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tv   Bloomberg Go  Bloomberg  June 24, 2016 7:00am-10:01am EDT

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low, gold stocks -- gold soars into bank stocks take a beating. ♪ jonathan: for our global viewers , welcome to "bloomberg go" and an historic day for the united kingdom. david: people said the money was smart, it was not. we have seen a global reaction. it has been a seismic event for the financial market. jonathan: let's let the numbers think for themselves. here are the market shares. futures in the united states, 3.75 right here and right now. getting hammered. stocksn blank -- bank down by over 14%. it is dramatic.
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down by a full percentage points. you have to say, what is happening on the continent, the pain more acute in mainland europe. david: we were looking at this before, was you put this in the same -- and once you put this in the same currency, rebates, everything going into the dollar, and you will see why this next board is important. the town has been battered -- pound has been battered, down by over 8%. that does not look as dramatic. and this was have been in the market -- swiss have been in the market. at .07 and we got down on the dollar-the yen, trading down by nearly 4%. jonathan: bring up the bonds. yields on treasury grinding got
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to all-time lows. points on the session. and for me, you spoke earlier, the idea that they could use -- lose a triple credit rating in the united kingdom. this is down 33 basis points. we talked about it being more acute on the continent. i believe it is down 12 basis points, 20 basis points on a 10 year yield right now. david: it is a sovereign, so the effect is much less. it is interesting to see what the ecb does. we will watch. jonathan: sally here with the prime minister had to say with reaction to this historic event in the united kingdom? take a listen. >> the british people have made it very clear decision to take a different path. as such, i think that the country requires french
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leadership to take it in this -- fresh leadership to take it in this direction. i will do everything i can to steady the ship over the coming weeks and months, but i do not think it would be right for me to be the captain to steer the country to its next destination. jonathan: we will bring in the global team, with reporters all around the world, westminster, berlin, and of course in brussels. we are live from westminster, anna, talk about the results. and talk about the political reaction. 52% of voters to leave the european union. 52-48, this result was not expected. it became clear early on that things were not going that many in the market had anticipated.
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we got early results from the northeast of english, they expected to be in the leave camp, but more than had been anticipated. that is how people knew that this would be going the way of the leave campaign. and in concert with some of the conservative mps, he is describing this as an independent day. -- indepencence day. methods ---to-date surgeon,nicholas already talking about another independence referendum in scotland. we knew that this vote, it became to pass -- if it came to pass, it would put into the spotlight whether the united kingdom could stay together. the scottish cabinet will meet tomorrow morning to discuss it. and david cameron talking about studying -- steadying the ship.
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and boris johnson speaking this morning, trying to give a message, saying that we will not be pulling up the drill bits. and many have said this was largely about immigration. will that be a message they want to hear? he says, we will see with the talks with europe will deliver. the timing of those is crucial. david cameron says he needs a new leader for the party by october, that is quick. and article 50, the terms by which the departure will be negotiated, will not be triggered until that point. so talking about speeding this up, the u.k. side of things might want to take their time a little more. david: thank you very much. i have to say, the reaction from those on the leave side was not dramatic, it was very disciplined and understanding
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and gave me the impression that this will be a drawn out process as we go toward the conference at the back end of the year. jonathan: we have no idea when article 50 will be coming and it will be fascinating to see when it does come and in what shape the negotiations are in at that stage. we will go from westminster to matt miller in the aberdeen asset trading floor. what a morning for those guys. hases, for these guys it been a crazy morning. it was manic at atx. i was there early this morning and they were trading throughout the entire night. from 5:00 a.m. the day before. and they were pulling people out, margin call after margin call, stopping people, and that was where all that the action was. a huge swing, people were positioned wrong going into it
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and a force them -- forced them to hit their limits. here at aberdeen, it is a different feeling. there is a long-term investor feeling, and they are saying it has been a calm shift. people were obviously position wrong yesterday and now they are repositioning. has beent been -- it like for the exits -- slight for the exits. people are coming out of equities, they are coming out of long pound trades. everybody had been short a pound, d leveraged, just because you do not know which way the vote would go. and they were already -- they are not having to sell those, they are giving calls -- getting calls from people who want to buy them from them. david: i was told overnight for
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the liquidity providers, in the currency market, they do not time trade. just stay away from the market. if you have to the end, you will have to have a rough ride. thank you very much. jonathan: caroline is in berlin. merkel speaking earlier, talking about a fast-paced negotiating with the u.k. >> i think this is where the split is already arising between the united kingdom and the core of the eu, which is france and indeed germany, summoning the francef hollande from and the leader of italy coming on monday, so they want to be looking at a quick exit of the u.k. --nwhile, bores johnson boris johnson and those who called for the leave vote, have
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been talking about a slow pace. the divisions between the eu and united kingdom are already building. and we did hear from merkel, talking about a measured response, the response body of the eu unity, this is a fear factor for her, the domino effect. we have heard of a scottish referendum, the spanish wanted to discuss referendums in the south, and the u.k. being the third biggest export market for germany. jonathan: thank you very much. and john, getting fascinating. jonathan: this will go on for months. we had this discussion, it is not an event, it is a process. it will be a prophet for the bank of england -- process for the bank of england. thank you for joining us. david: talk me through. what has the bank of england
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already announced? given the warnings from mark conte, did he have to roll back a little bit? guest: i think what he has done is come out with a very measured word. there is money available for liquidity. they have 130 billion pounds worth of capital. but the bank of england will not hesitate to act. they are channeling mario draghi in terms of this event. and in terms of what you have seen in the marketplace, the one thing that is interesting, we are in a political vacuum with the resignation of david cameron. one thing you can be sure of, the man running that institution ran the bank of canada during a crisis. governor conte, he took the bank of canada through a tough time
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and he stands ready. that is what will drive the decision-making. and goldman sachs already setting -- saying that they will cut further. when and if the governor decides to get into the market, it will be very different from 1992, it will be different. back then, they were able to do things with interest rates. you will hear a lot of discussion on the negative rates and easy. jonathan: there were warnings from the bank of england. and you get a feeling that they will be rolling things back a little bit. david: you cannot spook the market too much. these things happen, now we need to put a bit of a calming story over the whole thing. what is happening in brussels has to do with this whole thing. we have heard a little bit earlier -- us a sense of what is happening and how the
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negotiations will proceed from here. >> right now i think the environment is a bit poison by the surprise from the british prime minister who want his successor to begin negotiations with the european union. this is really important, when you think about it, if the negotiations do not begin until october, what we really get is a prolonged divorce proceeding where, we were talking about at least two years of negotiations, now talking about two years and some. and you can understand why david cameron does not want to enter into the negotiations, he wanted to remain in the european union. you can understand why the leave campaign wants to delay, because they think they will be negotiating from a position of strength. if they are negotiating the exit and the conditions they will have with the european union in
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the future, they feel like that is the better way to go. from an eu perspective and from brussels, that means more uncertainty. if it is going to be messy, they want it to be quick. david: thank you very much. we will take a step toward edinburgh in scotland had mr. donald trump -- scotland. mr. donald trump speaking. >> these were people that were very proud germans, beyond belief. they thought the greatest that they ever was and now they are thinking about leaving germany. andy see the problems in germany. i could see it happening. i have no opinion, and really, i could see what was happening here. i could see things happening in germany. i hope that they stray now the situation -- straighten out the situation, it could be very nasty.
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building in syria must take the zones, good idea. but when you are taking them into the united states, by the thousands, and you do not know who they are -- all you need to do is look around the world. more problems. [indiscernible] >> politicians to use immigration to divide, how do you use it to unite people? >> when people come into the country and it does not work, whether because of crime -- jonathan: coming up on this program, the global head of strategy, the pound having the worst day on record. we dropped to a 30 year low. next, we will discuss. ♪
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♪ shockwaves through the european union, but i think it will be a good thing. ♪ jonathan: this is "bloomberg go" from the city of london, at historic decision. here is first word news. >> a stunning results that has rocked the world and financial markets. voters in the u k have decided it didn't the relationship -- decided to end their relationship with the european union. the pound plunging to its lowest level in 30 years, according to
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the eu, they have two years to negotiate an exit. but they say it will not be long enough to work out complex trading agreements. it was a loss for david cameron who spearheaded the remain campaign, he is resigning same name that -- saying that the country needs fresh leadership. a new leader is expected by october. and boris johnson, one of the leaders of the leave campaign, spoke about the upcoming talks with the eu. >> in voting to leave the eu, it is vital to stress that there is no need for hate. and as the prime minister said, nothing can change over the short term except work will have to begin on how to -- the people in extra kate the country from the -- extricate the country from the supranational system. and as prime minister said, there is no need to invoke article 50. >> he also said the u.k. will
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continue to be a great european power. global news, 24 hours a day, powered by over 2600 journalists and analysts in 120 countries. this is bloomberg. jonathan: thank you. stunning moves in the market after this vote. look no farther. on your screen right now, presented changes, going all the way back to the early 1990's. it is a little round dot on the far left. on the far right, that is where we are right now. the biggest drop on record. david: sensational. the drop we saw over the few days, the opposite is here and true, because what we have seen is the smart money getting it wrong. and as a result, when the results came through, down we go. jonathan: and joining us, steven
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saywell. global head of fx strategy, when you wake up this morning, walk us through what you are thinking when he saw that chart. >> we all thought that the remain was had last night. 2016, a dramatic turn this morning. what was surprising was less the outcome, but really the turnaround between 10:00-11 p.m. last night and this morning. jonathan: what were the conditions like? i saw a provider last night saying, do not come near the market today. just stay away. if you have to exercise anything, you are going to get a pretty tough reception. what was on the cable this morning? >> very close. to answer the question more
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fully, i think the key point we would make is we do not see the full response yet. david: like we are -- >> we are surprised. i think that on friday, it has been a day to look at things, recalculate, and next week the market i think will take off and think what they need to do. unfortunately for the pound, we do not think this is the worst of it just yet. david: you will got, you are with the team and thought, this is the outcome. you need to make adjustments to the forecast. looking at the pound right now, what are the forecasts and what takes us there? >> changed dramatically from yesterday. two points that make us less positive, firstly, the flows into the u.k. they start with a large deficit, between 4%-5% gdp and it must
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respond to that abroad. and that is one reason to think bearish on the pound. and the second point, the bank of england. there we got there would be a rate hike, but now we think there will be a cut, 50 basis points. so that will reduce prospect for the pound and combined it changes thing. s/ 158 for the end of q3. some pretty significant changes. jonathan: what are your target for the dollar? >> we were a house that was very bullish for the euro-dollar. we have stepped away from that and we are now at 110. and i think that has to do with the political risk coming through from the eu. , on tradingephen
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floors globally, what stands out is the stress in europe. on the periphery, spanish, italian debt, yield after this decision. does the ecb have a problem is yet? -- just yet? >> it is early days with the ecb. remember, this is not the time of the telegraph, they have time to think about these things. remember, we do have the qe and the asset purchases. the ecb has already committed to periphery debt and that will alone limit any widening of spread to german bonds. creative --at about what next?
