Latest / Bloomberg Intelligence / GlobalReach's Mulhall on BOE, Sees Further GPB Strength (Audio)

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GlobalReach's Mulhall on BOE, Sees Further GPB Strength (Audio) · Bloomberg Intelligence

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  Speaker 1: one point seven six percent. I'm Charlie Pellett, and that's
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  Speaker 1: a Bloomberg Business flash. Your something to taking stock with
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  Speaker 1: Kathleen Hayes and Pim Box on Bloomberg Radio. The Bank
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  Speaker 1: of England, a rate decision, an upcoming vote on whether
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  Speaker 1: to remain part of the European Union, all issues that
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  Speaker 1: investors must taken to consideration and to get more perspective,
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  Speaker 1: we have Karen Mullhall. He is the chief investment officer
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  Speaker 1: at the Dublin based Global Reach Securities, joining us now.
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  Speaker 1: Thank you very much for being with us. Begin by
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  Speaker 1: giving us your thoughts about the Bank of England being
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  Speaker 1: drawn into the debate about whether the United Kingdom should
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  Speaker 1: remain part of the European Union. Yes, good afternoon, Tim.
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  Speaker 1: Football is well in New York. Yes, and we had
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  Speaker 1: to put an interesting Bank of England at meeting today
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  Speaker 1: where it looks like Mark Arney, the head of the
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  Speaker 1: Bank of England, has finally got dragged into the brit
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  Speaker 1: exit debase in Europe and they've been trying to sort
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  Speaker 1: of stay reasonably neutral and I think unfortunately with the
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  Speaker 1: modestly magnificant slowdown we've seen in the UK economy over
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  Speaker 1: the last six seven weeks, and he felt it was
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  Speaker 1: probably time to maybe highlight some of the downside risks
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  Speaker 1: that would be associated with the UK voting to leave
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  Speaker 1: the European Union, and I particularly I suspect amongst the
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  Speaker 1: newspapers in at the UK tomorrow the mention of the
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  Speaker 1: r words recession was said for the first time, and
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  Speaker 1: he suggested that there would be some likelihood under certain
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  Speaker 1: situation you could see the UK economy for them to
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  Speaker 1: a recession later this year, if indeed they vote to
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  Speaker 1: leave and in their referendum later in June. Is it
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  Speaker 1: your analysis that that's an accurate depiction of what would
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  Speaker 1: happen to the British And yeah, yeah, absolutely, I think
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  Speaker 1: that the I think that the we've we've seen that
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  Speaker 1: we've seen a fairly material slowdown just with the uncertainty
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  Speaker 1: of what would be associated with the referendum coming out
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  Speaker 1: US in a few weeks time. And I would suspect,
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  Speaker 1: you know that the likelihood is is that that the
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  Speaker 1: shock that such a decision to leave would have um
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  Speaker 1: people would be, you know, somewhat nervous about investing. You know,
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  Speaker 1: the various trade deals et cetera that would have to
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  Speaker 1: be renegotiated, and you know, all would suggest a slower
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  Speaker 1: outlook for growth and and you know, it's not like
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  Speaker 1: the UK economy has been growing at sort of three
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  Speaker 1: or four or five percent over the last few years.
