Transcripts For BLOOMBERG Countdown 20160712

Welcome. I am in and words. A new record. It took a long slog. The s p is what i am talking about, and not. Two major corrections. The longest stretch. The priceve got is earnings ratio. With trading up 20. Over the past 50 years, we are now above the average. The average over the past 50 and bp basis, around 16. 5. We are trading way above that. S p 500 has cited above its 2007 pecan the last rallies since this was 1946, 13 . That comes down to whether or not you believe the fed is going to hold back. Little like goldilocks. Absolutely. Anna the stimulus bets coming in from other parts of the world sounds a little bit goldilocks. The risk rate on overnight. The topics are in here and that is where the best games are coming from. A Strong Equity picture from japan. They have been saying about fiscal stimulus. 103 spot 06. Currency spending. Fiscal stimulus story crucial. What we have seen in some of the u. K. Political scene. 1. 3066. D, that is what closing the political vacuum tentatively looks like in the short term. Anna that is where it is at the moment. Who knows where it is at the end of the day. Nearly two months later, nickel leading. About 12,000 in six months. The first word. The International Money tree fund a urging china to deal with corporate debt. Isaging your says the issue manageable if the Government Works quickly. A former bank of Japan Executive director or says the boj needs to reduce its record debt purchases because it is approaching the limits of the bond market. They say the central bank is aware and should start reducing the price of bonded buying in the near future. Ubs Investment Bank workforce is the right size after thousands of job cuts in recent years. President. Vision he spoke exclusively to bloombergs erik schatzker. At this point in time, i think that to we are exactly where we should be to face the environment we have. ,o face the regulation we have to face the force we have. At this point in time, our challenge is to execute correctly what we have in front of us and i think the firm is very much focused on doing so. In Anna Christopher bailey is to end his role. He says despite the results not being what he had hoped for, the company will move on in the weaker pound might even be useful. It is certainly not a decision i wanted or believed in. Up it is what it is a end am always a Glass Half Full and we now need to move on. Done business globally. We trade all around the world. In, any trading agreement as something we will always work with no matter, you know, where, you know, what happens in the process. 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. david has the details for us. Once again, japan. David . David it is all about japan. That is where the market story is today. Were still talking about expectations. Maybe coming out with the next spending program. We do not know how large it will be. He does not know how big it will be but in any case i think the latest here is that a lot of these cabinet ministers have said they are there to start considering how to fund that when they get the details. Standing by for that one. Up one thousand points. In fact, north of that. That from friday, so talk about great expectations. The dollar yen continues to go up. Setting ourselves up for disappointment . That said, asia is looking solid. It is another good handover were giving you. Have a look at what is happening across asia. Emerging asia, another story. Money flowing into southeast asia, india entered able market yesterday. 13mud pies for the philippines and indonesia. Pressure from oil prices. The thank you. David is an hong kong. Davida may will succeed cameron as the uk Prime Minister tomorrow. The home secretarys only challenger for the top job dropped out of the contest yesterday. During this campaign, my case has been based on three things. The need for strong, proven leadership. To steer us through a uncertain political times. The need to negotiate the best deal for written in leaving the eu and forge a new role for ourselves. We aremeans brexit and going to make a success of it. It meanwhile, mark carney will appear before the u. S. Treasury tomorrow. Cut the first rate cut since 2009 is on the table. Minutes from the policy committee june to the eight. You can watch a mark carneys testimony live on bloomberg from 10 00 a. M. U. K. Time. Folio the head of asset solutions. Larry, thank you for joining us. It was your thoughts on the filling of the political vacuum n the u. K. Does this change everything more press pause . Is still pretty big figures below where it was on the eve of the boat. So it is higher than a few days ago and yes it is good to get the Political Uncertainty in one dimension over. The Prime Minister will be out of the way and there will be followthrough as she names the cabin and and proceeds. Brexit may mean brexit but that also means a great deal of challenge, uncertainty, and the pause on inward investment which is the fundamental source of pound weakness is unlikely to be reversed very soon. This point make about this. Up in certainty were about to go through and for you, politics will jump trump. Have a look at this. The market is already building up short positions again in sterling. What carneys trump potentially does . I think the large underway positions in sterling have to be to some extent scaled back. I can see a bit of a followthrough here but when we come to thursdays decision it is pretty clear right now from the anecdotal evidence and the first read that evidence does matter on the economy. It was slow going into the brexit vote. The probable thing is the bank will act. Whether it chooses to do so thursday or not is a closer call somebeen suggested by easing is required. Some point, some easing in the fiscal policy. Expecting action in august when they get the new inflation report. On the point about slowing inward investments, how convinced are you were thing that already is that something still to come. I asked the question because yesterday someone said the investors have been putting