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tv   Bloomberg Markets European Open  Bloomberg  June 9, 2017 2:30am-4:01am EDT

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♪ guy: welcome back. you are watching out u.k. general election special. the story has been going on throughout the night. i am in london. i am alongside matt miller who was at credit suisse. john sparrow has arrived in the u.k. to walk us through what he is getting in terms of the market reaction. he's going to be joining us to be joining us throughout this conversation as well. we are bringing together some of the best minds we have a bloomberg. we are minutes away from the european market open. we're going to give you a heads
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up on what you need to know throughout the day. the headlines look like this. it is a hung parliament for parliament -- for britain. some talk we would hear from theresa may around 10:00. that is denied right now. exit uncertainty is the big story surrounding this. is a softer brexit now a more likely outcome? we are going to take you lived to brussels to discuss that issue. what is going on with the pound? it is trading lower. the cash open in around 30 minutes. matt: it was interesting. when i came into this trading for around 4:00 this morning, there had not been a lot of action overnight, especially not relative to what you softer -- after brexit and the trump election.
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i thought we would see the pound move lower and more volume. that picked up once you got the hung parliament headlines coming across. we have seen no a pretty serious size in town to selling hit new session lows just minutes ago. within the last couple of seconds at bbc is reporting theresa may is saying she has no intention of resigning. i wonder whether that decision is hers to make anymore. it will be interesting to see how the party rallies around or does not as a result of what has been happening overnight. about what is going on. this is the gmm screen. what i think is interesting here is, he first thing is, how the british pound is down. it is around the 1.27 level. as we get into the london trade, we haven't broken down further. let's take this animation off. what you have got
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here, and ignore the pound. look at the rest of the screen. there is nothing really to see there. the rest of the story is actually one of reasonably calm markets. not a lot of contagion. that is interesting. ehe other thing to note is u . -- eu . it looks blue. you see what has happened in london. urban versus rural. young versus old. thing is what has happened in scotland, which is fascinating. as we have been hearing throughout the night, maybe -- maybe the snp has strengthened because of this because of the fact the conservative party finds itself in a difficult situation.
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teresa may's future being thrown into doubt. the gamble on this earlier election backfiring spectacularly. i wonder what order brown makes of all of this? -- i wonder what gordon brown makes of all of this? anna, give us what we are learning over the last hour, hour and a half. to bring everybody up-to-date with the numbers, we have 645 of the 650 seats declared so far. 314 to the conservatives. it has many people talking about whether we might see the conservatives forming some kind of an alliance, but even if that manages to get across the line, it would look like an unstable, there is no majority.
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that is one possibility. there are others talking about how if we don't manage to make that work, perhaps we end up with something still with the labour party and others. this looks spectacularly uncertain. let's go through some of the headlines. fascinating. the gamble that backfired. let's go to the "daily mail." happy result that theresa may wanted. this was the election that never needed to happen. the tory party -- newspaper declaring this one work, mayhem.
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the question over the brexit vote and what this means. we had george osborne saying the hard brexit is now in the trashcan. let's go to the other side of the political spectrum. ine blimey is the headline relation to jeremy corbyn and the strong performance he has had. i will pick it up there. we are seeing the pound touch session lows here. a lot of action in that risk asset, but not a lot of action in others. for the market, it is a fairly isolated event. it is a global story. i want to get more on that. let's go to the bloomberg first word news. let's continue our focus on the u.k. for the moment. labour party leader jeremy calling on prime minister theresa may to standdown.
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that comes as a result of the hung parliament. a conservative and was widely expected. >> the prime minister called the election, because she wanted a mandate. the mandate she has got his last interpretive seats, lost votes, lost support come and lost confidence. i would think that would be enough to go and make way for a government that will be truly representative of all the people of this country. shery: this hung parliament could see britain without a fully functioning government, and this is just before brexit negotiations are due to begin. that could upset the timetable for finalizing a deal. prime minister may calls for a period of stability as the country begins negotiations with
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the you. in the u.s., james comey has accused president trump and the white house of lying and defaming him during 2.5 hours of testimony on capitol hill. he says the president's shifting explanations for his termination simple." plain and theirt memos of conversations. >> the administration chose to defend me and the fbi by saying that the organization was in disarray, that it was poorly led them up at the workforce had lost confidence in its leader. those were life, plain and simple. -- those were lies, plain and simple. shery: global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. you are watching bloomberg. john: let's dig into the u.k.
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election market action with mark cudmore. i want to begin with jordan. if i had sent hung parliament, you would say that is a toxic tail risk. many out there called in the one 20's. jordan: i'm not surprised that what is going on. ,e asked a lot of people clients and our own people, 124 is where we are supposed to be right now. you have to ask why we are not. there is a question of liquidity. it should be lower. you have bids in the asian session, too. what is going on right now globally is everyone looking at the situation saying, hard versus harder in terms of brexit. now, there is this possibility of softer.
