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brexitome to a special update. the scottish minister called the talk with the eu in the wake of the u.k. brexit vote. speaking after a meeting of the say a scottish referendum is very much close on the table. she also said the government will set up an advisory panel on the legal and financial issues of such a move. german chancellor angela merkel has spoken out again this morning on the uk's vote to leave the eu.
she says britain needs to set out the future ties with the body, and she discussed post brexit ability and her party meeting. she says she wants good, factual brexit negotiations. the leader of the uk's labour party has ruled out supporting a second brexit referendum. jeremy corbyn made the comments in this speech when britain voted to easily the you -- to leave the eu. he said he could not leave the farage debate to nigel and boris johnson. he also spoke about his future in the labour party. >> if there is a leadership contest, will you run again? >> yes, i am there. thank you. [applause] john h.: as the financial services commission -- mark: johnson has stepped down
from his role. he says it would not be right to carry on after the brexit vote and he informed the european president of his decision. he was the u.k. member of the decision. the foreign ministers have agreed a quick exit -- is needed. said-walter steinmeier they made commitments to hold the eu together. said the u.k.ote exit talks need to start immediately. let's recap the big market moves yesterday. sterling falling the most on record against the dollar to its lowest level since 1985. it had dropped as much as 11%. european stocks dropped the most since 2008 after falling as much as 9%. that was the most ever. again was the haven currency of choice yesterday. --the yen was the haven currency of choice yesterday.
sinceld had its best day 2009, having risen as much as 8% on friday. let's take a listen to have the business world reacted to the news. >> the british people voted for brexit, would mean they are saying for at least a year, saying brexit vote would be doing downgrade in the u.k. sovereign rating, which is currently aaa. >> i believe this will be a long-term drama. i do think all of the market disciplines will be able to cope with the short-term volatility, and we will go back to a more considered reaction after a number of days. >> it is a shock and disappointment, but life goes on. people in britain will continue to travel to europe this summer, and europeans will continue to come to britain. the biggest question is, can the u.k. find a way to stay in the single market? mark: getting some heads from
the french economy minister, he is speaking in paris. fall with with the trap of delaying exits are continuing the theme. we heard throughout this morning from the consulate that leaders and ministers want britain to get on with it. let's get up with the latest news. anna edwards is down on the green in westminster. as well as the resignation of the eu commissioner from the u.k., we also read from angela merkel within the last hour. what has she been saying. thanks. the u.k.rkel saying needs to spell out its view of future time. you are right in timing is a sticking point in the early days , post brexit vote. it seems all the voices coming from europe talking about getting on as quickly as possible. as well as the voice of boris
johnson talking about no need to hurry, david cameron trying to hand over the reins of the party before talks with europe start to take place. that is clearly a point of tension. angela merkel said they need to spell out their future view. that may take some time. the campaign has been talking about how they did not want to stay in the common market. they realized they would have to pay for that, against other policies they did enact, freedom of movement and not paying any money to brussels. we will see what ends up being the u.k. proposal, but first you need to get the right decision-makers around the table to come up with what the u.k. want to see as its vision now. , the u.k.e commissioner of the table, and the financial services, which will be a place of competition between the u.k. and the rest of europe. even if the u.k. it has not left yet, it would seem a strange thing to have a u.k.