money out of the real estate fund, one of which is managing the overall in charge of, that is not the International Investors brings bit and getting out of the u. K. Asked the, he says that is retail and they said National Investors are queuing up to buy property. Larry for sure. In some cases, the market might on thestorted and flat basis of price action when seen, but the reality is is the nword and investment story must be what is driving the pound lower and that is not so much about pulling money out. A deficit which requires financing and steady inflows. These slowing of those inflows, not reversals, not capital outflows or flight, but these slowing in my opinion counts for the 20 bigfigure drop in the pound against the dollar and a fairly large move against other currencies as well. Manus one argument would be the control under the property or the ftse 100. For thehe volatility midcaps. In the u. K. Midcap versus 5100 and we have this sort of exponential spike it is at an alltime high relative to the large cap. Does i continue . Do we find the base levels . Does the 130 band with these support level or under the midcaps to a certain extent or is it just a largecap story. It is mostly a large cap story. I would argue it will not make that much different for export. Currencies of depreciated and exports have remained lackluster. It does not build out additional capacity when firms gain that competitiveness so it is second round affects and the economy is right. The midcap spike in volatility had to do with tremendous selling and luke biddy pressure in the markets of the seven bated now but i think it will come back and it will take longer for the stocks to recover. At hathaway. Thank you. In leslie and one hours time, they eu Prime Minister will brussels. Governor mark carney is due to testify to the u. K. Parliament treasury committee. Just two days of course before his first postbrexit policy initiative. International court is due to rule on the challenge brought to the philippines on the claim to more than 80 of this side of the china sees. Can sheet negotiate a clean brexit . This is bloomberg. Manus welcome back. Business flash. At maine is, first career lands to release fanfares of models made by volkswagen and audi. That is due to an investigation widening. July 22. A banker has revealed it is in talks to buy almost 2 million in property from blackstone. The investor says it will put in around 582 million with other partners. Thenot identify them company will split into by the end of the year. That is bloombergs business flash. Anna . And eu finance ministers meeting for the First Time Since the brexit vote. Become the said to uks next Prime Minister said they now know who they will deal leaves they prepare to the European Union. Ryan is there. Good morning. What are we expecting today . Ryan look, i am sure we are going to get more discussion of brexit. It was interesting yesterday, they were supposed to talk about brexit into it was on the agenda. But they intended to talk about how is going to affect their in economies, the European Commission came out and said they thought it could cost as much as one half of 1 to the eurozone economies. It could cost the british economy as much as 2 in 2017, but nobody was anticipating they were actually going to know they were dealing with as they went into the future of the underscore Prime Minister when they went into yesterdays meeting. Yet, they all had the news and seemed to be briefed about it and when it to be talk about it. Sit andooner we can sort this out diplomatically, the better. The position of the commission is the same as the position of the council which remains unchanged. It is that we should open the negotiations as far in this quickly as possible because we need to have limits on the uncertainty which is not good for the economy. The first major step we are taking. Least now we know the very thats a very shortly there will be a government in the u. K. Hand we can talk to them about the u. K. Endncerning that northern ireland. Anchor just because a timeline has been moved up by two monster is not mean theresa may would be sitting down here anytime soon because she wants to have preliminary talks with the eu and they said she has to invoke article 50 and she said she may wait until next year to do that. It gives them something to talk to with large osborne today and i am sure they will want to ask him about that. Suppose we will find out more over the next 48 hours. Sanctions. About the potentially for spain in and portugal. Ryan, where are we in terms of i suppose levying punishment on those two countries . So, i think we can expect punishment. Maybe not today, what they are going to do is recommend that spain and portugal be punished. That goes back to the commission and then the commission has to decide what the punishment is. But the feeling seems to be, yes we have to punish some because we just came up with these deficit roles and if we do not punish them what was the point of coming up the rules . At the same time, they dont want to punish because they do not want to encourage the antiestablishment parties and they want the union itself to be popular. So, the formula seems to be, yes we will sanction but no, we will not find. In other words, a slap on the wrist. Anna metaphorically. Is the italian Banking System on the agenda . It is an area of concern for many investors. Ryan it no. In fact that was the first question i asked when i spoke with the Prime Minister and he was emphatic it was never on the agenda, it will not read, it wont be today. He was quite annoyed. He said every media outlet in the world seems were going to talk about italian banks and we are not. So, quite clearly all that movement was on the italian Banking Sector yesterday on the market, with the italian finance minister and other finance ministers for that minute wanted to say yesterday was dont expect any deliverables or results when it comes to the italian Banking Sector at this meeting. Dummy row road, perhaps, but not here. Manus thank you. Larry hathaway is still