Transcripts For BLOOMBERG Countdown 20160628

Count them. Im anna edwards live in london. It is 6 00 in the morning. The broader equity picture in asia is quite stable. They posted stimulus from a central bank, entering into the market psyche. Lets have a look at what is happening with the pound. The pound catching his breath its breath after the dreadful selloff we have seen over the last couple of days or so. Down to 1985 levels. The relative index perhaps signaling the plunge may slow. Lets bring up our risk radar justin at you just to show you where the markets are. It is up around half a percent in the asian session. The yen fairly flat at 102. 02. Pause for thought. Abe will be watching foreignexchange and stock markets closely. Lots of talk of cooperation between Central Banks and finance ministers from the japanese. A fairly substantial pickup of 1. 4 . The nigerian ceasefire seems to be having an impact. We will take a look at supply data later. Lets get the bloomberg first news. Central banks have been reacting to brexit as korea is planning a fiscal stimulus package of more than 17 billion. Meanwhile, the nikkei has reported the general counsel has proposed a 906 million stimulus package to shinzo abe. David cameron is set to face his fellow European Union leaders for the First Time Since the brexit. The u. K. Prime minister will endure an awkward dinner after his efforts to calm britains divided public and investors failed to stop the pound from dropping again yesterday. Agencies have had their say on the referendum decision. Aaa rating toheir aa because of a less predictable policy framework. Dropping its voting to aa. We do no longer think the institutional strength of the u. K. Is what we have been used to four. Before. This regards the stability and the effectiveness of the policymaking. That is no longer a strength. We also think the funding risk for u. K. Entities are at risk because the u. K. Is dependent on capital flows. Alind the odds of a u. S. Recession may be as high as 50 following the u. K. Decision. The 10year yields may fold which may drive up the value of a dollar. Britain represents a small part of the Global Economy, a brexit would slow trade, immigration and trade around the world. As the brexit was not shocking enough, englands Stock Exchange is also out of europe. It was beaten by iceland. Fans went wild after the 21 win with. Iceland is the smallest nation to qualify for an international tournament. For england resigned immediately after the loss. On can find more stories bloomberg. Anna thank you. Futbol, but ih could feel the nation sighing. Lets check in on the asian markets. A fairly stable session in Current Trading environments. Juliette yes, absolutely. It also comes on the back that yesterday they managed to stave off the brexit shot but if you want to see how they are feeling, you only have to look at the japanese bond market. All yields on the twoyear, fiveyear, 20, 30 and 40year japanese yields have dropped to record lows and we are seeing these brexit concerns get the investors flying to safety. Can see the yield on the twoyear japanese bond is down. They are all down below 1 . We have seen a turnaround in japan. Up 6 10 of 1 . The yen weaker at the moment. We could see some stimulus coming back through from the bank of japan. There has been stimulus in south korea today to the tune of 17 billion to really cushion that economy from any affects of the fallout coming through from the Global Economy. We are seeing some flat movement in shanghai. The hang seng, the asian economy most closely exposed to britain, and that is the market coming under pressure. Hong kong is down 8 10 of 1 . Kongs richest man has a large holding tied to britain and that share price is down by 2. 5 . Elsewhere, mixed across southeast asia. Australia being hit by the downturn in commodity prices. Overall, the regional index is in the black so we are seeing some support coming through from asian equities today. Anna thank you very much. Of a busy day with post brexit meetings, mario draghi talked about the uks decision to leave the European Union. Setdraghi lets aside the questions we have for our british friends. For all of us in europe, the European Union and indeed for the world at large. Try to findide i the word that describes our feelings. I was talking about this a moment ago. Wordnk, probably the best would be sadness. Anna the ecb president made the comments at the opening of the Central Banks annual forum in portugal. Draghi will meet with eu leaders in brussels as policy makers scramble to map the way ahead. Elliot joins us now. He is in portugal. Mario draghi is still expected to make a keynote speech. What is he expected to say . One what imagine that when he speaks at 9 a. M. Local time, which is the same as 9 00 a. M. London time, he would not be able to get away from the impact. The speech he originally had planned may have changed somewhat since the vote on june 23. Going what he is presumed to outline is what the European Central bank is doing about it. He said in the past that the ecb would do whatever it takes to make sure everything the eurozone remains intact and everything is ok. We know they have said they stand ready to provide additional liquidity. The coulds reckon reduce its purchases of Corporate Bonds. It made about 5 billion