commissioner involved, making policy for the european union he knew his country was then going to leave. mark: bring us the latest on the thinking of what rex it might mean for the u.k. economy. -- brexit might mean for the u.k. economy. anna: the question surrounds the financial services industry. we had some predictions from the city running up on with the financial resources -- financial services industry going to be. we had talk of jobs shipping to other locations, but it is early for that. what movesrd about have already said about their outlook, we can expect further conversations for the likes of snp. for the warnings with the treasury, ecb, bank of england, all of the others, it established economic voices, warning what to begin which to
the economy. to enact the2% was brexit, which lets questions hanging over, investment and hiring, what will that do for consumption? what big hit will there be to the consumer? what damage weatherby for the currency, and many questions around -- will there be for the currency? and many questions around the pound. down in westminster, special question -- coverage all weekend on bloomberg and on the radio. we have a live special show at 5:00 p.m. on radio. we will bring you a special surveillance at 12:00 to 3:00 sunday tomorrow. full coverage over tv and radio starting at 1:00 a.m. u.k. time. -- 5:00 a.m. u.k. time. ♪
>> is bill gross writes that britain's vote says something about the state of democracy in the u.s.? >> think it is an important point that there is, one way to look at the brexit vote is it is a revolt of the people against elite, and i think that is something you see in many other places, including in the u.s., the political class in britain was out of touch with what people felt about europe. cameron would never have called this referendum if he thought there was a chance he might lose it. it is a shock of the system because nobody thought this would happen. that is because people making those calculations are not in touch with ordinary people thinking. i see something similar in the u.s. with support for trump and the cluelessness of the political class, liberal and conservative alike, in
accounting for the trump phenomenon. you see it elsewhere in europe as well. there is deep resentment in the way the eu is run, and the growing anti-eu sentiment and the political class in europe has been semi-paralyzed. they have not done anything to respond to it. i think brexit is the beginning of the consequences of that complacency. erik: to your point about trump, if you prefer, duties or horrors of the brexit vote was that it was about a binary income. in or out. the u.s. election and congressional elections are much -- much mored and, complicated, and they involve many more issues. do you think things will pan out differently than they did or will we see the same forces take over? guest: people are skeptical about expert opinions these days. they are right to be skeptical. i hesitate to make forecasts. i didn't think they would vote
to leave the european union. i never thought the trump would -- that trump would win the nomination. it will be fair to people to ask what do i know? here thatgreat risk we are finding that we don't understand quite what is going on in these political systems. and the brexit vote shows you that the consequences can be severe. say,hing i would just right before you said, erik, the brexit vote is complicated. one way, it is in or out. right? i see that. so the implication, where we go from here, that is an extremely complex question. there is a range of things that now needs to be negotiated between britain and europe. it is very hard to say how that will end up. europe might press for a very hard bargain in order to
discourage other potential quitters. in fact, expect the consequences for britain and europe may be even worse. erik: i will have the opportunity to check in with you later in the hour, and we will explore that thought. we return here on this special report, we'll take you to the continent. what is next for the eu? and we sit down with mario draghi. how does he see it playing out? the special report continues next. ♪
♪ erik: europe's foreign ministers are convening in berlin for an emergency meeting to discuss what brexit means for the rest of the eu. here is how leaders reacted to the vote. >> i'm fully aware of how serious or even dramatic this moment is politically. there is no way of predicting all the political consequences of this event. >> an awakening is needed. europe cannot deal like it was before. the people are waiting for the european union to reaffirm his values. freedom, tolerance, and peace. >> more and more frequently we see ourselves confronted with
the fact that people have very basic doubts about the direction the european union process has taken. >> the british people chose yesterday. we respect this decision. now the page turns. it's an unprecedented day. not an easy one, but europe has demonstrated over the course of its history that become stronger in the piece -- face of every difficulty. >> don't play campaign games with europe. that is the message from mario monti. former prime italian minister. lacquaoke with francine before treating got underway on friday. they been asking -- began by asking monti whether the brexit was the worst case in history for europe's political leadership. mario monti: it may lead to a more fractured europe. the eu and the u.k. had decided to remain, the all too general treatment given in february by
the other 27 to the u.k. would have created the temptation and many other member states of the we too want negotiate the ability to belong to you. and now in this the exit scenario, i believe honestly much worse for the u.k. than the , european union. i believe the u.k. would be bitterly disappointed in seeing how long and how adventurous would be the street, the road to new agreements with partners of how week into to miss a policy is will be. its domestic