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  Speaker 1: You know, in in a broadly low growth environment, any
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  Speaker 1: of those kind of shocks that would that that would
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  Speaker 1: any kind of shock that comes at you can easily
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  Speaker 1: tip you into the interfession, even if it's only a
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  Speaker 1: short lived one. How do you characterize the British economy
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  Speaker 1: right now? Give us the details if you can. Yeah, well,
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  Speaker 1: it had been one of the best of the o
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  Speaker 1: E c D countries and along with the United States
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  Speaker 1: over the last two to three years. But we've seen
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  Speaker 1: the p m I numbers particularly as a kind of
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  Speaker 1: a leading indicator of growth and trend lower, the manufacturing
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  Speaker 1: number being contraction for the first time and for April,
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  Speaker 1: and I think that's again it's it's it's been very
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  Speaker 1: similar to the United States in the sense that employment
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  Speaker 1: has remained that the strong point consumer spending, it has
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  Speaker 1: held up reasonably well. But the UK still runder rather
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  Speaker 1: large current account deficit which tends to be funded by
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  Speaker 1: mainland Europe and you know foreign fig multinationals, particularly with
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  Speaker 1: capital coupital flows into the UK. And again the concerns
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  Speaker 1: around brig eggs at et cetera, you know, might bring
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  Speaker 1: in the question and the continuation of these flows, and
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  Speaker 1: I guess in that context currently mentioned today that that
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  Speaker 1: one of the one of what what he felt was
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  Speaker 1: one of the larger negatives associated with with a vote
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  Speaker 1: to leave would be that we would have a situation
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  Speaker 1: where Sterling would weaken quite materially, and given Sterling its
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  Speaker 1: already weakened significantly in the last few weeks, um would
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  Speaker 1: excuse me over the last few two to three months,
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  Speaker 1: and that would be something I think to be avoided
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  Speaker 1: from from the Bank of England's point of view, Well,
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  Speaker 1: the Prime Minister of the UK, Prime Minister David Cameron,
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  Speaker 1: I mean he has worked through a renegotiation of Britain's
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  Speaker 1: relationship with the European Union, correct, I mean he did, yeah,
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  Speaker 1: And I think and and to be honest with you him,
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  Speaker 1: I like the book He's over here if you if
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  Speaker 1: you're looking for odds on on the referendum, and the
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  Speaker 1: bookies are about seventy five percent, stay go. And I
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  Speaker 1: always tend to trust and the bookmakers before I trust
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  Speaker 1: the opinion posed. And I think that that the broader
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  Speaker 1: UK population of maybe appreciating a little bit more warned
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  Speaker 1: what Cameron was they able to achieve in terms of
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  Speaker 1: renegotiating the overall their overall relationship with Europe, but also
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  Speaker 1: as well maybe some of the downside risks associated with leaving.
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  Speaker 1: And I think when I spoke with you in March,
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  Speaker 1: we talked a little bit about some Sterling strength, and
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  Speaker 1: we have noticed Sterling over the last particularly over the
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  Speaker 1: last three or four weeks, begin to trengthen a little
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  Speaker 1: bit now, particularly against the euro coming back from above
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  Speaker 1: eight down towards the seventy seven seventy eight area. And
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  Speaker 1: at our base case, would would would remain that the
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  Speaker 1: likelihood is that it's going to be a stay, a
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  Speaker 1: vote to stay, and that you know, like the US,
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  Speaker 1: the the UK, if we can get past this, will
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  Speaker 1: probably re accelerate in the second half of the year.
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  Speaker 1: And to be honest again Carney, Carney would have been
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  Speaker 1: highlighting that that that that that a vote to stay
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  Speaker 1: and and and no shock to the UK economy should
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  Speaker 1: lead to you know, back the trend growth at some
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  Speaker 1: point either later this year or in the first quarter
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  Speaker 1: of next year, which would probably have a situation with
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  Speaker 1: the with the Bank of England will probably move on
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  Speaker 1: interest rates and towards the first the end of the
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  Speaker 1: first quarter of next year, maybe into the second quarter,
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  Speaker 1: with a vote, let's say to stay in the European
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  Speaker 1: Union on June the twenty three, at that national referendum
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  Speaker 1: in the United Kingdom. If the vote is to stay,
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  Speaker 1: will that change the carr of the current Conservative Tory government.
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  Speaker 1: Um No, where I don't think certainly often the short
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  Speaker 1: term and it would certainly it would and certainly strengthen
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  Speaker 1: Cameron's position as Prime Minister. And you know there would
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  Speaker 1: be certainly that think the's three or four prominent cabinet
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  Speaker 1: members who are looking forward to leave. Um. I would
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  Speaker 1: what tends to happen in these situations is there have
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  Speaker 1: been a bit of time, will pass and assuming they
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  Speaker 1: do vote to say I would imagine Cameron Cameron will
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  Speaker 1: do some sort of cabinet reshuffle and that might We've
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  Speaker 1: got to leave it there. Karen Mohall, he is the
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  Speaker 1: Chief investment Officer at the Dublin based Global Reach Securities.
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  Speaker 1: On the United Kingdom and the referendum for the European
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  Speaker 1: Union coming up on taking stock, will be speaking with
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  Speaker 1: David Novak. He is the founder of Oh Great One,
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  Speaker 1: Young Brands we've got details on his new book and
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  Speaker 1: recognizing employees