euros worth since the start of it earlier this month. They may be compelled to cut Interest Rates. Obviously, he will not tell us precisely if the ecb will cut or do anything else in that regard, but he will try to reassure markets that the European Central bank and other central bankers here as well i very much on the case. Anna what else is on the agenda at the central bank . Some of the scripting may change since last thursday. What else are they going to be talking about . So, there are plenty of things on the agenda for the ecb. Some of them have taken a backseat in the wake of the british vote to leave the union. Things like a eurozone wide protection scheme. That is something they may want to try to kickstart into the right direction. Longerterm plans, for example, for a eurozonewide treasury, finance ministry. Things like that will not happen until countries have made the necessary Structural Reforms, deficits have come down to within the levels of 3 that is prescribed by the European Central bank and the likes. There will be other internal housekeeping things on the agenda and other central bankers are here from around the world. They will be discussing the way forward and what to do in the event that the volatility and the turmoil we have seen in the Financial Markets translate into something more worrying, perhaps recession in britain where the eurozone or globally. Anna thank you very much, elliott. Greenspan predicts scotland will leave the u. K. Following the referendum. In an interview, he called the vote a terrible outcome in all respects. I think they obviously made a terrible mistake. Closedmed it would be a issue very quickly and the alitical problems is consequence of the minority which would be pushed aside. They were mistaken. The Prime Minister has lost his job and the cabinet will lose their job. Its a terrible outcome in all respects. Anna Alan Greenspan there. Joining us now is the director of phantom financial consulting. We start with the big picture. Your experience of the bank of england and what you saw, talking about the big picture. Hours, over the last 12 expectations coming through in markets about what Central Banks can do to support the current environment. Are we expecting too much . From Central Banks, i think so. What they can do is very limited. Monetary policy has come to the end of the road. Very is roles of the dice in terms of Interest Rates, applying the kiwi two different assets whether it be government bonds were Corporate Bonds and none of those make a great deal of difference to economic outcomes. Where we are now with brexit and the impact on sterling, were in the beginnings of a kind of currency war situation where every currency is trying to be the force. The ones markets are selling first. The race yesterday but others would want to prevail. Some coordination to try to management process, but i dont see it having a significant impact. There is a 20 e chance of a rate cut from the u. S. , this is from the fed, built into markets from the end of the year. It has come from off the floor. Zero expectation of a rate cut. Is that overdone in the u. S. . Erik i think so, unless they are concerned to keep the value of the dollar low which would be a mistake in the current environment. They should allow the dollar to appreciate because everyone else is trying to sell off. I think the impact that the world brexit has on the in a macro sense is not that great. As long as it holds politically, the way it falls apart is if the politicians do not get their act together rapidly enough. Prevent, for example, a fesurgence, reigniting o questions about the longterm viability of the euro would cause this to turn into something much more pronounced longterm. Anna it is amazing how the normal politics can seem interesting but a very little consequence to markets on your average tuesday. Yet, we find yourselves in a very different situation. Markets were reassured by draghis comments back in 2012 whatever it takes. The push in the market which has meant people have worried too much, but that is all for nothing if the eurozone were to fall apart. Erik absolutely. The idea is holding portuguese Corporate Bonds, or shares from the bank that holds those bonds. Im concerned about the longterm risk on the possibility. I dont worry about that in terms of the current pricing for those. I know if anything goes wrong, the ecb and mario draghi will step in like he promised. That has put doubt in my mind that maybe there will not be an ecb. Maybe britain leaving is the start of unraveling of the whole project. Chance that5 outcome comes to pass. Anna when im looking at the banking stocks, especially the u. K. Focus, is this about weakness in the u. K. Economy. Is this about eurozone debt . The difficulty making money. All of those things together . Erik all of those things. When we think about the european peripherals the that matter into the Banking System with respect if they hold that debt. There is a structural problem and one that would come to fruition ifif it this is the unraveling. There are concerns about their ability to access the European Markets. Suggests the fundamental probability down the line will be a consequence of that. Issues on top of that to deal with negative Interest Rates being a possibility. Anna thank you very much, erik. He