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tv   The Pulse  Bloomberg  June 29, 2016 4:00am-5:01am EDT

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francine: steady on stimulus hopes. the relief rally in europe continues. the french president says london will suffer from brexit. merkel says there is no backing out. david cameron turns home. the islamic state is blamed for the attack at the international airport they killed 40 people. ♪ francine: "the pulse." welcome to -- welcome to "the
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pulse." i am francine lacqua. let's get straight to these markets. we are seeing a relief rally that we saw yesterday. that is continuing into the early hours of the trading session in europe. from 1.4% -- i want to focus on the back because overall the gains are 2.6% if we did have a downgrade by moody's. volatility down a touch. pound 1.3389. barclays getting 3.4%. if you look at five trading session chart, it looks very different. they were really slammed on friday and monday. some of them lost 50% of value of the deal.inning let's get straight to the bloomberg first word news with nejra cehic. nejra: coordinated attacks at istanbul's international airport have killed at least 40 people.
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the prime minister says islamic state is likely to be responsible. the attacks which injured 200 people in off at about 10 p.m. local time. turkish airlines says the airport has reopened for flight. the president of france has targeted a keep color of the financial industry as he called into question the city of london's status at a clearinghouse speeding at a meeting, francois hollande says the brexit book shows the u.k. has turned the back on the idea of free movement of people. "you lose the advantages that come with it." slide in the run-up to the eu referendum, bank of england governor warned that a vote for brexit which riga a recession. now it seems it is on the way. three-course of respondents to a survey conducted after britain devoted to leave say the economy will dip into a recession for the first time since 2009.
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an majority predicts the bank of england will add more stimulus, including cutting interest rates in the third quarter. as manythird time in days, japan's top decision makers have met to discuss the impact of the uk's decision. after this morning's meeting, shinzo abe told reporters that he will mobilize all possible measures following the brexit vote. at the same time, harry tito kuroda says the central bank can add funds to the market as needed. global news, 24 hours a day, powered by 2600 journalists in more than 120 countries. you can find more stores on the bloomberg at top . francine. francine: the pound resumed its decline after rallying from yesterday. in brussels, prime minister david cameron -- to express regret over the results as european leaders says there was no turning back from brexit. cameroninal -- mr.
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maintains that is a job for his successor. >> britain should seek the closest possible relations as britain leaves the eu. close relations over trade, cooperation, security while britain is leaving the european turn its back not on your. -- on europe. francine: ryan chilcote is an brussels. business with for france. ryan: and frightening the u.k. at the same time. whether the u.k. will be up to maintain its during operations in europe. it is a profitable business. it has been a hub, london has for a while peter last year, the city of london, the financial district one a big victory over the ecb in a court in luxembourg
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that allowed it to continue those operations. what the french president is saying is if you leave the eu, then in two years time, and the u.k. officially exits, you will not be up to do that, because he would love for france to take up that business. francine: ryan, the mccammon is coming back to the u.k. 20th is when other eu leaders gathering today on the agenda brexit. brexit, group hug, group therapy. today is perhaps more important than yesterday. yesterday, met with a lame-duck prime minister who can i do what they want him to do which is to start the active negotiations. what they can do amongst themselves as a group of 27 is decide what kind of european union they want in the future.