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>> this is tricky. the yen has traditionally been a safe haven currency. send a surprise with the sterling and the yen. it is tricky for the japanese, because the bank of japan has eased policy in the past. we would fit is that there would be more easing coming from the bank of japan, but also we think that there will be some physical easing as well. and i think the combination may actually help limit the yen depreciation. but it will be a challenge. david: you have painted a trajectory for several currencies, but we had a big gap in several of these pairs. is this over? talk to me about market structure, price formation in the weeks to come. >> it is not over.
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i think that is a part that makes us nervous. we talk about the dollar-yean. we -- yen. we see a strong relationship with that and the 10 year yiel ds. it is more the fed that is driving this, rather than the bank of japan. given what has happened, the u.s. bond yields are heading lower, so that puts downside pressure on the dollar-yen. i do not think we are out of the woods. jonathan: the message that came it is alltrongly was, about long ball. that is how you will make the return. walk me through where you see the biggest volatility. >> i think it makes sense and is consistent with the view that we are not out of the woods. i think sterling needs to be at
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the top. particularly now that david cameron has shown his cards. as far as the u.k. is concerned, there is uncertainty on the future, when article 50 will be triggered. that is the big one. more so than the euro, the young, or the -- yen, or the dollar. david: thank you very much. steven saywell, global head of fx strategy. coming up, one question, what does the bank of england do next? we will discuss. ♪
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>> it will send a shock wave through the european union, but i think ultimately that will be a good thing. ♪
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u.k. decides in a historic decision to leave the european union and we have more political news from the united states. senator sanders saying he will vote for hillary clinton in november. he got some comments in there on brexit as well. in the global narrative in terms of the movements and politics we have been witnessing on both sides of the atlantic. it is now showing up in the brexit. bernie sanders's saying the u.k. votes shows the global economy is not working. the message he has been trying to deliver, a parallel between that and the u.k. jonathan: going to the markets. action.l ftse 100 down 4.6 percent.
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so many asset classes and security -- the price action the biggest it has been since the financial crisis. the dax down four percentage points. and the paying guide much more acute for european banks. barclays down almost 15. that is not the lows. >> and you have to bear in mind there is the currency factor on top of all of this. the ftse 100 may have read taken that 6000 mark -- re-taken that 6000 mark, but it is with a currency that is significantly lower. we heard from steven saywell, 137 -- 1.3708. the spread colossal. we will see how it goes into the euro-dollar. we have seen thomas jordan and co. in the market. jonathan: will we get
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information from the boj. that is a 31 basis point move on 10 year yields, down to one point 07%, an all-time low. that is a 22 basis point on 10 year treasury yields. a phenomenal session. it takes me to the morning must-read. happens is --t what matters is what happens with potentially qe. the bank of england will likely be active initially. the price stability will be maintained. subsequently, in delivering actual monetary easing. the call from bnp paribas -- rate cuts and maybe even qe. another round of qe from the ble. >> in some ways, qe is the more easy option.
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cutting rates down to zero, it would almost be impossible to go negative. it would be interesting to see how that works. joining us now to discuss what the appeal we is going to look like, former boe monetary policy number, danny blanchflower from hanover, new hampshire. good morning. bank, how do you think the will react? a calm reaction so far. they are in troubled in the forecast was that this would not happen. they said the world would tumble if there was a brexit vote. now we have had it. it seems an occasion where you want a central bank to get there retaliation in first. with 9/11, it took quite a lot of discussion on the mpc to persuade then governor king that there should be an emergency meeting. them toa week for
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actually cut. jpmorgan and others are right through this looks like a negative shop output. we will see some moved to stimulate it. i saw your point about qe and interest rates. thatne thing about qe is it takes a wild to work it out. the benefit of cutting rates is that you could do it quickly. if you will do qe, you have to work out the options and what you will do. that takes a bit to get in place. so i agree but because of simple timing, probably a cut will come. i am surprised they did not need this morning, but they may be forced to your. it may be a better idea to get in early and do something to say we are easing as a precaution. the question is with the fall in market today, is at the end? i suspect it is not. jonathan: if you are sitting with the mpc, what kind of argument would you make?
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it is a political shock for a lot of people. i am guessing it will make an economic shock as well. is that thereger is. the stories you have been reporting. banking stocks around the world in trouble. the impacts that a, on the financial sector. what we learned in 2008 is that dominoes fall quickly. they are all in this together. so a preemptive strike to calm nerves would make sense. but politically, carney's is in a difficult decision. presumably the new prime minister will not be happy. group will brexit push him to remain. is the chancellor goes, presumably carney goes.
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it is time the bank of england tries to calm nerves. it was not clear to me in the statement this morning or the speech from carney did that. the committee of nine will have a separate set of view pay there will be a separate meeting to think what the nine think. will you think carney ultimately depart the bank of england shortly. how destabilizing you think that would be? think youo notdanny: want to do that quickly. the last thing you want to see is carney and osbourne going with all of the chaos. but their position, once the initial shock has been dealt with, there long-term and medium-term positions do not look good. to calm nerves today. the worry was that the chancellor said things would be terrible but never told us what would happen if there was a brexit vote. the bank of england was in the same position.
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so the markets are left thinking. remember, for the bank of england, the inflation report forecast they made a month or so ago, it is thrown away. now they have to start all over, presumably with a much lower forecast and higher inflation forecast. so all of the stuff they did a month ago is gone. jonathan: how much of a stimulus is the drop in sterling? a considerable stimulus. it will have an effect on inflation. clearly, a decline in the exchange rate is a stimulus. but it will presumably give a boost. but there are other forces going on as well. especiallyof that, if this is on the floor. lowering ofermanent sterling, if you were to look at what the u.k. needs the next couple of years?
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you talked about kiwi and cutting rates. that might be something we have to factor in. how low the sterling have to stay and for how long in order to have a meaningful impact? danny: it seems to me that this vote, this is likely a permanent downgrade. a permanent lowering of the pound. the question is by how far. were talking about 30, others were talking about 20. it seems to me this is a permanent adjustment downwards. i assume we will see things like a downgrade of the u.k. credit rating. this looks to be a permanent change, i suspect. interesting weeks ahead of us. thank you. denny blanchflower, joining us from dartmouth college. jonathan: a check of the stocks. here's julie hyman. julie: i want to start with the groups. in the s&p stoxx 600 in europe.
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usually we look at the u.s. timeout. today, we have the european imap. 522 of the 600 stocks are trading lower now. financials taking the biggest hit. they are down 11% as a group in europe. are down, evenps consumer staples, down 1.5% -- the least. looking at the u.k. banks. check the selloff. in the double digits for lloyds, barclays. all of them down sharply. it is spreading to the u.s. bank s as well pay looking at premarket trading based in the united states. banks like jpmorgan and citigroup. down sharply, especially considering it is premarket trading, which is relatively thinner volume. also a selloff and travel-related stocks and airlines. this is a group that has been reactive to the polling the next
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-- the last several weeks. -- ryanairan and down down double digits. we have been checking u.s. airlines. there is concern about the effect on global travel. is there going to be some sort of global, economic pressure from this vote and what affect will that have? also sharply affected. carnival down more than 8%. delta an american airlines also -- delta and american airlines to selling off. jonathan: checking the breaking news. guy: according to germany, there ita g-7 finance ministers -- says cheese, i am assuming it is finance ministers -- in a conference call taking place now. expectonation we would looks like it is taking place. jonathan: what does it mean with
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politics. ,oming up, jacob kirkegaard senior fellow from athens. ♪
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david: this is "bloomberg ." i am david gura. coming up, martin scholz with his reaction to this historic day. ♪ jonathan: this is bloomberg." joining us now is jacob kirkegaard. rates have you with us on the
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program. us onat to have you with the program. the conversation is what is next . i want you to put that in some context for us. his next even a conversation worth having? jacob: no. i do not believe it is. we have so many floating variables at the moment. we just heard that the scottish nationalist party is going to onk another referendum scottish independence. we had the resignation of the prime minister. we are likely to see the ouster of the leader of the british labour party. what point theat u.k. government will launch the article 50 process to actually leave the european union. we may have an early election in the u.k. we still do not know what the rest of the eu will do. guy: should this be negotiated
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quickly or slowly? judging by political reaction, the u.k. seems to want to go for the slow approach. we have already heard from angola merkel and we are hearing merkel, andla vision from france for a long. what side are you? julie: as quick as jacob: as quick as possible. the longer it goes on, the more uncertainty will play on the -- pean is something that will not endear him very much to the other leaders, that he will meet with in a few days. jonathan: the follow-up to that would be for a lot of people he has a lot of leverage now. because these guys did not give
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him a good enough deal to give to the british public and sway the vote this way. does he not have leverage now? jacob: no. the european leaders have already said that the deal negotiated in february was final. there will not be any renegotiation. meanwhile, it is the u.k. economy that will be taking the biggest hit. if we are looking at potentially three months of uncertainty before the next conservative convention, then possibly after that, a general election in the u.k., we could have another six months of essentially knowing nothing about where this process will end. that is the amount of uncertainty that will have lasting implications for investor confidence and broader levels of investment in the u.k. economy.
