tv Bloomberg Go Bloomberg June 13, 2016 7:00am-10:01am EDT
>> terror in orlando. a gun man is responsible for the deadliest mass shooting in modern u.s. history. we will discuss what the tragedy means for presumptive candidates trump and clinton. >> a very warm welcome to bloomberg . i am jonathan ferro alongside david westin. for the next days, events on the table. guests thatve some we will be marching -- watching closely. >> we will have interviews with george osborne. brexit andgh in on
much more. daniel your in will join us and find out where he things oil is headed. alex hill is here and that means one thing. oil and copper. down by a 10, the underperformance on the dax in frankfurt down by almost 138 points. the losses in asia as well, with shanghai having its biggest drop. to the bond market, yields on treasuries grind low on .60%. -- .62%. ono sterling approaching that particular pair. we will be over those for you. let's get you up to speed on the top stories and check in with the bloomberg team. is on the markets.
megan murphy in washington on the latest reaction from clinton and trump on the worst mass shooting in u.s. history. with begin with brexit growing anxiety over the u.k. exiting the european union. anna edwards is live. lead in one poll for leave and it is looking to close to call. >> 10 days to go until we get to the eu referendum in the u.k.. the pound is under pressure. .en and gold surging the pound down against the yen and the dollar. by the most in nearly three years according to the latest data and it is not just in the currency markets.
european stocks hitting two-month lows. mentioned they -- the leave camp ahead. there is a great deal of confusion, even the polling companies don't know exactly what the polls are telling them and they cannot call the results here. many people are looking for the betting markets. that is the implied probability of a brexit. all of the betting probabilities from the market-- some people don't like to talk about these -- what many investors want to because they say with the polls in such disarray they like to follow that money. with european equities underperforming, that will be the discussion point later. as far as the campaign is concerned, rolling out gordon brown. what is the significance of that? ex-u.k. prime--
minister was credited with keeping the u.k. together -- at least in part -- with his at the nightratory of the independence referendum. they are willing him out again. the labour party have got him speaking out today. the leave camp have been accusing the remain camp but once again scaring people into voting, saying the latest campaign is just fear on steroids. londonn: anna edwards in . thank you. brexit concerns also impacting stocks in egypt. let's check in with the latest. that is not apparent -- not a comparison you want to be making. >> in japan, we are seeing a
different wave. we saw a big concern. negative exports in japan brought down japanese stock. course -- we have picked are links to british stocks. there are worries that there might be a brexit spillover in hong kong. taken together, it is a soggy mood on the back of brexit. we need a central bank governor. it could be market turmoil if u.k. was to leave the european union. fears are starting to mount about the impact of that vote. >> we do see all the chinese data that came out overnight, you had resale opening up as well. it was really that asset investment that got a lot of people concerned. factories have been holding
up, that adds to stabilization, but when you look at the investment spending, you see the private sector doesn't want to spend at the moment. they are worried about falling profits. they are uneasy about an economic backdrop. government will have to step in and increase spending and that is at a time when the government is trying to keep a debtn that in china -- on in china. the government still has a lot of work to do. >> thanks very much. chief asia economics correspondent. david: now the latest reaction of the worst mass shooting in u.s. history. megan murphy joins us on this very sad story -- the latest details. what are investigators learning? investigators are continuing
to sift through the evidence, sift through this man -- omar who shot andmateen killed 50 people in orlando. they are trying to figure out what were the motivations for the attack. people this was what call and isis inspired attack. this is a man who did phone 911 and pledge allegiance to isis in the moment before the attack but investigators are still yet to conclude just how extensive those ties were. or the issue of another lone wolf attack that is going to become self radicalized. a very said day. we are waiting for a press conference from the fb i. this man was known to authorities. he had twice been looked at by the fbi. first due to threats he made in his workplace and also connections to other self radicalized americans.
the fbi will have to answer questions over that. we expect many more details to come this morning. david:+++ entire country. we can't get too far away from a presidential election year. what was the immediate reaction? you saw the contrast between hillary clinton and donald trump. hillary clinton calling for closer collaboration with our allies. how we can reform our laws so these weapons cannot get in the hands of people who are likely to carry out these attacks. donald trump calling for the president's resignation over his failure to call this radical islamic terrorism. a real war of words between them . donald trump will be talking about banning muslims in this
country, taking a tougher line against radical terrorism. love lost between these candidates and you can expected to continue to be heated and ugly all day. thank you megan. now we go to julie hyman for stocks this morning. s.chief among them is g4 that is the company for whom as a securityrked guard in a retirement community. there are questions over the company's vetting. shares are down 6%. there have been questions about this company in the past. it failed to play -- to supply security guards for the olympics in london. that caused a crisis for that company in 2012. we will be watching the stock all day. we are watching the u.s. gunmakers today.
when we have had attacks in the past, you tend to see these stocks surge because there is the theory that there could be some kind of increased gun regulation on the backs of attacks like this but that has not necessarily come to pass but the stocks reacted this way. of course, the other market moving in that event is the causing a lot of trepidation around the globe in markets. we have seen bond yields fall and the ripple effect among european banks. large -- banco popolare falling. that is one of the groups performing the worst within european stocks. to get an update on headlines outside the business world. here is first word news. runner oscarmpic
pistorius faces up to 15 years in prison for killing his girlfriend. a hearing began today when the judge convicting him of manslaughter ordered to sentence him for murder instead. air france says it is able to get 80% of its flights in the air despite the strike by pilots. a fourth of the pilots have walked out because they have to work longer hours without more pay. french garbage collectors, railroad workers, and energy employees have also walk out because of new labor reform. bernie sanders will meet with his rival hillary clinton tomorrow night and clinton is the presumptive nominee and tomorrow is the last primary in washington dc. sanders is hoping to get some of his positions in the party that form. global news, 24 hours a day, powered by 2,400 journalists in 150 news bureaus around the world. i am shery ahn.
weighing on global markets but i think there are issues in china that are specific to china. the numbers that we saw -- stabilization but when we dig deeper, not very encouraging. that industrial production growth only being achieved through the application of heavy government stimulus. if that stimulus was withdrawn, we would see afar worst picture. i think people are realizing china is not going to be an engine for the global economy anytime soon. 6% growth is going to be sufficient to keep these domestic situations stable. however, it really cannot drive global economy down. much of the problem is the growing realization that there is a limit to what china can do to stimulate? problem.ot a big debt how much of that is the problem? >> you cannot supply more debt to make the problem better. you already have a problem with
the chinese banks. thealked about loans within banking sector, official numbers about 1.5%. there are a wide range of market estimates out there. it will be close to the 12%. are we going to see a banking crisis? probably not. that level of indebtedness and nonperforming loans within the banks is going to be a constraint on bro -- on growth. all of these concerns on the eve of a decision over whether to include chinese shares. how difficult is that? chinese ancludes shares you will see etf flows in chinese stocks. you will not see significant flows from active managers. they are relatively opaque. the better stocks are listed in the a chair market -- a chair
market.- a share the level of research on these companies -- i don't think you are going to see active managers looking at the a share market as a way to gain significant performance. it takes a long time to let those filter out. this is one of my favorite charts of the last couple of weeks. this charts the u.n. off-shore versus on for rate. the onshore rate is the blue line. it means the u.n. is getting weaker. the purple line is the shanghai composite. august.ivergence in we saw divergence in january. we are starting to see this pick up again and that leaves a lot of uncertainty in the market when you have this currency weakening. jonathan: let's start with the
spread. what is that telling you? >> offshore investors are not confident about the direction. there is a bet that china is going to pursue a week policy in order to keep that providing stimulus to the economy. it to export its capacity to the rest of the world in the form of steel and fuel experts as well as. the world is betting you will see a cheap policy from chinese. jonathan: you said it was a positive. a positive for who? i'm going to end up with money in that market. what want to be there? >> a lot of the a share market is not exposed to the primary sectors of the economy. a lot of the stocks are composed of domestic consumption. this is a very important point. people will over simple by the picture and look at it as one
block. economy, aan old state owned enterprise sector, a primary goods sector that is in very bad shape but you do have sectors within china that are doing very well. if you look at earnings growth, which isprise index predominantly state owned enterprises, the market is looking for negative earnings prices of around 6%. going into 2017, we will get 9% growth. that look at the coverage my company looks at, a lot of these companies are growing above 20%. the valuations are still very stretched but there are sectors exposed to retail and technology that are growing very well. >> you love that kind of growth in the u.s.. simon, you mentioned the capacity for excess exports from china. how long is the world going to
put up with that? >> world is not putting up with it now. >> 256% tax is now? >> it is coming in india and markets all over the world but it is something the world is going to have to live with. china is going to eliminate some capacity however there will still be over capacity. that is going to come into global markets. the question global governments have to ask is is this protectionism. toe than allowing companies ration by more cheaply. jonathan: the fed no longer looking so live. sayinga, everyone was that troubles around the corner with the chinese currency. if the fed stepping back a good thing? >> in terms of lower interest -- higher interest rates for china,
i think china is marching to its .wn to -- own tune it is a lack of confidence in the private sector. we saw that in the 3.6 global growth and domestic opportunities. dot the government needs to is to make hard decisions to close down overcapacity and take a more creative policies were driving growth than more debt. --id: simon are but is going simon arbuck is going to be staying with us. >> crew dropping since february. the vice president is going to be revealing where oil prices are heading next and why. shares of apple falling this morning.