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that is going to be a robust discussion. all 27 are politicians and they want to be reelected. they are well aware that back at home there is some of the same euro skepticism, some of the same questions about how good the eu is that they need to address. i think we are going to see a push for reform to a lot of the countries have been clear that they would like to see the eu change, maybe become more of a political club or deep in financial integration. begun.petition has and they will continue as the u.k. gets its own political house and your. -- in order. francine: all of the latest news in brussels. more, jane let's get foley. tim cook you have to look at the
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nuances of -- jane: you have to look at the nuances of sterling and currency markets in the markets are believing that central banks will be delayed in terms of what fed can do. they are taking everything with stride. -- the be very cautious market is thinking central banks were going to ease anyway probably are. this is the bank of japan, maybe the ecb and maybe some others, new zealand. the market but pricing in that the fed won't hike and of the bank of england will. why would the bank of england ease. the reason would be we are try to stave off recession it that is clearly -- off recession. that is clearly not a positive factor. that's a majority government. now what we have got? political uncertainty. that's not something to be celebrated. a huge amount of political
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uncertainty with respect to the financial services industry. industry part of the in relation to how we -- we have not seen the lows yet. francine: you say the markets are focusing on the wrong thing. you see how they price in all of this political turmoil. jane: a huge amount of political uncertainty. it is difficult to see through that. one thing is very certain, uncertainty is bad for investments. currency. bad for from that point of view, it is thiscult to envisage rebound from sterling getting any less. francine: are we going to see action? of coordinated
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there are problems internally. jane: if we were to see cornet that's a real price and volatility. hopefully we will not get to that point. will there be intervention in japan? the probability has arisen. francine: jane, thank you so much for now. with us and will be talking a lot more about the dollar. we will be bringing you our interview with the foreign secretary, philip hammond. joins -- the ideas festival. you will see that at 10:30 tonight u.k. time it -- u.k. time. forget next year, the fed rate rise will be in 2018. that is according to the markets. the economists foresee a recession and expect house
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prices to drop 10% at end of this year as ihs re-talks real estate. here in turkey, officials blamed islamic state for the latest terror attack. what does it mean for the global fight against terrorism? ♪
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francine: you are watching bloomberg. let's get to bloomberg business flash with nejra cehic. nagel france income cornet the tax into stumbles international
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airport have killed 40 people. the countries prime minister has said islamic state is likely to be responsible. the attacks was also injured 20 people went off in rapid succession at the airport at around 10:00 p.m. local time. turkish airlines is the airport has reopened her flights. -- reopened for flights. brexit may cost carmakers $2.8 billion through 28 -- 32018. -- through 2018. vodafone is wearing his options at the u.k. voted to leave the eu. the company says it will consider moving its headquarters elsewhere unless the country negotiates continued access to the single market. that is the bloomberg business flash. francine? francine: forget december and
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the next year. the fed is not hiking until 2018. the brexit derailed the tightening timeline. jane foley, head of ethics strategy. -- ethics strategy. we're pulled it back to 2018. jane: the market tends to overreact so they could come back. important data from the u.s. today. -- i think people are going to more heed into competent surveys the come up after the events. to try and work out how much impact it does have on the economy. of course the u.s.. ,t is another headwind certainly september is off the table. we have not discarded the idea of a december interest rate hike yet.
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francine: is because the u.s. economy stronger? it won't trigger a worldwide recession? jane: it is a headwind. on the back of it, particularly it is growth -- prettily if growth in europe slows down on back of it. we do think it is too difficult just yet to preempt all of that and work out what is going to happen in the u.s. u.s. as yellen has been clear, we have been seeing growth. we have seen disappointments. one big factor will be the dollar because if the dollar keeps on strengthening, -- francine: d believe we will see -- do you believe we will see a dollar rally? jane: it is quite likely. dollar is the
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political -- it erupts further in europe. extent seen that to some against the u.s. dollar. really poured elections next year in germany and france. the less for years, look at the european parliamentary elections in 2014. we could have more that in the wake of brexit. maybe not. certainly, i think the dollar is going to test given the uncertainty -- given the uncertainty. francine: what does this mean -- the for the bank of japan? asian banks have done so much in the last couple of months and they are not going to back down now. jane: we have seen the yen stronger. that is not going to be welcomed by the japanese. the currency is not just the single problem. at least immolate demand went inflation is shrinking -- how do
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you stimulate amand when inflation is shrinking? and sugar currency is not going to help. the question is -- react to the mystic fundamentals and risk appetite. risk appetite is low, it is going to be difficult for them to push against it. a large fiscal package from japan. probability -- will the yen selloff in this environment? i don't think so. francine: jane foley, thank you so much. we will be talking about to the next. up next, we update you and talk to about this talk to you about political risks. -- and talk to you about political risks. ♪
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francine: terror attacks have killed 40 people into stumbles main international airport. more than 200 others were injured. -- he focuses on political risk in europe. jane foley is still with us. iq for joining us. how did you read these terror attacks. it is always a huge tragic loss of life. i we expecting more attacks of the sorts? .> the risk is very tangible
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this is the fourth attack and assemble along since the beginning of the year we saw two more major attacks and ankara. threatlear that the isis is within the country and outside the country. the risk is there. islam is significant because istanbul stumble airport is the third busiest and europe and almost 61 million passengers every year. we have seen a systematic attempt by isis. significant. francine: is it unusual that they have not claimed the attack yet? claims their attacks in turkey. it is not unusual. all fingers .2 isis. francine: this is an attack not only on human life but also tourism in turkey because it is a big part of their gdp. >> absolutely.
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a good year brings $30 billion in revenues. a significant decrease because of the bad relationship with russia. in may alone, it was down 35%. if there was a chance of recovery in the second half, these chances are over. francine: is there a direct link between the fact that i.s. is losing ground in the middle east? and more attacks are frequent and violent? cooks there is a need to keep the franchise alive. -- >> there is a need to keep the franchise alive. they need to attract people and money. target becauset there is presence of isis in turkey. the forces are overstretched.