used to run the bank of englands macro mottos. Dels. Plenty of brexit events today. At 9 00 this morning, addressing the European Parliament at the start of the exit. Half an hour later, Angela Merkel will deliver a speech to the German Parliament on the same subject. Eu leaders are scheduled to meet officially in brussels later and then the European Commission will also discuss brexit. A lot of talking going on today. Later this morning, a bloomberg explosive exclusive. Ervyn king will be with us. Jonathan hill stepped away from the commission. That is here on countdown at 7 00 u. K. Time. Up next, british Prime Minister David Cameron goes to brussels for what promises to be an uncomfortable dinner with eu leaders. Anna welcome back. 7 30 in brussels. The summit to address the brexit fallout will get underway today with eu leaders. Yesterday, the leaders of the euro areas biggest economies say they are keen to living for quickly to eliminate market uncertainty. Meeting just a few days after a very painful and regrettable the citizens of Great Britain to leave the European Union. We do respect this decision, of course, but it will have to be sorted through in its consequences. Anna good morning, ryan. Given that article 50 is yet to be filed, we heard from the eu there could be no talks until that is filed. What can we expect from the summit . Ryan look, i think if we go back to the divorce analogy britain has effectively announced it wants a divorce. It has not filed for divorce yet and it is the first time sitting down with his counterparty and it is going to air his feelings while the other side does the same. We have 28 you leaders coming together. They will be talking about britain, what to do about britain but they will also be talking about how to save the union. This is a very big meeting. When they listen to the british Prime Minister over dinner tonight, i think it is going to be just that. I think there will be in exchange of views. We have said the british Prime Minister will not invoke article 50. The germans will not start negotiations until britain has. This will be about why did you do that . Here is what im upset about. You need to do this. I dont think we should expect a lot more than that from this meeting tonight, though that will be probably interesting when you get 28 politicians in a room and they say what they think. Anna you mentioned the divorce. I think sleeping on the sofa is the same kind of analogy being used. John kerry wrapped up his visit to brussels and london. Did he have anything to offer. Ryan he is the marriage counselor, or maybe the divorce counselor. He came here to brussels, said a bunch of nice things about the European Union, its significance to the united states. He then flew to the u. K. And that the foreign secretary and said the same thing. He said he regretted brexit but what can we do . I think that is the big question. What can the u. S. Do . They are concerned about the playbook for rules and geopolitics in europe which has been thrown open. The u. S. And john kerry simply wanted to make sure that he was having the ear of both sides and said keep it civil. What we have that unites us as opposed to what separates us, the u. S. Is concerned about containing russia, trade, the financial market. There is a lot at play. Anna thank you very much. Not easy for the u. S. To answer. Erik is still with us. What do you expect the bank of england to do . Erik one things they are doing right now which is very important is remaining calm, at least somebody is. It is not completely imploding. There is something about that air of stability, especially from carney and others of the bank which is a good thing no matter what they do. I know that calmness is external and internally they are under intense pressure. They are working extremely hard to get around this problem and come up with a strategy. Anna what does the strategy look like . They are getting the Monetary Policy together but what does the strategy look like . Will they raise more quantitative easing . What are we talking . Erik i will go to the last one of those. I dont think it will make a difference if they cut rates. They may do more qe. I think the key thing they should do is stand by to provide liquidity. They have made those statements. Contingency Funds Available for the liquidity. Prevent them from having a credit crunch. That is priorities one third 10. It looks like he has done it and a Lesson Learned when we did not quite do that fast enough in 2009. That is good. Remain unflappable. Somebody give the impression that somebody here has a plan. The helicopter money is another issue. Things that actually have a chance of improving in the economy or changing it, improves it or makes it worse. There will be unintended consequences. The helicopter money is possibly what is coming, whether it is in the u. K. Or other countries like japan. Anna do they wait for the data first . They will i suppose based on the value of sterling, the status of the markets. Or may be there hand is forced by the political chaos. Anna Big Bank Stocks can false out. Thank you very much, erik, spending the last half hour with us. Later, we will talk to the European Commissioner Vice President. An expanded mandate at the European Commission. That is coming up soon. Get ready for the rio Olympic Games by switching to xfinity x1. Show me gymnastics. X1 lets you search by sport, watch nbcs highlights and catch every live event on your tv with nbc sports live extra. Im getting ready. Are you . X1 will change the way you experience nbcuniversals coverage of the rio Olympic Games. Call or go online today to switch to x1. Anna welcome back. This is countdown. 