Transcript: Nightly Business Report – June 24, 2016

NBR-ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.

(BEGIN VIDEO CLIP)

DAVID CAMERON, BRITISH PRIME MINISTER: The British people have voted to leave the European Union and their will must be respected.

BORIS JOHNSON, LEAVE CAMPAIGN: I believe we now have a glorious opportunity.

UNIDENTIFIED FEMALE: I would go back to the polling station and vote to stay, simply because this morning, the reality is actually hitting in.

(END VIDEO CLIP)

SHARON EPPERSON, NIGHTLY BUSINESS REPORT ANCHOR: A new world. Stocks plunged, investors stunned, the future of Europe and the global economy now uncertain.

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: What Britain`s historic vote means for your investments and your money tonight on NIGHTLY BUSINESS REPORT for Friday, June 24th.

EPPERSON: Good evening. I`m Sharon Epperson, in tonight for Sue Herera.

GRIFFETH: And I`m Bill Griffeth, in tonight for Tyler Mathisen, coming to you this evening from the New York Stock Exchange where stocks were battered today by the United Kingdom`s unprecedented decision to leave the European Union.

Government bond yields plunged today. Oil prices cratered. The financial sector especially had its worst day since 2011 as the global markets entered a tailspin. When all was said and done, the Dow Jones Industrial Average lost 611 points, closed at 17,399, its eighth largest point loss ever, by the way. The NASDAQ fell by more than 200 points. And the S&P 500 dropped 76. The S&P now negative for the year, Sharon.

EPPERSON: We have three reports tonight from around the world. And we`re going to start with Wilfred Frost in London.

(BEGIN VIDEOTAPE)

WILFRED FROST, NIGHTLY BUSINESS REPORT CORRESPONDENT: Britain has voted to leave the European Union. The final results, 52 percent to leave, 48 percent to remain. A surprise outcome on almost any time horizon especially compared to 24 hours ago, when pollsters, betting markets and financial markets were all united in expected a vote to remain.

The results therefore this morning unsurprisingly tumultuous, the pound briefly hitting a 30-year low. European equity markets closing sharply lower, as did U.S. equity markets. The Dow down some 610 points.

The reaction in financial markets unequivocally negative. For people on the streets, it was more mixed.

UNIDENTIFIED FEMALE: I think it`s a very, very sad and stark thing. Not just for Britain but for humanity in general. It`s just unwound many, many decades of hard work by a lot of people, not just in the U.K. but all over Europe.

UNIDENTIFIED MALE: It`s the vote for democracy, it`s a vote for freedom. And I think it`s going to have huge implications right the way across Europe.

UNIDENTIFIED MALE: I don`t think it affects us too much to be honest with you. I think the euro is falling altogether, I think we`re better off without it, to be fair. I think a lot more other European countries will follow suit.

UNIDENTIFIED MALE: I just worry that there`s going to be a lot of anger and division in the months and the years ahead.

UNIDENTIFIED MALE: We have referendums in place for a reason like this. That`s why — I think look forward and hope for the best.

FROST: As for politicians, a big surprise for the British Prime Minister David Cameron who delivered the referendum in the first place. He has been forced to resign but will stay in his post until the autumn.

A massive vote for the future of the United Kingdom and the European Union as well with repercussions around the world.

For NIGHTLY BUSINESS REPORT here in London, I`m Wilfred Frost.

(END VIDEOTAPE)

EPPERSON: And now, we head over to the capital of European Union, Brussels, and a report from Julia Chatterley.

(BEGIN VIDEOTAPE)

JULIA CHATTERLEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: So, it turned into a beautiful afternoon here in Brussels in the heart of Europe. But I think that belies the underlying shock, the underlying trauma of the results of this U.K. vote. I don`t think anybody here really expected U.K. voters to decide to leave the E.U.

And I think that message was clear when Angela Merkel, the chancellor of Germany, spoke earlier. She said that she deeply regrets U.K. voters` decisions, but more importantly, I think, she said we need to assess the situation calmly and not make any instant decisions. I think that`s very important and forecast that with what we got from some of the leaders of the E.U. institutions.

