Latest / Bloomberg Intelligence / Invesco's Das: UK Remaining in EU Strengthens Germany (Audio)

Transcript

Invesco's Das: UK Remaining in EU Strengthens Germany (Audio) · Bloomberg Intelligence

• 0:00
  Speaker 1: The Brexit vote on Bloomberg Radio, continuing coverage of the
• 0:07
  Speaker 1: vote in the United Kingdom. Polling has ended and the
• 0:10
  Speaker 1: count continues in the United Kingdom over the referendum to
• 0:15
  Speaker 1: remain or to leave the European Union. Here to help
• 0:18
  Speaker 1: us understand more is arenab Doss. He is head of
• 0:22
  Speaker 1: Emerging Markets macro for invest Goo Fixed Income and he
• 0:27
  Speaker 1: joins us from London area. Thanks very much for being
• 0:30
  Speaker 1: with us. Tell us a little bit about your day
• 0:32
  Speaker 1: and what did you see during the voting process. UM. Well,
• 0:37
  Speaker 1: you know, it's like all the news stories are saying
• 0:39
  Speaker 1: there's there's been a raining, cats and dogs and problems
• 0:42
  Speaker 1: with the with the transport system, so there was concern
• 0:44
  Speaker 1: about turnout. UM. The Nigel Farage quote UM to Sky
• 0:49
  Speaker 1: News makes the very important point. I think that turnout
• 0:52
  Speaker 1: was extremely high. There's some estimates that turnout was perhaps
• 0:57
  Speaker 1: UM despite the despite the problems with the weather and
• 1:00
  Speaker 1: the transport system, which indicates that UM, probably the Remain
• 1:05
  Speaker 1: camp was successful in getting the vote out. UM. And
• 1:08
  Speaker 1: by all accounts a high turnout would be would point
• 1:11
  Speaker 1: to a Remain success. So I think that's that's where
• 1:14
  Speaker 1: it's going. It's quite early to be sure yet, but
• 1:17
  Speaker 1: that's the direction that we're headed. I think, so if
• 1:20
  Speaker 1: we're heading that direction, let's let's just look as sort
• 1:22
  Speaker 1: of emerging markets broadly, because it seems that you can
• 1:26
  Speaker 1: slice a possible Brexit vote which apparently is not passing
• 1:29
  Speaker 1: a lot of different ways from a lot of different countries.
• 1:32
  Speaker 1: But the one big factor has been uncertainty, right right,
• 1:36
  Speaker 1: I think the uncertainty would have been very well and
• 1:39
  Speaker 1: if it is the case that there is still a
• 1:41
  Speaker 1: vote for Brexit, the uncertainty will be very magnified. The
• 1:44
  Speaker 1: market has effectively priced out the risk of Brexit UM
• 1:47
  Speaker 1: in UK assets, European assets, and generally in risky assets. UM.
• 1:51
  Speaker 1: There's probably some more upside because there is residual uncertainty.
• 1:56
  Speaker 1: But I think if you know the danger now is
• 1:58
  Speaker 1: that if UM, if the vote count goes the other way,
• 2:02
  Speaker 1: that there's significant downside, right because it's all been pricing
• 2:06
  Speaker 1: towards the Brexit out sorry towards the Bromain outcome. UM.
• 2:10
  Speaker 1: I think if if that's the outcome that we get
• 2:12
  Speaker 1: Bermaine UM, then we're more likely to see continued UM
• 2:17
  Speaker 1: calming down in the markets. Right because a major event
• 2:20
  Speaker 1: risk and a major source of political contagion in Europe,
• 2:22
  Speaker 1: copycat eggs at referendums and so on, as well as
• 2:26
  Speaker 1: the political crisis within the UK that Professor Blanchflower mentioned.
• 2:29
  Speaker 1: All these things would be much less of an event
• 2:32
  Speaker 1: risk and so I think we would have continued buying
• 2:36
  Speaker 1: of of risky assets UM, including emerging markets, because liquidity
• 2:41
  Speaker 1: conditions in the world remain very high, inflation is very low,
• 2:44
  Speaker 1: yields are very low everywhere. UM. So I think you
• 2:47
  Speaker 1: know that it would be a kind of a bit
• 2:49
  Speaker 1: of a green light. It wouldn't really solve anything fundamental,
• 2:52
  Speaker 1: but it wouldn't open a kind of worms either. But
• 2:56
  Speaker 1: I'm wondering if you could tell us about what the
• 2:58
  Speaker 1: European Union would do or respond no matter which way
• 3:02