here. He is the head of multiasset portfolio solutions. Should we be more worried . We have a host of things to talk about but should they be more worried about a tyra banks . The imf this morning saying they are concerned about urgent action in terms of bailing. Not just a blind run 80 percent. Just stabilizing around 18 percent. There is a huge weight of bad debt. Larry if we think about brexit and sanctions against digital in spain and think about the italian banks, by the way not just a tyra banks, others as well, i far and away the biggest challenge is the Banking Sector. Indeed, if they do not fix the next six months that will be the biggest challenge thereafter. Thorny really a big issue in the sense it will not go away. Too many bad debts and too little capital to support the sector and yet the resolution mechanism, they Banking Union couldadopted by the eu, potentially be destabilizing for italy politically but potentially destabilizing for the Banking Sector in being economies and the rest of europe including france and germany and being able to resolve this banks without creating those sorts of destabilizing issues is, it seems to me, paramount for the eu to address and i am shocked they are not addressing it. Anna you were shaking your head and a number of things being discussed and brussels. Why would this be destabilizing to other countries because some of the countries we have had around the banking sect there in italy has been around the sort of selfcontained nature of italian finance and it doesnt necessarily spell out to the rest of the eurozone as other crises may have done. Larry look at Deutsche Bank on this as an example. Which is to say if you go through a resolution youll have to have some bailand from editors. In italy the problem is those creditors tend to be retail and and hence the political challenge. Europe is trying to engineer a Stable Recovery which requires credit formation. The last thing it needs is an adverse shock of uncertainty in particularly impairments to the credit story. It is round that they need to address this issue in a much more pragmatic way into the roles they have adopted it will be roles in this situation . Larry unfortunately not. The eu itself is a rolesbased institution and the lead voice on these issues, germany, is a very much rolesbased approach to things. This is where the rubber meets the road and it is grossly underestimated in many respects. Euphoric that brexit has been pushing the side, the japan will stimulate the World Economy and it is all rosy for major equities. If use of thist of the s p at a new record high. Story and bnp context, this is a bond issued in 2008. Trading at . 49. 10 billion euros worth of bonds to reach the mom and pop bond. 180 billion. A cannot they cannot. Cant. Larry that is the case that shows his party trailing the fivestar movement. Of course, given the importance of the referendum, because additional referendum for october, about a different issue but nevertheless could be portrayed within italy as a policy. Um on anna larry, thank you. Still to come on countdown, airbus plans multibillion orders. Will there be more ready for takeoff . Stay tuned. Were at the air show next. This is bloomberg. 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. Manus it is 6 30 a. M. In london, 7 30 a. M. And paris. Main dig into some of the stories making todays edition. Who is this man . Anna carney. Do i get a prize . Manus i dont know if he is going to get a prize from the select committee. Anna in connection with the june 28 financial policy meeting where they announced the takeup of their liquidity or relations. This will be the first time he is said to come facetoface with law markers. Lawmakers. Runup to the referendum. It will be interesting to see the dynamics. As many people pointed out yesterday, a lot of the leaders have been quick to praise mark carney as being the Stable Institution at a time of crisis. Manus the other thing will be the focus on teresa may. 48 hours to go. You will be in the cabinet . George osborne setting out in a twoweek trip. Will he still be in the post . There was a great article talking about is theresa may challenging Margaret Thatcher . The odds are, probably not. She is talking about workers being on board. She is talking away from tax cuts being the only answer. 15 beingvocating what he might look for. Is that what theresa may will go for in terms of the vocabulary she used . To me it was a little bit more inclusive. A number of commentators pointing out a number of thing she talked about is quite similar to what ed miliband to the about in 2010 elections. Also the oil market. The first feature trading more than five dollars a barrel. Forw contracts for delivery the first time a year. The price gap has doubled in month, the recovery will be messy. Another of the stories that daybreak is picking up. Manus the price today is much less than in a years time and that says, look, it over saturated, overcapacity. Is 51 in top of this market benchmark their short daybreak. And the yen gains after aend weekend fresh round of stimulus. Good morning. Good morning, manus and anna. The s p closed at a record high for the first time in more than a year yesterday. The ftse 100 entering a will market. Asian shares of crime to levels last seen in april. Looking at the index, up 1. 