policies will be. i see just one but big positive to this drama. >> what is that? mario monti: well, for the first time, it is very, very clear to everybody that you cannot play games with europe. without running serious risks. you are at yale university studying under james tobin. is this a moment where retains the dialogue on italy's austerity, spain's austerity, the added kingdoms austerity -- united kingdom's austerity? do we change our dialogue and decision-making on fiscal austerity? mario monti: i think brexit has nothing to do with that. the dialogue as i see has to change a bit in the sense that austerity first, a world without
sense, i never use it -- a word without sense, i never use it. but fiscal discipline has to stay. we in italy have played huge prices -- paid huge prices for not sticking to fiscal discipline. but we need to change the mind of the germans. and it is not impossible, to that me, by telling him serious public investment is not a violation of fiscal discipline. this is the only change which is really needed. if we just take a step back, what exactly does this historic moment mean? is this the end of the european project? are we going to see more referendums, including in your country if it is possible voter mario monti: it is possible, it is possible it could be the end. if you follow just a second, the
most serious risk of unraveling thatropean integration is national leaders, more or less, all of them deal with europe, treat europe, participate in european decisions having in their mind as top priority there electric grid -- electoral results in the opinion polls next week. and we cannot expect europe to be able to take the right decisions when the most important body, the european council, is filled with persons like this. i believe the catastrophe, soi believe the catastrophe, triggered by mr. cameron, showing that indeed you can be , inflicted huge pains if you play these games may bring more , wisdom, more sense of responsibility to the others. foreman italian prime
erik: welcome back to our special coverage, britain out. president obama talked about britain's decision to leave the eu speaking to an audience of entrepreneurs at stanford university. the president said he is confident britain is committed to an orderly transition out of the eu. my colleague sat down with ambassador susan rice for an exclusive interview. david began by asking her about the potential national security risks that could stem from this decision. susan rice: we respect the decision of the british people. and this is not pointed change fundamentally the special relationship between the united states and britain which has endured historically for
generations and generations. nor will it change the nature of our relationship, the united lationship which is a -- with the european union which , is a critical economic and security partner for the united states. we have every interest supporting the european union as they work to affect an orderly process of separation. we have every interest obviously also in maintaining the strong security relationship we have within nato which includes not only many of the countries of the european union but the of course of the united kingdom, and that will end your. endure. will d the security implications need not be particularly significant, assuming britain and the european union continue to operate as they have for many years under the umbrella of nato. we remain committed to the transatlantic relationship as
always. we think europe will too. david: what role will the u.s. play in london and brussels? susan rice: we won't play a direct role. obviously this is something to be negotiated between the united kingdom and the european union itself. but because we are critical partners with the european union we will try to help them to the , extent that we can as they request to support the stability of europe and britain economically, of course. we will continue as we always would in any event to maintain our strong security ties and work together with the european union member states as well as with the u.k. on things like migration, on dealing with the refugee flows countering , terrorism. all these things are areas we here we would work together in our support in any case. our support and engagement has been critical and will continue
to be. david: do you worry this will weaken nato? susan rice: no, i don't see it impacting nato. erik: that was david gura with susan rice. clive, the ambassador wants us to, at least to a degree, to believe not much will change. i'm not so sure. i'm asking what does this mean for multilateralism? what does it mean for nato and military alliances? what does it mean to the commitment to free trade? what does it mean to the efforts, for example to relieve , poverty? what does it mean for the fight against climate change if nations like britain turn inward? clive: i don't see it as a case of written turning inward. i know that is one possible interpretation, but britain is very internationally minded. something the lead campaign stressed is they want closer
relations with non-eu countries. i think it is wrong to worry too much about a breakdown of the spirit of internationalism. i think it is much more about discontent with europe, with the european union, with the europe arrangement. i agree with what susan rice said. there are so many common interests when it comes to national security that i would be surprised if, you know national security interest were , impacted by this to any significant extent. i don't see that happening. erik: the europeans and the british share enough as they look east to russia or to china, for example, that their future is tied together. clive: absolutely, and i don't see any dissent from that on the brexit debate. erik: it's good to see you. thank you for staying with us on this special report. everyone, you
erik: you are watching a bloomberg special report, i am erik schatzker. it was a brutal campaign that left deep scars around the united kingdom. remain or leave? markets don't vote, but on investors around the world paid the price as the shock of britain's decision to leave the eu set in. stocks changed the most since the financial crisis, with trading volumes higher than the 30 day average. currencies were shot. pound fell to 1985 levels, and that again surged.