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in some ways, the eu can better economically afford to wait. guy: but this is all about politics to we have french elections and german elections next year. the longer this goes on, the more this issue will bleed into those stories. hollande what this done with. if it is not done with, they meaningful -- jacob: this is all from the perspective of the other eu leaders, particularly for merkel and hollande, it is about mitigating the political parts of this. the core argument of the leave campaign was basically high is because of it the eu we have high immigration,
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therefore we need to leave the year. that is an argument marine lap enne would love to make in france and that many other populists would love to make. so francois aland and ago chancellor merkel -- france while --- francois holland and angela merkel would one to defeat. jonathan: sterling having its worst one-day drop on record. here is the why -- here is david gura. david: political earthquake in britain:. the aftershocks are being felt around the world. with 52e campaign won percent of the vote, sending global markets plunging kb pound l to its lowest level in three decades. it also means there will be a new leader in the u k prime minister david cameron says he is resigning.
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a new prime minister will be in place by october. >> british people made a clear decision to take a different path. as such, the country requires it inleadership to take this direction. i will do everything i can as prime minister to steady the ship over the coming weeks and months, but i do not think it would be right for me to try to be the captain that steers our country to the next destination. david: cameron has been in office six years. a possible set -- a possible successor -- boris johnson, one of the leaders of the lead campaign. german chancellor ongoing merkel says germany is strong enough to survive this departure. scotland's first minister says brexit means a second referendum on scottish independence is likely. voted tooverwhelmingly
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be part of the year. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. i am david gura. guy: we will carry on the conversation with jacob kirkegaard next. european politics, global markets in turmoil. ♪
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guy: this is "bloomberg ." we back with the peterson interstate -- peterson stitute's jacob kirkegaard. what does this mean, when you like at the central relationship germany,rance and
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there is a lot to figure out. how do you think the rest of europe will rally around them, if at all? are these two capable of leading europe? jacob: unfortunately, i think even though scope of leadership france and germany has now is limited. they will not be able to respond by having another giant leap forward towards integrating in the euro area or the eu as a whole. they will have to settle for something smaller. what they can probably agree on, to try to stem this potential contagion risk from brexit is to be tough on britain in the coming negotiations. they want us -- they want to send a single to their own voters and voters in other countries, if you want to leave the eu, consequences will be dire. jonathan: punishing greece was
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easy. it was a small economy. fifth biggest economy in the world -- is that not a different ballgame? jacob: there is no doubt. greaterill inflict far -- that this will inflict far greater economic costs. there will be economic pain to go around. but it does not matter, because what will trump these economic is the political necessity that france and germany has two prevent political contagion from brexit spreading. >> there is no economic reform. if you look at what is happening in brussels, the commission, the idea that somehow europe will end up in a better place as a result of this is hard to get to.
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you wonder how bureaucracy reforms in itself. you wonder how we end up with a banking union in the debate between france and germany and the resistance of germany. is there not danger that u.k. goes its own direction but the eu does not reform? and that will ultimately doom it? jacob: there is certainly that risk. even if i am cautiously optimistic that we will get a union,ledged bank ing deposits and all that, that is not the political issue. what this vote shows is that the average person in the u.k., and therefore likely the average person in many other eu countries, feel alienated from the year -- the eu. institutions like the banking union will not change that and make the eu relevant for the average voter. unfortunately, the prospects for
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reform of the eu that will make them regain that relevance is slim. be interesting to see how some of those elections, third. thank you. jacob kirkegaard from the peterson institute. jonathan: the more we talk about it, the more the problems and the headwinds are big, if not bigger, on the continent. coming up, alan ruskin, deutsche bank's cohead. that discussion, next. ♪
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>> brexit. the united kingdom votes to leave the european union. high minister david cameron announces his plans to resign. guy: the pound thanks to a 30
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year low. gold soars and bank stocks take a beating. ♪ to our viewers worldwide, a warm welcome to "bloomberg ." special coverage of the referendum with jonathan ferro and guy johnson. guy: the markets are spectacular. let's get an idea of what is going on. we thought the morning reaction would of eight a little. we have seen -- abate a little. we have seen a little of that. the ftse is down. are taking it hard. some of the continental markets -- italian banks, etc. feeling this. the ftse down less of then some. but you go back into the dollar,
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and it is underperforming. reaction the fx market is astounding. 84 percentageover points. 30 year lows. the euro not as genetic. the swiss bank has been intervening in the market to stabilize the swiss franc. dollar-yen dropping below 100. that is significant. guy: it will be easy to find out whether the boj will do anything. let's look at the bond markets. look at what is happening with the british pound. we are a had steven saywell saying that we could have a 50 point basis cut. we are having a huge market move coming through across the whole story. that is what is happening with the u.s. 10 year and with the , which is gone
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negative. david cameron really in the eye of the story. he is going to resign. he has not resigned yet. he will go in three months time. this story out of the u.k. really putting him flat on his back. >> the british people have made a very clear decision to take a different path. as such, i think the country requires fresh leadership to take it in this direction. i will do everything i can as prime minister to steady the ship over the coming weeks and months. i do not think it would be right for me to try to be the captain that steers our country to its next destination. outgoingd cameron, the british prime minister saying he is no longer the captain of this ship, politically and ended. -- unended. jonathan: let's check the
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bloomberg coverage, from was mr. to london, the bank of england, and brussels as well. and from the trading floor. we begin with and a red wets. talked us through the vote. i was talking to an fx guy around 10:00 p.m. run us through the night's events. anna: absolutely. 52 percent to 48% in the end. ending 40 years of european the u.k. gration with some political commentators saying this is the biggest political change in europe since the fall of the berlin wall. things started to develop around midnight. when we got some of the first results coming through. some of the areas from the northeast of england, the people we knew would vote for leave voted for leave even more than
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anticipated. that is what triggered the alarm bells for fx traders. johnson was on the right side. the former mayor of london was the one who split from his -- was on thegues fringe of the cabinet, but was involved in the governing party. with them, leading this leave charge. he has been talking about not pulling up the drawbridge. interesting to see if he will become the leader of the conservative party. edwards in weston there. the -- in westminster. market, theythe fx did not think it was going to happen. guy: as a result of which, the mood we have seen today even larger. let's go to matt miller from the aberdeen assets trading floor. we have already seen the
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reaction of a number of assets. the guys behind you looking for opportunity or are they so playing defense? matt: the guys behind me at are much longer-term investors focused on individual areas and benchmarked to those indexes. you do not have the hectic mania here that you have on another trading floor. i was at uts -- they had big bets, but they were still around 5%. trades, andking big it was a little manic there. here, it one of the fund managers i have been talking to have been trying to completely gettingge, some of them short the pound before the voting even got underway. so they are not as energetically
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dancing around the room today. but thinking more about longer-term strategy. , massive shifts in risk assets, in bonds and currencies and equities. it is still difficult for them. but as we look out the window into the streets of london, people are still walking around, going about their daily business. it is not as if there was a horrible tragedy that you might think there had when you look at the financial markets. guy: it is even sunny outside. matt miller, joining us from the aberdeen asset managements floor. standing manus cranny outside. we are waiting to see full be the monetary policy response. we have the verbal intervention, so to speak. what does governor carney have to say? carney almostr
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channeling mario draghi. whatever itdy to do takes. i have a preacher on my left. the bank of england behind me, run by a canadian. but we have a political vacuum with who will run the country. this man is gone, governor carney, the man who took the canadians through the tenant -- through the financial crisis in 2008 and 2013. his language is interesting. he reassured us that the banks in this country will have 10 times more capital than it has at lehman's. extensive planning. and the rhetoric. for me, it was the style and format. the pragmatic tone that carney used to deliver his message to the markets. we will find if there is a g7 response. whether this is edition actually
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intervenes in the market. but is friday really the day to intervene? we need to see how the world reacts. as far as the market, those words were delivered in such a tone and manner that there is the sense of somebody is steering the ship. not quite sure it will -- where it will end up, but there is someone in charge. jonathan: a little bit of a whatever it takes moment from governor carney. guy: we will see whatever it takes to a let's get reaction from brussels. ryan chilcote joins us from there. the u.k. once to go slow, brussels wants to get on with it. ryan: yes. they are not very happy with that announcement from the british prime minister that he will leave it to his successor to begin those negotiations. that will prolong the divorce proceedings until at least october. then the u.k. has two years to negotiate its exit.