2 at the moment. Japanese shares driving those gains in asia. Headed for their steep twoday climb since february. Announcing that fresh round of stimulus. Take a look at what is happening with the yen as well. One of three spot 08 on dollar yen at the moment after it had octoberest loss since 2014. Very much risk on today. Partly to do with stimulus out of japan. Partly to do with strong u. S. Momentum. Are lead do with some certainty forhe u. K. And sterling up a third day with u. K. Getting closer to having a Prime Minister of course in the fold of secretary theresa may. 176 on sterling right now. One it to show you crude oil. Brent over two days. Oil has halted that drop near a twomonth low. This is ahead of data forecast to show that u. S. Inventory fell for nathan week so we are at wti and juston about 46 a barrel on brent. Manus it is day two of the air show. One of the biggest events of the year for the industry. Course to dominate conversations. Guy johnson is on the ground. He spoke to the qatar. Heres what he had to say about the impact of brexit on his business. Other than the Foreign Exchange of peoples due to this brexit, we are not affected. We still have the numbers. We still have passengers traveling in and out of europe. As a matter fact, more and more people are flowing into the u. K. Because of the lower pound. Anna talking about brexit. Ities around die joins us on the ground. Are other voices talking about opportunities variant tuned with treason may who is called on everyone to look on the bright side, to paraphrase. Terrible sensea of relief at the show yesterday when it was confirmed theresa may was likely to become the next Prime Minister. I think people were concerned about the insecurity of a couple of months of and inventory fight to see who would be the next pm. A probable sense of relief. Thes trying to look at bright side but interestingly, here is a bit of the hole. Just over a 15 stake in iag, the owner of British Airways and iberia. We have had a story of bloomberg talking about the idea he may be looking to raise that stake up to around 20 . Now, i ask you about this. This is what he had to say. Are 15. 24moment we and we went to stay at that level. We are longterm investment so thise confident that relationship between us and iag will continue growing and we will keep on an offending from each others purchasing power. This was ad him if brexit affect. There is considerable concern that the north atlantic routes will slow down as a result of the uncertainty surrounding brexit. He was very clear in dismissing that but i think a lot of people will be looking at the story and thinking maybe it is wise to bite his time and see what happens. But given the Foreign Exchange story he mentioned in the first sound by talking about sterling lower, maybe there is an opportunity. He does not feel comfortable thisg that decision at stage. Manus i need to know what happened yesterday. We have gone from a very summary guy johnson to a very dark, sober, navy blue. What is the tone from yesterday until today . Guy that jacket is drying out, maine is. At around 1 00 yesterday the cameramanened and my paid to show the carport behind the stand. There was a river running through it. They ended up having to shut the our office so the entire site was evacuated. So basically, it was a boat show yesterday. Everyone went home early except around and managed to get our cars out. That is a nice way of putting it, maine is. Back to you. Manus i want the creamcolored jacket back. That is what i want. Anna we talked about floating, and in a we . Brexit. Went into the vote with little momentum and offinspiring race. The lobby group says businesses eud clear leadership on negotiation. Joining us, acting director at multiassetd of portfolios and adam, great to have you on the program as always. Obviously your report is necessarily a little backwardlooking but makes the broadpoint i suppose that things did not look brilliant going into the referendum for the u. K. Economy, at least the momentum was not great. To go back to that segment where we said the economy was in a Holding Pattern during the time right before the referendum, what you saw was growth flacking for lots and lots of firms in both service and manufacturing set her. Seeing that slackening since 2014, this is a twoyear pattern. The economy was already slowing down. Was alreadyiment slowing down well before the referendum. You andt them, what do they know about this. Three some may. Theresa may. 126 people want to know more about the prospective head of the United Kingdom in terms of her background. What do you know about her . Is she the woman to lead brexit . What does brexit mean for the bbc . Stability, clarity, and action. Whoevers going to be prime , you need stability on the market. Clarity over the timetable. And, action on those things within westminsters sphere. What we really want is to get on with governing. Many things the u. K. Government can and must get on with to promote Business Confidence and lucas in addition to negotiating. Anna some commenters have suggested that when she talked about getting employees on board, limiting executive pay, taking action against predatory takeovers, some commentators like 2010 thised is just a start with theresa may, but what does that sound like to the Business Community . I represent,sses some of those measures will be attractive. Particularly the ones on corporate takeovers and applying stricter competition tests to make sure they deliver real economic value to the United Kingdom. They have been questions in the past. Doesnt mean the corporate takeover and m a should not happen, but they need more scrutiny. When it comes to theresa mays other proposals, i do not think they would want to see extension Government Intervention and pay ratios but that is in matter for boards and shareholders. If they want to strengthen that, that is a different story. Manus from a political point of view, there is a operable sigh of relief you say. There is a global businesses. Showcasing their wares. From a global perspective, does he u. K. Just turn itself into the bahamas . Do we just turn ourselves into a tax haven of anonymous kind of thing . Went down defenses. Get Onward Investment going. I do not think theresa may is a woman to do that. X i do not think she has expressed a preference. Probables to be the outgoing chance then perhaps a probable incoming Prime Ministers preference. Deficit ahead. That was initially planned for the end of this parliament in 2020, now it does not look like that will happen. You cannot really be aggressive on tax reduction if you have Debt Reduction at the top of your agenda. They have to raise productivity, not just about tax cuts but also public investment. Infrastructure is something this country needs to focus