>> this is bloomberg . we have apple down 1% in free markets. nikkei is coming out saying that iphone sales are expected to fall for the first time in 2018 according to a major supplier on iphone shipments. a conference later on today, which we will be definitely paying. head of the asian equity sales joining us now. when you have apple looking to china for growth, a lot of u.s. companies are looking for that as well. can they do that? because i think the
purchasing power of the chinese middle class is is growing rapidly. the iphone is an aspirational product that many chinese people want. the problem facing apple is that in china, you have enormous competition from an industry that is offering increasingly better products at a fraction of the price of the iphone. countries such as the u.s., the ecosystem apple offers is important. if you have a pc or an iphone it integrates. in china, that is not as important. the iphone and the smartphone is used in isolation. in china, peoples lives operate on we chat. alibaba. when apple offers you is not as compelling as it is elsewhere. will be an, china important market for apple but i think you are going to see
chinese brands take market share. >> thanks very much. good to see you. jonathan: coming up, is the oil rally losing energy. .ore from daniel yergen reveals to us what a brexit could mean for the british economy and its impact on the rest of the world. , the s&p 500 futures negative seven points. london's ftse down 7%. in the bond market, yields grounding down to new lows. get ready for the rio olympic games
by switching to xfinity x1. show me gymnastics. x1 lets you search by sport, watch nbc's highlights and catch every live event on your tv with nbc sports live extra. i'm getting ready. are you? x1 will change the way you experience nbcuniversal's coverage of the rio olympic games. call or go online today to switch to x1. jon: its risk aversion in the markets with european stocks a lower.
the underperformance on the prospect of a stronger swiss franc. markets, the dax is down by 1.2%. sterling is down by another half of 1%. look to dollar-year and today. a stronger japanese yen is appreciating against the dollar by about nine cents. yields are at all-time lows in the bond market. bunds to grind down to zero in the german market. brent is down by one full percentage point. alix: i love my crude oil in the morning.
outside of business, let's go to first work news. >> the fbi interviewed the shooter in the orlando shooting because of terrorism suspicions but they closed the investigation for lack of evidence. he is blamed for the worst mass shooting in history as 50 people killed and 53 wounded at the attack at a gay nightclub. he was killed in a shootout with police. he called 911 before the shooting to proclaim his allegiance to islamic state. vladimir putin and the european commission president may discuss a controversial natural gas pipeline project this week. they will meet at a conference in st. petersburg. russia could expand its gas outlook -- output to europe. at the tony awards, "hamilton" was the big winner.
tony's just short of the record. the presentation was dedicated to the orlando shooting victims. david: we will show you a press conference live from orlando, florida. rick scott is there and the mayor of orlando and the police chief and the fbi going over the tragic events over the weekend with 50 people shot dead in a nightclub and more than 50 were wented by a young man who in armed with an ar-15 and slaughtered these people after calling and pledging allegiance to islamic state. this is been tied to terrorism and obama has spoken out and this will consume the nations attention over the next couple of days. jon: in the bond market, this is the morning must read with tom keene.
this is a chart and the global has zero yields and zero problems. the returns on the global bond market this year, almost 5%. these bets start of the year on records that go back to the late 1990's. we are looking at a fixed income market that you would judge by the coupon you get but it's the capital returns so far that has dominated market sentiment. as you know, there is an immense amount of fear out there. thursday was incredibly nuanced as well as friday and my major message this morning is there is no let up inside you there are so many things moving on the bloomberg that francine has to remind me where german yields are.
ofs morning, there is a lot nuance within those bonds up yields down. has been a combination of the chase for capital gain on the backs of central banks and the idea that it will nth work so you price and lower inflation. the additional point was risk aversion. it is not all yields lower. spreads are wider in europe especially today. tom: everybody is talking about brexit that there is less discussion about the new hallmarks we saw friday. as you use my five weeks of vacation, terminal value was lowered. where are we heading with the data check? we don't know.
jon: everybody is scratching their heads on what is happening. the big question is, what constitutes a bond market bubble? tom: i don't have an answer to that but remember the storm eight months ago or so. it was the short of a lifetime. what is a right now? the german 10 year is two points. alix: talking about commodities, u.s. crude is falling to a three-week low and the producers are putting more oil rig's work
and production climbed last week it i spoke to harold hamm from continental resources, the largest shale producer in the country. >> i think $60 at the end of the year is conservative. 15% low on that. from washington is the ihs president. he said oil could hit $80 next year. what is your tart your -- your take? >> i think we are in recovery. oilave been looking to have over the second half of the year to orbit around $50. it has been accelerated by the disruptions in nigeria. the issue with a short-term issues is just that area production can come back. what if nigeria is not as bad as we think? how long-term will
these disruptions remain? was just in canada and it's already coming back pretty fast. canadian oilsands have been increasing and will continue to increase lovably adding another live hundred house in barrels by the end of this decade area nigeria is critical. when the president of note -- of nigeria came in, he cut off the payments to the military just to the militants. they responded by blowing up type lines -- pipelines. nigeria could get back to a better position because 70% of its budget comes from oil. rally, take had the a look at my terminal and i have u.s. production and we saw something pretty amazing with u.s. reduction moving up by 10,000 barrels per day.
rallies, ourthese producers responding? there are no people more responsive than the independent producers. describe u.s.now shale oil as a short cycle oil because it can responsive equity on like a five year oil project. david: what is the price point at which it responds? around $50 to see and people start to hedge and there is a lot of debt. harold hamm was saying that once you have $60, that's when you see the increases in dan. everybody is struggling that you have had such a egg hits. will these people -- had such a big hit.
you start to see u.s. supply going up again. we are down one million barrels per day in april of last year. harold said we will help our balance sheet right away. then you have to go in and finish the wells they have already drilled and then you get to add oil rigs. it's a slower timetable. talking about iran, it is producing more than was expected. is that because there oilfields are in better shape than we thought? >> it's a big question as to how much of this is oil that they had an inventory and how much of what was called iraqi oil was iranian oil coming to the market. they have come back aggressively.