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guy: kevin both sides. i don't think you have risen parcel of exit. -- reversal of brexit. lets the with the government comes up with. what is brexit actually mean? that is good for the pound. matt: mark, what do you think we get it theresa may does resign? bbc, she is determined not to. it may not be her choice. getid not get up -- we did movement on the pound. do we get more action if she resigns? say, it will be taken out of her hands at some point. i am not a political as it. -- political expert. will probably be taken as
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positive. one of the main takeaways from this campaign is that theresa may lost all faith from the electors, which means it will be generally seen as any alternate might provide any -- better leadership. ultimately, a new leader for the government would be seen as a positive. there is that uncertainty that would come first. guy: where are we going to see this happening? i have the risk reversals up. this captures a one month. -- period. where do we start to see this happening? where does this start to percolate into the market? think they are still too low. volatility across all asset classes continues to come lower, dolphins lowhat considering what is happening.
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it is important to note that sterling fundamentals were clearly negative. they haven't really shifted because of the election. a lot of the noise here. there is going to be two-way volatility. there are some opportunity for the market to play this positive narrative. this might mean delayed brexit, softer brexit. are going to get to a volatility in the short-term. there is still uncertainty to come. let's get to the uncertainty around leadership. the bottom line is, the prime minister and her campaign team made this about her. -- has noing she is intention to resign. what is the future of the prime minister? she starts her campaign
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with ratings at skyhigh levels. the last two weeks is a big sharpening of jeremy corbyn's rating higher and theresa may's lower. -- if shevative party was to resign, that makes it complicated. if this government is going to continue in this form, conservatives plus the du p. to june 19, will she be in power? if she is not, how are they going to pass the queen speech? it beckons fresh elections. i think it is to way. it is not going -- guaranteed she is going to step down. matt: i want to bring it back to
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markets. gilts and equities open in 15 minutes time. do we expect to see a selloff in equities and a purchase of gilts? we did see this inverse relationship between sterling of the ftse 100. because earnings are based abroad. vote, the ftset 100 did well. we can see a little bit of that repeated a. i think the ftse 250 will fare works. -- fare worse. guy: jordan, is the pound's next move in the hands of the europeans? we got a response from europe that says you guys have got to figure it out. we are going to back off and give you time and let you figure
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it out and talk to us when you know what you're going to do. if the europeans take a more sanguine approach to this and they come out and say, we're going to give you more time. forget about the clock. what kind of message will that communicate? jordan: i think he has been constructive. to june 19 and the queen speech, it is also the birthday of the brexit negotiations. this is politics. anything can happen. if it is delayed because you don't have a meter -- leader, markets would like that so much. people say they europeans will play hardball. it is in their interest to do that. that is good, news, i would say. is going to be
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interesting to see both sides of the channel and how they respond. jordan, thank you very much. he joined us last night. and markchester cudmore. you can follow them in the rest of the team. go back to what is happening at westminster and back to anna. anna: thank you very much. i am joined by a guest on the green outside parliament. is with us.burn good morning to you. is 7:45 on the day after an election. aboutms premature to talk something, because we don't know who the new government is going
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to be. what are your thoughts? carolyn: i think business is stunned by this outcome. we know there is going to be a hung parliament. that creates uncertainty on top of uncertainty that already exists. they want a new government to form a functioning administrative -- administration. the world is watching. we need to signal rapidly that we are pro enterprise, open for business. it is not the time to put the brakes on. anna: we could find ourselves in another electoral cycle soon. business would not welcome that. carolyn: business is resilient. we know that from what we have seen. we can feel confident that business will deal with uncertainty, but keep it to a minimum.