-- the yen surged. the drama isn't over. scotland is threatening to break away from the u.k. solidarity remains in question. we cast our net across the financial world to gather opinions that matter. here is what they have to say. >> the british people have spoken. their decision is to be respected. it will be some time until we know the nature of the future relationship between the united kingdom and the european union. in the meantime, it will be important that there be clarity on the negotiation process and that it be carried in as smooth a matter as possible. >> as a backstop and as a function of the markets, the bank of england stands ready to provide or the tune of 50 billion pounds of additional provide more than 250 billion pounds of additional funds. >> saying for at least a year,
brexit vote would lead to it downgraded in the u k severin rating, which is currently aaa, which is the last of these around. that is what we said. erik: wherever you look the , market reaction was swift and dramatic after thursday's vote. the approach taken by most was shoot first, ask questions later. howard marks of oaktree capital, one of the credit investors has , seen dozens of crises before. so i wanted to know what he makes of the turmoil in the months to come. howard, you may be surprised is , not jumping on the bandwagon. >> there is no history for this kind of development. i don't see how anybody can be confident they know what it means. i think these economies will slow down. there probably has been a synergistic effect on the u.k. and europe from membership in the eu. they will probably each produce a little less on their own than they would have produced together. i think there will be a psychological effect as people
pull in their horns and spend less and invest less. i would be surprised to learn that this is a long-term fundamental negative. for these countries. erik: why'd you say that? howard i just think the reaction : is very strong in the markets. but the question is, are people going to live differently? are people going to produce less and are people going to buy less? you told me, eric, even when there are crashes on the pound, on the stock exchange the people , outside are still buying hot dogs. other than psychological contagion, which should not be underestimated, i don't think that this is a fundamental catastrophe. now, i do think there will be very strong societal, societal and political and geographical
ramifications, but i just i have , trouble dealing with it as a financial catastrophe. erik: ok, if it is not a financial catastrophe and things over the medium are going to be ok here, yet at the same time they will be confusion, which i will translate to uncertainty, should be the order of the day, what is the logical thing to do for an investor? so first and ask questions later? howard: that doesn't only a very clever or stable position. you know, there is an old saying i have heard for many, many decades, as long as i have been in this business that the markets have poor uncertainty. they do. that doesn't make them necessarily correct in their abhorrence. what it means when uncertainty rises people get uncomfortable. , they do sell. that doesn't make them right. i don't see why increased
uncertainty in itself makes selling the right thing to do. it is always a matter of what are you selling, at what price, what are the things that might happen, what are their probabilities? the mere fact uncertainty has increased doesn't mean it is time to sell. erik: doesn't mean the people doesre selling today, just it mean the people who sold earlier, selling today when we , were at the lows, they are going to regret those decisions? howard: they may. not that they will. but they may. i just don't see the math through which increase uncertainty means you should sell, and certainly not that you should sell at any price. the clever people were the first to hurry or the news and say, that is it, i will get ahead of everybody else by selling. they put the thing down into percent. at the opening, a percent or so.
right now, it puts you down 4%. so what that means is they are , wrong. erik: that was oaktree capital cofounder howard marks. the brexit throws the future of london into serious doubts. so perhaps it was no surprise bank stocks took a beating. after thursday's vote to leave the eu, marking their worst single day decline in four years. :00 issuisse fell 14%, one of the biggest -- oakmont is one of the biggest credit investors. he is now sorting through the wreckage for buying opportunity. >> certainly, there is considerable more short-term uncertainty in the environment. that's never good. on the other hand prices have , reacted quite negatively. you mentioned credit suisse, but look at the periphery banks. there is a follow and even a french bank, bnp paribas, not to mention what has happened to the
u.k. banks. i think people are comparing this with what happened seven or eight years ago. ,t is not a direct comparison even the state of capital positions -- given the state of capital positions. the banks are in a better much, much better position to weather these uncertainties that we are now facing. and i think we do have some positives. there's a very strong global consumer out there, high employment rates, low unemployment rates, low energy costs, low interest rates consumers are doing pretty good. , they are not as indebted as and 2008.in 2007 we don't have these debt overhangs. there are some negatives with the uncertainty of what is going to happen with the united kingdom and how it relates to europe, but on the other hand the banks are in a better , position to deal with this uncertainty if you look at their leverage ratios and capital ratios. i would say some of this, some