Jean Claude-Juncker, the commission president, maintaining this line, “out is out and there will be no renegotiation.”

JEAN CLAUDE-JUNCKER, EU COMMISSION PRESIDENT: We stand ready to launch negotiation swiftly, swiftly, with U.K. We got terms and conditions of its withdrawal from the European Union.

CHATTERLEY: I think you could make the point actually that he perhaps wasn`t talking as much to the U.K. as he was to other E.U. nations and those with populist parties that perhaps could look at this vote and say, hey, why don`t we talk about having our own referendum on E.U. membership?

Then again, guys, you know, you look at the moves that he saw in the market and perhaps that`s enough of a pause for thought for some of these countries, particularly the moods in the eurozone banks, given what we know, the eurozone economy still struggling with high debt and the banks still need work.

For now, we wait and see what happens as far as future negotiations between the U.K. and the E.U.

For NIGHTLY BUSINESS REPORT, I`m Julia Chatterly in Brussels.

(END VIDEOTAPE)

EPPERSON: Finally, reaction overnight in Beijing.

Eunice Yoon reports.

(BEGIN VIDEOTAPE)

EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Investors in Asia were caught off guard by the Brexit outcome. Tokyo was the biggest casualty, the Nikkei dropped by nearly 8 percent as investors scrambled into safe haven assets, pushing up the yen, which in turn hurt exporter stocks. Shanghai suffered less because it`s a largely isolated market.

Throughout the region, policymakers are trying to calm the markets. In Japan the finance minister said the government would make sure the jittery yen movements don`t continue, though he stopped short of talking about an intervention. In China, where the yuan hit a five-year low, concerns are growing that the yuan could face further pressure from a stronger dollar. The stroll bank said it aimed to stabilize the exchange rate what they called a reasonable and balanced level.

Beijing officials said they were hoping for calmer times.

HUA CHUNYING, CHINA MINISTRY OF FOREIGN AFFAIRS: We hope that the U.K. and Europe can reach a consensus after relevant negotiations as soon as possible.

YOON: Also in China, I managed to catch up with the Indian finance minister who said he believed that the impact of Brexit on the markets would be short-lived.

ARUN JAITLEY, INDIA`S FINANCE MINISTER: As the situation proceeds further, it will settle down. After all, it`s going to be the same U.K. and the same European Union. Except that you`ll have to treat with them separately.

YOON: Research firm Capital Economics points out experts to the U.K. are equivalent to 0.7 percent of GDP for the region as a whole. Cambodia, Vietnam, and Hong Kong could be affected but the firm says otherwise the impact on Asia`s economy because of Brexit could be limited.

For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.

(END VIDEOTAPE)

GRIFFETH: So, after today`s steep plunge in the stock markets, what happens next?

Bob Pisani takes a look for us tonight.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: We ended near the lows for the day on the biggest volume day of the year. Most large stocks were down 3 percent or more. But it could have been worse. The rebounds in the Russell Indices occurred at the close but it was orderly and it did not appear to impact stock prices.

All right. So, what`s next? We`re back where we`ve been many times on either side of 2,150 in the S&P 500. We`ve pivoted in and out of that point for over a year.

The key question for investors is, what`s the impact on earnings? Many big global companies get 20 percent or more of their sales from Europe.

There`s three areas of potential impact that`s concerning investors today. First, an economic slow-down could reduce capital spending as companies simply buy less technology, buy less resources, buy less office supplies. Second, lower consumer spending over there might hurt consumer stocks like retailers, for example. Finally, a stronger dollar might reduce commodity prices and reduce earnings for energy, materials, and even big global industrials.

Most analysts believe that earnings will turn positive in the second half of the year as stable oil helps energy companies and the slowly improving U.S. economy helps boost sales. But a slower Europe could turn a positive second half scenario into a negative scenario. And no wonder, there was a sell-off.

For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.