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threat.e the isis francine: an attack like this will it alienate some of their fighters because it is during ramadan? >> i don't think so. say look at target, they are normalizing relationships with israel. they are arresting our brothers in turkey and so on. the attack is well justified. and isis supportable look at this. francine: jane, looking at the markets, it does impact currencies and the way that politicians deal with the countries relationships with investors. what will the currency does what is theprospect -- what prospect for the currencies? sensitive to flows. we know the economic .mpact, the human impact
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this is a nail in the coffin for the tourism industry. we've seen a low with the lira. from an economic point of view, clearly this is negative. forcine: what does it mean president aragon -- president er dogan? >> turkey has been enduring attacks of all sizes. all of the people -- the minister of interior, the security forces, nobody is assigned it the public is starting to a wonder about this -- assigned. the public is starting to wonder about this. a dream of a constitutional change to allow for executive presidency. the support is that you need a strong man to run a country
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which is under threat from within and outside. because to be careful the question mark about the ability of the security forces to tackled this threat. it is happening in central places where this is not supposed to happen. francine: jane, if you go back to there's all of this consolidation of power, this will not play out well with international investors if we don't see something going forward which is more like the systems we are used to here in the west. jane: if we consider, there is a lot of fear. these are terror affects -- attacks, people look inward. this is not great for investment flows, political uncertainty. again, it is bad for global growth. francine: is their relationship for change between turkey or the eu?
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does it change the perception of citizens in the eu and a time we see fragmenting? --i don't think it does it it does. --ause they were targeted apart from that, turkey is an important player in the region. europe still needs turkey to deal with the migrant crisis. there is a need for the tackletion effort to terrorism. francine: is there any way of protecting airports? >> meaning there is plenty of security. the last two weeks the police presence was intensified. what is not possible to do is control the cars basically because given the size of the airport, the airport is not given -- is not designed to do that. the security is really well
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done. you need to prevent the people from getting into the airport. francine: thank you so much. we are back in two. we'll talk more on turkey and brexit. ♪ you guy's be good. i'll see you later
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francine: welcome to "the pulse." i am francine lacqua. let's get to the bloomberg first word news. nejra: coordinated attacks in istanbul's airport has killed at least 40 people. the prime minister said islamic state is likely responsible. also injured more than 200 people and went off in rapid succession around 10:30. the airport has we open for flights. the friends -- the french
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president called into question london's clearing hub. showed the brexit vote the u.k. has turned its back on the principle of free movement of people and added that when a country abandons one of the eu's key pillars, you lose the advantage that goes with it. mark carney warned a vote for brexit would trigger a recession and now it seems it is on the way. almost three quarters of respondents conducted after britain voted to leave the eu say the economy will slip into recession for the first time since 2009. the majority predict the bank of england will add more stimulus including cutting interest rates. japan's top decision-makers have met to discuss the impact of the uk's decision to leave the eu.
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the prime minister told reporters that he will mobilize all possible measures following the brexit vote. the bank of japan governor said the central bank can add funds to the market as needed. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. francine: i will get on to the referendum and just a couple of seconds but what we know so far is that markets are believing that central banks are here and ready to act, which is why we are seen yields on a lot of sovereign bonds ever lower. ireland dropping to a low. we may touch a few more technical levels across the european countries and we will talk treasuries in the next hour. david cameron has left brussels after his last summit as european leaders rather for the
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second day of brexit talks without him. angela merkel says she sees no backing out of brexit. fuchs.peak with michael always great to have your perspective on these things. clear,ancellor was very there will be no renegotiation and probably no access to the single market. what are renegotiations going to look like? michael: first of all, the u.k. has to trigger article 50 and as soon as this is out and has been made, we have to form a team to negotiate. there will be no free access to the single market anymore. this has to be renegotiated and to say it bluntly, there is no free lunch. you have to do something or pay
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something and except terms and conditions which is obvious, look at the countries like norway and switzerland. they all have their rules and regulations with the market. it is the same for the u.k. in the future. kindine: concretely, what of measures would you put into place looking at security and defense? michael: as far as security and defense is concerned i think we really should work together because europe should be as a whole united in order to defend ourselves because that is not going to be easy. we have to increase our budget for defense which i think is necessary. , while out of the site we are talking about the i wish it would be as fast as possible because uncertainty is something which businesses do not like and is
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bad for business. francine: how much do you think the city of london will suffer? how much will financial institution suffer, and can germany pick up a lot of those banks and bankers? michael: you have to know there is an instrument called banking passport. that is something which many banks need to have access to the european market so the banking passport will be definitely gone. that means a certain amount of banks, they have to move into france,be it germany or maybe even dublin. they cannot stay in london because otherwise they have no possibility to trigger an ipo or handle ipo's or new bonds and things like that. it is something that has to move out of the u.k. instantly. i'm quite sure some of the banks are already preparing.