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must not be knocked off course. business will be looking for a recommitment for some of the productivity issues in the economy. you have been to visits to members of theresa may's leadership team. and they really listened, we're talking about a new team here. do you want them to reengage with business? has there been a lack of engagement? carolyn: this is a real opportunity. this is a time for governments and business to step up together on the biggest problems of our time. example, brexit. business has so much experience
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to bring in the big challenges. this is a time for real listening and partnership. businesses everywhere are up for doing that. anna: we don't know if theresa may is going to be leader of the conservative party or prime minister by the end of the day, let alone the end of next week. do you want to see the conversation about what brexit means reopened? george osborne has been saying this morning a hard brexit has gone in the rubbish bin. what does business want to see on that? carolyn: nothing has changed between yesterday and today with business. the goal of a comprehensive free-trade agreement, free trade, access the people -- anna: doesn't mean pushing for a simpler model? the norwegian model, for
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example. carolyn: we have always talked about outcomes. business once outcomes. -- wants outcomes. wouldn't it be simpler for everybody and save time if we try to go for one of those more off-the-shelf models now? carolyn: there are several ways of getting to free-trade. the clock is ticking. we are in the timeframe now where this is going to lead to the exit. the important thing is we get the leadership team together and get the best outcome for our economy. so much depends on this. if we are talking about more fiscal spending, because some people have said this election has been about austerity. government is looking
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for a fiscal boost, where would business want that? carolyn: there is support for some of the big issues around skill. education, wrote structure. we have a problem in this country and we need to get cracking on those. at the same time, fiscal stability and the importance of remaining a pro enterprise, pro-market economy is something that the world will be watching. it is not time to put the brakes on. anna: you have said the world is watching. how does the uk's economy look to you? carolyn: i see resilience. u.k. -- we are seeing great investment going into the northeast. we have carbon cash transfer,
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life in the northwest. if we can get this phase right and get through this period of uncertainty, we can have an economy that is great. we have got to get this right. we have got to be pro enterprise, pro-market, and open to the world. carolyn: think you very much. , cbiyn fairbairn investment director. matt: i am on the floor of credit suisse. just to run you through how this worked out this morning, there was little trade overnight. john took you through the initial results that we got. we started to get an idea that it was like to be a disappointment, but the selling was not large in size. it was mainly focused in the cable trade. selling pounds versus
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dollars, even though you saw the zero pounds trade going in the same direction. -- euro pound trade going in the same direction. cable selling started to pick up around 6:00, 7:00 this morning. 6:00, 7:00 this morning. we started to get an idea that it was going to be a hung parliament, and then it picked up exponentially. still not the same level you saw trading the night of brexit or the trump election, but still some big selling. we continue to hit new session lows in the pound as we broadcast. beenis how the action has now. more and more people coming in, waking up to what is really a surprise. what i am seeing is a negative surprise for the u.k., but isn't such a global issue. it is really focused on the pound and britain. guy: absolutely. it does feel like that this morning.
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it is still a standard deviation move. we are getting used to these -- this size and scale. we're brushing it off a little bit. john: i think the surprise today was actually you have the most toxic outcome in terms of the hung parliament, and we have only printed 1.26. many people out there were looking for 1.25. my site i said if you get the hung parliament confirmed, where you go on cable? he said you're going to 1.20. that is that the price. brexit andthe softer the margin being priced back in. we know the mechanical process has been taking place on the ftse 100. pound goes down, ftse goes up. it is because of the revenue streams. keep an eye on the exporters and minors today. it isse 100 looks like going to outperform today. i would urge you to look at it
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on the currency adjusted basis. that will give you a real look at what is happening here. the 250 is probably going to be where the action is this morning. has become an inverse proxy for anything that happens with sterling over the last 12 months or so. i do not think that is going to change. what i find interesting is how the brexit debate evolves now. people say softer brexit area. others say a harder brexit scenario. the debate ise, back. i think that is why you find support on cable. guy: you are looking at live pictures of the leader of the labour party. he ran quite a campaign.
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he has a lot of thinking he needs to be doing this morning about what happens next in the u.k. the market open is next. the gilt open is next. this is bloomberg. ♪ ♪
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guy: we have one minute to go into be cash open in europe. the ftse 100 coming out of the gate strongly. john: the reason is the weaker pound. easy.his stuff is the story gets more complicated after that. where does the pound go from here? do you buy the ftse 100? do you want to hold during growth -- going to the weekend? guy: tell risk starts to grow. biger outcome can have a effect on the british pound. matt, what are you hearing on the floor? matt: it is not a tough trade.
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that is what the traders are telling me. there are some buyers out there, though, because although we have had steady and climbing volume of sales. --we do not see the pound sales here, we do not see the pound dropping to the levels we saw before. we are expecting the ftse 100 to come out of the gate strongly. the market makers have been easy job. ftse 250 flash a and a second. that could be interesting. it is trading softer this morning. unsurprising, given the fact it has more domestic focus. -- its have the revenue does not have the revenue stream story attached to it. about howmore details
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the european open is progressing. manus: there is a cracking line. theresa may is not set to resign , according to the bbc. europeanction on markets. industrials are flat. energy is also having a little bit of a difficult session. we are up .4%. the markets are trying to look at this. uncertainty, uncertainty, uncertainty. this is a british situation, not a global market risk. when you talk about risk pull ups, go into -- the risk reversals on your terminal. it is slightly above. it was one of the worst. you are right about going into the weekend in terms of being long sterling.