of these 20% down prices are perhaps overdone. -- wells fargogo market down 5%. european bank stocks down gene percent. david, would you go shopping at these levels? try to get a sense of what you would do. keep in mind, they were already selling at low valuations before this happened. yes, there was a lower rally this week, but if you look in the last 8, 9 months in anticipation of this, if you look at the valuations, they were already reflective of something coming. i don't really like to comment on current trading, but our motive of operation is to determine intrinsic value of a business, and price separates itself quite aggressively from what we believe. as it approaches intrinsic
value, it will attract. i don't think the intrinsic value of these banks has fallen by anywhere near what the market has done to their prices. as a sign of their prices. you can almost guess what our thoughts are right now. >> let's try and confirm your thoughts. did you buy credit suisse on the drop? david: again, i can't really talk about our trading. but i would say at this price, credit suisse is attractively priced. some of these other european financials. now again there is going to be , short-term uncertainty and volatility. it is to be expected. erik: guy johnson pressing howard pharrell -- the brexit debate may be resolved. one question is scotland. remember scotland held a , referendum in 2014 and voted to stay in. but thursday's decision may change all of that. francine lacqua reports from
westminster. francine: scotland is making a lot of noise. we heard scotland did the decisive vote for remaining in. so they don't want to lose out membership for the eu. she hinted at the fact there could be a referendum. whether it will come soon -- a second referendum -- or if they will wait a bit, it is not clear. they have nothing to gain in rushing through the referendum. actually as you say this will , play out for months and years. we don't really know what they u.k. will negotiate with the eu. so scotland will wait first and see if they get a deal with the eu, and then we go. erik: that was francine lacqua reporting from westminster, talking to our colleague sarah pharrell. coming up we hear from mohamed el-erian why the doesn't live up to the lehman moment. stay tuned. ♪
erik: this is special coverage, britain out, i am erik schatzker. aftershock after the decision to leave the european union continues to jolt markets worldwide. on friday, stocks tumbled as the pound touch lows not seen in more than 30 years. the bloombergith chief advisor mohamed el-erian ready for exchanges on friday morning. jon ferro and guy johnson for this interview, and they begin by asking mohammed what bank of england director mark carney needs to do next. >> he needs to make sure banks
have enough liquidity, that is the first thing. second thing he needs to get on , the phone like others and talk europe into developing a plan b that has some sort of association agreement. the worst thing that can happen to markets right now is to have this notion there is nothing to replace eu membership. coming up with a plan b is going to be absolutely critical in weeks to come. john: it doesn't look like we are going to get a plan b for a long, long time. they have not triggered article 50. there is talk of waiting for october for the conservative party minister conference. that article is actually triggered. we could be here until october. how significant is that? mohamed: that would be really bad news, markets don't respond well to vacuums. if there is no clarity on what institutional arrangement could emerge next, then you are going to have the worst combination, which is institutional
uncertainty on top of financial fluidity, on top of economic fluidity. having a plan b is going to be critical in the days and weeks to come, if this financial shock doesn't develop into a much bigger global economic shock. mark: it looks like nobody has got a good hand of cards here, but if you were sitting around the table, you have angela merkel, who has the better hand of cards here? mohamed: i don't think it is about who has better cards. it is about holding together, and they will have to work quickly to avoid a recession. it's not easy to change institutional linkages overnight. so there is a reason why the european stock market is doing worse than the europe -- than the u.k. stock market. it is because this is also a major shock for europe. navigate thisot well, then there is going to be
a lot of questions on who comes next. i think this is not as much who has the better hand as collectively they should hold , hands and try to make the best out of this. this phenomenon is all over the western world. you should realize that a majority of people of decided to go against expert opinions, to against both the political and business elites and express anger and frustration with this new normal period of low growth and rising inequality. this is a very important wake-up call to politicians all over the western world. at the east side of the table. we already have francois a long -- hollande and angela merkel saying this needs to be done quickly. you seem to be comparing that view when you time to figure out what we need to do here. does either side have a clearly thought out plan?
does either side have a plan of what comes next? mohamed: my hope there were contingency plans. there was a plan b being discussed. of course you wouldn't talk about it publicly, but there were things being discussed. if in fact a plan b wasn't discussed, you are going to see a lot more financial volatility ahead. jonathan: i wonder how much a financial shock it is. we can let the intraday moves the for themselves. the ftse is actually up on the week and the pound is back to levels this on earlier in the week. how much of a financial shock could this actually be with that in mind? mohamed: it can be a significant financial shock. but the good news is this is not , lehman. this is not a payment and settlement crisis. it is a shock to the institutional setup. it will cause some major financial moves. theyou are going to see financial sector block more than technology when the dust settles.