(END VIDEOTAPE)

EPPERSON: There is so much to talk about now.

Let`s turn to our two guests for more on what the U.K. vote to leave the European Union will mean for the U.S. stock market in the days and weeks ahead.

We have financial journalist Ron Insana and John Manly, chief investment strategist at Wells Fargo (NYSE:WFC).

Thank you both for being here.

Ron, let me start you. When you look at what happened today, big down day, but for the week domestic and foreign stocks not as badly hit. Some financial advisers saying maybe for long-term investors this is not as much of an issue.

Are they being overly optimistic, as they were when they thought we`re going to have a remain vote at the end of the day?

RON INSANA, FINANCIAL JOURNALIST: Well, that was part of the problem. The reason the market weekly did so well is that investors bought shares of European stocks and bought shares in the U.S. in anticipation that the U.K. would stay. So, you had a run-up in the market, then a big drop. So when you net it out it wasn`t as cataclysmic as today would suggest.

I don`t think this is going to be over as soon, Sharon, as some others might. This is a long-term process that the U.K. has begun. It could lead to further unraveling of the European Union. I think there`s a lot of risk out there — more selling to come. I don`t think we`ve hit bottom yet.

But if you truly do have a long term horizon, when you`re talking 10, 20 years, you`re going to find stocks that you like at bargain prices and so, you can go ahead and buy those. But this is still going to be a market event for some time to come.

EPPERSON: Yes.

GRIFFETH: John, what do you think? I mean, plenty of individual investors have to be asking themselves, what do I do now? Should I buy this dip as was popular the last several years since the market bottom in 2009? Would you be buying this dip?

JOHN MANLEY, WELLS FARGO FUNDS CHIEF INVESTMENT STRATEGIST: Yes, I was with Ron all the way until he got to 10 to 20 years, I don`t think it`s going to take that long.

I think what we have to go through in the next several weeks is an adjustment. The market sort of got sucker punched. We thought it was going to be OK. It looked like it was going to be OK, and all of a sudden, it`s not OK. So we have to adjust to that. We still don`t know what exactly is going to happen. We don`t know what form it`s going to take.

One of the big positives is that the market is so cranky. We have a way of acting up when we don`t like things, so we definitely pass along the message. I remember that happened with TARP, and I have a feeling everyone`s going to be at the top of their game as they try to negotiate how the U.K. and E.U. interact.

HERERA: John, a lot of investors want some specifics. We got great many notes today from financial advisers and investment strategists saying, broader diversification, adequate cash reserves, bond reserves, you`ll be fine. What does that mean exactly? How do you diversify in light of this?

MANLEY: Well, I`m not so sure there`s any way you can diversify around this. It`s a surprise. The future sometimes surprises us. Many times you don`t have to predict the future to do well in the stock market. This is one time when you had to. So, we adjust, we react, we let the market settle. The market will settle. It has a way of taking care of itself.

Corporations, good corporations, the ones you want to own long-term, they`re very good at adjusting. Governments can have all sorts of agreements between or amongst each other as to how they trade, and I don`t think that`s been taken into account. So, let it settle, look for opportunities, find things you want to buy, when they hit the points, if they hit the points, take advantage of it.

GRIFFETH: Ron, one standout investment that did very well today was gold. I mean, a lot of people can`t decide whether that`s a risk asset anymore or a hedge against inflation or geopolitical concerns. Would you be looking to gold right now?

INSANA: I think — gold, from a technical perspective, first hit a target that I think a lot of people were watching, which is $1,315 an ounce. In dollar terms, if the dollar continues to appreciate, I`d be loathed to buy gold. I`d be buying other currencies.

If you`re a British investor, you might want to be buying gold. If there`s any risk that the European Union dissolves and we start to see individual currencies popping up on the continent, they`re going to want to buy gold as a hedge as well.

I think in today`s action, this is really a response to not only the uncertainty that was created from this event but you have negative interest rates around the world that make the cost of owning gold considerably less than it`s been in quite some time. And so, in that regard, it remains I think relatively attractive.