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do you want that risk? will it be theresa may's last weekend? -- ook the london traders we open down 3% on bital volume in asia. we had a recovery up to 1.5%, but this is where we go. this is your pound by times him. times him. we will see when new york up.ens up -- wakes soft brexit, hard brexit, it is a big debate. will be hard right hold theresa may if she stays in power to resume terms of hard brexit? do we need a delay? said we need a
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pause. there are other markets, gentlemen. close -- onin the the close them up. london is up .8%. guy, jonathan. guy: we will get to the gilt open in a second. there are stock specific stories. this is what we are looking at. barclays is softer on the back of this. , btmore domestic stories group softer. sky is the interesting one. you have the 21st century fox story out there, and that could feed into the inability to get that done. the political story could feed into the inability to get that
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deal done. there are some specific stories surrounding this, but probably, you are seeing the more domestically focused sentiment of what is happening in the u.k. this morning. let's get to the gilt open. this morning, as we open up, not a big move. we are pretty much in line where we traded yesterday. there was a big story what a labor main -- win would mean. there was another story that if you get a hung parliament, maybe gilt yields have to go lower. guy: the bank of england story is interesting. we saw the bank react post-referendum. solid -- we saw it lower rates. the data is rolling over right now.
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let deal with the politics now. may's future as pie minister has been thrown into doubt. a gamble to call a early election. let's get back to wes minister -- westminster. anna: we're heading in for a hung parliament. votes of the 650 are now declared. a hung parliament according to the latest forecast. this is not a majority for the conservative party. they will need help if they are going to try and form some kind of government. theresa may signaled that is the intention of the party. help oft be with the ireland? what price what they want? will it be something to do with brexit?
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they want a strong business relationship with the republic of ireland. that could be an interesting one to watch. snp took 56 last time around. not very strong from them. if we are to see the labour party in this hung parliament situation, could the snp take on relevance there? so many things we do not know. overnight speaks volumes about the extent of the which we had away from the conservative and the disappointment we are seeing. -- constituency of category of canterbury has fallen to labor. guy: thank you very much. anna edwards down in westminster.
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michael metcalfe is with us. good morning. a big political event in the united kingdom, but in some ways, not a big market reaction. explain. like simon must not, i would've anticipated a bigger sterling remove -- move on this result. , and i thinkexit there is some support for that. clearly theresa may did not that the mandate. we don't know about the leadership. on the other hand, this might make a bad deal more likely, because rather than getting a strong and pedro will government, we have a weak one with a -- i spoke to pimco last week. he said, where would gilt yields go?
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much lower. why are gilt yields up a single basis point? it must run in the family. spoke to pimco last week as well, and he said there is very little chance of this outcome. in terms of gilts, because sterling hasn't fallen that much, there is not a big inflationary threat. the one thing we are guaranteed is uncertainty. be the safeing to haven, especially when you don't have the collapse and sterling and the inflationary process from it. where are we seeing be safe haven trade this morning? i am looking across markets and i do not see it. you don't see selling in the pound, people piling in two gold or the yen. what is going on this morning? are people slow to come to their trading desks? showsl: i think what this
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, and this has been clear throughout this year, is that markets are far less systemic at the moment. when we get shocks in one country, they don't propagate to the market like they did last year. this crazy a lot of political uncertainty for the u.k., but this is very much a u.k. event. ofthis creates a lot political uncertainty for the u.k., but this is very much a u.k. event. the popular the movement in the u.s. had implications for europe. this is all about the u.k. gilts might attract some bids, simple he because the economic outlook and the fiscal outlook in the u.k. are more in certain. guy: the market was among sterling going into the referendum. i want to go back to a question i asked earlier. is the next phase of this the response of europe?
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if europe comes out and says, you have a mess over there, figure it out and come back to us. or if they turn around and go, clock is ticking, get on with it. think it puts the ball in europe scored, especially given the timing of the brexit negotiations. if they play hardball -- the other thing to throw into this themacron and his movement has been doing so well. they are going to argue for a harder negotiation stance. not in ao, u.k. is position to respond anymore. in terms of how the markets balance between softer and harder brexit is europeans could force a harder brexit. john: what is your base case now? does this change the nature of the conversation with europe or just delay it? michael: i think it changes the nature of the conversation. all the way through this, it is
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assumed to have been a mandate for what brexit meant. that has put this into question. that is why we have this big outcome. the one thing you should expect is greater volatility in sterling. manus was talking about the skew in sterling. it was nothing like it was before the brexit vote. i suspect we will see much wider -- we know that markets generally have been complacent this year. we had sterling volatility. it is certainly going to go up, i would say. matt: does britain have a weaker hand in brexit negotiations? easier andake things orderly? u.k. u. do want a strong they want and economically stable u.k. michael: that is right, but you
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have to remember from the european side, we voted to leave. the europeans want to make sure that he don't what the week u.k., butnce a weak there is a quid pro quo there. see. be interesting to guy: michael will stick around. michael metcalfe at state street global market stays with us. the story down at downing street, it has been quite a night. it is eerily quiet. surrounding how the process of government works now. the queen's speech, a stabilization, and then maybe the knives come out in terms of who is going to be the next leader. there was an expectation that
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maybe we have estimate from theresa may. that has now been pushed back. we have not heard. up next, we continue the conversation surrounding what is happening in the market reaction. the market reaction, really interesting this morning. it has not been as dramatic as the referendum, but more granular and interesting. cable is trading. this is bloomberg. ♪ ♪
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15 minutes into the open. welcome back. i am jonathan ferro alongside guy johnson. if i tell you were sterling is, you can guess worse -- where the ftse is. he weaker pound means a higher ftse. tells the domestic story. we are down. if you see the inflationary story building up on the back of a weaker pound? gilt yields driving higher by three basis points. guy: let's talk about how we break down the stoxx 600 this morning. u.k. domestic stocks is really pressure is on the selling side this morning. the housing sector, you have some of the domestics.
