more progress on that front, he may get some credit for the strategy. The chancellor of the exchequer, the exchequer, the former chancellor, mr. Darling, says absolute madness to take a gamble on brexit. Now a french government spokesman suggests france will do initiatives after the vote here it i do not know why not before. Francine the problem the problem is that this smells of account that has been taken by the wrong foot. The pollsters have been suggesting a brexit win in the last couple of days, so you are seeing the labour party has really been behind putting their in this newss spokesperson, alastair darling, and also George Osborne, trying. O get strong words out there getting back to the banks and the linkage between banks and brexit michael, i guess one of the largest hits away from bank names opinion differs is credit. Difficult to assume that brexit if it were to happen and spending would be hit, banks with the largest credit card exposure in the u. K. Would also be hit . Michael there are a lot of questions about how brexit would affect the u. K. Economy, whether it would come through in spending, in home values, business confidence. Those could affect a different range of banks. Barclays is one of the bigger ones there. Home prices could affect the smaller banks, and you see them down quite a bit in june. Rbs hasy depends on a huge u. K. Presence, but it is largely on the corporate side. Francine michael moore, thank you so much. Michael leads are u. K. Coverage for u. K. Banks. These are live pictures of the flotillas on which nigel farage is on. He has joined a flotilla. You can only see one boat there, but there are at least 10 of them. They are sailing up the thames to take back control of british waters. Tom good morning, everyone. Bloomberg surveillance. A quick currency check, sterling doing a little better today. As osborne and darling speak. Francine coming up shortly is bloomberg. Jon, i know you are looking at brexit, currencies. Focused d meeting really looking forward to the News Conference with janet yellen. Msci snubbing die mastic shares in china once again. Snubbing domestic shares in china once again. Kent andborne goes to says if you do not leave you will get more tax hikes and spending cuts. We will debate. Tom patiently waiting, Jim Osullivan of highfrequency economics, and brian belski. Ing up the chart right now. This is sort of, kind of like what people want to happen. We look at two inflation indicators. The white line is the ending up of the cleveland cpi. Up of theebbing cleveland cpi. , over 2 . Overshoot can the Central Banks succeed at that . Can they jawbone, or through policy, make it to higher inflation . Jim there are a lot of people who say that they should, but that is not their goal. Their goal is to get back to 2. To get there, they may have to shoot a little bit over on the employment goal. 4. 7, nextals show year 4. 6, 4. 5. Just because we have been below for the last couple of years does not mean that we have to offset that. Sandberg, optimism is rising inflation and the economy doing better, brian, optimism is rising inflation and the economy doing better. Day, at the end of the rates go higher and we start to see this blessed rotation out of bonds and equities we have been talking about for several years. At the end of the year, we think it is growth. I think it would be very positive in general. Francine jim, how much does the fed need to look at what is happening in japan . To thelk about a race bottom when it comes to currencies. If the boj goes into further negative territory or helicopter money, what does the fed do . Jim ultimately, they had to look at the impact on u. S. Financial conditions. To the extent that the dollar goes up or down or u. S. Equity markets go up or down, certainly they have to take that into account in terms of their setting of financial conditions through the funds rate. Japan is one part of the global economy. We have a lot of focus on europe right now and china, but at the end of the day, the stronger the dollar is, the less reason there is for the fed to tighten. I do not think japan of itself is going to dominate the direction of the fed. Francine what are the chances of a dollar rally for here, as soon as janet yellen hikes . Brian i would say the majority of the dollars move historically has come before the fed starts to raise rates. Too many people are focused on the fact that the dollar is going to go up if trade goes up. The dollar may go up if the economy continues to improve, but i think the Dollar Strength will continue. It is not hinged on if the fed raises rates. Tom in this most unloved bull market, Corporate Officers have been detached from the debate. Our Corporate Officers detached from brexit are the Corporate Officers detached from brexit . Brian here in america, probably a little bit more. They are more focused on what the fed is going to say today and what the fed is going to do in july, but at the end of the day, it is the tail wagging the dog. Corporate america, their job is for the stock price to go up. They have been hoarding cash and becoming more conservative. Now they need to grow. Tom they have been hoarding cash and so have the banks. Where are we on loan demand right now . Bank growth has been expanding at 8 per year. Growth, Domestic Credit Bank lending growth itself is 8 right now. Tom then why am i so miserable . Jim Consumer Confidence numbers in general have moved back to respectable levels. , but not, boom boom clearly it has come a long way from a couple of years ago. It is consistent with the Unemployment Rate going down, and obviously wage growth the Unemployment Rate has had slack and productivity has been weak. Of i would love to get both you on again. This has been great, with equity markets and economics. Jim osullivan and brian belski as well. Francine, i look at what we have going here with osborne and darling speaking, with those blistering headlines. I guess they speak. What do you expect to see from brexit today . Francine we have eight more days of this. I think it will be more vicious attacks on either side. It is going to be personal. They have eight days to sway voters. It might get even uglier. So francine, thank you much. Our fed coverage begins this afternoon at 1 00 p. M. Theres zero chance of the Federal Reserve hikes today. The polls turn against the remaining campaign, leaving the e. U. Would mean more austerity. And third time unlucky as domestic equities are denied. Benchmark indexes once again. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Isit ncicap. Org] a very warm welcome to bloomberg go. A big 24 hours off the Central Banks around the world starting with number one yellen this afternoon. What will her tone be when it comes to the u. S. Economy. I sat down with an interview with bill clinton and what he would do to get the economy going again. And were going to hear from venture