on and that means some tradeoffs between new expenditures and the potential attacks cuts. So the picture will be much more nuanced. Aboutshe is talked infrastructure. I know you have been lobbying for some clarity about the liver. Of eu to the theresa may was one of the contenders in the leadership battle who would not commit to allow them to stay. The reason, a logical one, is you need to have reciprocity from the rest of the eu on the state of the u. K. Nationals iving outside of the u. K. But what are your thoughts on theresa may . Many of them make a contribution to the businesses i represent. They need to know those people making a contribution do not have uncertainty hanging over their lives. It is fair and right. We would like to see a swift confirmation those people will be able to stay longterm regardless of the outcome of negotiations because we need their skills to propel the productivity improvements larry is talking about in addition to the skulls of the u. K. Nationals. When it comes to infrastructure versus tax cuts, we are very clear as to where we would sit as a Business Community. The infrastructure is much more part. Corporation tax cuts, most of my businesses are looking for that. They say it is the cost of doing business first place. Hiring people, energy, and so on me more than paying tax on profits. Manus will talk about the japanese in a moment. ¥10 billion. I have heard different figures. What would drive, what would compensate that shock to gdp . What do we need . Think it is something that is probably an ongoing exercise rather than a oneup. It is not just building a highspeed rail and being done with them. It has to do with education and moving the u. K. Forward in the newly digitalized world. Others brickandmortar, things also. It is continuous. Anna any preference for chancellor if George Osborne wont keep the job . I dont care her it is, i want them to invest. I can start with digital. Move onto to energy and transport. Anna thank you, Adam Marshall acting general at the British Chamber of commerce. Manus of next, former bank of japan directors as the central bank will need to slow down its bond buying program. That is next. This is bloomberg. Anna perhaps still in shock over the strong gains at yesterday. Vista for bailey, his role of ceo. Industry veteran. Meanwhile, he says despite brexit results not being what hopedfor, the company will move on into the weaker pound might be held. Manus he spoke with bloombergs francine look why and an exclusive interview. It is certainly not a decision i wanted or believed in but it is what it is a end am always a Glass Half Full and we now need to move on. It was done, the referendum was the in the right way and decision was made. Now we need to find the right path to what brexit might mean. The important thing is getting stability and clarity on the future that affects peoples everyday lives and businesses. Francine youre probably the sot famous british expert, he will compound helps . It helps in certain ways. We have always done business globally. We trade all around the world. Any trading agreement is something we will always work with no matter, you know, where, you know, what happens throughout this process. Francine this is the first time people will be able to look at the catwalk and buy directly from the runway. The september show is a change in the way we are treating and thinking about the show. Historically, the shows have been very much and insider event media in ofd the course, all of our buyers. The way we flipped it is we have been doing very intimate, private previews with our buyers and with some of the press. And in september, it will be much more customerfocused and we will be able to you will be able to buy the collection immediately as soon as we do that show but i am very excited and going back to our earlier conversation, change is good. It is interesting. On founder was sitting there his knife, which in latin means to move forward in and i have always been a big believer in moving forward and excited both on in executive level and otherwise. Anna christopher at burberry there. Need to reduce the base of their record effort as it approaches the limits of the bond market. The central bank is aware of this and based on common sense should start reducing the pace of bond buying in the future. The governor has said he will expand stimulus if it is needed to reach the 2 inflation target. Arry hathaway is with us the end is coming. The end of quantitative easing is running. Bonds toruns out of buy eventually. I think that comment slightly misses the point. Of course they are buying a great number of bonds and they cannot forever increase that amount. However, the government can. It is clear the government will pursue further fiscal stimulus and while those bonds will be sold in the primary market to investors, they will be scooped up by the bank of japan in the secondary market. There will be no impact on the gop due to fiscal stimulus. Industry the bank of japan has reached the limits on a even unconventional Monetary Policy. Further deep cuts in the negative Interest Rates are untenable in japan and further, outright purchases of assets bring very little as they know. What is happening is a shift toward fiscal policy. By the way, we see that in the United Kingdom as well. Physical policy will be more expansionary. Perhaps europe will lag, but we will not expect if early from a germanled europe that they would use a different policy. This might play a fairly interesting role in bond markets. If we are going to see an expectation Monetary Policy can no longer provide unlimited purchases or Interest Rates, does it begin to signal the end rallyt now multidecade in government bonds because without central tank further support, you could begin to argue the bottom is not far away. My suspicion is that is in fact the case. To us abouttalk your Investment Strategy of that is the case. What is the time horizon on that kind of fall . People been saying for many years this cannot go any further. Yields cannot continue to keep going lower. You