there is no question they want to reclaim their position in the oil market. that gets you to a fundamental tension because saudi arabia and the other our producers don't want to give up market share to iran. context a geo critical to this weaker oil price we are seeing. for the iranians, will they get the investment that they want to ring into their fields. we hear that companies will be very cautious about making new commitments to iran. david: is that because of things like the u.s. restrictions? >> absolutely, one set of restrictions were removed that there is a large number of laws and executive actions that limit them and people are very cautious about u.s. sanctions. in the nuclear agreement, the ied sanctions could be appl again if iran violates them. alix: we are talking about
supply but demand is the question. it's great if shale can be price movement but it only produces five million barrels per day. what do we need to see to meet that strong demand? growth, itdemand will not happen with $50 and probably won't happen with $60. foreign investment to really get going, you probably need $70-$80. between now and the end of this decade, where looking at world oil demand to increase by five or $6 million per day. you need a lot of investment. you will not get it in this environment. two years from now, the oil market could look quite different than today. david: how big a factor is india? >> india is the big new player
on the demand side. in the first quarter, indian demand exceeded chinese demand the prime minister from india was in washington last week and energy was a big subject. he knows he needs energy to support his 9% economic growth area the global industry is looking to india as the next wrote story if they maintain economic growth rates. alix: it's kind of where china was a decade ago so it could be incredible. it is an analogy. chinese demand is about three times that of india but india is the fastest growing country in the world right now. if they remain on that track, we will see more focus because they will need more energy. alix: what is your outlook for m&a in the u.s.? there has been lots of bankruptcies.
will this be the year? >> many people have been waiting for that. it will be interesting if people are confident about $50 per barrel oil. not seeing super mergers we saw at the beginning of the century when oil prices were low. i think he blessed still waiting and we could be surprised tomorrow but the bid and ask have to be closed somewhat. natural gas seems to have rallied but's is struggling a bit now. can the rally keep going? >> it will be driven by what happens in terms of the weather. the natural gas supply is very large. summer, wea hot could see further strength to it area it's still a very different market than oil in terms of the overall response.
we recently read it our numbers on u.s. natural gas. we upped the recoverable resource to 50% at four dollars or under. in other words you still have a great deal of natural gas in north america. alix: great to see you and thank you very much. david: coming up, shares of apple are falling after it's reported that iphone sales will fall for the first time. investorook calm fears? later, the u.k. chancellor joins us and will reveal where he stands onbrexit and what the fallout will be. ♪
alix: this is "bloomberg . bank of america senior global economist michael hansen will be with us in the next hour. david: there is a press conference going on now in orlando, florida. this is the police chief speaking now and also rick scott, the governor and the mayor of orlando and the police chief and representatives of the fbi. we are learning that they have identified 48 of the 49 victims. the 50th person who was killed is the suspected killer who was shot during the gun battle overnight. this is the tragedy happening in orlando. president obama has spoken out on it and we heard him hillary
clinton and donald trump on the subject and there will be more coverage as we continue. apple shares are edging lower on the report from the nikkei that iphone sales have declined ahead of big at theements expected annual apple development conference in san francisco. great to have you with us. the report from the nikkei with reclining iphone sales, the market is reacting slightly ahead of the open. the iphone andve you have seen the negative affect not just from apple but other smartphone makers. eyes are on the developer conference. it's really about the software and the services which is what apple is focusing on. i think you are starting to see
the patience wearing thin. jon: the market's foes to some the hardware. when will investors take any real notice of of the software? until they have proven the software services is the bigger piece through innovation or acquisition, all eyes are on set timbre with the new i phone. you look down the road and that is the focus area they will start to see growth return and we are seeing headphones and the -- headwinds in the smartphone market. investors are getting tired of this. david: apple has been a hardware company so it's a take transition to go to software. the multiple is more attractive as a software company. do you know whether they have
made the decision to become a software company? hardware is their dna but you are seeing more focus on software and services. it's the value we are seeing on the software services where you see more customers focused. aboutem, it's coordinating the developer community. you look at watch and the other areas and that's what they are focused on. you,: just listening to and improvement in siri will not make me run out and get a new iphone. do they have anything else? >> streaming music to some has been afar, it rounding error. there is content on the tv side which is the shorter goal but it
comes down to hardware and the next iphone. it might make you stick to their ecosystem and not switch to the android phone. is that the play? >> samsung has narrowed the gap. it comes down to the hardware but now as hardware is less a differentiator, it comes down to the software and the ecosystem. alix: so it's hardware through software. this is the highway for them to the next big release. it comes down to the iphone6 that raised the bar and it's hard to navigate the waters since then. this is perhaps a defense of play? what is their offense of play? fair one of the most innovative tech companies we
have seen in modern times and there is focus on what's happening. when you look at the other technology out there and how it points to the content, you look at cloud and content and that is the holy grail and smart phones. david: thank you so much. coming up, the impact of record low yields across the world is not new but it taking -- it's picking up steam. ♪
japan is in white, germany is in u.k. is in white it debt -- is in purple. we talk about it being expensive, it's because people are paying the government in order to borrow. alix: it's not a new story but the superlative we get is more intense. looking at the ten-year treasury yield minus the s&p dividend yield, you have treasuries that are more expensive. if we can call up the second chart, this is the spread between the 10 year yield and the dividend yield on the is an peak 500. usually the 10 year yield is up historically. this goes back to 1970.
alix: why wouldn't a stock or bond investor buy stocks? not going to get the return and treasuries, why not keep buying stocks? julie: we talk about this being one of the most hated all markets in history but this could be one of the underpinnings for a bull. jon: that does it for the first hour and next up, the u.k. chancellor george osborne tells us he wants business to speak out over brexit concerns. ♪
are in territory. presidential candidates are focused on stopping terrorism after a mass shooting in florida. david: welcome to the second hour of "bloomberg ." with marketsoff looking pretty uneasy. we will have a huge interview coming up. alix: u.k. chancellor george osborne is joining us and will reveal where he stands on the brexit debate and what the fallout will be. jon: futures are lower.
a lot is piling up on mainland europe. the dax is down 127 points on the session. dollar-en , down by8/10 of 1%. approaching.80s pounds. wti is down one full percentage point. in with theireck bloomberg team for in-depth coverage of our top story. megan murphy is in washington with reaction on the worst mass shooting in u.s. history. we have just had the news conference in orlando. what did we learn?
gan: there wasn't a huge amount of new information. final count which was 49 victims and one shooter dead. heard details about how the police stopped of this and how had aat incursion that standoff for multiple hours in orlando and how going in, they believed saved more lives. in terms of what investigators are looking at is combing through everything about this man's life in history. rented a car to go to this nightclub and commit this tragedy. they are looking at exactly his leading to extremist groups. he called 911 and pledged allegiance to isis. this was a man who was known to u.s. authorities.
he had been the subject of two separate fbi investigations which did not come to charges of any kind. he was a security guard. they will be combing through everything. he could have been inspired by extremist propaganda or maybe had any links this was something more than a rogue attack. even in a tragedy of this evidently ahe fbi deadly had investigated this individual more than once. askingple already what went wrong with the fbi process? there will be questions about someone who was suspected woulding radical leanings manage to be able to purchase guns illegally. he did purchase guns illegally and there will be questions of
doubt whether we should have a system where people who have been subject to these investigations should be allowed to get their hands on assault weapons area you see this already roiling the 2016 campaign area we had hillary clinton calling for common sense gun reform including a ban on the kind of weapons we saw that can discharge so many magazines so quickly. we will see this contrast between her and donald trump. and how they would tackle this issue. how can we keep guns out of the hands of people who are likely to commit these crimes. david: thanks very much. guy johnson's live with the latest from the city of london on brexit.
a poll is sparking some fears? guy: the market help fairly comfortable that this was not going to happen. now the market is waking up. everybody is sitting on the edge of their seats. in most major asset classes, it's front and center. you saw what happened to sterling. the london market outperform the little bit which is logical. denominated in sterling, the value of sterling goes up and as a result, you can exclude the brexit risk for having an impact. maybe the outperformance is a currency occurrence.
sterling is taking it on the chin right now. it will be interesting to see how the rest of the week progresses. we have three new polls coming out tonight. it will be fascinating to see how the market parses that and we have the former prime minister stepping into the fray. who said we are going to join the single currency. he said we will not join the euro. he is stepping into the story and it will be fascinating. jon: let me bring in another voice. we spoke with a chancellor, george osborne. >> i am confident that written will vote to remain in the eu and we are here at the international festival of business in liverpool.