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you can understand why the u.k. it would want to do that. it wants to negotiate the terms it will deal with the eu in the future while it negotiates its position of seems a power and strength. from the eu perspective, if it is going to be messy, it should at least be quick. guy: thank you. ryan chilcote joining us out of brussels. in theirother voice conversation. joining us now is the former greek finance minister yanis varoufakis. good morning. let's talk a little about what happens next. we did not get a grexit. we are getting a brexit. is this the beginning of the end for the eu? yanis: there is no doubt. i have been warning about this for many years. that the european union is in a state of disintegration. now we are getting to the point where it is at an advanced stage
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of disintegration. what happened in britain is too many voters identified the european union the combination of terrorism and failing economic policies. believed another successful democratic european union is possible. jonathan: you have been in meetings with finance ministers in europe. the conversation that is that they will punish the british for making this decision. do you think it would be easier to punish the greeks than the british? i think this is a valid comparison. in both occasions, this is shooting themselves in the foot. greeknishment of the government, in which i served, in the end was a punishment of the european union to as you can see, a year after the referendum and the closure of our banks, -- theial of debt relief
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result has been that greece continues to bleed. anotherout eats to which leads to a loss of legitimacy and the european union everywhere in the european union. the same thing will happen now if the approach is adopted by brussels against a substantial economy. let's not forget the place where parliamentary democracy grew. a place, within europe, which is committed in a particularly touching way -- and i am saying this with no dose of irony. guy: to pick up on that point, the u.k. has had a revolution, but it has been done by the ballot box. if we see that ability of democratic freedoms be exercised
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elsewhere, howard t think the story will develop -- how do you think the story will develop? yanis: you only have to look at the euro barometer of the european union. these are the official surveys of public sentiment in europe. five to eight years ago, the vast majority of opinions trusted institutions of the european union. if you look at the european union's own data of european sentiment, there is a large majority that would vote, in many countries, against the eu is given the chance. i am a staunch phonetic of the europeans. but those actually running the affairs of the opinion are the european union's worst enemies. jonathan: getting a statement from the g7. let me read through it. g7 statement in tokyo. fxilant of any risk in
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markets. that is the immediate shock. waswhat we saw in the vote a win in labour heartland's. the disillusioned left. i want to talk about the evolution of that movement. we have spent a lot of time talking about the national's party and the nationals front in france. i want to know how that will evolve. a disillusioned left. how will that of all in europe? yanis: i happen to our campaign campaigned in the heart of cities in ireland and scotland and england. imposedars of austerity by london. the combination of those with ofe view across the channel the austerity and union that is now trading deflationary forces
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in germany. think of a housewife who sees her pile of savings dwindle, while other ultra-right-wing parties are governing. this combination of what working class, blue-collar workers in the heart of england and wales have experienced with the view from the continent has created this perfect storm. guy: thank you. joining us here on bloomberg, the former greek finance minister yanis varoufakis. jonathan: coming up, we take you straight back to the fx markets. call onkin with a big sterling. a lot of downside from here. ♪
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a shock wavend through the european union, but i think that will be a good thing. ♪ a historic day in the united kingdom. live from london, this is "bloomberg ." let's get up to speed. here is david gura. want tooters in britain divorce from europe. the final tally had 52% agreeing to leave the european union. it has rocked global financial markets. the pound has not dropped this low in three decades. a huge political loss for prime minister david cameron, who
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spearheaded the remain campaign. theas resigned, saying country needs new leadership. a new leader should be in place by october. donald trump is time what happened in the u.k. to his campaign for president. he is in scotland for the real burning a luxury golf course he owns. donald trump: the people want to take their country back, they want to have independence. you see it all over europe. you will have more than just what have been last night. you will have many other cases where they want to take their borders back, their monetary back, a lot of things back. thinks brexit will be good for the u.s. economy, but it will take time. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. i am david gura. this is bloomberg. jonathan: what a day for price action. groupsingle industry
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trading in the red in europe. let's get you up to speed with julie hyman. julie: one group we are watching our the bookmakers, which did not seem to accurately predict the result we got last night in the u.k. androkes, william hill, shortly --trading sharply lower. a lot of the volatility in japan. andnikkei volatility index the increase it had. x.d the v stocks -- vstox it had been trading higher, but not as much as the town volatility. it is happening in the u.s. as well. year-to-day, up
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to and above 20. this is something many traders have been bracing themselves for for some time. they say they do not know what will cause this spike, but they in it fell back to levels january. we are watching the etf's that truck volatility. a lot of folks going along with these things. here's the fix -- the vix .hort-term a lot of buying of volatility this morning. people are bracing themselves for more to come. guy: thank you. the move we have seen on sterling overnight sensational from a historic port of you. it makes the exit from the erm in 1992 look like a walk in the park. joining us now alan ruskin, global head of the fx markets
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from deutsche bank. today's market action, what are you make of it? alan: it is stunning, overnight. a lot of people were looking at overnight volatility priced at 1.50 and thinking how could this possibly be? when you look at the appropriate pricing for overnight volatility in cable -- sterling against the dollar -- it should have been 3.15. certainly a crazy event overnight. , there is ay now huge amount of uncertainty. the prospect eventually, with additional slowing in the u.k. economy, potentially the bank of england easing. this is falling on a country that is running a deficit that is in the danger zone already. we are talking about a deficit of over 5% of gdp on a consistent basis. that is problematic in its own
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right to the financing of that will be a problem. 1.731.n: a rate of for 1.15bank calling year round. you and i had a conversation last week about gappy markets. do we continue to trade that way? ,lan: i suspect it will be thin going forward, but not nearly as thin as overnight. market is what we have already seen. from here on, it is more about watching the political process, watching the knock on effect on the economy and then on to policy. it is a financing side over deficit that will be problematic. hit not know if we will those levels with that kind of speed, but the direction is clear. the what is the call on
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euro-dollar, given the fact that the single currency area has a lot of skin in the game. not seen more downside in the euro-dollar, and how much more do we see now? alan: the year end for the euro-dollar is still at 1.05. there are a few things happening on euro-dollar. we have already seen the euro fashion asesilient you get realpage asian of capital to the liquid markets -- repatriation of capital to the liquid markets. you do not have major selloff in the periphery markets, which bodes reasonably well p that is one you have to watch carefully in terms of additional stress. the tale is wagging on the dog -- tail is wagging on the dog, to some extent.
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providing support to the euro-dollar. jonathan: i want to talk about rate of change. yields genetically lower. the pound is dramatically weaker. you can put 1992, and it is nothing compared to the moves overnight. my question is how much of the hard work the gilts and sterling are doing for the bank of england now? alan: it is very helpful. you are making an important point. that angle,t from between the long end of the , the pound in particular, it is easing financial conditions and providing some offset to what we are seeing on the equity side. the key will be on the adequacy ine -- on the equity side, terms of contagion. what happens to the banking sector. do we see contagion from bank
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-equity to debt structures. is that one of the sources of contagion or is that overblown? that will be crucial as to whether the pound and what you have seen on the gilts side is sufficient offset on the equity side. guy: briefly, give us a target for what you think the boj will do. has already confirmed it. do you think the boj will? alan: i have been surprised that we have not had confirmation that they intervened below 1.00 last night. we had incredible markets when we slid below 1.00 so far. held off the fact that it held off so far , it is at the point where they
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can continue to hold off. it does not seem that there is g7 coordinated intervention. guy: great to get your take. alan ruskin, deutsche bank's global cohead of ethics research -- of fx research. jonathan: there is a signal their that there is some stimulus coming from those moves. the weaker pound, that is a stimulus when the economy needs a buffer. coming up, talking about the markets. ♪
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jonathan: this is "bloomberg ." a historic decision from the british people to leave the european union.
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significant market reaction. what a move. stocks, the ftse down by almost 44 percentage points. most fourwn -- about full percentage points. switching up the boards. the fx quickly. significantly weaker pound. cable dropping hard. that's get economic data from the united states as you whip board. the fx durable goods, -2.2%. pulmonary reading. and ugly read right now. and transportation, -0.3%. this is u.s. economic data. capital goods coming at -.0%. shipping atgoods negative zero point 5%.
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the survey, 0.3%. soft economic data in the preliminary reading. guy: something of a theme there. , el-erian is the allianz chief economic -- mohamed el-erian is the allianz chief economic advisor. what does carney need to do next? mohamed: he needs to make sure banks have enough liquidity. he needs to get on the phone and talk europe into developing a plan b the house some sort of association agreement. the worst thing in the markets is to continue having this notion that there is nothing to replace eu membership. coming up with a plan b will be critical. jonathan: it does not look like we will get a plan b for a long time. they have not triggered article 50 in the treaty. there is talk of waiting until october for the conservative party conference until we get a prime minister and then before
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that article is actually triggered. how significant is that? mohamed: that would be really bad news. markets do not respond well to vacuums. if there is no credit he on what institutional arrangement -- no clarity on what institutional arrangement could, next, you have the worst arrangement which -- is critical in the weeks to come if this financial shock does not develop into a bigger global economic shock. guy: it looks like nobody has a good handout cards. but if you were sitting around the table, you have angela merkel, france aland, the -- brits,s hollande, the who has the better hand? everyone is holding
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hands together and they have to work quickly to avoid a recession. it is not easy to change institutional linkage overnight. there is a reason why the european stock market is doing worse than the u.k. stock market. it is because this is also a major shock for europe. if europe cannot navigate this well, there will be lots of questions on who comes next. much who hast as the better hand as collectively, they should hold hands and tried this.e the best out of and they should also realize, because this phenomenon is all over the western world, that a majority of people have decided to go against expert opinion, against both the political and , and expresse anger and frustration with this new normal period of low growth and rising inequality. this is an important wake-up call to politicians across the advanced world.