seem to be suggesting we will see that turning point. In a number of markets. U. S. 10year with treasuries. Were playing it from the short side. We do not like duration fixed income in the run bonds and that is kind of because it was over q1 andleration evidence by the most recent survey data but it is probably around the idea some of these changes in global monetary conditions probably reached their peak. Idea that the bank of england was having strong easing following brexits may be slightly overdone. Brexit may not prove to be the big calamity like some such as the imf that it would be fulls would be. Brexit was a big negative shock. The ecb may have to start thinking about when it will end quantitative easing. The paper tantrum took place against simply stopping purchases, not the Monetary Policy so i think in some sense bond that yields are too low and should move higher and that is how we are position. Manus you a masonic a man who was convinced that of that was the scenario and physical liftoff, the ineptitude of Monetary Policy, whered we go than with the fed . Is that sounds as if it could be a fed more in place than the bond market anticipating. We are not anticipating major hikes in the u. S. Until 2017 or 2018. That last point is the relative one. It seems to be against economic data, notwithstanding certain around the exit that the market is underestimating when normalization will return in the united states. I think it is entirely possible the fed will lift rates by the end of this year which is the far cry from the forward curve. The repricing of the possibility whether it helps or not, just moving the probabilities back towards that becoming a realistic policy will become enough to push up Interest Rates, probably more the frontend of the curve. Towards the twoyear note or maybe at the backend the distal surprised by these global monetary conditions but nevertheless the path of least resistance is for somewhat higher rates not a further rally of the bond market weve seen over the last six weeks or so will some anna to think the bond market will come with you, larry . What easy for capitalists down the road to catch up with your view . As someone who would expect that and would, as it were, be the beneficiary, you would want the market to move with you but beyond that trivial comment comment seems to me what will drive this process is a story of improved u. S. Economic performance recognized be the Federal Reserve upcoming statements around the next meeting. Less of the risks we are already seeing manifest in markets around Political Uncertainty in the u. K. Or japan and what is also important is china does not represent the next source of instability. Anna thank you for joining us. Manus athaway will stop up next, when it rains it literally pours. The s p 500 hits an alltime. Igh after a 285 day the city that never sleeps. All of that to come. This is a bloomberg. Manus brexit means of brexit. May plans to leave europe out of the year thats out of your union. Who will be the next chancellor. Mark carney will address the u. S. Treasury committee two days before his first post rent desk post referendum post referendum. Tells bloomberg that his workforce is now the right size. Thousands of job cuts. At this point, we are at exactly where we should be to fix the environment. To fix the regulation that we have. Manus good morning. Welcome to countdown. Anna i am anna edwards. And 00 if youre watching in germany. That is where we go in terms of this data because of the inflation data out of germany. It is in line with expectations. 0. 1 . I month on month, that is exactly what the survey expected it would be. Cpi dear on year up by 0. 3 . Germany not the weakest link in the eurozone chain. Any type ofon reader cross will look like. We have a soft numbers. Manus people have been shopping online. Retail sales up 30 . A rise of 23 it when it comes to breaking down how they are 33 . , u. S. Sales up by here in the u k, now this is interesting because we saw the position of the u. K. Going into brexit, things were not great. Our retail sales up 28 . That is not a huge of performance. Europe ared bolstering this story at a sauce at asos. Line in termstop of the margin sales group for this year will be at the upper end. 25 . O anna let all of these things together with what we found from the u. S. The strong session we have seen in japan because of the weakness in the yen. Where does that leave us. Mental we made new records in the u. S. We waited a long time, 13 months. We are seeing a little bit of a reprieve. Larry hatheway has been with us. There has been in a few submits in the markets. A little bit skeptical of the ability of these markets to go higher. Monetary policy is at the end of its rope versus the probability of fiscal policy. Whatever word you want to use, he sees that Monetary Policy possibly is running to its end. Overpriced into these markets. Anna he is questioning the multiyear bond market. We should throughout the risk radar. Assess and the Asian Session will give you a clue as this has been a riskon session. If the japanese markets leading up by 2. 4 . A lot of focus on what abe has been saying in terms of fiscal theulus in the way that more risk on attitude in the market wrket has weakened the yd we can see that, down by. 2 , a move of. 2 . The move has been for the weakness in the japanese currency, a typical safe haven. 1. 30. Und in there at that is the shortterm story at least in the u. K. Nymex at 44. 84. Manus the bond markets virtually unchanged. 0. 2 . D reading was bond yields in germany rising. 