there will be investor concern as the country votes to quit the eu. it's important people understand that great britain is stronger being part of a big international single market as we are in part of the eu. >> despite that the kleins and polls, there seems to be uncertainty in the market based on brexit. is there a sense of complacency in the city? >> it's an important referendum where every vote counts. whatever the markets say in the end will be the decision of the british people. are concerned or businesses who are concerned or investors or concern about the prospect should speak up. british telecom done so and many other businesses have done so. this is not a moment for
businesses to sit it out. people should speak out about what they see as the risk of the opportunities it written remains. they said the pound would fall to its lowest in years. does that concern you or would that be good for the economy? >> the treachery -- the treasury impact onould have an inflation. there would be concern in financial markets. the real challenge for the country will be that great britain would be trading less and less productive. that would be reflected in the value of assets. i am confident the british people are aware of that economic risk and can see the
economic opportunity of remaining. we talk about the downside. if britain roads to remain in, uncertainty in the british economy and it will be the case that the u.k. is the both productive place to do business. yes, programs eventually will focus on the risk. there are massive opportunities. : one opportunity could be a weaker pound. i don't talk about the precise value of sterling but it's never a good thing for businesses to have an economy that's weaker where there are few people -- fewer people at work and trading last. that's not a good thing for any business. if you are an exporting business, there is uncertainty about the trading relationship country has with your key export markets.
the president of the european council was saying it would take two years to exit the eu but at least five years to negotiate new relationships with these key european markets for the u.k. i don't think any business will think this is a good thing for them. abouthere has been talk sending staff abroad in case of brexit. on june 23.entrated the risk is the single market of financial services which bit -- which britain benefits from enemies the u.k. is the headquarters for many companies want to trade into the eurozone. i don't want that to be put at risk. you had these big investors like jpmorgan making precisely this point. one of the great benefit opportunities in the eu and look at the upside, a british commissioner developing the
capital markets and britain's businesses and the london financial center and other financial centers are benefiting from that single market as it deepens. that's the big upside for financial services in the u.k. if we vote to remain. do you want to stay as chancellor regardless of the outcome? >> eyes serve at the request of the prime minister. this is a job where i have more to do and more to give. i want to make sure i'm using that time and energy to be holding up the british economy. i am focusing very strong on making sure the come -- the country remains. this is about the country's long-term economic future. that was george osborne,
the u.k. chancellor. we have heard this argument and we have had the business be vocal. he is urging businesses to speak out more. is that a mistake to keep beating his drum when the polls have now wrote? narrowed? what we have here is two sides of the dead date focusing on their message. makesay will cost jobs and people want to leave the eu. they will talk about sovereign sin immigration and neither side has an argument that works the it's way around area of
very hard to gauge the out come but what we should hear is more of the simple message that it's bad for the economy and bad for sovereignty. -- abt that will change of great deal. we will see what gordon brown has to say later. are so far into the process of the polls seem to be all over the place. beyond the argument, who are they trying to persuade? what are the key members of the voting public that they have to sway? most people have probably you up their minds arian
so far in 2016, the most going 1997.o some people say those chasing concern, what constitutes a bubble in the bond market? >> every time there is a rally in something, it's a bubble. bond yields are below two basis points and japan went to below -15 and here we are approaching 1/16. the issue is not whether or not there is a bubble. it's whether or not the fed actually moves and we move toward a flat to potentially inverted yield curve. ,istorically, the stock market it's not the level of interest
rates, it's the level of the yield curve. if it starts to get inverted or get really flat, that's trouble. the last time i was on, we talked about dollar-yen making its high. it was approaching $1.06 on may 3 and now we are approaching middle of june and july and we are but -- act below those levels. it could go to par. these are very interesting times. i would not say it's a wobble. the hard trade is always the right trade. it's more likely the top traders to buy u.s. bonds. david: an interesting time but also unprecedented. we have not had the central banks rick -- nearly this active. did that change the rules of the game? >> the rules of the game are always changing. we take little subsets and we look at the marketplace.
the major role is the shape of the yield curve and how do you find the central banks being active. we had the greatest intervention when we had ronald reagan. was that active or a one-time event? we are in unprecedented territory because of the massive international deflationary forces which are continuing and that the tug-of-war. central banks are trying to fight that repeatedly. monetary policy is defense and fiscal policies offense. we have no offense. they said no one is talking about copper. i have been talking about it for a week. this is fascinating. you've got copper versus oil with an intense move together. you think of it as a risk on trade. we have seen a huge divergence. the blue line's oil and the
white line is copper. look at the drop we have seen in copper. it was tremendous last 10 days. do you think this is fundamental becauseabout inventory someone wants to make a hot trade? prices move in the short run because of supply and demand. i don't know view you want to call it fundamental or not. aggregate demand is weak. is the oil rally real? that it could be $60 or $70. why cannot go back to 30? we have had a long-term decline in oil and then we had a rally. we had a rally at the exact same point last year and then we headed down again. oilink copper is leading and the rest of economically sensitive markets and are likely
to join copper to the downside. do you take top down deflation trade around this? individual commodity markets whether its soybeans on the weather or in the short run, you can have a supply shock and those are sensitive to you can have a rally in that market. repeatedlyn that over the course of this decline but if you step back and look at a five-year chart of soybeans, they are in the lower end of the range. if you look the last two months, holy cow, soybeans are off to the moon. that's not the way markets work. they don't go straight down or straight up. i'm always cognizant that the bearish case for everything is always easier to make them the bullish case.
i want to double check and be certain if i think things are going to go down. i don't see aggregate demand and i see zero fiscal policy and i see with happening in puerto rico and illinois and in greece. i always go back to that one line -- how do you solve the debt crisis by issuing more debt? alix: now you've got me depressed. jon: great to have you with us and thank you for your time. will takeet yellen center stage and will she give any hint on hiking rates? ♪
are we looking at $1300? >> i certainly think we have to be considering 1300. from the mayat it highs in the january 2015 highs and that could be a shortstop. brexit fears have played into this. since thek at gold april fomc minutes april 18, we traded down to $1200 and it has snapped back strong especially on the heels of the may employment report. the fed is out of the picture right now as far as gold pricing. there isn't a real expert asian how they will raise rates this year. i look at what is happening in europe. it's now a brexit trade. what will happen if they stay in or decide to leave? the ramifications of the other countries in the eu and maybe
side deals could get cut here. strong are the plays in gold? >> when>> you see gold up quickly, it tends to go down. a pop above $1310 in gold will energize us forward. if you take the fed out of the picture, $1400 by year end is not out of the alix: bastion. alix:thank you so much. reddish town is feeling the pain from the upcoming referendum on we will talk possible outcomes next on "bloomberg ." ♪
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in underperformance euro-denominated equity markets, not sterling. the pound is substantially weaker. strongerr pound, a yen. that is the story here. trading at one dollar 42 against the dollar. stockscommodity markets, are down one percentage point. we cling to a 50-handle on the session. in the bond market, it is all-time low yields. u.k. government yields grinding lower. to sleepait approaching 0, 10-year rate. "bloomberg " time for news -- david: time for news around the world. >> the f.b.i. has lowered the number of victims in the orlando shooting. saying 49 were killed
when a gunman burst into a gay nightclub and opened fire. all but one have been identified. omarding to authorities, mateen called 911 to claim allegiance to isis before opening fire. it is the worst mass shooting in u.s. history. oscar pistorius faces up to 15 years in prison for killing his model girlfriend. a hearing began today. the judge who originally convicted him of manslaughter has been ordered by south africa's supreme to sentence him for murder instead. air france says it is able to get 80% of its flights in the air despite the start pilots. about1/4 of the pilots have walked out because they have to work longer hours without more pay. french garbage collectors and railroad workers and energy employees have also walked out because of other disputes, including new labor reforms. global news 24 hours a day powered by our 2400 journalists
in more than 150 news bureaus around the world. i am shery ahn. alix: breaking news. microsoft is buying linkedin for $196 a share. the total deal is valued at $26.2 billion. this is an all-cash deal. jeff weiner will remain c.e.o. of linkedin. this is huge. microsoft buying linkedin for $196 a share. the stock has halted in premarket trading pending the news. we will keep you updated. microsoft is currently down about 6% on the year. microsoft buying linkedin for $26.2 billion. deal.196 a year, all-cash the close of linkedin, $131. this is a substantial premium. david: they did not want anyone else going after it.
he is taking the company in a different direction and not shy about it. jon: bloomberg has crushed the numbers. the premium 49.5% is the premium paid for linkedin. $196 a share offer. the previous close at $131. 49.5% premium. the other angle is china. linkedin is playing in that market while other networks have struggled to get in. alix: you mentioned this is an all-cash deal. microsoft's free cash flow is like $24 billion. they definitely have the cash to go after it. good point when it comes to china. look at where microsoft makes a lot of money, i looking at its revenue breakdown. the u.s. is about 50% of its overall income in terms of revenue last year. $43 billion. they do need to get some juice overseas. jon: the big premarket move is linked in.