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guy: let's look at it from each side of the table. france aland -- francois hollande and angela merkel says there needs to be something done quickly. saying there needs to be time. mohamed: my hope had been that there were contingency plans. that there was a plan b behind closed doors. was not discussed, you will see a lot more financial and economic volatility in the period ahead. jonathan: i want to bring in new york bloomberg editor editor in chief for bloomberg news john micklethwait. great to have you with us. a stunning decision and a market that has been shocked. what were your first thoughts
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when he saw the headlines confirm the u.k. voted to leave the european union? all in thenk we're same position. i was surprised. i was not shocked, saying that -- it was possible. you can feel it already. i watched with a couple of people who were probe -- pro-brexit, and they do not believe it would happen. protest vote the comes back to hit you. but this is something we would want to get sorted as quickly as possible. all of the evidence at the moment is merkel asking for a quick divorce and the conservative government saying we will wait for your it could take three years. the idea of three years of
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uncertainty is exactly the thing people do not want at this moment. guy: does the u.k. not need to get its house in order to get an understanding of what it w ants? john: the margin for the leave willfficiently big that it be hard to go back and say we decided narrowly, maybe we should think again. also the dynamic in the conservative party will probably to elect someone on the leave aside anyway. there is talk of general elections. you have the very real prospect of scotland is saying we want to stay, we voted to stay, why should we be dragged out with you? all of those things, to stay. countries may now enter a period of huge uncertainty. jonathan: how much of a
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financial shock is this? the 50 is up on the week and the pound is back to levels we have seen recently in the past couple of months. how much of a financial shock could this actually be, with that in mind? mohamed: it can be significant. but this is not lehman. this is not a payment and settlement crisis that results in a sudden shock in the global economy. it is a shock to the institutional setup. it will cause major financial moves. you will see the financial sector move a lot more than technology, when the dust settles. but do not draw too many locations from what you saw. a still have not seen counselor at the close their positions. we have not seen how the retail segment will react. so do not extrapolate too much from what we have seen so far. this is still early, from a technical aspect it.
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there is also the economic question. so it is early yet in terms of how markets are reacting. if this is the start, why should we not extrapolate forward into other events? donald is on our side of the pond -- why should we not extrapolate that? why should we not extrapolate that we have significant a more political events like this. we have french and german elections coming up. there is so much more political upset that could come down. is not even the first. this is just a continuation of a whole list of improbables and unthinkable's that have become reality. you get the protest vote without thinking of what the consequences are. there is a probability -- small -- that this could finally be the wake-up call to the politicians.
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pay what is context ailing us is not an engineering problem. most economists have a good handle on what is needed to remote inclusive growth. what is ailing us is the political world and the political will to affect the handoff from overreliance on central banks to a more confidence of policy response. if you think, and you look at the markets a lot, there was a lot of action, particularly .ith the funds there were talks of people putting big bets against this, and in the end, they suddenly switched it with the polls just before the results started coming out. is there a danger of fund managers get into trouble? absolutely. even as late as a couple of hours after the polls closed
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last night, people were betting on remain. you saw the pound get to 1.50. the last few days have sucked in a lot of people. long's areed vulnerable. you will have a lot of margin calls. i have been quite a few of these. it takes time to play out. and there is not that much liquidity available. places, traders are scrambling, trying to figure out how to get back on side. some people have been sucked in. there is also cash on the sideline. the problem is time and consistency. that the cash will wait until there's evidence that the longs willlevered have cover their positions. can i speak to more long. would you run a big u.s. bank out of the u.k. now? to see: i would wait
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what arrangement comes out. i cannot imagine that the u.k. will have no association. there is too much at stkae -- stake for europe and the u.k. and see what emerges. i think london has a lot of attributes that make it a natural global financial sector. that has not disappeared. wants to preserve its position, has to replace institutional uncertainty with something people can plan on. there is nothing worse than trying to do a multiyear plan when you did not know what the neighborhood looks like. companies are wondering what this neighborhood will look like in the next few years. jonathan: who knows what this neighborhood will look like. is it a case of jobs leaving the
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city of london but potentially no extra jobs being added between now and then? talk about the conversations you have had with the leaders of big banks. john: over the past four to five months, there have been this that they knew this was a possibility. and they all had board meetings were they discussed this. been the sense of urgency about it. the typical response is along the lines of we will definitely not put more people there. and we are very divided about where, exactly, we would try to put others. there are staffing issues for reasons that my german colleagues may struggle to understand. not many people living in chelsea want to live in frankfurt. that is problem. in paris, that would be attractive, but you have labor laws. the spanish are making noises.
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are makingese noises. everyone is trying to make a grab at this. the one thing that is certain is that you would not be over investing in london, because you would be worried without this passport to be able to deal in europe, the attraction of that would go down. jonathan: bloomberg news editor in chief, john micklethwait. and special thanks to allianz chief economic advisor, mohamed el-erian. coming up, we continue to talk about potential consequences for the wider european economy. the ftse down 3.8%. the pound experiencing its biggest one-day drop on record. ♪
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david: this is "bloomberg ." coming up, oakmark international fun manager david herro -- fund manager david herro. ♪ ."y: this is "bloomberg i am guy johnson alongside jonathan ferro. joining us now is david owen. we were hearing about the problems the u.k. economy could face. how do you see it? that: the first point is there was much the referendum the old into the data were looking at. now we are looking at high risk going into a technical
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recession. now we have the period of heightened uncertainty and slow recovery. at the end of the day, we could drop two quarters. but once we trigger article 58, which will not happen until , which, -- article 50 will not happen until october, potentially, a the u.k. will be weaker. about if a big debate it is a good or bad thing to hold off until october. is it a good or bad thing they are holding off? david: at the end of the day, we know that article 50 will not be triggered for some time. david cameron made it clear it will not happen until a new p.m. is in the seat. we also have to put in play negotiators. we also have to do primary talks with our eu partners. once we check your article 50, it is clear that the eu
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countries are in the driving seat. particularly in the service sector. services are much wider. that is what matters. world, allt uncertainty would and now and we would know exactly where we are going. but that is the world we live in, with a projected period of uncertainty. it is not clear we will trigger article 50. listening to boris johnson, he did not really want to win. so at the end of the day, could we get so far and then pull back? what he does not want is the u.k. to go into recession and then turn around and blame and say was that not your fault and that maybe these experts were right? guy: let's talk about the relationship we should be looking for. mohamed el-erian was talking about and association agreement after a norway model. the lead campaign talked about
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leaving the single market. walk us through the options now. one has actually done this before. no one has triggered article 50. the whole point about the single market is you need free movement of labor, capitals, services, and goods. so no country at has access to a single market without paying contributions to the eu and without accepting the free movement of labor or taking any part in the regulations and migratory pressures going forward. that is not in the u.k. interest. theover, no country has access to services outside. that is the issue. in terms of services, it is about red tape. so the issue goes beyond financial services. 8% of the u.k. is services. that is where we excel at.
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that is where it is key. the eu is our greatest partner. guy: we have the october effective referendum taking place. we will talk about what it means to the continental economies, coming up. david owen, jeffrey's chief financial economist. one-day: the biggest drop on record for the european stoxx 600. stocks in bank particular getting hammered. ♪
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will send a shock wave through the european union, but i think that will ultimately be a good thing. ♪
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guy: this is "bloomberg ." i am guy johnson with jonathan ferro. we are joined by david allen. peripheral spreads widening. will draghi be worried? this will set up the bond buying pay they are trying to protect peripheral bond buying. for us, it is fairly successful. have the financing operations. the take of their was low. the banks had to put it on the allocation before the brexit decision was known. we thought it would be bigger, so that is a surprising. they will have to cut the rate with a gain and then expand -- extend kiwi beyond march. so they will continue what they are doing much -- extend qe
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beyond march. so they are buying ig credit for not banks. interesting that standard and poor has said credit negative, and the potential for to get negative, the u.k., and lose its aaa rating. but as spreads rise in the eurozone, how much is the ecb masking credit risk that still exists in spain and italy, given today's price action? david: they can protect the peripheral space today. they do not want to tip the u.k. into recession. they will watch events very closely. they cannot really afford for the eurozone to have another recession. they went to a deep recession and recovered and then went into recession again and then recovered. so the danger is another recession. at that point, there will be a problem. core inflation is stuck below
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one now. we could be in a situation where it is stuck low 0.5, running themselves out. at the end of the day, fiscal policy will -- and the pressure will be there to increased public spending. there is a limit to what they can do for themselves. a lot can happen. thin, buteep spreads they need to get this system growing and expanding. this is key for the moment. they want recovery to continue. guy: october, we get a referendum. an italian banks are hugely under pressure. we have spanish elections. if we got -- without a brexit, the spanish elections will be a spanish problem. but now what happens in spain could be a systemic issue for the system.
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rates in italy have collapsed because of these measures. lower rateseven than you theoretically would pay as a german company. loanstops nonperforming' from rising. but if it rises, it becomes a major issue for the banks. guy: just another big problem to deal with in europe. david owen, jeffries cheap economist. jonathan: coming up in the next cio of "bloomberg ," harrods associates, david herro. ♪
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e jonathan: the united kingdom wants to leave the european union and david cameron to resign.
