Latest / Bloomberg Intelligence / Kit Juckes on Brexit: I Wouldn't Buy Sterling Pound Here(Audio)

Transcript

Kit Juckes on Brexit: I Wouldn't Buy Sterling Pound Here(Audio) · Bloomberg Intelligence

• 0:03
  Speaker 1: Global business news twenty four hours a day at Bloomberg
• 0:07
  Speaker 1: dot Com, the Radio plus Mobile Act and on your radio.
• 0:10
  Speaker 1: This is a Bloomberg Business Flight from Bloomberg World Headquarters.
• 0:14
  Speaker 1: I'm Charlie Pellett. Stocks are tumbling the most since January,
• 0:17
  Speaker 1: joining a sell off in global risk assets on speculation
• 0:20
  Speaker 1: that the UK decision to leave the European Unional hamper
• 0:23
  Speaker 1: worldwide growth. Our coverage continues here on Bloomberg Radio. The
• 0:27
  Speaker 1: SMP five hundred index down sixty three points after the
• 0:31
  Speaker 1: Brexit vote to two thousand forty nine, a drop there
• 0:34
  Speaker 1: of three percent down. Industrials down five hundred eighteen points
• 0:39
  Speaker 1: now at seventeen thousand, four hundred ninety three. That is
• 0:42
  Speaker 1: a drop of two point nine percent, and has stacked
• 0:44
  Speaker 1: down one hundred eighty three points, a drop of three
• 0:47
  Speaker 1: points seven percent. The tenure yield one point five eight percent.
• 0:52
  Speaker 1: Gold surging fifty seven dollars an ounce of thirteen twenty,
• 0:55
  Speaker 1: a gain of four and a half percent. Crude oil
• 0:58
  Speaker 1: down four point four percent, down to twenty two barrel
• 1:01
  Speaker 1: forty seven nightty right now on West Texas in media Crude,
• 1:05
  Speaker 1: I'm Charlie Palli. That's a Bloomberg Business Flash you're listening
• 1:10
  Speaker 1: to with on Bluebird Radio. In a historic vote, the
• 1:17
  Speaker 1: British Electorate decides to exit the European Union and Prime
• 1:24
  Speaker 1: Minister David Cameron decides to resign the premiership. Here to
• 1:29
  Speaker 1: tell us more is Kit Jukes. He is global head
• 1:32
  Speaker 1: of Foreign Exchange Strategy for Associate A General. He is
• 1:36
  Speaker 1: based in London and he can be followed on Twitter
• 1:39
  Speaker 1: at Kit Jukes and Kit. I was gonna remember a
• 1:42
  Speaker 1: couple of quotations from Richard this second, particularly that one
• 1:46
  Speaker 1: about well England as the happy breed of men, this
• 1:51
  Speaker 1: little world, this precious stone set in a silver sea.
• 1:56
  Speaker 1: Is this going to be a Shakespearean moment for the
• 1:59
  Speaker 1: British people? H it needs to sens shakespeare a moment
• 2:04
  Speaker 1: intense and in sense of making a political decision that will,
• 2:09
  Speaker 1: you know, will reverberate for the next generation in terms
• 2:11
  Speaker 1: of the relationship with Europe, which is what all UK
• 2:14
  Speaker 1: politics is about. So I wouldn't understate the importance. Um,
• 2:19
  Speaker 1: you know, at the moment it's it's the negotiating period.
• 2:23
  Speaker 1: So the uncertainty for the next couple of years and
• 2:26
  Speaker 1: whether that has to go through I don't know, you know, anger,
• 2:29
  Speaker 1: denial and then finally acceptance that we have to make
• 2:32
  Speaker 1: the best of what we've decided to do. Um So,
• 2:35
  Speaker 1: so I'm nervous about the anger denial phases of this
• 2:38
  Speaker 1: particular negotiation, and I suspect that while the negotiators will
• 2:42
  Speaker 1: take it slow. So so those are the things that
• 2:44
  Speaker 1: I worry about. But when when I get to the
• 2:46
  Speaker 1: final deal, we will have a different relationship with Europe,
• 2:49
  Speaker 1: and then we'll we'll see what Europe's relationship with itself
• 2:53
  Speaker 1: looks like and we'll kind of take it from that.
