Passport’s Burbank Expects ECB to Reduce Rates Next Week

John Burbank, founder of $3.4 billion Passport Capital LLC, expects the European Central Bank to cut interest rates when it meets on July 5.

“The last thing the EU needs is a stronger euro,” said Burbank, speaking today on Bloomberg Television’s “Lunch Money” of his reason for the prediction. “I like the dollar in a deflationary world.”

The euro surged about 2 percent against the U.S. dollar, the most this year, after European Union leaders eased terms on loans to Spanish banks. It traded at $1.2662 at 1:30 p.m. in New York after opening at $1.2443.

The central bank probably will lower the benchmark rate to 0.75 percent from 1 percent next week, according to the median estimate in a Bloomberg survey of economists.

Burbank, 48, said the earnings of U.S. companies will be “pretty bad” in the second quarter with shortfalls “habitual,” which the U.S. stock market isn’t discounting. The Standard & Poor’s 500 Index jumped about 2 percent today.

“We’ve been predicting a bear market for the last six months,” said the hedge-fund manager, speaking from his offices in San Francisco. Burbank’s main fund rose 20 percent in 2012 through May, investors said earlier this month.

Burbank said the best U.S. stocks to own will be large- capitalization companies that pay high dividends. He’s betting on declines for companies, such as commodities producers, that depend on global growth.

To contact the reporters on this story: Katherine Burton in New York at kburton@bloomberg.net; Stephanie Ruhle in New York at sruhle2@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net