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the construction sector hasn't been doing that badly lately. berkeley group. it is these kinds of stories that are under pressure this morning. elsewhere, external revenue streams. look at what is happening. berg we exposed globally. rolls-royce exposed globally. point, tell me where the pound and and i will tell you where the the stocks are performing. we will get the bloomberg first word news. jeremy corbyn has called on prime minister theresa may to standdown. that comes as a result of the election she called and it hung parliament. the conservative landslide was
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expected. the premise are called the election, because she wanted a mandate. the mandate she has got is lost conservative seats, lost both, lost support, and lost confidence. i would have thought that is enough to go and make way for a government that will be truly representative of all the people of this country. a hung parliament could see britain without a fully functioning government, just days before brexit negotiations are due to begin. that could upset the two-year timetable for finalizing an exit deal. retainingfter maidenhead, she called for stability. comey has., james accused president trump and the white house of line and defaming him during 2.5 hours of testimony on capitol hill. he says the president's shifting
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explanations for his dismissal plain and simple code he says he kept memos of their conversations because he feared the president would paint a false picture of their encounters. then chosenistration to defend me, and more portly, the fbi, by saying the organization was in disarray, that it was poorly led, that the workforce had lost confidence in his leader. those were lies, plain and simple. shery: that is your bloomberg business flash. the conservatives have made gains in scotland. this is an interesting side story. lost his seat. puts primen result minister theresa may in a difficult position. >> i think one of the biggest
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this iss the fact that a disaster for theresa may. she called this election unnecessarily. she arrogantly thought she would push the opposition aside. tonight, she has had a disastrous performance. bloomberg politics team front and center. our reporter joins us on set. michael metcalfe is still with us. let's talk about what is going on this morning in the conservative party. werenservative sources telling me last week that theresa may had lost all credibility. were expectingey a majority of 60. today, the thought that she has any backing left is ludicrous. sources have said she wants to stay on. she is going to try and cobble
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together a minority government. governmentat this leadert and she can see of the party for a long time is in doubt. what happens concerning brexit? for international investors, that is the most important question. >> i think leaders will be looking at this car crash of a prime minister who called an election to get a mandate and think, well, here we go. this is not a strong negotiating team. i would be surprised if talks weren't delayed in semi-, first, to figure oute what kind of a government we have before we even think about what sort of a brexit negotiating team we have.
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in mind thatear labor are going to be trying to anyup a fight to challenge intention by the conservatives. we could be looking at months of political instability, potentially another election, and that could delay talks. john: some interesting results overnight. if i told you the conservatives would make the gains they had in scotland, but they have taken seats, where would you have told me the conservatives ended the night? certainly not here. what is the bigger story here? there is no sweeping narrative at all? >> i don't think so. theresa may grand a shockingly bad campaign. -- ran a shockingly bad campaign. germany corbyn ran a classic campaign of trying to demonize
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the opposition leader. inevitably backfire. voters were confronted with a cardse or who played the of being strong, stable. she played the relief card. that worked. card she was made to look like somebody who is out of touch with the public. guy: to pick up on that point, if i looked at the map, this is a urban rural story. it is incredible. you look at the map. it is blue. you zoom in on monday, and it is read. how to white dice this in terms of demographics, the urban rural split? this looks like a divided country.
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making projections as to where we go from here looks like discourse. seeing part of what jeremy corbyn was saying is happening. it is an engagement we have not seen in a long time. the sense of politicians being detached from the electorate. the one thing jeremy corbyn made is he spoke to the demographic. thank you so much for joining us. i want to bring back michael metcalfe to the conversation. michael, what do you expect as far as the next prime minister? does theresa may hold onto power or do we see boris johnson come into office?