• 2:56
  Speaker 1: But yes, things have changed, tremendous volatility. I was here
• 2:59
  Speaker 1: last night preparing for De break Asia Kit and you know,
• 3:02
  Speaker 1: the first polls came out with him and I were
• 3:03
  Speaker 1: still doing our show Yes to Afternoon, and the pound
• 3:05
  Speaker 1: goes up and then all of a sudden the results
• 3:07
  Speaker 1: started coming in. Boom. It had its biggest drop in
• 3:10
  Speaker 1: six years. Now, it's reached its lowest level since. Am
• 3:14
  Speaker 1: I crazy to ask is it time to buy some pounds?
• 3:17
  Speaker 1: I'm not buying any but but it's not crazy to
• 3:19
  Speaker 1: ask when you're down. Here was my first year doing this,
• 3:25
  Speaker 1: and we felt a lot further. We got to one
• 3:27
  Speaker 1: oh five and five before the Plaza Accord came through
• 3:31
  Speaker 1: and turn things around, but you had higher interest rates.
• 3:35
  Speaker 1: My problem with buying the pound at the moment is
• 3:38
  Speaker 1: this period of uncertainty, Uncertainty about who's going to be
• 3:41
  Speaker 1: in charge of the Conservative Party and therefore leading the negotiations,
• 3:45
  Speaker 1: Uncertainty about how the negotiations negotiations go, along with my
• 3:49
  Speaker 1: concern that the first thing people do is go slow,
• 3:52
  Speaker 1: and also that in the anger denial phase of of
• 3:56
  Speaker 1: of of negotiating this split, people might not play nicely
• 4:01
  Speaker 1: initially they wouldn't have much incentive to do so so
• 4:04
  Speaker 1: and then and then during that period, you know, uncertain
• 4:07
  Speaker 1: it's not good for markets, and uncertain is not good
• 4:09
  Speaker 1: for economies. And although the UK economy is a small
• 4:12
  Speaker 1: economy in the great scheme of things, that the global
• 4:16
  Speaker 1: economy isn't exactly running fast enough for me to feel
• 4:19
  Speaker 1: good about things. So if if if the global economy
• 4:23
  Speaker 1: was tootling along at three, the US was growing at
• 4:25
  Speaker 1: two and a half and Europe was growing at two
• 4:28
  Speaker 1: and the Chinese were having a good time, I'd be
• 4:30
  Speaker 1: in a much better mood this evening than contemplating how
• 4:34
  Speaker 1: dreadful it would be if the U S economy goes
• 4:36
  Speaker 1: on slowing, kid Jukes, will Scotland hold another referendum to
• 4:43
  Speaker 1: leave the United Kingdom? Um, the instinctive yes is yes.
• 4:49
  Speaker 1: When all prices are higher than this, that that that
• 4:51
  Speaker 1: they'll they'll talk about it and they may decide to
• 4:54
  Speaker 1: do it. But that did the economics of an independent Scotland,
• 4:59
  Speaker 1: A separates Gobland and how they run their budget with
• 5:01
  Speaker 1: the old price down here is pretty ugly for them.
• 5:05
  Speaker 1: So I think that they'll be They'll not be in
• 5:08
  Speaker 1: a hurry, but they'll spend some time looking at the principle.