49.5% premium. offer,e close to that 47.7% move. 193,ng in the premarket at a huge move. david: don't underestimate microsoft getting access to the data. you get a lot of information about the people and connections with them. that is worth a lot for microsoft to use in different ways. take aa look a -- alix: look at my bloomberg. you can see the spike when we got the headline. you cannot make that up. that is a huge move up. er we see another bidd come in or is this premium enough to let it ride? practical joke. david: they obviously have linkedin on board. they said the c.e.o. will remain. the message the markets, don't come after it. buy microsoft is to
linkedin in a deal valued at 26 $26.2 billion. the offer is $196 a share. linkedin stock in the premarket surging by over 40%. a 47% move in the premarket. the big story. we will bring more to you later. microsoft to buy linkedin and a deal valued at $26.2 billion. we will move on to today's morning meeting where we hear what key banks are looking at. michael hanson at bank of america, merrill lynch joins us on the fed's next move. june is live, june is dead. july or is that getting pushed back to september now? >> september has been our goal for a while. i don't think july is off the radar but i think it is a high hurdle. i would look later.
i think the fed needs to see calling in global markets, better u.s. data. i think september is the sweet spot. jon: which leads to the next event risk, we get close to the presidential election. historically the transcripts from the fed suggest this does by arn them, displaying stray potential particularly potential bias-- during a particularly sensitive time. >> that is a can of worms they don't want to deal with. i don't think that is a big constraint. the risk from the fed's perspective is if we were to have an increase in uncertainty ahead of the election that spilled over to the real economy. the fed would have to take that into account. jon: we reflect on and ugly jobs report. going forward, what are the key points of data? we are waiting for the next payrolls report to confirm or
deny the labor market is softening? >> yeah. the fed is more focused on what is happening with slack and signs it is diminishing, that wages are picking up, stabilization of the rate. we far along in the recovery. given demographics, we will not continue to print 200,000 for the future. a bit of a slowdown is not a concern for a fed but they do not want to see signs of further weakening in the job market. jon: expectations around the fed doing something and then they pushed up. now they are rock-bottom again. do you think they are underestimating a move from the fed with regional fed presidents doing the groundwork after the meeting and recalibrating expectations again when the brexit risk has potentially passed? >> i do think this is a tactical hold by the fed.
they are waiting to see what will happen with the u.k. referendum. they want to see what is happening with the global outlook. they would like to see another pay will report to get a feel for the labor market. there are a lot of things the fed is keeping an eye on. i think there are unlikely to be big revisions. i think the fed is eyeing the possibility of two rate hikes this year. i don't think july is completely off the table. the data was going their way and then stopped. that is what gave the about-face. i think it depends on how the data are shaping up and whether the fed starts to talk about july or focuses more on september or later. jon: great to have you with us. we will bring you more on that huge deal with microsoft, set to buy linked in. linkedin stocks surging with an offer of $196 a share. linkedin trading at $194 and
jon: this is "bloomberg " i am jonathan ferro. is the german bond market in bubble territory? that is next. more on the breaking news. microsoft set to buy linkedin. microsoft will be financing the deal issuing new debt. the company saying it will have a minimum dilution of 1% to adjusted earnings per 2017 as well as 2018. joining us for more, cory johnson on the phone. why did microsoft want to buy
linkedin? >> it is interesting. it is a huge deal. it puts them in a situation where they want to be offering business services, software business services, with profitable margins. linkedin has margins growing fast. it puts them in a position having a lot of growth. it is a very expensive deal to acquire that growth. is growing worldwide and has had success in china. it is one of the largest, fastest-growing social media companies in the world. david: give me the strategy here from microsoft's point of view. this is a big deal. why do you make this move? year, we broke the story microsoft was in talks to buy salesforce. there were three companies we have heard microsoft might be therested in getting into
enterprise software business. that clearly is the direction he wants to take the company. with salesforce, there was true to that last year, a very extensive company. i know why some of my microsoft sources have not been calling me back. this is not a surprise in terms of name. it is a bit of a surprise in terms of timing. finally we see he is making a big move. it is in a direction where there is a lot of growth. this is a company that straddles social media and enterprise services, cloud services. it is a statement in the direction microsoft wants to go in. alix: there is a call at 11:45 eastern. we will have the c.e.o. of microsoft and the c.e.o. of
linkedin. mr. weiner will continue to be the c.e.o. of linkedin. i want to give you perspective of how d big the deal is for microsoft. these are the acquisitions in recent years. this is the value. hold on a second. linkedin is about $26.4 billion. skype was its next biggest deal, but only $8.5 billion. this is a huge bet for microsoft. bet.: a huge it is a lot cheaper than salesforce would have been. >> if you look at this in terms of what you're getting, you have a company at an inflection point. to beatpected expectations. it is expected to have a 27% operating margin this year. it has a $1 billion profit this year.
it is very important for this company because it is an inflection point. suddenly, it fits into microsoft's overall income statement, goals, and what they are trying to get to. jon: give me more insight on the price. the premium stands huge at 49.5%. based on where the stock was a few months ago, beginning the year around $200 a share, we need to think about where linkedin is coming from. can you give it more perspective? on what are deal notes the company will be comfortable with. you also have to look at what microsoft is willing to pay. hethe case of salesforce, would be paying for a company burning through cash like crazy. yes, growing on the top line but not showing much on the bottom line. i'm talking about the adjusted numbers. is just as important to think
about what this combined company is going to look like. putsompany aspects microsoft in a position to acquire a company taking off in terms of profitability where it will not screwup the rest of the finances for microsoft even at this very high price. that raises a good point of where it is going from here. that is why it is good for microsoft. why is it good for linkedin? what is microsoft bring to this? >> that is a good question. some is unknown at this point. microsoft is a huge company with a ton of resources. it will be interesting to here what he says on the call. there will be synergies. there will be duplicate overlaps. so make sense. in terms of the direction of linkedin under microsoft versus what it would do independently,
i'm sure he will explain that, what his vision is. david: take us into linkedin. international was one of their priorities. does microsoft help? >> these are different businesses. when oracle takes over a software company, suddenly you have the oracle salesforce with another bow in their quiver to sell. this is a very different product from anything linkedin has. they're selling to hiring managers at corporations. that is the heart of linkedin's business. i would not expect we would see big opportunities for linkedin with the additional sales force of microsoft because it is a different product for them to sell.