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what is the most likely scenario? michael: i think that is why we have got this market reaction. certain whoow for is going to lead the next government. more portly, what their opinion of the exit is. boris johnson has talked about trying to keep access to the union. that is one for the camp of potentially hard brexit. the one thing that is guaranteed now, which markets have not fully priced yet, is, for certain, we have a less stable and weaker government. that means u.k. assets probably need to price in more of a political risk than they currently have. john: where does that price need to be more pronounced? michael: i would agree with sterling. link to the stock
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markets you talked about. domestic stocks, you would think that needs to be price. the only place i don't think it needs to be priced is in gilts. sterlingc stocks and are what are going to be vulnerable. guy: give me a sense of order of magnitude. when you think of where sterling was when it was out the lowest of the year, we were talking about the risk of a hard brexit, uncertainty about how the negotiations would go. we have uncertainty about the negotiations right now. the only question is, if that does not happen -- as you said, the key thing is how the europeans respond. if the response is, there is a ticking clock, well, the chances of us not getting to a deal have gone up significant the. guy: michael metcalfe with state street global markets stay with
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us. the ftse 100 is up high this morning. upt is interesting is it is 1.8%. this is bloomberg. ♪
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delivers consistent network performance and speed across all your locations. fast connections everywhere. that's how you outmaneuver. >> it is a hung parliament for britain. theresa may's future hangs in the balance. when will you hear from the prime minister? brexit uncertainty, after this mandate failed spectacularly. is a softer brexit now more likely? and the pound falls. i am here on the trading floor. the ftse 100 is trading higher and domestic focused stocks are taking a hit. ferro, the and jon band is back together for this
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really massive political story, guys. but it does not look like a huge market story. it's very specific, very focused. guy: very local to the u.k. and that is a massive difference between this time last year. the open. into let's get into the action for you. the ftse 100 is firmer, up by almost one full percentage point. marknk the big question coming into this, guys, some people would say hung parliament. they were not saying 1.27. guy: absolutely not. made it survey that clear they hung parliament was the worst case scenario and it was worse than a labour party administration for the city of london, which at the time i thought was a fascinating outcome. we all thought it was a hard brexit or a harder brexit. there is now the opportunity at
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the other end of the distributive outcomes that we get a soft brexit. i think that's where the two way action is this morning. jon: that did not exist one month ago. i still find it spectacular, the idea that one month ago we were not talking if, but by how much the conservative party would win. now we are talking about a hung parliament and the future of negotiations. we learned this last year, brexit negotiations are going to take a lot longer than anybody thought. about asked people article 50, would it take the two years, or would it need to be extended? if we asked people if it would need to be extended, what with they say? guy: i suspect they would say yes. we're going to take you to brussels very shortly. a quick look at what is happening this morning. this is the stoxx 600 breakdown. this shows the story quite nicely. anything with an external
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revenue stream in the u.k. is trading strongly. vodafone, unilver, either the kind of stocks that have a global story attached to them, and as a result, they trade on that this morning. that strength is being priced back in. in some ways, they are not moving. in reality, these stocks are not moving at all. you are simply getting a translation reflect and as a result, you have to price that bank in. that is probably be interesting story. the labour party has had an incredible my. let's hear from one of the most senior figures. anna edwards, down in westminster. anna: thanks, guy. as the helicopters circle above us, i am joined by the labour m.p. john, thank you for your time this morning.
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your reflections on tonight, do you consider this a win? >> no, we wanted to form a majority labour government. it is not an overall success, but if you look back, we were in an interview three weeks ago where we were over 20 points behind in the polls. people were talking about a complete meltdown for the labour party and a landslide victory for the conservatives. that.e overcome i think we have had some considerable success. however, we are not in government with the majority position. we are offering ourselves a minority government. i don't think the prime minister's position is tenable. the party, should they have the right to go first, to make this work? john: let's start with the prime minister. i just cannot see how she can continue on. leadinga number of
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conservatives, boris johnson, on maneuvers. anna: they should be given the first was to form a government? john: i don't think it is a stable enough party to enable that to happen. what will she do? chaos. a coalition of anna: a phrase you have said before. but how can you and a minority government be more stable? john: we would put forward a queen's speech, and an alternative budget. and we would invite mp's to vote for it. and i think we would secure, not through deals, but we would secure majority support. i think the government should support -- anna: is that not just a coalition by another name?