• 5:11
  Speaker 1: So for the sake of argument, it's in two years time,
• 5:14
  Speaker 1: the UK is most of the way through negotiations to
• 5:17
  Speaker 1: leave Europe, and the old price is you know, a
• 5:18
  Speaker 1: good bit higher. Uh, then I think the odds the
• 5:21
  Speaker 1: old shift in favor just about the This means for
• 5:25
  Speaker 1: the UK government bond market, because there's been a bit
• 5:31
  Speaker 1: of a rally there as people guess that, Uh, the
• 5:34
  Speaker 1: Bank of England is going to have to maintain a
• 5:36
  Speaker 1: very easy monterrey policy. So that's one part of it.
• 5:39
  Speaker 1: And again our Bloomberg intelligence team has did some work
• 5:43
  Speaker 1: saying how good the Remain vote would have been paving
• 5:47
  Speaker 1: the way for a rate high. Do you agree with
• 5:48
  Speaker 1: the UK Treasury their report yesterday that the mod the
• 5:51
  Speaker 1: moderate path is what a three and a half percent
• 5:54
  Speaker 1: hit to UK GDP, a severe shock would be more
• 5:57
  Speaker 1: than six percent hit to g d P and how
• 5:58
  Speaker 1: home prices down tempers. Yeah, So I'm working on the
• 6:01
  Speaker 1: basis that whatever you thought UK growth would be for
• 6:04
  Speaker 1: each of the next five years, kind of take half
• 6:07
  Speaker 1: a percent off that as you're working assumption. So if
• 6:10
  Speaker 1: you thought we were growing at one and three quarters
• 6:12
  Speaker 1: just slowing from two a bit like the US put
• 6:15
  Speaker 1: one on a quarter down, so not less than one,
• 6:17
  Speaker 1: not in a recession, but on average over the next
• 6:19
  Speaker 1: five plus years while we go through this. So that's
• 6:22
  Speaker 1: the right starting point now in that environment, if you
• 6:25
  Speaker 1: you know, I could redo it in the US that
• 6:27
  Speaker 1: the next move in monetary policy is to cut rates,
• 6:30
  Speaker 1: but not immediately. Um so maybe in twenty seventeen, I
• 6:33
  Speaker 1: don't know, but the you know, if I looked at
• 6:36
  Speaker 1: those numbers, I would that that would be my immediate
• 6:38
  Speaker 1: con think, and if the pound were to fall further,
• 6:40
  Speaker 1: I would still cut rates. Frankly, that wouldn't put me off.
• 6:43
  Speaker 1: If I saw slightly higher inflation for a bit, fine,
• 6:46
  Speaker 1: that's the currency acting as a acting as a support
• 6:50
  Speaker 1: for the economy of setting something what's going on making
• 6:53
  Speaker 1: us a little bit more competitive? Nothing wrong with that?
• 6:55
  Speaker 1: So um yes, so that that would be my my
• 6:58
  Speaker 1: working assumption, Kit Jukes, give you about ten seconds. The
• 7:02
  Speaker 1: city of London. What's the mood today? Pretty grim? Pretty grim?
• 7:06
  Speaker 1: But I mean, you know, I mean there was a
• 7:09
  Speaker 1: there was a band playing outside my office and everyone
• 7:11
  Speaker 1: seemed happy. But people I was talking to nervous about
• 7:14
  Speaker 1: you know, what does this mean for jobs? You know
• 7:17
  Speaker 1: we're not We're already bouncing back from the financial crisis
• 7:19
  Speaker 1: now right, Well, Jukes, thank you so very much joining
• 7:24
  Speaker 1: us from ground zero for that UK bregsit vote to
• 7:28
  Speaker 1: pound at its lowest level since when Kit Jukes says
• 7:32
  Speaker 1: he started in the business. He's global strategist at Society General.
• 7:37
  Speaker 1: I'm Caffeine has along with Pim Fox and this is
• 7:39
  Speaker 1: taking stock on Blueberg Radio. Coming up on taking Stock.
• 7:48
  Speaker 1: Will the British Parliament try to foil the Brexit vote?
• 7:52
  Speaker 1: Even after the general election. Most MP's members of Parliament
• 7:56
  Speaker 1: favor remain We've got details ahead