EPPERSON: All right. We thank you, Ron Insana and John Manley with Wells Fargo (NYSE:WFC), more to come for sure.

GRIFFETH: In the meantime, the Federal Reserve says it is prepared to add dollar liquidity in the global financial markets if it is needed. And the U.K. vote will almost certainly change the central bank`s thinking on rate hikes in the future.

Steve Liesman has more for us tonight.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Brexit vote having profound effect on the outlook for U.S. economic growth and interest rate policy from the Federal Reserve. A Fed that was seen hiking in July or September now seen on hold until at least the fall. Markets are now pricing and even a small chance of the Fed`s next move could be a rate cut.

Around the world, there`s even speculation other central banks might look for ways to stimulate their economies. The reason for the change in the U.S. is that the growth outlook now being revised downward. Wall Street economists cut their forecast for U.S. growth in the wake of the Brexit vote. They pointed to a stronger dollar hurting U.S. exports and moving the Fed further away from its 2 percent inflation goal.

A big hit to the economy could come from a confidence shock point of concern that Brexit might be the leading edge of more departures from the European Union. Businesses could be less likely to hire and invest. Consumers, they could be less likely to spend. It will be months before the Fed can gauge the magnitude of these effects. So, the Fed should be on hold until the considerable fallout of the historic Brexit vote can be counted.

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

EPPERSON: One of the most immediate effects on Americans is the change in mortgage rates. As investors seek safety in government bonds, yields fall and mortgage rates follow.

As Diana Olick reports, it`s a bright spot, at least for homeowners and buyers.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Before most Americans got out of their beds this morning, home ownership got a little bit cheaper thanks to Brexit. As the bond yields that mortgage rates follow fell.

MAT ISHBIA, UNITED WHOLESALE MORTGAGE: From the mortgage side, it`s very positive. For consumers and lenders, they`re going to take advantage as well. They`re going to be very busy. Supply and demand, you know, obviously, will be happening here.

OLICK: The average rate on the popular 30-year fixed mortgage which was already lower than a year ago fell further. These low rates contributed to stronger spring sales as buyers faced higher prices. This was an unexpected boost as most thought rates would move high where the Federal Reserve raised its rates at the end of last year.

Now even lower rates could spur more refinances. Thousands of borrowers gained significant home equity this year, thanks to rising home values and they may opt to tap it.

Lower rates certainly don`t favor lenders but they can`t exactly turn away from their borrowers. After all, lenders have to lend in order to profit.

RICK SHARGA, TEN-X: The more likely scenario is that what we`ll see is more and more aversion to risk in the loans they do make. So I think we`ll continue to see lending. I think we`ll probably see more lending in the mortgage industry by non-bank lenders than by the retail banks.

OLICK: A trend that is already well under way.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.

(END VIDEOTAPE)

GRIFFETH: And still ahead, an intriguing question being asked today. Will America follow Britain in November?

(MUSIC)

EPPERSON: Donald Trump was in Scotland for a business trip to one of his golf courses today, and while he was there the presumptive Republican presidential nominee praised the dramatic rejection of the political establishment in Britain. And he compared it to his own rise in U.S. politics.

Hadley Gamble was there.

(BEGIN VIDEOTAPE)

HADLEY GAMBLE, NIGHTLY BUSINESS REPORT CORRESPONDENT: With the U.K.`s decision to leave the E.U. roiling global markets and leaving governments in turmoil, Donald Trump had a clear message for the people of the U.K. — Brexit, he says, is great.

DONALD TRUMP, PRESUMPTIVE REPUBLICAN PRESIDENTIAL NOMINEE: I love to see people take their country back. And that`s really what`s happening in the United States. And I think you see that. And that`s what`s happening in many other places in the world. They`re tired of it. They want to take their countries back.

GAMBLE: Arriving here in Scotland for the reopening of his Turnberry golf resort, Mr. Trump didn`t seem that worried how Brexit is going to impact global markets or even his own business.