certainly, microsoft has a giant impact across the world on where it is selling. it is also important that linkedin is seeing growth in china where no other social media,- global social has seen a kind of growth. ist is where microsoft fighting a battle to protect it. bigger tech trigger deals for the rest of the year? we are in this weird position where over the last two months, this is the eighth or ninth deal in broadly speaking enterprise cloud companies of about $1 million or more. in two months. that is more than a trend. there's something going on right now. point, twitter right now is up 4.5%. salesforce is down by over 3%. to your point, twitter speculation perhaps now? >> there are other companies
that have been waiting for something like this to happen. facebook, but we have not seen many $20 billion plus tech deals. maybe one or two more i am forgetting out since may conduct. but there are a bunch of companies. apple has a ton of cash. cisco has a ton of cash. facebook has a ton of cash. amazon and google have a ton of cash. at some point, it does make sense to put the money to work. maybe they have been waiting for one to jump off the plank. will we see a trigger effect after? that story, it will be an all-cash deal. the real headline is it is primarily funded with new debt. do you expect to see more of that? >> yes because debt is cheap and
these companies can easily do it. however what we saw in dell emcee was months went by when we did not see anything in the tech world because banks can only supply so much debt. at some point, you have to say enough is enough. i think enough time has gone by and that sale has gone quite well, so now we are ready for round two. but you cannot have one after another because you run out of money. alix: you were wondering if we would see the big buyout. >> these companies have a ton of cash so it does not all have to be debt. alix: we have to leave it there. thank you, for johnson and alex sherman. -- germannment government bonds in bubble territory? our next guest joins us to explain. ♪
alix: breaking news. microsoft is down 4% premarket as microsoft buying alix: -- linkedin for $196 a share. jon: the open about 37 minutes away. says germany is in bubble territory. yields have tumbled after they started buying corporate bonds, dropping as much as one basis point on june 10, lowest on record. joining us from germany, andreas gruber. thank you for giving us your time. let's begin with a simple question. it may be tough to answer. what constitutes a bond market bubble? the consequences are not as large as you might expect 0.01% on the 10-year is
extremely low. however in the last three to six months, we have seen it between 10 and 30 basis points. is aterm clearly, this bubble in the government bond market in germany because if you look at the economic development and inflation expectations, likely higher yields should be expected. jon: you are defining a bond market bubble because they are trading out of line with fundamentals in germany. does that really mean it is a bubble? >> from our perspective, it is a bubble. is uncertainties in yield. ofever, we are optimistic
moderate growth. we do not see the risk of recession. on the other hand, you have to see the buying program of the which clearly at large fornts in terms of demand european government bonds. this has an impact on markets. jon: levels usually burst and then we start calling them bubbles in a big way. you said allianz has never been a big investor in government bonds. the selloff does not discriminate it is across the board. are you worried about the consequences from a backup and yields again? a spring 2015 type scenario all over again? it depends on who is the
investor. are insurance companies different from income investors. portfolio,iversified utterly government bonds but also corporate bonds and in fixed income and on the equity side. jon: great to have you with us. unfortunately, we have run out of time. next, a blowout deal. microsoft buying linkedin for $196 a share. linkedin stocks up 48%. ♪
in the fx market, a stronger yen and weaker pound. yieldsbond market, drawing lower again. five-year down almost three basis points. in the equity market in the u.s., it is a monster deal, microsoft-linkedin in focus as we count down to the market open. we are just under 30 minutes away from the opening bell in new york city. this is "bloomberg " i am david westin with jonathan ferro and alix steel. alix: it is merger monday. valuedft buying linkedin at $196 a share, a 50%
premium to linkedin closing price. you are fired up. you were totally shocked at the steel. >> absolutely. one would have thought they were going after salesforce, a traditional software company. this is truly from left field. i would not have expected that. alix: why did they do it? what's when you buy software today, you go out and install the software on your computer or login to the portal and connect to the enterprise. with this, they are completely passing this. if you want to be a software company, why wouldn't you use linkedin to talk to people? that has been used a lot in businesses today. if you want to hire somebody, why wouldn't you go straight to linkedin? david: that explains why
microsoft thinks it is a game changer for it. why is it a game changer for linkedin? why is linkedin worth more owned by microsoft? >> if you would have gone back a couple of years ago, there was a lot of talk about linkedin getting into the cm business. they have not done a good job executing that. with microsoft, that can change. microsoft is a leader in the infrastructure and platform in the service cloud. they were behind the cloud applications. >> if you are linkedin, you could do more with microsoft behind you. the might and name and money that comes with microsoft. the other thing is the 50% premium. $26 billion, all-cash. microsoft sitting on so much money they rented out -- lend it out. they could afford to do the deal. last year when we approached
salesforce was being approached, microsoft was one of them. we assumed they would do a deal with salesforce. that would cost you $80 billion given its market cap. this is a cheaper alternative. alix: the market is not liking this news for salesforce, down 2.5% premarket. jon: linkedin trading toward the offer price. that makes sense. on the year, unchanged. why do they go away just because it has been bought by microsoft? >> they've given out a strategy doing a lot of cm stuff. i think they backed out a little bit. this marriage can make them one of the top crm companies giving them a strong fight the lights of crm and sap and oracle as well. alix: out sherman was saying this could be the start of a huge boom in tech m&a. at twitter's premarket share
price popping at 5%. it is up 5%. is this what we can learn from that? >> this year has been mostly about smaller software deals. last year was the semiconductor deals. dell and others were spending a lot of money. this could be the beginning of it. there was only one big bank used on this, morgan stanley who has had a down year. they have not competed much with goldman and j.p. morgan. now they show up as the only big bank on the deal. the other two are catalysts on the south side -- sell side. david: a few years ago if this was announced, you would think washington would be coming down on them right away. do you think there are regulatory issues? >> not really. two disparate businesses from a software point of view. microsoft is nowhere on the top list of the crm window. salesforce dominated the area.
not from that point of view. jon: are we going to see more social networks partner up? we are looking at the equity markets. twitter trading higher premarket. is that a knee-jerk reaction or is there a fundamental reason to say twitter is next? >> that is a knee-jerk reaction. it would not surprise me. limco talked about seeing big tech deals this year. he was not talking about yahoo! and the deals happening. i don't have a prediction of who will link up, but it would not be surprising if we had a few more $10 billion deals. alix: this is a big deal because we were worried the capital markets were closed to huge deals. microsoft buying linkedin will be different from a sketch year that company -- sketchier company. multibillion-dollar deals are here. that is significant. >> private equity is sitting on
$400 billion plus dry powder. you don't have the risk of regulatory problems with most of the private equity funds so they could be competitive and by some software companies as well. david: dry powder you want to use, but you better make money off it. dilutive to earnings to share the first year. they think in two years, it will be positive. is that right? >> when he came in, he said cloud first and mobile first. if you don't have an asset in cloud, you build it or buy it. they are strong in infrastructure, right next amazon. they are very strong in platform. this is what gets them on the cloud application side. he is making the right strategic moves. with so much moving back and forth, the numbers might not look good for the next couple of years. you have to look at more strategy than numbers at this point of view. jon: eerily quiet and no scoop.