16 . View is it is going to be the shorter end of the. A precipitous drop in year in yield. More so to do with the fact again that Monetary Policy perhaps has reached its end. Anna Rosalind Chin joins us. The International Monetary fund is urging corporate debt problems. The risks are cute but the risk is a manageable if they move quickly. They give their Economic Outlook next week. A former agent bank of Japan Executive says the boj left to reduce the pay as it is approaching the limit to the bond market. The central bankers are aware of this and should start reducing the pay in the near future. Expand ifs he will needed to reach his 2 inflation target. You best possible Investment Bank is the right size ubss Investment Bank is the right size. Also spoke with bloombergs erik schatzker. At this point, i think we are to face we should be the environment we have, to face the regulation that we have, to face the forces that we have. Now at this point in time, our challenge is to execute correctly what we have in front of us. I think the firm is very much focused on doing so. The euro group is resisting calls italy wants the European Union to 360 billion euros of nonperforming loans. Resolve byms need to the banks themselves and themselves. The rules are set and it is now in the hands of our supervisors to work with those rules and the opportunities they have defined precise solutions. Any solution for the italian bank needs to be very specific within the framework. Bailey ious crisper barberis Christopher Bailey not touching the one he hoped for. The pound might even be helpful. A is not a position decision that i wanted or believed in. Halffulls a glass and we now need to move on. A weaker pound helps in certain ways. We have always done business globally. We trade all around the world. Any trading agreement will always operate no matter where what happens throughout this. Global news, 24 hours a day, powered by 2600 journalists in more than 120 countries. You can find more stories on the bloomberg at top. Manus lets check in on the markets. David ingles is standing by. The yen has reversed its position. How is it playing for the equity market . David it has. Where looking at 103 for the first we are looking at 103 for the First Time Since brexit. Japan, the main story. At allse, it is a look of the optimism, the expectation that shinzo is going to come out with a huge the latest leg of abenomics. What we know so far is that his cabinet officers were talking his finance minister and economy minister as we said they are prepared to consider funding once they get details. At the moment they have not been ordered just yet, so we are waiting for updates. There is a as the cash markets close, we will be watching. On llar yen. Back to levels prebrexit. That moved the markets on the nikkei 225. Across asia though, we are looking like this. Robust asas yesterday, but we are still looking at gains. Put everything together, very good handoff. Volumes are quite healthy, youre looking at a 3 gain between monday and tuesday. Guy. Anna david ingles in hong kong. Lets bring in Robert Parkes. Reat to see you on the program looking at what we saw on the u. S. Yesterday, very Strong Equity session. That filtering through into the japanese session. How do you feel about equities at the moment . You have renewed confidence in this rally as we fill the political vacuum in the u. K. . Robert we are underwhelmed by the outlook. In particular in europe as well. We see significant asymmetric risk at current levels it received very limited upside in levels. We see very limited upside in the markets. Not ly the markets are that is not in the that is in line with what we expected. We expected a policy driven rally and that is what we have seen. We dont believe that rally is sustainable. Going forward, we see disappointment. That has to do with the disappointment that we see with the outcome of numbers. Manus lets circle back. A lot of sense is being driven on the markets to the states, will they hike . 500 is the s p priceearnings ratio over the past 50 years. We are trading in at about 20 that is above the historical average. Negative growth for six straight , not seen since 1936. When i see data like that, if that is what the u. S. Has got and they have 2 at gdp and have a chance at cracking on a higher rate, what chance do the rest of us has just the rest of us have the rest of us have . Robert we are global strategist that was more to do with the riskoff. It is expected to persist. The s p is expenditures and the earnings has been disappointment. We expect more disappointment from europe. More exposed to political risks. Anna when we look back at what is going to be the Third Quarter we look back and say that took us in a new direction or will he say that is a continuation of buybacks that we have seen previously . Which of those seems that we will be looking for . Robert we expect disappointment. At what is happened over the last five years, consensus always starts at 15 . It ended in flat or negative territory. The outlook for next year is 10 to 15 . We are questioning that. Anna the Eternal Optimist . Robert perhaps. Analyst downgrades we have been stuck in this forever. Ae market is being driven by relating trade stimulated by Monetary Policy. We see the market is suffering from Monetary Policy fatigue. Olympic at that alongside effectiveness evaluations in expensive and fully valued. That puts a lot of emphasis on the driver. For the market to move higher, we need to see the eu story kick into gear and we are questioning that. Manus this is echoing what Larry Hatheway said in the last hour. Perhaps this rally and markets were running to the end of that. What kind of physical drivers are going to drive the equity story higher . This is to suck 600 this is the stoxx 600. Fiscal policy will come in there. Banks are down 31 . Stoxx 0 come out do i position myself for the next wave . Think the manus, we Shopping List should be to answer these two attributes. As you can see, those type of sectors have tended to be the best performers from you today. We expect that to continue. We are very defensively positioned. Where looking for this sectors, yes they want cheap. Where looking at sectors such as health care, food and beverages. Anna pretty defensive stuff. Robert pretty defensive stuff, im afraid we like switzerland im afraid. We like switzerland. It is our top pick in europe. Manus one of the biggest concerns was the strength of the swiss franc. Given where we are, the exporters there, you got health care, luxury, the currency not something which causes you concern . Robert it doesnt cause a concern because we think especially if you look at this in dollar terms. I think that is critical. That is true as well we look at the index like the u. K. The ftse 100 looks ok. When you look at it in dollar terms, it doesnt look so healthy. We believe they are not that pricey. We believe they will deliver that investors are looking for. Anna thank you so much. Robert parkes stays with us. Manus brexit the message from may as she prepared to lead britain out of the European Union. We discussed what is on the talks for the u. K. This is next. This is bloomberg. Manus it is to 19. 