TRUMP: Look, if the pound goes down, they`re going to do more business. You know, when the pound goes down, more people are coming to Turnberry. The pound has gone down and let`s see what the impact is. I think places like Scotland, England, different places in great Britain, I think you`re going to see a lot of activity.

GAMBLE: Aside from questions about just how this is going to impact the global economy, there are geopolitical concerns as well. One of which of course is just how Brexit is going to impact America`s relationship with the European Union and how that`s going to impact the situation with Russia.

TRUMP: I know how he`s been scorned by certain — to a certain extent. Certainly, he`s not a person that likes our president very much and our president doesn`t like him very much. He said some very nice things about me. I think he probably is somewhat of a beneficiary.

GAMBLE: Now, while this was the first trip abroad for the Republican presumptive nominee, he said this wasn`t about politics, it was all about business. But that didn`t keep him from taking political pot shots at the president and Hillary Clinton.

TRUMP: He came in and really tried to convince people to stay. And I thought it was inappropriate. And then she doubled down and did the same thing. And obviously for the 219th time, they were wrong.

GAMBLE: For NIGHTLY BUSINESS REPORT, in Ayrshire, Scotland, I`m Hadley Gamble.

(END VIDEOTAPE)

GRIFFETH: You know, some say that Britain`s rejection of the European Union and the political establishment could bode well for Donald Trump`s presidential campaign.

Eamon Javers is following that story from Washington.

And, Eamon, Trump says the exit vote is a model for his campaign. How do you think this plays into his chances this November?

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, look, obviously, Donald Trump from the clips you saw there thinks this plays very well into his chances in November. He is in many ways appealing to a similar constituency here in the United States — an anti-free trade, anti-immigration constituency that`s worried about the future of their country, fearing this immigration push that we`ve seen in the wake of is terrorist attacks in Brussels and Paris — this sort of fear factor that Donald Trump has based his campaign on.

That may play out in November here in the United States. The question is, are the political dynamics here as similar to what they are in England as Donald Trump thinks they are?

EPPERSON: President Obama also spoke today about the U.K. vote. What did he say?

JAVERS: Well, the president said that he expects an orderly transition. He called David Cameron today. He also called Angela Merkel in Germany.

The president sounded a little bit disappointed, a little bit downbeat in his remarks today. Obviously, to some extent this is a personal rebuke for Obama as well because as Trump just pointed out in that clip, you know, the president did go to England, and he did campaign for the remain side, he wrote an op-ed in “The London Telegraph” on April 23rd urging British voters to vote to stay inside the European Union, praising the European Union as something that`s brought stability and peace for a generation to Europe.

That side was trounced in the vote. So the president feels the sting today.

GRIFFETH: Eamon Javers with the view from Washington tonight — thanks, Eamon.

JAVERS: You bet.

EPPERSON: Finish Line sprints higher on a day where seemingly everything else was red. And that`s where we begin “Market Focus.”

Earnings at the athletic shoe retailer beat estimates despite dropping 30 percent. But revenue rose thanks to what the CEO called explosive growth in the company`s Adidas business. Shares of Finish Line soared over 21 percent to $20.45.

Analysts at BRG are bearish on AT&T (NYSE:T). The firm downgraded its rating on the telecommunications giant to neutral from buy saying the company is fundamentally healthy but it doesn`t see much more room for shares to run. AT&T (NYSE:T) down nearly 1 percent to $41.52.

GRIFFETH: Meantime, Medtronic (NYSE:MDT) is raising its quarterly dividend by 13 percent to 43 cents per share. The yield on that stock is now 1.8 percent. And this hike marks the 39th street year that the medical technology company has indeed raised its dividend. Shares of Medtronic (NYSE:MDT) fell nearly 3 percent with the rest of the market today to close at 83.28.

And a Delaware judge says that Energy Transfer Equity (NYSE:ETE) can legally end its $38 billion merger agreement with rival Williams Companies (NYSE:WMB). ETE entered that takeover talks with Williams over a year ago but cited a tax problem in March that would prohibit it from finalizing the deal. Williams is expected to appeal this latest ruling. Shares of Williams down 2 percent closing at $21.29. Energy Transfer shares fell more than 3 percent to close at $13.83.