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guy: the pound sinks to a 30-year low. gold soars and bank stocks take a beating. jonathan: this is a special edition of "bloomberg go." i'm jonathan ferro here in london with bloomberg's guy johnson. david weston on assignment today. what a move we have seen in global financial markets. truly stunning beyond the shores of the u.k. and across the u.s. as well. guy: let's take a look at what we have seen. you need the currency adjusted because the currency factor is important. why is the ftse 100 trading north of the trading? the d'backs is off and off hard this morning. the financials are taking a big hilt as you can see. the banking sector in europe down nearly 15% at the moment. and we are expecting a negative
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start on wall street. jonathan: the headline that just crossed the bloomberg according to the bbc, morgan stanley begun to move 2,000 london staff to dublin and frankfurt. the financials are gyrating. but morgan stanley according to the bbc set to begun moving 2,000 london staff to dublin, frankfurt. that's the story that will be ongoing and we will keep you up to speed. it needs no superlative whatsoever. the biggest one-day drop on record. not a typo. down by eight full percentage points. euro swiss stable. the swiss national bank has been intervening to stabilize the swiss franc. a break of 100 earlier in the session for the yen. guy: the market is expecting big things. the bank of england, we're seeing the price there very, very clearly.
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let's switch the board up and show you what's happening with the bond market. you can see that move in a 10-year guilt. yield dropping. similar stories with treasuries. it's fascinating to look at how the market is now pricing into the possibility of red rate hikes. no, cuts. what's next for the fed and also for the e.c.b. this is what we're seeing. the flight to safety continues and we are in negative territory. but the spread in europe widening out. the market is selling spain as well. this is ahead of the election later on over the weekend. throughout the days, we've been hearing from u.k. politicians about what this decision ultimately means. >> i will do everything i can as prime minister to steady the ship over the coming weeks and
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months but i do not think it would be right for me to try to be the captain that steers our country to is next destination. >> the bank of england will not hesitate to take additional measures as rider, as markets adjusts and as the u.k. economy moves forward. >> in voting to leave the e.u., it is vital to stress that there is now no need for haste and as the prime minister has just said, nothing will change over the short term except that work will have to begin on how to give effect to the will of the people and to extricate this country from the super national system. jonathan: some stunning words from across the political spectrum in london. francine lacqua is here. many of the politicians in shock. some of them incredibly happy. but what is clear is we are facing a significant unsure few
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months right up through october. uncertain is the word. how does this evolve? are you hearing? francine: they're trying to decide their future. sewell of them are angry. labor party is thinking about it can do next. some within the labor party think this is a chance for them to come back into power possibly. on the other side, you have the other party with david cameron saying he will resign in october. it's unclear whether boris johnson will be able to transition from what we can call a gesture to the crown prince. this will depend on whether he gets his party on board. one thing is clear is that we don't know what will happen politically to this country. there is an outlier call which the bookies are thinking of, which could be that boris
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hnson comes and say we are going to extricate ourselves from the sovereignty of the e.u. and for the moment, it is not getting that much traction. but you have all sorts of things being talked about in westminster. jonathan: thank you, francine. the politicians reacting. and the central bank reacting the federal reserve saying carefully monitoring global financial markets. the fed issuing a statement on the brexit. the fed is ready to provide liquidity. guy, it got a rubber stamp in the next couple of months. guy: the fed judging by market pricing might as well go on holiday. seriously, take a break guys,. come back in 12 month's time.
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jonathan: yeah. on the phone is c.i.o. of harris associate david herro in chicago. you see european bank stocks getting hammered. credit suisse in particular, down, down, down. has anything changed for you in regards to the fundamentals that justifies the kind of moves we're seeing? david: certainly there is a considerable more short-term uncertainty in the environment and that's never good. on the other hand, prices have reacted quite negatively. you mentioned credit suisse, but look at the periphery banks and even the french paribas not to mention what's happening to the u.k. banks. i think people are comparing this with what happened seven or eight years ago. it's really not a correct comparison given the state of
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capital positions and safety capital like these banks have today. the banks are much, much better position to weather these uncertainties that we are now facing. and i think we do have some positives. there's a very strong global consumer out there. there's high employment rate, low unemployment rate, low interest rate, low energy costs. consumers are doing pretty good. they're not as indebted as they are. we don't have this debt overhangs. so there are some negatives, especially with the uncertainty which can happen with the united kingdom and how it relates to europe. but on the other hand, the banks are in a better position to deal with this uncertainty if you look at their leverage racial owes and capital racial owes. so i would say some of this 20% own prices are overdone. guy: wells fargo down 5%.
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european bank stocks down 15% on coverage. would you go shopping at these levels? give us a sense of what you would be prepared to do. david: keep in mind they were already selling at very low valuations before this happened. yes, there was a low rally this week but if you look at in the last eight, nine months in anticipation of this, if you look at the valuations, they were already reflective of omething coming. if price separates itself quite aggressively from what we believe is intrinsic value, we add. as it approaches in intrinsic value, we subtract. i don't think a lot of the intrinsic values of these banks is near what mr. market has done their prices. so you could almost guess what
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ur thoughts are right now. jonathan: let's try and confirm your thoughts. did you buy credit suisse stocks on the drop? david: i can't really talk about our current trading but at this price, credit suisse is attractively priced as some of the european financials. there is going to be short-term uncertainty and volatility to be expected. this whole thing was kind of a big head fake. it looked very close going into the polls and then, of course, people began to believe that they were going to stay in and even as the polls closed, there was that early polls. and you saw the big movements in the market. huge swing in sterling. first it was up a couple of percent and today, it's at 136, 137. so this volatility is providing short-term uncertainty, which, again, look for the quality, look for the companies that have
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good strong financial positions to weather the storm. and again, this is the big difference between this time around -- a, you strike zone the successes has you had in 2007 and the and 2008 and -- stronger financial position is marking a very big difference between what we saw around the lehman time. guy: when you talk to sergio, they talk about the fact that investors are paralyzed, that nobody's willing to execute. and i don't think anything has changed really in the events of the last 24 hours, they're only going to exacerbate that position. very hard for them to deliver on the upside when investors are effectively so fearful of doing anything with their money they're sitting on their hands. david: yeah, i agree that in the short term there, will be more sitting on your hands. but eventually what you get is
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this fear fatigue and people finally start getting off their hands and start doing something. and at least the referendum here, at least the uncertainty surrounding the referendum itself is gone. we have to see who is going provide leadership and what are the european leaders going to do? for instance, the european leaders are going to somewhat reflective and say what did we do to cause this? are we trying to make europe a more business friendly? more attractive and a less regulatory burdensome place? i mean, these are the lessons, these are the questions that the leaders of europe should be asking themselves. what cause this? what caused 52% to the electorate to want to leave us? and i think of whoever that's going to be the leader of the united kingdom has to work hard to make the u.k. be an attractive place to stay and work and to attract investments and that's exactly what the u.k.'s going to do. the question is what europe's going to do.
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are they going to look and reflect and say what could we have done all right? did we overregulate? did we make things too hard to do business? etc., etc. and hopefully, hopefully, and maybe i'm just being overly optimistic, some good will come of this. the good is they will reflect and they will make changes to make the environment easier and more positive to do business to live to exist. and kink this is one of the lessons that has to be taken from this. jonathan: if that were to be the case, would it be a good opportunity there for global banks to look to exit london and move elsewhere within the e.u. as it is going to exist in the future? do you think london is lesser a financial sensor as a result of this? david: it could be less but it could be more. look what happened as a result of the financial turmoil in europe over the last three or four years. people flooded to london. i mean, there's parts of london
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that there's more french speaking people than english. i'm exaggerating a little bit but the point being that the mysterious, the hard-working and the entrepreneurial will go where they're most free to practice their trade and their business. and if london makes itself attractive and if it makes itself a destination and europe doesn't, you're going to get this impact that perhaps london, almost like switzerland will become a magnate for these places -- magnet for these places. but if europe doesn't change and makes itselfmes -- a more attractive place in the short term, -- over the medium term, it might be just the opposite of what conventional wisdom would dictate. jonathan: david herro, really appreciate your time. thank you for joining "bloomberg go."
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coming up on "bloomberg go," hugh hill joins us and looking ahead, special coverage this weekend. bloomberg, it was bloomberg radio, saturday, we have updates throughout the day in new york and london and a "live" special program on radio. a special "surveillance" from 7:00 a.m. and in new york, 12 p.m. in london. ♪
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jonathan: this is "bloomberg go." i'm jonathan ferro alongside guy johnson. special coverage of the u.k.
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decision to leave the european union from the city of london. 14 minutes away from the cash open of the new york city is the state of the financial market. future downs and down hard. limit down on futures earlier in the session. we're off those lows but deep in negative territory, down by 3.5%. here in europe, the banks getting absolutely hammered. down by almost 15% points on europe's stoxx 600. have a look at some of these moves. the likes of barclays, opening lower by almost 34% points. we trade now, negative 2 1. hsbc, lighter in terms of the negative news off by 3%. but you see this across europe and beyond the u.k. with 16.4%.e bank down by the big headline, cable. 30-year low. biggest drop on record. down by almost 8% points in the here and now.
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here's the why. here's david. david: it was a political earthquake in britain and the aftershocks are being felt afterwards. they did so leave the european union. the pound fell to its lowest level in three decades. stocks plummeted from london to tokyo. it was a huge political loss, david cameron has resigned, saying the country needs fresh leadership. cameron will say on for the next three months. a new conservative leader will be in office by october. and donald trump is in scotland anywhere reopening on a luxury golf course he owns. david: -- people want to have inns in a consensus you see it all over europe. you're going to have more than just what happened last night. you're going to have many other case where is they want to take their borders back.