2 19. Is cable trades at 13484. Theresa may is going to be driving the bus. She is going to change the gears. David ingles is with us. David thanks manus. Talking about changing gears, the dam a person says it has beaten Market Expectations for a second quarter. The automaker says adjusted earnings up 5. 6 in initial tally. It excludes 900 Million Euros set aside for airbag recalls and legal charges. To revokea plans certification and bad sales of 32 models made by vw and audi. That is as an investigation widens the ministry of the environment says it will be holding a public hearing on the german automakers units on july 22. Theaude yunker 582 milliond along with other he did not identify those it is working with only to say they are not related parties at ikea will recall 1. 7 million over fears of injuries to children. The recalls including drivers including dresses linked to accidents and the u. S. Late last month, ikea announced recalls of 29 million dressers and chess in the u. S. That is your Bloomberg Business flash. Anna. Manus. Anna david ingles with the business flash. Theresa may will succeed david cameron, steering the country out of the European Union. And you secretarys let some dropped out of the contest. During this campaign, my case has been based on the need for steer usadership, through what will be difficult political times. The need to negotiate the best deals for britain and to forge a new road for ourselves in a new world. Brexit means brexit and we are going to make a success of it. Manus mark carney will appear before the u. K. Treasury Committee Later today. It comes days ahead of the first post referendum Rate Decision when the first rate cut since 2009 is on the table. Prior to carneys appearance, the minutes from the policy Committee Meeting that was on june 28. You can watch carney live on a. M. Berg at tenant like slight Robert Parkes is with us at 10 00 a. M. Robert parkes is with us. It is an interesting dichotomy. Weve got carney who said he is ready to do whatever it takes to hold the u. K. Economy together. Theresa may saying brexit means brexit. Rate cut on thursday, what comes next . Do you expect more quantitative easing . What will become demented what will become demented from the new chancellor george is still in the office. Anna he is on tour. Robert we are expecting 25 rate cuts. It would do a lot of good for the economy, i am not so sure. The hangover calls is going to be the week economic numbers we expect to come through. Investors,r equity that uncertainty on the economy combined with the Political Uncertainty we are seeing throughout europe will dominate and drive equity prices lower to the year and. Just to the yearend. To the yearend. Anna doesnt that remain a driver on the u. K. Doesnt that remain a driver on the u. K. . Robert that link is still there. The politics, the uncertainty we are going to see is going to be very high. That is going to create more volatility and markets. What we do expect to come through is the economic numbers are going to start to disappoint. We are seeing signs of that already in terms of some the confidence indicators. And the business side we think on the economic numbers, the risk on the downside. Manus are we going to have a recession . When . Robert we think it is going to be a near miss. Weve that no growth forecasts for the next week. Manus really just plodding along. I brought this up, this is the volatility. V2023. S bt fasten your seatbelts. This is volatility relative to the ftse 100. Mid versus large good that differential between the two versus large. That differential between the two you might consider stepping into ftse 250. Or is that for the moderately insane . Robert we think it is still too dangerous because of the economic uncertainty. We dont know how far the economic numbers are going to fall. We looked at getting involved back into the 250. We could be a long way off where the pace of the false starts to slow. I think in the case of the u. K. Economy, it is looking like stagnation. No growth combined with higher inflation. That is not a good mix. Anna we think of other things you do like in europe. We got a lot of folks on the italian Banking Sector and the problem there. How interested are you in the Banking Sector . Is it another when you stay away from . Robert broadening your question out to financials, clearly over the last few weeks, they have been hard hit. They are the part of the market since is just to the economic numbers. It is not a powerful market a we try toarket stay away from the this is interesting we look at the link between the ftse 100 and the 250. As we know the ftse 100 is an international index. Companies. G global that explains the outperformance we seen in the 1100 relative to the 250. Matt anna Robert Parkes, think you for joining us. America that does it for today. On the move is next. A we will continue to focusing on the move of the japanese markets. But the u. K. Can learn from germany. Markets look a little weaker. Anna welcome to on the move. It is 7 30 in london. We are counting you down to the european open. I am anna edwards alongside caroline hyde. Here is what we are watching. Brexit means brexit. The message from theresa may as she prepares to lead britain out of the European Union. Chancellor . The next mark carney will address the u. K. Treasury committee this morning, two days before his first post referendum Rate Decision. Is cu