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john: no, it is a stable minority government, but make sure we are stable in this country. at the same time, you recognize the conservative party. unfortunately, it's going to be unstable. anna: are you in talks? john: no talks, no negotiations, no deals. a stable minority government. anna: you would not do a coalition if they approached you? john: no. anna: let's talk first about what would happen if we don't see some stability here, because this is a hung parliament with uncertainty hanging over it. do you see us in another election this year? john: if the conservatives fail to put together enough seats, i think we could. we are the next largest party and i think we would be able to form a minority government. anna: so you don't think there
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will be a need for another election? john: i think we have had enough elections, but we will do our best in the interest of the country. the reason theresa may has filed is because people recognized she called a general election unnecessarily in the interest of her party, rather than the country. anna: you must be disappointed with the results in scotland, though. now, the conservatives are back with a vengeance. john: i think last time we spoke i said it would be a long haul for us to rebuild the labour party in scotland. we have just seen the first stages of that. so, i'm quite pleased with the advances we have made. anna: but the conservative party seems to be doing much better. john: i said it was going to be a long haul, i said that. i think the conservative party in scotland will be exposed for what they are because they continue to support an austerity party in england through theresa
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may and as a result, they will become unpopular. anna: it is a very divided country, if you look at a map, it -- youivide could divide it. how do you unite the country? john: i don't think we have to be divided that way and the manifesto we put forward demonstrates you can bring people together. and the point of jeremy corbyn's politics is about consensus building. anna: what about motivating the youth vote? john: to a certain extent. anna: how do you build those bridges? john: to a certain extent it was about giving people the confidence to vote. but we are focusing on an elderly vote as well. and what happened to the conservatives. for elderly people, they
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thought, they always vote for us anyway and they turn out, they don't matter. the young people, they thought, they don't matter, because they don't turn out. we are trying to build a crossgenerational consensus. anna: john mcdonnell, thank you. jon: thanks for that. a failure to secure a majority means theresa may will knock at the strong mandate for government that she had hoped for. that brings major implications for the style and timeline of brexit negotiations, if we get to them at all with theresa may. ian is in brussels and joins us. how does this change how the eu sees the brexit negotiations? >> well, matt, i think it is double-edged in a way. it is a bit of a kick in the teeth for the eu, because they
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were hoping a prime minister would come back with a big majority to be able to make deals and not be beholden to her. on the other hand, it does not change a lot as far as the strategy is concerned. they know they are not going to compromise on citizens rights and the bill they want the u.k. to pay. in that respect, they will wait for the u.k. to sort it out. guy: do they give the u.k. anymore time? the clock is ticking. ticking, or still are we looking at a timeout here? ian: no, the clock is absolutely ticking. there is no two ways about it. the u.ki. will leave. theoretically, they could decide to withdraw the article 50 no notification. i don't think that is going to happen. yeah, the clock is ticking, and the talks have not started yet.
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the talks were supposed to start in two weeks time on may 19. but will that happen if they are still coalition talks in london? that is hard to see. the leverage is still with the eu. they are waiting for the u.k. to tell them they want to start talking. guy: great to have you with us on the program. still with us in london is michael metcalfe. michael, let's talk about going into the weekend. we asked the question whether you wanted to hold sterling going into the weekend. what are the risk events, as you see it, going into the weekend and coming up monday morning? >> look, all we know for sure is that brexit is going to take longer and there is a wider range of possible outcomes. that means greater volatility. i think the investor preference for european stocks, which we
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have seen all year, will continue. and you are much more likely to hedge your sterling risk than you were before. guy: i want to come back to that mcdonnell interview. asemy corbyn made comments well, we are ready to serve the country. how? if if we start to work towards a labour government and we get john mcdonnell writing a budget and nationalization is on the the -- and that takes us back to, we have never really been there before, where will that leave sterling in international investor's eyes? theell, in his view, question of should you be today?ing u.k.s stocks probably not. the political landscape in the u.k. is changing everywhere quickly.
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this is a surprise result. labour did better than expected. they are still a long way from potentially forming a government. as the year progresses, and if there is a risk of another election, perhaps they will begin to need to at some point in the future. it just highlights why your only reason for buying u.k. stocks should not be sterling. the more likely scenario, a weaker conservative party negotiating brexit than a softer brexit coming out of those negotiations? isn't that why we see the pound bouncing off 1.27? >> i think this hope of a softer brexit, and i know david davies made comments overnight, that is providing some support. sterling is still very cheap here, more than 10% undervalued.
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the selling pressure is not all one way because of that. you will see buyers down here because it offers value. my only real question is, and to answer jonathan's question before, what i want to hold sterling over the weekend, i don't think sterling discounts this big increase we are guaranteed to have. jon: there are two conversations in london. one is that you get a harder brexit because you need to keep the back benches happy and you have a small majority. the other conversation is that actually, you are headed to a soft brexit because you do not have the currency for a heart ard one. >> a lot will depend on if may remains prime minister. it also depends a little bit on what the d.u.p. need to be to get the queen's speech through. there is a wide range of
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outcomes we did not have before. investors will hedge sterling more aggressively, i think. guy: it will be interesting to break down the individual stock stories as well. michael, it has been great to see you this morning on such a busy day. got some comments taking place with jeremy corbyn. he is reiterating he thinks theresa may should resign. he is also thing brexit talks need to continue. but i think the question then needs to follow, what will be the u.k.'s position surrounding those negotiations. i think that is where we sit right now. let's get an update and figure out where we are globally with the bloomberg first word news update. reporter: thank you. theresa may's future is prime