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they want to take their monetary back. they want to take a lot of things back. david: he thinks brexit will be a good thing for the economy but it will take time. this is bloomberg. guy? guy: thank you very much. let's talk about where the market is doing stateside. let me han you over to julie hyman in new york for a quick check on the movers. julie: we are seeing a widespread sell-off just as you are in europe. big cap technology, that's one of the things that we're watching. we've got apple, alphabet, amazon and microsoft all trading lower. we got a note from bloomberg intelligence this morning saying that the brexit vote is likely to put a damper on international tech spending. so we're seeing that reflect in the shares this morning. also we're looking at some of the big industrial companies. in addition to this vote, we got
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a durable goods number in the u.s. this morning showing an unexpected drop by the most in three months. general electric, boeing and united technologies are lower. and the financials. we're watching them. not just a big consumer focused banks but also some of the brokers and asset managers. goldman-sachs, morgan stanley and black rock also feeling the pain, which is widespread this morning, guys. guy: thank you very much, julie. let's talk about the political story and the central bank story in a little bit more detail. we're joined by huw. he is goldman-sachs's chief european analyst. mohamed el-erian saying they must have enough liquidity. are central banks doing what they need to do this morning? huw: i think so. one of the somewhat reassuring things that have happened over the last few hours in quite a disturbed environment is being that the central banks have stood up. market functioning has remained
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relatively orderly. there's been a conservative international attempt to ensure that, led by mr. carnie's statement this morning but supported by all the leading central banks coming up with similar statements from the e.c.b. and frankfurt in the middle of the morning. and we had the g-7 statement after lunch london time. that concerted effort and the preparedness that's been signaled to provide liquidity to provide term fund to banks and activate and use the effect swaps to ensure you don't get currency mismatches. that's been an important part to avoid the panic. so one of the paradoxes here is that the experience we had post-lehman which did feel like stepping off a cliff and seeing markets seize up, that paradox is the type of mechanisms that were put in place probably too slowly in the face of that
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problem. they've remained in place and they're more prepared to deal with these types of issues after the events of last night. jonathan: they speak to themselves but i want to wonder is there any positives that gild is is down 8% and 30 basis points. huw: that's an easing of domestic financial conditions of the things equal. and other things equal level of support, activity in the u.k. in support of competitiveness and export. but i think you have to put in mind, keep in mind, that these financial changes, these financial repricing are a reflection of a financial shock -- fundamental shock. primarily, the rise and uncertainty that's a full out of the decision that was taken last night. the fact that we don't know what new trade arrangements are going to be. guy: and won't know for a long time. jonathan: that's the point. there's a duration mismatch here. the rest of the e.u. want to get this negotiation done and done
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quickly. the u.k. appears to want to make it happen more slowly. from an economy point of view, from an economic point of view, who's right? huw: there's little doubt to say that it's better to get things done quickly and resolve uncertainty because the pattern of asset market moves is best explained by the consequences of the aversion to uncertainty that's being created. and having said that, a quick deal is a bad deal is not better than a deal that takes a long time to achieve. that is a good, durable deal that benefits both sides. so i think dish would not be in a rush to judgment here. what i slightly worry about and of course, this is being symptomatic of developments within the jew and more broadly in europe over a long time is that attempts to play a game of brinkmanship, perhaps people ave read a bit too much game theory. they could complicate a
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negotiation which ends up hurting all sides. i think the greek experience, which i wouldn't compare to the brexit experience one for wasn't they're careerly different experiences but nonetheless, the greek experience which is still ongoing, of course. if you think back to last summer, that was an experience where this bringsmanship did not lead to a good sexouck if we were to go to that direction, i hope we won't will be very painful. jonathan: i've got to deal with some of it now. earlier on some reports that morgan stanley has begun to move saying there will be time to implement changes. no sign of them confirming that at all. saying we will adapt accordingly according to a spokesman of morgan stanley. no confirmation from them. the other headline is the reaction from the white house. the statement from the president. "the people of the united kingdom have spokeen and we respect their opinion. the special relationship between the united states and the u.k. is enduring and they remain a
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vital cornerstone in economic policy." the president, rather like many of the european leaders conciliatory tones with the u.k. not what i heard going into the referendum. the u.k. get to the back to the queue. do you think there's going to be a change of approach globally from what we've heard better the vote coming out of it? huw: i think that has been the tone of what we hear this morning from u.k. politicians and from politicians throughout the world. we're living in just a different world. to try and create incentives to vote that i think probably many of these people wanted to get their u.k. population to vote, certain statements were made. now in a face of the decision props gone in a direction they didn't like. there's a reconsideration of those positions and at everybody, and of course, that's ultimately as an economist, that's ultimately what the gains of trade can bring you. everybody can benefit if we get to a good deal. getting to that good deal is
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what we need to work on. guy: thank you, huw pill. jonathan: the market fallout coverage continues. we are four minutes away from the cash opening. dow futures negative 548 points. s&p, negative 75 points. 2009 losses. for a lot of these markets, they're the kind of drops we're seeing on an interim basis. ♪ you guy's be good. i'll see you later
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[ bark ] [ bark ] bye. see ya pal. ever wonder what your pets do when you leave home? [ laughing ] aw you cutie pie. aw. aw. aw. aw. [ barking ] [ washing machine running ]
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party's on! know what your pets are up to with xfinity home. xfinity. the future of awesome. see the secret life of pets, in theaters july 8th. you guy's be good[ bark ] i'll [ bark ]later bye. see ya pal. ever wonder what your pets do when you leave home? [ laughing ] aw you cutie pie. aw. aw. aw. aw. [ barking ] [ washing machine running ] party's on! know what your pets are up to with xfinity home. xfinity. the future of awesome. see the secret life of pets, in theaters july 8th. jonathan: to our viewers worldwide this is bloomberg . i'm jonathan ferro with guy johnson. we have seen the moves and heard
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the decision that the u.k. decides to leave the european union. here is the market reaction. the ftse 100 down by 3.71%. a time banks down. the ftse benchmark in europe down since the most i october 200. hear the opening bell in new york city. if you hear the applause. i do not think the bulls will be clapping. switch out the board and we get to the fx market. drama for sterling. $1.37, a move of almost eight percentage points. a 30 year low and the biggest drug. has stabilize the swiss franc. a move on dollar yen shows you how much risk aversion is out there. we trade at 1.0 217, a -- we trade at 102.17, a stronger
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japanese yen. >> out of the gate, it is not as bad in europe as in terms of the depth of the selloff. the dowaq is down 4% as and s&p open down to percent. .- down 2% there are stocks that are not fully open because of the gap down. officials at the various exchanges have tried to take steps to avoid what happened last august when it was market turmoil on august 24 with delays in trading and market disruption . but we have seen is that they have widened the circuit breakers on independent stocks by 10%. there will be a momentary pause of an individual stock if it falls by 10%. the trigger for the oval -- for the overall market is 7%. we are obviously not there at this point. a two dayomberg,
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moving average, some traders have pointed to you and technical analysts have pointed to -- we're not going there. that is a level to watch. when i talked about last august, we are talking about the selloff that created the market disruption. something have been watching the world wirp interest-rate probability. what are they pricing and in terms of what the fed may do. 0% of a probability of a hike to november. there is a probability of a cut being priced into interest-rate futures. 10% at the next meeting. going up to 15% for the following 2 meetings after that. that is something we will be watching. let's get to what is selling this morning. thanks as we have seen in europe, they are selling off in the united states with concerns about their businesses.
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morgan stanley, there were early morgan stanley would move staff from the u.k.. they said we will figure out what our next move is as we ascertain the effects of the vote. of bank of america, morgan stanley, they are all .rading down anything sensitive to the american economy will sell off. apple, alphabet, mobile, they are all selling lower. global travel has been under pressure. one area of green has been gold as people look for refuge. futures are -- gold trading higher. volatilitye vix index, it is up to 23.59. not as high as earlier this year, but still spiking. jonathan: big market moves.
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s&p 500 down by 2.6%. the dow lower by 500 points, the biggest moves that earlier this year, 3.4 percentage points. it is not as dramatic as europe, but it is a significant move lower. global leaders respond with statement after statement after statement. guy: it is not surprising. we are asking leaders to come out and make statements. the latest from the secretary of the treasury jack lew. the statement in short and to the point. as we consider developments in the financial market i have been in contact with my counterpart and financial market participants in the u.k., eu, and globally. have.k. and policymakers what is necessary to support the financial sector key to growth. the message is we are monitoring
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the situation and will do what is necessary to make sure that the financial sector continues to function. that is a message we have heard from europe and the united clearly.ery let's talk about the financial sector and how it is managing the event and reacting. share prices down heavily on both sides of the atlantic. michael moore joins us on set in london. hit hard.ks are peripheral banks in london hit hard. we have london banks opening to a downside, but the system is functioning. michael: it is functioning. you do not see the bank runs that were feared. 20% isny percent -- down not as bad as this morning, but it is a significant move. stanley, willan they or won't they move? we had a conversation with morgan stanley who said the move would potentially the to dublin or frankfurt.