i wonder what the story is. was it the fact they only had a few people working on this? >> that is part of the reason it did not leak. in march or april, we heard microsoft was up to something big. we thought it was salesforce. we checked about on salesforce and linkedin and got waved away from it. they kept it to a small group of people. you only see one bank for microsoft. that tells you more traditional bankers are not on the deal. they are probably on the phone now screaming at somebody. jon: jeff mccracken gets many big scoops. this there a lesson being learned here by some companies? it is usually not a benefit for to bequiry -- acquiree looking at a deal and have it leak because they have to pay more. is there a lesson for other deals down the road? >> it is a lesson they should
have learned years ago. it is obvious if you keep it to a small window it is less likely to leak. does steve ballmer feel on a day like this? david: this is not consumer facing. >> from the day he has got income he has been serious about the enterprise, about the cloud business. he wants it to work on the next -- lennix now which is odd for a company like microsoft. david: what is microsoft's track record on taking big deals and making them work? this is a completely different regime. great jobdone a managing the company. this is the first big bet he has placed. it will be interesting to see how he changes linkedin to a software is this. -- software business. david: thanks for being here. just interviewed later
today on bloomberg. for more on this deal, we will speak with the c.e.o.'s of both companies in under two hours. jon: looking forward to that conversation. 21 minutes away from the market opened in new york city. julie hyman has stocks to watch. julie: i will pick up where you left off. you talked about twitter jumping when news of the deal came out. inp saw a sharp leg up premarket as there is speculation about the next target potentially. twitter has been frequently named as a potential target. salesforce down about 2.5%. workday has not been falling as much. we have been talking about apple this morning. this report by the newspaper that iphone annual shipments fell for the first time since 2007, down 8.6% compared with 2015. it has been talking to apple
suppliers to get this number. they are talking about 210 to 220 million in iphone shipments this year. the shares have pared earlier decline. there is another deal and technology. $4.65 in cash. blue coat is to be public and now it is controlled by bain capital. symantec has been trying to evolve from being an antivirus software company to the new cybersecurity needs. this deal speaks to that. the bluecoat c.e.o. will take over the helm of the entire company when the deal is done. david: thanks very much. we are going to hear more on the update from the orlando shootings. >> thank you, david. the f.b.i. is investigating the worst mass shooting in u.s. history as an act of heroism -- terrorism. authorities say omar mateen
called 911 to claim allegiance to islamic state before opening fire in orlando. 49 people were killed. 53 were wounded. mateen was killed in a shootout with police. f.b.i. agents interviewed him twice for suspected ties to terrorism, but the investigations were dropped for lack of evidence. bernie sanders will meet with hillary clinton tomorrow night. clinton is the presumptive nominee. tomorrow is the last primary in washington, d.c. sanders is hoping to get some of his positions in the party platform. in beijing, the chinese premier and german chancellor are trying to limit conflict over trade. merkel pressed for transparent and reliable rules for foreign investors. the meetings overshadowed by germans unhappiness over a chinese company takeover bid for a german robot maker. global news 24 hours a day powered by over 2400 journalists
in more than 150 news bureaus around the world. alix: thanks so much. coming up, concerns in the currency market over a potential brexit. a new bloomberg survey showing how bad it could get for the pound. details next. coming up, reports iphone sales will fall this year for the first time since 2007. we bring you all the latest in tech. ♪
the possibility of britain leaving the e.u. take a listen. >> businesses or investors who are concerned about the prospect of britain quitting the e.u. should speak up. british telecom have done so today. many other businesses like airbus and b.m.w. have done so in recent days. this is not a moment for businesses to sit it out. people should speak out about what they see as the risks of quitting and the huge opportunities if britain remains. jon: for more, we are joined by richard turner from london. fromgin with the comments the norwegian wealth fund, they say they remain committed to the investment. is it down to the investors to make noise about which way the u.k. should vote? >> i think if you are concerned about which way the u.k. votes, i think it will have a significant impact on financial markets. i think investors have to be focused on that. if we see a vote to exit, you certainly see sterling
vulnerable to further declines. you see u.k. domestic stocks honorable in the short run -- vulnerable in the short run to declines. we've seen global applications as people become more risk-averse. it has implications for peripheral european stocks. i think people are realizing a u.k. vote to exit creates greater uncertainty, not just in u.k. but more broadly. jon: before we talk about where to go along, let's talk about downside risk. the asymmetric risk, looking at the bloomberg risk the day after brexit, the downside risk seems much larger than the upside potential. that is reflected in the price of downside protection. options around cable. i wonder where it is best to get a heads outside of direct -- hedge outside of direct options of cable. where would you go? >> i think you will see a big move in sterling either way.
people are very focused on the downside risk. you have seen that in the last few weeks as the prediction markets have suggested a higher possibility of brexit. sterling has been materially impacted. it is worth noting you have significant crowded short positions in sterling right now. a lot of people have looked to hedge the downside risk by sorting the pound. vote, ad a remain significant risk to the pound as well. this is a difficult decision to hedge. the reason is it is a binary outcome. in the event we see the u.k. choose to leave, the typical hedge assets you want are the assets that benefit from risk. that includes areas like gold, long dated u.s. treasuries. for many investors in the u.k., it is difficult to hedge because of the binary nature. alix: i love that you brought up
long-term u.s. treasuries because that is what we have seen. the global bond yields story continuing to fall. how low can global bond yields go at this point? >> what you are seeing is this almost insatiable appetite for long-duration assets across the world. every time you see yields pick up when there are concerns about inflation and the fed raising rates, huge buyers come in, particularly international buyers from countries experiencing negative interest rates. they include japan, large parts of europe. we also see pension funds, companies with long dated liabilities, huge demand for yields. every time yields pickup, you see that demand come in. you now have 10 join dollars of trillionobally -- $10 of assets globally with negative yields. you see that huge demand. we don't see that stopping anytime soon. david: this is a situation in
which the markets care a lot about what the people think because they will vote to decide. i wonder if people care what the markets say. you hear george osborne say we need u.k. businesses to tell people how awful this is. will the undecided voters listen? >> they are not focused on the financial markets. the debate around brexit is focusing primarily on the economic implications and secondarily on political implications. for the average voter, what happens to sterling and ftse is not going to be the key decision on the 23rd. jon: what happens to the ftse is important. you talk about shorting u.k. domestic focused equities. one of the traits that has emerged in the last few weeks is taking a look at the fx market, the potential for a stronger euro against the pound and go long ftse versus
euro-denominated equities. does that resonate with you? >> no, it does not. i think in the environment where you get a brexit vote of the binary nature, i think you see risk across many assets. the initial reaction will be negatively impacted. you see the ftse, the large-cap stocks international in nature benefit from a fall in the pound. they will be cushioned in the first instance. they certainly do better on a relative basis than the domestic stocks, the mid-and small cap stocks we have talked about. that is going to be a relative gain. to make absolute returns you have to look outside of equities. david: thanks very much. that is richard turnill. kravitz sitsnry down with bloomberg to reflect on 40 years. details of that interview next. ♪
alix: this is "bloomberg " i am alix steel. it is the big story of the morning, microsoft buying for 196 dollars a share, a 50% premium from friday's closing price. this friday's linkedin at the highest multiple of any takeover over $5 billion. in terms of what the stocks are trading, microsoft down 4% premarket. taking all by 50%, markets by surprise. sales force was the rumored to be bought out by microsoft. they are the men behind the woman private equity firm kkr, affirmed they started four years with $120,000 and now manage over $120 billion. jason kelly set down with henry kravis, cofounder of kkr, for an article.
jason joins us now from san francisco. i read this. it is a fascinating article. i certainly learned things i did not know. he describes himself as an industrialist. i was interested in the information he has about credit cards, that spending patterns he sees. tell us about that. >> it was an interesting interview for me as well. very expensive. one of the ideas we talked about was this notion of being a c.e.o. of c.e.o.'s, getting data across the spectrum of the company's kkr owns. specifically, they own first data which processes credit card transactions all over the world so they get this window into where consumers are spending. groceries,ying gas, luxury items? it is a really interesting way to see the world. david: how does he see himself
in terms of an investor? is he short-term, long-term? what does he favor? >> incredibly long-term. that was certainly a theme i heard from him, especially during this sit down. he has had 40 years to learn about this. private equity firms are increasingly more than private equity firms. these asset managers see themselves as truly an alternative to the liquid markets in many ways. long hold to ride out a lot of the volatility in the market by owning companies for a long time. david: it strikes me you spend a lot of your interview talking about culture, the way they deal with each other within kkr. what was that so important to him? >> one of the most interesting things not many people know about this is george roberts is henry kravis' cousin. they have known each other since they were two years old. in the interview, he talks about
their last fight was when they were seven-year's old. they really set the tone, their collaboration and assistance on being open and honest with each other is the way they run the firm. david: jason kelly, thanks for joining us. read this in "bloomberg markets" magazine. terrific interview. jon: about four minutes away. futures soft. equities down in europe. the big deal is microsoft-linkedin. linkedin stocks surging ahead of the open. we will break down the details of that deal and stock moves next on "bloomberg " ♪
points. china joins the party. .pening bell rings here biggest one-day loss. stronger yen weaker pound. yields in the bond market grinding to new lows. down by almost 1.5%. 25 seconds into the market open. >> it is the lowest we have seen since late 2012. chance priced into the futures that we will see a change in rates.