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francine: will they moved to frankfurt or berlin? michael: could be frankfurt, could be berlin. that is an authority which is in london at the moment and i think this is also going to move because a regulatory measure will be out of frankfurt ecb. overall, and we understand from people that were on the ground in brussels that last night's dinner was emotional. everyone said they were not wishing anything bad to happen to the u.k. at this stage, but are there any silver linings for germany? are we going to see more integration and power for germany and the new integrated eu? michael: we are not happy at all because u.k. was our most important ally because both of us, we are living with a free market economy and the others
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are a little bit more state oriented. for that reason we are very upset that the u.k. is stepping out of the eu because we use our most important alliance. one has, weo rights combined it together with u.k. and it was easy to have a veto override. we are not happy at all. said thatnigel farage thousands of german car manufacturing jobs were at risk from brexit unless there is a deal to allow u.k. access to the single market. is it true or false? michael: i can only tell you he so had said -- he has said many nonsense and this is nonsense as well. francine: putting it simply, putting it punchy. michael fuchs, deputy leader of the edu.
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piccoli is still with me. when you listen to michael fuchs part of it is remorse but he is very clear, there is no free lunch. they will be tough on the u.k.. what does it mean for the city of london? wolfango: i do not think anybody has thought about it and there are four pillars in terms of freedoms. the freedom of movement is the key one. if you want access to the single market, you have to accept freedom of movement. short of that you are not going to get a nice deal and that will have implications for london and the rest of the u.k. economy. it depends on how london wants to play it and now we do not have anybody in charge. francine: who is the best prime minister for the u.k.? it needs to be someone that
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captures the mood of the u.k., has leadership skills, and knows how to negotiate with the eu. wolfango: looking at a pool of candidates, not of them in my view is particularly suitable for this kind of job. the challenge is phenomenal. -- therson will an act vast majority is for remain. all sorts of aspirations have been created, controlling the migrants, economic boom. then you have to do with brussels. whoever is going to become prime minister is set to fail. there is no way this person can meet these kind of challenges. there is also significant risk of a failed election after the authority is appointed. what do you tell people who think the u.k. will reverse their decision?
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wolfango: people were wondering about that but looking at this statement from cameron and the european leaders, the decision has been make in, the train has left the station. i do not think there is a walk back at this point. francine: are we looking at a recession? wolfango: i am not an economist but certainly reading from the people i think are reliable, there is a significant risk of recession. the longer the uncertainty stays with us, the increase in the risk. francine: does it put the u.k. at risk when we were having the campaign and when things got a little bit ugly, people said it puts us at more risk for terrorism. we were told nato takes care of this. wolfango: i do not think the security will change. it is popular on both sides. europe needs the u.k. and vice
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versa so i do not see major changes. on the european side, italy has a chance to do more integration and it will be about security, mainly federalism as you can sell that to the public. in terms of european integration elsewhere, now the public will not be supported. francine: thank you for joining us. coming up we will be talking to alvera about what brexit means for his company and energy security in europe. ♪
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pulse.": this is "the stocks and sterling are making gains this morning. mark: stocks in europe rising for a second day bringing that four-day decline to 7.3%. at monday it was sitting at a 10.8% decline. .hat is the stoxx 600 this is the function showing equities, bonds, currencies, and commodities. this is a wonderful chart showing the correlation between pound-euro and the euro stocks 50. rises oneound-euro way we see a gain on the euro a -- the and we see
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highest correlation since the single currency was introduced in 1999. 2007.s the pound index in this quarter, the pound index has fallen 7.4%, the biggest quarterly decline since the fourth quarter of 2008. height of is at the the global financial crisis post lehman brothers and then the pound index fell roughly 18%. in the fourth quarter of 2008 the pound index was a steady decline and through last week, it was actually up 2.8%. the declines have happened since friday. let's look at the world interest rate probability function. for u.k., july is now for a cut of 35%. we are up to 54% in august.