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it has not been triggered. only from that point it will take 2 years. i wondered from the conversations you had, how do they handle the uncertainty between now and 20 negotiations begin? michael: you have heard from every ceo that has come out that the devil is in the details. wait and see. they want to see what passport ng looks like. what equivalent look like. can they avoid the cost of moving a ton of people, or will that be a necessity in the new europe? are there workarounds? if you are in asset manager maybe you can register in dublin ?nd work in london are there ways the financial sector can figure out how to make it work for them? they are good at figuring out a set of rules and ways through them. michael: currently, they do not
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have the set of rules. they like having a set thing to work with. i'm sure there are workarounds. they have subsidiaries on the continent, most of the international firms do. the problem for them right now is that it is not in their hands . it is in the politicians hands. how they negotiate with the eu gets them the rule set to attack. jonathan: michael moore wrapping up some of the bank moves and drama we have seen. i moved to the downside in the united states. matt miller has been at the aberdeen trading floor all morning with the senior investment manager. luke, this morning i was witnessing sheer mayhem on a different trading floor. this looks organized. what is the difference? right.e somehow got this
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we were neutral in the sense of guilt last week. we were taking the risk out of the portfolio. today it does not feel they get is the time to react to anything else. it is time to think more carefully about what this could look like in two or three weeks. matt: so anyone who made a wrong bet, taking risks, you have to get out of the trade today. how do volumes look? is it massive? is it sizable? luke: not at all. the real activity has been in derivatives, crossover, and investment grade. sizes have been very large. 1.5 billion traded this morning. on the bond level, the physical level, not many bonds are trading. the long end and quality space, people want bonds. at the moment, i'm not inclined to let them have them. matt: what about next week?
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a lot of people are saying when you have cleared out and gotten neutral, you will sit on your hands and wait. when do you think we will see action kick in? luke: it could happen because we see, as an industry, redemptions. redemptions in a market which could cause further trouble in terms of pricing. or, if we do not see a good response from europe or the central banks in terms of supporting the market, talking about how to go forward, talking about fiscal stimulus, if we don't see that then we get banks. matt: what you think about carney's actions and speech this morning? luke: we are standing ready. we will do it we can to support the market. that is what we needed to hear, but we need to see the rate cut come along.
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it may be august, but the market needs to think about where the next problem is. maybe the u.k. is not the next problem. megan: thank you for joining -- matt: thank you for joining us. a senior adviser at aberdeen asset management. guy: thank you. we have a statement coming out reassuringsdaq customers that the plumbing will be operating. we will act accordingly to fluctuations in volatility, maintaining resiliency across markets for our partners and customers is the forefront for us. the plumbing is critical. that is what went wrong during the financial crisis. any markets are making sure they make it work this time around. that is coming out from the nasdaq. joining us now is larry hathaway . the chief economist. thank you for taking time to join us. as you watch the market action and think about what it points
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to, what are the takeaways from trading in europe? we are not far from wrapping up. what has today taught us about what happens next? larry: worst and most importantly, it taught us that this was unexpected. in the preceding 4 trading days markets have moved higher in anticipation of a remain outcome. leave has been a setback for markets. after the initial selloff we saw balance and stability. this is about repositioning and risk management within portfolios. the level of uncertainty elevated will remain so. there will be an obstacle to genuine fundamental space investing in this environment. therefore, the hallmark of the future is likely to be volatility and uncertainty. said,an: something you the way markets were priced into the decision. the pound is 137.29.
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it did have 138 in late february and early march. i know that it is a 30-year level overall and looks scary in the intraday move, but on the footsie in the week, it is higher even with the aggressive move lower. can you talk about the intraday move and the drama that brings. on the market was positioned going into the decision. before we begin to get the results, the pound was flirting with 150 as the first results came in. it felt like a stone and we saw those around 133. that is before we saw the recovery to the levels that prevail. the message behind that is the market was unprepared for the outcome. beyond that, a second message to heed. that the pound owes its stability to capital inflows. classk. runs the world
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deficit that require spending capital inflows. in an environment of uncertainty unleashed by the brexit it is questionable that that money will continue to come in at a pace that supports the pound at these levels. you are right. we're back to levels that we saw earlier this year. this is just the first chapter in what is likely to be an unfolding story. the prospects for the pound don't look that great. guy: give us an idea of how much lower we need to fall to make the two sides of the ledger work . where does the pound need to be? if you recall, as people were considering the brexit outcome in the weeks running up to the referendum, there were a number of views that suggested that the pound could fall to 125 and even below. i really don't know in the near willexactly what dynamic unfold. i think those are levels that we have to keep in mind.
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i don't think that we should look at short-term movements that are unfolding today and take them as reflection of strategy.l based this is about near-term risk management. when participants come back to the market next week and in the ensuing weeks and assess the fallout of the brexit for domestic politics in the u.k., for the wider landscape in the eu, and potentially the world economy, we are likely to see pressures reemerge. jonathan: larry hatheway with solid advice. the head of multi-asset portfolio solutions and chief economist. a sharp move down. bank stocks dominating in the early part, just like europe. on theup down 7.5% session. i don't know if there's a knee-jerk reaction of global risk aversion or something more on the mental to be discussing. guy: i expect a lot of people
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might be salivating at those numbers. let's see exactly what the bid looks like at the end of the session. coming up, the cbi economist will be joining us with what is next for the british economy. ♪
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david: and the hewlett-packard enterprise greenroom, coming up ssough gross -- bill gro weighs in on the referendum vote to leave the eu. guy: let's talk about what is happening in westminster. francine lacqua is standing by.
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francine: i am pleased to -- oduce that must be so much uncertainty from your leaders. what do you tell them? >> now is a time for reflection. for our members to think about what are the implications for the business and for the wider u.k. economy. the thing to focus on is restoring constants to financial markets. it is important the government works together to provide liquidity and stability. does reflection mean? if i'm a medium-sized or big company, should i think about leaving the u.k.? we don't know if scotland will leave at some point. rain: what is important is nothing changes in the real economy tomorrow. we have time to renegotiate the trade relationship with the european union.
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that will matter to a lot of businesses across the u.k. it is important to focus on that in the medium-term. resilient and used to dealing with uncertainty. they will adapt. francine: what are some of the questions you have gotten the most. so many questions about the banks. are there concerns about hedge funds? concern isain overall volatility and financial markets. what does that mean for the exchange rate some of the equity crisis. we have seen huge movements in the prices today. businesses will think about what does that mean for their individual businesses, and what do they do starting monday? francine: you have been away for 24 hours. have you spoken to members that have voted for the brexit and regret it due to the market turmoil? rain: we have been focused on where do we go from here. what it means for their business, the u.k. economy, our
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trading relationship with the european union. do you need from central banks across the world, mark carney, and to reassure members that there will be stability in the u.k. in the next couple of months? rain: what we need to see is what we saw from mark carney. they will provide the quiddity. liquidity.l provide that they will take steps to insured monetary policy stability. that makes it easier for businesses to invest and grow. francine: i don't know if it is the polls or markets, but how did leave get it so wrong? in the lot of surprises results so far. now is a time to reflect and think what that means for the u.k.. now's a time for business, government policy makers, to come together to ensure prosperity for the u.k. as a whole going forward. francine: what is your number
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one nightmare? aside from more volatility, breakup of the u.k. with scotland arguing for a second referendum to join the euro? rain: that is something for the people of scotland to decide. we need to bear in mind that we are focused on the u.k. economy at the moment. we do not need another shock from the rest of the world hitting the economy is. it has to be about restoring confidence in the financial market. francine: thank you for joining me. back to you in the studio. there is tension as people wait. they are all looking at our markets. put currencies and asset classes are doing. they are turning to the markets to see if we get stability. jonathan: fantastic coverage from westminster with rain newton-smith the cbi chief economist. we have reactions from global institutions connected.
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we get a statement following the british people's decision to leave the european union we are following developments around the world and stand ready to support our member countries. everyone feels the need to be heard that they are ready and standing by. central banks are getting behind and saying we are here and ready. whatthe reader cross is they will be making in the u.s. elections. hillary clinton saying she was the choice of the people made in the brexit. she is getting involved. jonathan: stocks are opening sharply lower. bouncing off of those lows, details with abigail doolittle in the nasdaq. abigail: we are looking at a selloff for the nasdaq. the index is down 3%, the worst drop since february. the index was on pace for the worst drop ends august of 2011. the nasdaq is outpacing the dow and s&p 500.
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apple, microsoft, and amazon are the biotech index is down 3.5%, deepening the bear market. michael ye is seeing amgen and gilead in the current list off environment as a weakness. we have the nasdaq down 5% year to date, underperforming the s&p and dow. jonathan: moore bloomberg and market reaction next. ♪
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guy: this is bloomberg . i am jonathan ferro with guy johnson. 25-minutes into the session. a move to the downside. from thec decision
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british people to leave the european union. there is no drama in conversations. no friction between european leaders and british leaders. guy: i think there are some friction in terms of the timeline of getting things done. that is where the acrimony may come through. there are political factors in the mix. my take away is that anyone who talks about smart money should. everyone anticipated this would be easy. the brexit wouldn't happen. jonathan: down for asset classes. full coverage on bloomberg tv and throughout the weekend. special coverage on bloomberg tv and bloomberg radio. ♪
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>> it is 10:00 a.m. in new york, 3:00 p.m. in london, and 5:00 p.m. in hong kong. i'm vonnie quinn. mark: i am mark barton.
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it is bloomberg "markets" on bloomberg television. ie: global coverage on the vote. this is what we are watching. the vote no one was expecting. the u.k. leaving the european union causing aftershocks throughout the globe. mark: every asset class is moving dramatically as investors are put on edge. shift in powerve as world leaders plan their next move. ♪ mark: what a day it has been. it has been a history making 12ket, rattling the last hours. the aftershock of the brexit vote being felt around the world. markets look like this.


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