6 30 a. M. In london. Lets get the first word news. Arelind Central Banks reacting to brexit. South korea has a stimulus package of more than 17 billion. The nikkei has reported the General Council chairman of the Democratic Party has million stimulus package to Prime Minister abe. David cameron will face his fellow European Union leaders for the First Time Since the brexit. The u. K. Prime minister will endure an awkward dinner later toer his failed efforts t stop the pound from slumping again yesterday. S p has stripped the u. K. Of its aaa rating, lowering it to aa because of what he calls a less predictable policy framework. Fitch cut its rating as well. We do no longer think that the institutional strength of the u. K. Is what we have been used to before. This regards the predictability, the stability and the effectiveness of policymaking. That has been greatly weakened. There is no longer a strength. We also think the funding risk for u. K. Entities have increased which is important because the u. K. Is extremely dependent on capital flows. The odds of a u. S. Recession may be as high as 50 following the brexit. The fund manager things the yield on 10 year u. S. Funds may fall to 1. 25 . That could drive up the value of the dollar and increase the odds of a recession. He says while britain represents a small part of the Global Economy, a brexit will slow trade, immigration and growth around the world. Enough,exit was not England Soccer Team is out of the euro cup. They were surprisingly beaten by iceland. Fans watching went wild after the win. People,t 331,000 iceland is the smallest nation to qualify for an international tournament. The britain manager resigned immediately after the loss. Inbal news 24 hours a day more than 120 countries. You can find more stories on bloomberg. Anna thank you. Pauses for thee First Time Since the brexit vote. We are watching the markets. Into are seeing money move u. K. Asset for the First Time Since brexit. Sterling up after a record 11 drop over the past two sessions. 1. 33 but thet a dolla pound is up 7 10 of 1 . Futures up more than 1 as well. , the show you how sterling is performing against other major currencies. On the day that we got the result of brexit, every major currency was gaining against the pound. You can see it is behind with the yield was today. Commodity currencies like the aussie dollar because we are seeing commodities rise. The bloomberg Commodity Index which tracks returns rather than spot prices rebounded from its lowest level in more than three weeks. We are seeing wti at about 47 a barrel which is rising along with copper. What i want to show you, just do end, is the bond market because we have been talking about this new abnormal bond market. Bond yields continue to tumble globally. Futures are now indicating the next move from the fed will likely be a rate cut. There is the probability dropping of a rate rise. 10 year yields have dropped in to record lows in japan, australia and other countries today. Japan benchmark yields have dipped below 1 for the first time. The u. K. 10 year yield dropped below 1 for the first time yesterday. Anna thank you. Sterling has bounceback for the First Time Since the brexit vote in todays session but it is far off where it was a week ago. We now have a chart of the hour. Good morning. Yousef it has been an 11 tumble over two days. That is a serious knock and we will put this into perspective. Traders and investors are trying to put some certainty in the uncertainty. This is the relative strength indicator, 14 days against the u. S. Dollar. Notice the drop and leveling off. I tried to highlighted with the two circles. It helps us measure velocity, if it is oversold or overbought. Anything under 30 is an indicator that it is oversold. Currently at levels of 28. The chart would suggest the pound is due for a reversal and strategists are scrambling to adjust. We saw what happened with Goldman Sachs where there three months target has fallen through. We will see were this goes from here. Anna thank you. Lets get back to the u. K. Political scene as David Cameron is set to face his fellow European Union leaders in brussels later for the First Time Since the brexit. Back in britain, the political situation is in a state of extreme flux. Jeremy corbyn will face a noconfidence valid today after several have resigned in the wake of the results. No one has put their name forward for the race to be the next Prime Minister. George osborne has brought himself out. Speaking in the house of commons yesterday, David Cameron said while the u. K. Was exiting the eu, it was not turning its back on the world. Mr. Cameron we must not turn our backs on europe or the rest of the world. The nature of the relationship we secure with the eu will be determined by the next government, but i think everyone has agreed we want the strongest possible economic links with our european neighbors and with our Close Friends in north america. Important