the impending vote on brexit, all of that contributing to the declines we are seeing throughout the globe today. not seeing as big of a decline. we have that big deal this morning. microsoft agreeing to buy linkedin for $196 per share in cash. microsoft shares are pulling back. want to put something in perspective. remember this drop we had on february 5, that was a 45% drop in a single day. things were not going to go
perhaps as quickly as investors were anticipating. it is still down even with the increase in today's trading as a result of this deal. when we see this risk off trading people are buying what they see as safer. finally as we talk about the attack in orlando we are seeing when wetypically see have these types of mass shootings. there could finally be some sort increased gun regulation. >> it was obviously merger monday. allans bloomberg reporter sherman. you have some updates, it has to
start with news of the day. what does this mean for m&a tomorrow? we are probably going to see a continuation of the trend. we saw valuations on a bunch of different tech stocks across the board slum it. what we will begin to see is they kick up a around late january or early february when the valuations fell. the buyers got comfortable with the price of the price of a bunch of these companies. we have seen nine and a price software related companies. it all dictates where the valuation stems from that plummeting that we saw in january and february. as weine we will see that get more details as it picks up time, becauset
these companies became more digestible. >> the plunge and february on linkedin, we learned the acquisition talks began in january. while we talk about this 49.5% premium, that is the price. be very happy with the price they are paying. the market doesn't seem to be quite as happy with it. the plummeting is what convinced linkedin to say let's do this at this point. maybe that's similar type of dialogue is why we are seeing so many types of deals completed. all of a sudden they became 49% premium. >> it appears there is a sense of herd mentality, when they start seeing their competitors teaming up, the pressure goes up.
what does that mean for other companies? >> some of the bigger companies are saying this is the year -- i think back to several conversations i had with the top thinkers at the beginning of the year. several of them thought this might be the year that microsoft, apple, google made the rigor bets we have not seen. a couple of semi conductor deals that were big. >> you can go to fill out the sectors where you cmn day. that is only over a thousand in all three sectors.
>> this goes back to the bluecoat deal. we broke late last night that they are talking about a deal. that deal did not happen, and part of that is a valuation because of the timing of that deal. you can see that similar to a lot of tech companies. there is the year to date. you can see the top of january plummeted. apart.al fell you have to imagine may be the thinking is still there. which is why perhaps the stock
is roughly flat. >> why does that deal makes sense for semantic? >> that was almost half their company. became more scaled-down and focused. have been trying to refocus on more enterprise security. >> this is a $4.6 billion deal? this is the highest price for an aqua higher that i've heard of. bythis was a company brought -- company bought by private equity. a lot more growth. insecurity, you only have to
read the headlines area this is not a new trend. >> at&t bidding about 5 billion for core businesses. >> he may get confused on the reported here where he -- where we reported the high threes here. the key is what are they bidding on. what we reported on late friday is for eyes and did not bid on the path of the real estate. yahoo! told verizon we would prefer to sell this elsewhere. my sources have indicated to me they are willing to bid for the real estate.
verizon's did see coming out in the same ballpark. today we should have a better sense of what private equity firms are still there. equity firm around this has had some preliminary talks with some strategic to partner up. in order to bid at the same level. it is not only a three horse race. if verizon wants to buy yahoo! they will buy yahoo!. they work with four different financial advisors on this. you would have to imagine that they wanted to work with for
>> in south korea, a group has posted what would have been the biggest ipo on the year on hold. .olding as much as $4.5 billion korean prosecutors are widening their investigation into the conglomerate around investigations of them best the -- of embezzlement. it is a deal -- it will also fill in fake and executive officer position. greg clark will be in charge of the combined corporation. would renewable energy will take over natural gas. .hat is according to analysis in the next 24 years the u.s. is
expected to invest seven times as much. the latest business flash. here minutes into the open . let's look at some of the movers. ,> one stock that is moving downgrading to mutual from buy. she believes second and third quarter revenues could still come in below consensus. she us believes margins could come under pressure. $184 per share on a stock down year to date. 5% that theyp would be buying the glucose system for $6.5 billion in cash.
it will likely generate cost savings. to sell lots of security stocks. point all trading higher here on the open. that is what is moving on the nasdaq. >> apple's developers conference kicks off today in san francisco and in just about three hours cory johnson the conference venue. does make tim cook's job a little harder today. cook doesn't have a lot to say today. this is really important for apple. this is about churning the ecosystem developed for apple.
it is going to run on apple products. from that perspective giving away but the linkedin deal, these are the people. these have been lining up here. the same way that linkedin is an application of the backend of cloud services. >> is there a lot of chatter in the apple conference about it? sure there is because a lot of details to linkedin. a lot of people got new resumes as of this morning. be very different than it has been in the past. saw as we things we were getting ready going to bloomberg radio and tv is think
about the products were linkedin has struggled. of the sales price is related largely to the failures. we know that microsoft looked at salesforce. we also look at linkedin trying crm product. look at what they were doing and the tools they have. they are so further along from developing their own product and take microsoft so many years. that may be one of the things that interests them. have all this information on the buyers and sellers of every kind of product in the world and everyone they have ever worked with. is a powerful source of information that can be used.
already generating hundreds of billions of dollars in revenues. >> thank you so much. cory johnson joining us live. breaking news from the ecb. this is a purchase program that began on june 8. 248 million euros. corporateine, ecb bond holdings totaling 328 million euros as of june 10. at saw estimates 240. >> analysts have it anywhere between 5 billion through 10 billion euros per month. around five is considered the consensus right now. it is really gauging where we are month from month to month.
scarcity ofis a corporate bonds, that is a whole other problem. >> let's turn back to apple. stephen milunovich joins us from their office. target of $115, you have a buy rating but you also say it is range bound. is there anything that could happen in this conference that would break it out of this range? think it is pretty unlikely. this is focused on developers whereas the september announcement is focused on more products. of the mostone interesting things that could come out of it is what they do with siri. more is a machine learning that is going on between microsoft, facebook, ibm and apple. is perceived as somewhat behind. we are waiting to see what improvements there are and if they open that up to developers. >> we have been talking about the microsoft deal with linked
in. entires that change the battlefield for tim cook and apple? >> i don't know if it changes too much things. they have their approach and super focused on what they do from an m&a perspective. apple is seen as somewhat behind in software and services. very unusual they came out with terms ofuncement in offering more search capability within the app store. we talk about apple as a platform. apple is a multi sided platform. system sitting between the consumers and hardware and the content developers on the other side that they tend to subsidize. what you are going to see his developers, making the platform stronger. that is an analogy to the linkedin deal.
this conference is an likely break you out of the range. how much pressure does that put on tim cook and apple on the new iphone coming out in the fall? as we have looked at it we think the iphone seven is likely to have modest growth. it doesn't look like the features will be tremendously different. we have issues with people waiting longer to upgrade. china is weakening on the margin. i think apple takes a longer term view. metric iser one customer experience and customer loyalty. on one hand the ecosystem has never been stronger. on the other hand the product cycle is quite weak. we expect units to be down double digits. we expect modest growth on the cycle.
the reason we have a bye in the stock is because our dcf analysis suggests only in a blackberry situation is there really significant downside from here. >> thank you very much. >> coming up next it is bloomberg markets time. erasing most of the losses for the session. what is coming up on the program? >> big day. to the chiefng executives of both companies. just after 4 p.m. in london. the interview with both chief after that $26 billion takeover. we know the figure. it just started this program on june 8.
great day to have thought. she is codirector of investment grade fixed income. take on thather and his flight to quality we are seeing today. in our pursuit section, don't miss our interview with the director of the last drop distillers who go in search of , old, extremely rare whiskeys. they sell it for thousands of dollars per bottle. >> he keeps some under the desk. thank you very much. we will bring you more with that interview with the chancellor.
some break breaking news, linkedin and microsoft become one. >> halfway through the program it turned. that6.2 billion price take microsoft is willing to pay for linkedin. will we see more deals? >> talks that began in january. six months this secret has been cap. that is what is coming up on bloomberg television come at the linkedin ceo together with the microsoft ceo joining us for an interview on their $26 billion deal. at his coming up next on bloomberg television.
this is bloomberg markets on bloomberg television. vonnie: we are going to take you to new york and london and the next half hour. 10 days to go until the referendum vote. how much damage will that anxiety bring to global markets? mark: government officials are trying to put the pieces together after the deadly mass shooting. and presidential candidate donald trump and hillary clinton will likely make their first campaign trail comments later today. market sees the oil bouncing towards the end of the year, but with output essentially the same. we are about 30 minutes into the tradinda