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minister has been thrown into doubt. may thought she could boost the conservative's parliamentary majority and strength in her hand in brexit talks. instead, she has fallen short of the 326 seats needed for an overall majority. the bbc reports she has no intention of standing down, even as labor party leader jeremy corbyn calls for her to go. >> the prime minister called the election because she wanted a mandate. well, the mandate she's got is l ost conservative seats, lost votes, lhasa poor, and lost confidence. i would have thought that was enough to go, actually, and make way for a government that will truly be representative of all the people of this country. reporter: a hung parliament could see britain without a fully functioning government just days before brexit negotiations begin. that could affect the two year
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timetable for finalizing an exit deal. prime minister may calls for a period of stability as the country begins negotiations. in the u.s., james comey has accused the president and the white house of lying and defa ming him during two and a half hours of testimony. he said the president's shifting excellent nations for his dismissal were "lies, plain and simple." he said he kept memos of the conversation because he feared the president would paint a false picture of their encounters. >> the administration than charles to -- the ministration then chose to defame me and the fbi by saying the organization was in disarray , that it was poorly led, that the workforce had lost confidence in his later. those were lies, plain and simple. reporter: global news 24 hours a day, powered by 2700 journalists
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and analysts in more than 120 countries around the world. this is bloomberg. guy: thank you. jon, i think michael's point about the u.k. stock market is interesting because we are on the back of the fact that there is a revenue stream that needs to be counted. the domestic story is lower this morning on the back of what is happening with this cable story. jon: you are talking about extreme tailrisk. guy: let's say it is not a zero probability by any stretch of the imagination, a labour government. jon: jeremy corbyn is trying to position himself with that this morning. has he really got a mandate for what is in his manifesto? guy: that can be debated, but
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the market is not a zero probability. we will take another look at these markets very shortly and will continue to do that throughout the morning. the market story is fascinating. the cable rate, sitting around 1.27, which is as big a surprise as anything else this morning. this is bloomberg. ♪ matt: welcome back to
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"bloomberg markets: european open." i'm matt miller here. i am here with pierre bose. a really shocking failure of the conservatives to win a majority, resulting in a hung parliament. how does this set up the u.k. for brexit? it is probably one of the most important questions. >> i think it makes the focus are now more short-term, rather than long-term. the items like immigration, etc., you will need that negotiated as a clear mandate. right now we simply don't have that. i think the focus will be on things over the next month. matt: why do we see the pound holding around the 1.27 level. instances were
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telling us, if you get a hung parliament, that is the worst case and you could see sterling go to 1.20. >> hours can scenario would have been potentially different. labour victory would open up different question marks. for us, it would not be the worst-case scenario. we were indicating that we could have sterling decline by the level that we have seen and potentially, a lot of people were pre-positioning for it, but more through the derivatives market than the cash market. matt: you are the head of european strategy and look after more than just the u.k. how do other markets perceive this? it looks so localized from the traits i am watching today. >> i think the results are localized today. in terms of our own view of the european assets, it does not change our overall recommendation for europe, but that is also partly because the
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short-term emphasis is that potentially, this is a slightly more fractured u.k. politics over the course of the next month. the implications are local. once we get into the brexit negotiations, quickly the market will start to look at implications through other parts of the market. best casewhat's a scenario over the next couple of months for sterling and what is the worst-case scenario? i think it is one more effectively, we will need to resolve any questions around the conservative party leadership over the course of the next one month. i think also after the results, what we have been short on during the course of the election is detail on brexit. we have been short on rhetoric and detail. the major parties will have to figure out what the tangible objectives are for brexit and begin to agree on those between parties. first, the internal party situation. then, they have to solve the
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party dynamics between the parties, and then that carries across the negotiations for the eu. for the eu, there are shorter-term elements, like the divorce bill to discuss. but there are much bigger issues as well, like immigration. the positive scenario is one where we can have any clearer i dea. francine: pierre, thanks for your time. pierre bose, head of european strategy at credit suisse. guy: mnatt, great work on the trading floor. interesting commentary coming through. talking about the idea that this soft brexit story is a red herring for the simple reason that any soft brexit ultimately means single market access, which means free movement of people, and even a minority conservative government is unlikely to go down that road. so, don't go down that. jon: that is the debate this
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morning and that is the reason we have some support on cable at 1.2711. i put the of us is because the big conversation coming into hung was, if you get a parliament, that is the toxic outcome and that means they moved down to 1.20. that is not the result at all. right, that means sterling will slowly grind lower as the months progressed. guy: you asked, do i hold sterling into the weekend? my question is, do i buy or sell it? if there is a rally, do i sell into that? i guess that is the question the market has got to figure out. jon has got a really busy morning and has plenty more to do. we have plenty coverage coming out of the united states. jon will coanchor with his team out of the united states.
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of next on bloomberg television's "bloomberg surveillance." i will join the radio team. if you get the sense that the coverage is extensive, that is because it is. this is bloomberg. ♪
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francine: may this calculation. the prime minister's snap election backfires. jeremy corbyn has called for her to resign. reports of the tory leader due to speak in an hour. might we get a soft brexit? could it radically alter negotiations with the european union? sterling slums while u.s. stocks rise. will multinationals set to gain from the weaker pound? this is bloomberg "surveillance ." i'm live from westminster. you can hear big been s

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