partners like india and china. Anna britain will have to make new trade agreements with the European Union and with other countries as well. Our next guest will help us understand. He is the former ceo of u. K. Trade and investment. He joins us now in the studio. Very good to see you this morning. Speaking to the topic of trade, one of note, where did you start . What kind of trade relationship is what the bonds are talking about. Boris johnson is still talking about access to the foreign markets. We need to be in agreement with the European Union. We cannot stop negotiating with america or china until we have some clarity, or until we have left and then had some clarity about the nature of the relationship with europe and we have had none. The European Union has not decided what their position will be. We dont know who will be Prime Minister and we dont know what are negotiating position will be. Until we have some political clarity, we really dont know where our policy will go. Anna if we can put aside the political chaos for just a moment and we focus on the exact trading relationship, it would be in the uks best interest and brussels, are we talking about a norway model or a new u. K. Model . Andrew it depends whose interests you were talking about. If you are talking about london, it is clear that no way model is going to be the best thing because that will retain the passport right of institutions. If you are talking about the votedst of the man who leave because he wanted to restrict immigration or thought he would protect his manufacturing industry, then there will be other interests. If you voted to say i want sovereignty, you want as distant as a relationship as you can. That is why we need a Prime Minister and government which sets out its objectives, policies so we know what interests they are defending. I would argue the closest possible trading relationship with europe, as close a relationship to what we have now would be in the citys best interest. Anna you have a great deal of experience. You have worked before this, despite denials coming from various services. No reparations being made for brexit. You thought preparations must be made behind the scenes. Are you sure now . Andrew i hope so. One of the oddities is how little preparation so many of the brexiteers did not do. It was a shocking decision of the Prime Minister to instruct civilservice not to do any preparation. I dont understand that. They have not been doing any detailed preparations and they are scrambling to do it. Yesterday, the Prime Minister announced the establishment of a task force with treasury, business department, staff to start planning. Of course, we cannot really do Detailed Planning on so we know what the government until we know what the government of the day wants, its priorities and objectives are. Anna do we need a new election to establish that . Do we need to seek a new mandate . Andrew i dont think they need to let all. There is a majority. I think it will be a decision of politics taken entirely on the question can they win a large majority . Can they stick it to the opposition . I dont think we need that for policymaking. Anna we have this standoff over article 50 where various forces have seen we can have talks before we trigger article 50 and the eu said that will not work. You have to trigger article 50 if you want to talk. How does that get resolved . Andrew both sides are sitting out the negotiations. One thing that is little formalood is the legal position has britain must enact article 50. Britain has to leave the European Union and then and only can, according to the law, britain start negotiating a new trading relationship. If that were to be followed, and that is a hardball position for the European Union, that means we would have a gap, quite a long gap before we find out what the relationship was and we will be trading on wto rules. I dont think that will happen. It could be waived. In europe, everything is possible. It shows you how uncertain it is and both sides are sitting out tough negotiations. Anna we are talking about article 50, the way we leave the union. There has been some signs that have talked about other ways of leaving. We have not heard about that since the vote. They were talking about bill cash, if we just rejected european rules, we could just reject it and that is how we can exit. Andrew one of the most shocking things in this whole episode was the see the justice secretary who is responsible for upholding the rule of law advocating in an interview that we should break up international law. Im flabbergasted by that. I understand that taking back control means you can do whatever you want, but if you do that, what law with the judges in force . With the civilservice be able, be proper for them to obey a government telling them to act illegally . If in theory we could say to europe we are off, but the ourct upon business, upon image in the world is so great. I think in the end, we have to use the article 50 route. When heayling is right says we can delay in voting truele 50 and it is always that in dealing, negotiating with europe, you could go around the legal realities. Will have, both sides a sensible negotiation. Anna David Cameron saying this is going to happen, there will not be a second referendum, but there are many ways