EPPERSON: And coming up, from newer retirement accounts to other investments, how can you protect your money from the Brexit fallout?

(MUSIC)

GRIFFETH: Every Friday, our market monitor guest recommends stocks to buy. Tonight in light of the news, though, you can find Mike Bailey with FB Capital Partner Stocks. His picks are permanently on our website, NBR.com. He calls them three ideas for an uncertain market right now — Sharon.

EPPERSON: And now, Bill, so what will all this uncertainty about the future of Europe and the global economy mean for you and your money?

Our next guest manages money for individual investors. He`s Tim Maurer, director of personal finance at BAM Alliance.

And, Tim, it`s so good to have you on the program.

One of the things that you`ve brought up is it`s very important for people to understand what this Brexit vote really means because 48 hours ago many folks probably didn`t think it meant anything for them. So now they see the headline. What should they do?

TIM MAURER, BAM ALLIANCE DIR., PERSONAL FINANCE: You`re absolutely right, Sharon. Being educated on whatever it is that`s happening, that`s having an impact on the market, will absolutely decrease your stress, because one of the things you will find as you dig into this is, is this is the type of political event that is going to happen cyclically, over and over and over again. It always does and often it has impact on the market. But, fortunately for most retirees or future retirees, it shouldn`t have much of an impact on them personally.

GRIFFETH: You know, it`s funny, I had a friend last night message me. He recently retired. He`s getting income from his 401(k) plan and he`s very worried this could impact that. You seem to be suggesting they should be not concerned.

But what do you say to those analysts who say this is going to drag on, this problem, for a few years now?

MAURER: Well, here`s what I suggest you tell your friend. If that individual has a good diversified portfolio, I`m sure he does have some exposure to equities because indeed, over time that`s going to help him outpace inflation. But it`s not the equities that he should be looking for today`s income from. That should be provided by his fixed income exposure, his cash. The equities are what is going to provide him with income many years in the future.

So I try and help retirees look at it. If somebody`s in retirement, I totally understand that stress. Look at the fixed income portion of your portfolio as what`s providing you income today and the equity portion of your portfolio, what`s going to provide you with income in the future.

EPPERSON: What about those who are putting money into a 401(k) or an IRA? It`s now the time to take that money out or put more money in, and why?

MAURER: Well, ultimately, you`re going to put the same amount in regardless, Sharon. By all means, if this motivates someone to put more in their retirement account, I`m all for it. But I`ll tell you this much, when it comes to people who are going to be retiring in the future, by the time you actually need this money, you won`t even remember the term “Brexit.”

GRIFFETH: Finally, I keep asking people. We see what gold did. It`s going to get people`s attention. Do you put gold in that diversified portfolio you`ve been talking about?

MAURER: I don`t mind seeing a tiny bit in precious metals but the truth is gold is not as much of an investment as it is a pure commodity. You`re going to see it go up on a day like today. Any time the fear factor goes up, gold may go with it. But at best, gold is really a hedge. I don`t recommend it as a long-term investment.

EPPERSON: All right, always sage advice from Tim Maurer with BAM Alliance — thank you.

MAURER: Thank you.

GRIFFETH: And before we go, here`s another look at the post-Brexit sell-off on Wall Street this Friday. The Dow lost 611 points today. That`s about the low for the session. The NASDAQ fell by 202 points. And the S&P 500 dropped by 76. The S&P, by the way, is now negative for the year.

EPPERSON: And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sharon Epperson. Thanks so much for watching.

GRIFFETH: And I`m Bill Griffeth. Have a great weekend, everybody. We`ll see you again on Monday.

END

Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. The program is transcribed by CQRC Transcriptions, LLC. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Nightly Business Report, or CNBC, Inc. Information presented on Nightly Business Report is not and should not be considered as investment advice. (c) 2016 CNBC, Inc.

 

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