  Speaker 1: the vote goes. It's likely to be very close. The
• 3:05
  Speaker 1: fact that you have so many people in a major
• 3:08
  Speaker 1: European Union country who would like to leave this particular club.
• 3:13
  Speaker 1: What will the European Union's response be. Well, I think
• 3:17
  Speaker 1: in the in the remains scenario, UM, I think we're
• 3:20
  Speaker 1: likely to get a kind of um validation of the
• 3:23
  Speaker 1: deal that Prime Minister Cameron UM achieved with the with
• 3:27
  Speaker 1: the European Union back in February, which essentially paves the
• 3:31
  Speaker 1: way towards a kind of full fledged two track Europe
• 3:35
  Speaker 1: where the Eurozone heads for deeper integration, however slowly towards
• 3:40
  Speaker 1: some sort of federalization, hopefully along the American model. But
• 3:43
  Speaker 1: that's by no means assured UM and the rest of
• 3:47
  Speaker 1: the European Union UM is in a different track to
• 3:51
  Speaker 1: a different destination. Right that the UK then has an
• 3:54
  Speaker 1: opt out from this idea of ever deeper union, which
• 3:57
  Speaker 1: is one of the fundamental tenets of the European Union
• 4:00
  Speaker 1: and of course of the euro itself, so that I
• 4:03
  Speaker 1: think it's in and of itself, will be an important change,
• 4:05
  Speaker 1: almost regardless of the um of the outcome for Prime
• 4:10
  Speaker 1: Minister Cameron himself, and that will create room for Europe
• 4:15
  Speaker 1: as a whole to hold together UM with countries that
• 4:19
  Speaker 1: are Euroskeptic but not members of the euro UM and
• 4:23
  Speaker 1: stay in the in the European unions, such as Denmark.
• 4:26
  Speaker 1: Does this put UM? I just wonder what is it does?
• 4:29
  Speaker 1: What does it say for Germany? You know, Nigel Farrage,
• 4:33
  Speaker 1: who's one of the big leaders, the biggest voices in
• 4:35
  Speaker 1: favor of Brexit, critical, very critical of Germany and how
• 4:39
  Speaker 1: they become so UM dittorial right or the EU. If
• 4:45
  Speaker 1: I can sum up the tone of what he has said,
• 4:48
  Speaker 1: does Germany rethink its position? Does Germany say, well, I'm glad,
• 4:52
  Speaker 1: breathe a sigh of relief that this didn't pass, but
• 4:55
  Speaker 1: take somewhat different tact in its relations with some EU countries. UM, well,
• 5:02
  Speaker 1: I think you know. The first thing for Germany is
• 5:04
  Speaker 1: that having the UK UM stay in the European Union
• 5:09
  Speaker 1: strengthens Germany's hand for a more economically liberal and open
• 5:14
  Speaker 1: European Union and Eurozone right. So Germany is always UM
• 5:19
  Speaker 1: in a position of UM, supported I would say, or
• 5:22
  Speaker 1: even lead in some respects by the United Kingdom UM
• 5:25
  Speaker 1: in opposing the UH greater degree of labor market rigidities,
• 5:32
  Speaker 1: difficulties and hiring and firing difficulties in UM, in the budgets,
• 5:36
  Speaker 1: difficulties in the welfare state UM, and the protection for
• 5:40
  Speaker 1: labor that is more present, let's say, in southern Europe
• 5:44
  Speaker 1: and in the Mediterranean countries and also in France. So
• 5:46
  Speaker 1: I think, for for you know, for starters UM, Germany's
• 5:51
  Speaker 1: view and preference for a more open European system economic
• 5:57
  Speaker 1: system would be supported UM. On the issue of UM,
• 6:01
  Speaker 1: the the idea of what ultimately needs to take place,
• 6:05
  Speaker 1: a kind of federalization UM in which there's political union
• 6:11
  Speaker 1: ultimately fiscal union UM and a much stronger banking union UM.
• 6:17
  Speaker 1: I think the the continuance of the UK in the
• 6:21
  Speaker 1: EU makes that a little bit less easy to accomplish.
• 6:26
  Speaker 1: If there were shocks, it would be perhaps faster, but
• 6:30
  Speaker 1: in this scenario probably be slower and may not get
• 6:32
  Speaker 1: there until the next shock. Aarn Abdas, thank you so
• 6:34
  Speaker 1: much for joining us head of Emerging Markets MACO for
• 6:37
  Speaker 1: invest Go fixed Income, taking a look at the Brexit vote,
• 6:42
  Speaker 1: taking stock Bloomberg Radio