i would just caution, don't draw too many implications from what you have seen too far -- so far. we still haven't seen accounts close their positions. we still haven't seen how the retail segment is going to react. so don't extrapolate too much on what you have seen so far. this is still the early days of the technicals perspective. there is also the economic question. it is early days yet in terms of how markets are reacting. guy: why shouldn't we actually into other events? donald trump was on our side of the pond today. we shouldn't we actually have more political events like this? we have french elections, german elections, so much more political upset that could come down that results from this, maybe doesn't result from this. this could be the first of many. mohamed: it is not even the
first. this is just a continuation of unthinkable's that have become reality. why? people are angry and you get a strong protest vote without thinking about what the consequences of the protest vote is. having said that, there is a probability, small, but a probability this could finally be a wake-up call to the politicians. remember the context. what is ailing us is not an engineering problem. most economists have a good handle on what is needed to promote high inclusive growth. what is ailing us is the political will to affect a handoff from overreliance on central banks to a comprehensive policy response. maybe this could serve as a wake-up call. erik: it could be a wake-up call. he wants to be optimistic. bloomberg columnist mohamed el-erian. when we return, hear more brexit
reaction from business leaders around the world. stay with us on bloomberg television. >> june 23 needs to become a national bank holiday, and we will call it independence day. [applause] >> i think this country requires fresh leadership to take it in this direction. >> britain will continue to be a great european power. ♪
process and business leaders may not know the full impact on their companies for months or possibly years. but already they are taking , stock of the situation and trying to come to grips with an uncertain future. >> i'm afraid that this is definitely not a good day for europe. there is no doubt the consequences will be negative on all sides. as a britain and the european, it especially saddens me that the european idea obviously has lost its attractiveness to so many of my fellow countrymen. that is a clear signal to the eu to get closer to its people and to strengthen democracy. as a bank headquartered in germany, and with a strong hub in the u.k., we are well prepared to mitigate the consequences. >> we have an unwinding process ahead of us with the eu, to its will take -- which will take considerable time. it is not just the two years, it is not just the triggering of 50. it is the renegotiation of all these trade agreements.
there are resources we have to negotiate. some people talking up to 10 years to renegotiate these agreements. the concern is to say the least, really troubling. >> we don't see riding on the street anymore related to this anger, but you do now see digital rioting. if you pay attention to the media feeds, the social media feeds, you can read some of the anger that people have had, conventional wisdom was wrong again. erik: europe needs a new playbook. and it is now looking to its largest economy to take charge. caroline hyde reports from germany. caroline one of shock and : concern clearly. we are speaking to leaders in foreign policy particular. they say, overall, a catastrophe for germany and the eu. angela merkel is a voice of calm at the moment, typically pragmatic as she is the leader
of germany. she has got a very difficult balancing act, vonnie. on the one side, wanting to punish the edit kingdom, hold them up to prevent anyone else from calling referendum and start this domino effect so feared in the eu. we have the right wing parties from france and spain already desiring that own referendum. talking about a rush through to get this deal done with the u.k. and to immediately start with start -- preparations for an exit. she's been the voice of reason. a collar measure is because she realizes the other side of the balancing act business side of , the balancing act. she was to support the business ties. she wants to ensure the economy progresses as best it can. >> you will be covering this meeting on monday when the french and italian ministers arrive in berlin. what do we expect out of that meeting? caroline: monday of course merkel has , summoned her counterparts.
in italy with frenzy, and donald tusk, the head of the eu. he has been the president. he said this incredible words. if we did indeed see the u.k. leave the eu, it could spell the end of western political civilization itself. but those leaders will be gathered together, and they will want to start to decide how they will lead the eu to be cohesive , how they will prevent any sort of domino effect playing out. that way they will prevent concerns in the right-wing populist expression, starting to rear what many feel is its ugly head. there is much to look at. erik: that was caroline hyde, and this was a bloomberg special report on britain's decision to break from the european union, a historic decision rocking global markets on fridays with percussions unfolding weeks, months, and years. stay tuned this weekend for special programming here on bloomberg television, bloomberg radio and bloomberg.com. ♪
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