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are basically saying there will be a cut in interest rates in the third quarter. francine: thank you so much, mark barton with your asset check. central banks providing the safety blanket. one of europe's biggest gas pipeline operators is here. thank you so much for coming on. there was talk about you de-merging part of the business but at the end of the day, how concerned are you about market volatility? how difficult is it to continue with your plan and there is a little bit of craziness on the market? marco: certainly there is a lot of volatility. we are deem urging the distribution business of italy and the great thing about a.d. merger is you are not pricing it as such. we received great confidence from the banks that are
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supporting us on the financing side so i think it is a vote of confidence and trust. it is regulated as high quality assets and volatility means there an interest in such predictable returns. francine: we are trying to get a sense of how investors are pricing risk and where they want to flock to. do you believe they can be benefiting from brexit or no? marco: not at all. i think it is early to call with the implication of brexit will be on the energy side. we have a 50 year amortization time and that is a long time. u.k. and the continent are connected physically by the interconnect are. it is the energy equivalent of the euro tunnel. i do not expect disruption on the physical side, and what i hope will not happen is as europe can lose the u.k. leadership in energy policy there may be an impact as they
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try to address their energy policy. francine: that is a significant risk. are there any threats to these plans for energy unions, and the relationship between the eu as a whole with russia? marco: the priorities for energy union are always in the continent so the efforts are always in the continent. billion ofabout $70 investment required to create the investment. securityomes to supply, i think it is very high on the political agenda of every country but in europe there has been a lot of talks about energy security. russia will play a stable role in terms of volumes but there were probably need to be additional russian infrastructure whether it is at the north or south or through turkey. francine: d think overall the
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relationship between the eu and russia change not only for energy security but because of a brexit? marco: i do not think so. continental europe has begun a consolidation effort. has been 16,000 days of russian gas flows into europe with three or four days of issues due to disputes between russia and the ukraine so i think that will continue to evolve as europe integrates itself. that will mean cheaper prices and more like stability and security. francine: we talked about market volatility and funding. i do not know if you worry about currencies or political risk in other countries. marco: italy is the most diverse gas country. we havepolitical risk had and we can manage that, and
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from an energy securities, that has been managed. i think the greater risk is prolonged insecurity -- prolonged insecurity because that will affect the market. francine: what a great pleasure to meet you. brexit britain, a real problem for real estate. homebuilders- punched approximately 25%. ♪
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francine: welcome back. we got new housing data. rise prices continue to 40.2% in june but that was before the eu referendum. how does the housing market look like? homebuilders plunged. here are three of the biggest losers on the ftse 100. we are joined by global head of research liam bailey. think you so much for joining us. how bad will it be? we will see money coming back in the u.k.? think we should separate the short term from the medium and longer-term. aere is no doubt we have seen weakness and the market over the past six months, particularly in london. sale volumes are lower at it
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comes on the back of the election, big changes to taxation, and the brexit vote and the result we had on friday. is that salesn volumes will probably stay at current levels until we get clarity on where we go next in terms of the uk's relationship with the eu. talking to our agents across london and the country, most deals that were agreed, most sales that were agreed prior to the brexit vote appeared to be continuing as agreed. there has been a few renegotiations on price but we have also seen some new buyers coming into the market, particularly from asia into the london market, looking to take advantage of the weaker pound in the shorter term. toncine: how difficult is it talk about sale prices? prices, you mentioned the
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nationwide figures for the u.k. which is still rising and prices in london have been static for about three or four months. our latest data points to a slight decline in june. vote we prior to the announced and our expectation is that prices will stay week, at least until we get resolution on the agreement of the eu. i think we were warned by the chancellor that prices could fall to 17% or something in central london. is there any truth to that? liam: i think the problem at the moment is on a macro level. london is massively undersupplied with homes and demand for london has held up very well even though we have had all of these changes.
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there is their doubt the tax burden has increased and that is beginning to weigh on prices. the impact on brexit comes to how long the renegotiation takes , and ultimately what the final result is. francine: what is most important for house prices in london? is it access to the single market? i am not sure what we are looking for to have a direct correlation for house prices in london. liam: i think the biggest issue .s access to the single market the assumption from the marketplace is that the health of the housing market really relates to the ability of the u.k. to do a deal with the eu and keeps the single market particularly access to financial markets and export services. much,ne: thank you so liam bailey joining us from singapore. later today we will bring you our interview with the u.k. foreign secretary and then after
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that, blackrock ceo larry fink joins erik schatzker for the aspen ideas festival. "surveillance"s with tom keene and we will be talking about the referendum, currencies, and these markets. ♪
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the relief rally city, thein europe anda warnine french president says london will suffer from brexit and merkel says there is no backing out now. state made anamic attack at the istanbul airport that killed at least 40 people. this is bloomberg "surveillance,"


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