you can see something getting in the way of this. Whether it is from the scottish parliament, a general election being called. Youre assuming this happens . Andrew one must. I think the only way i could see it not happening is a general election where the labour party and the liberal democrats put in their manifestoes we dont think we should leave europe. If by that time, remorse has set in and the Financial Markets are in meltdown and the impact to britain was so bad the public sentiment has changed, you could see labour winning the election on that platform. That would trump the referendum results and we would not leave. I would not put much money on it. Anna thank you for joining us. Andrew cahn. Up next on the program, as u. K. Financial stocks either biggest three days and currency since 2009, we see what mark carney is doing. Anna welcome back. This is countdown. In hong kong is where we find rosalind with the business flash. Losses over the rigging of the diesel ignition tests. It jumped more than 15 billion. The figure is 5 billion more than previously reported and more than any u. S. Civil settlement. The move would bring vw closer to the 17. 8 billion it set aside to cover the cost. New ceo. S named a theands the reigns to worlds biggest food maker for the first time in nearly a century to an outsider. It will start the ceo at the start of next year. Japans most popular messaging service what could be the biggest tech ipo of the year. Line did not set the price yesterday. It is seeking to raise at least 1 billion and aims to set a final price on july 11. The best performing hedge funds following britains decision to leave the eu was given by computers. The Asset Management group uses mathematical models to find out what to buy itself. Trillions were wiped off. Inbal values left it paralysis. That is your Bloomberg Business flash. Anna thank you very much. U. K. Banking stocks have posted the biggest twoday decline since 2009 and the bank of englands government chair mark carney is set to have a meeting with officials that overseas the industry. They will also have a special auction later today. Joining us now to talk about the turmoil, the head of fixed income and fx strategy. Thank you so much for joining us. The pound looking a little bit firmer this morning. It is possible to say in the current context, but lets see what happened in the last five days. This is what the pound lost against the japanese yen, 10 . 9 and the list goes on. Where now for the pound . Can you say yet with any uncertainty . Good morning. It is not unusual, but the trends very much remain downside. That trend could be supported by the bank of england if and when they cut rates. Say thatld not try to move. There is some talk in the market that possibly brexit could still be avoided. That is supporting the calls we are seeing this morning, but i think most scenarios are too concern for investors to cancel the move. We think we break below 1. 30 and go anywhere between 1. 20 and 1. 2 5. That is what were looking at. Anna there seems to be a general call in markets and some of the thinking is maybe this might not really happen, although political voices say it will happen. The other thing in the markets seems to be increased expectations from stimulus. And the ecb or the fed, the bank of england. What is your expectation around any kind of extra stimulus . Ancent let me say it is not even moment. It is a slowmoving train. It will create negative shock on the economy at a time where already the Global Economy was quite weak. It is going to sink more slowly. We have seen some tensions, but it is quite limited compared to what we saw in the past. Crisis. Liquidity i think the Central Banks know that they have been there before and know how to manage such a situation. Eurozone,in the excess liquidity. I think from that front it is different from questions we had in the past. I would not expect a massive policy response and that is something that actually worries investors. The Central Banks do not have a lot of room from here to act. Some of them had room like the bank of england via the fed. Whether they will use that quickly is not clear. Im also worried by the fact governments do not have a lot of high. Ecause the deck was in europe, we have quite a busy election season in 15 months. I think governments will not be very keen to make a move towards the different in germany, i dont think we are getting to see from them the acceptance of much more risk sharing between nations. That is a concern that will keep the mood quite subdued and negative. Anna we have elections coming up in the coming year or two in many places. Talking about the bank of england, what is your expectation . Some people say they will cut rates maybe not until next year once the data is really on the table. Other people say it could be as soon as next month. What is your expectation . Vincent the official line from the chief u. K. Economist is the bank of england will cut only next year once all has settled a little bit. Personally, i think the risks are very heavily skewed to a quicker move. It will not be easy to cut when sterling is falling fast. That will create inflation and the bank of england does not want to feed that trend but overall, given the extent of the economy shock, how shocked the banks have been, i think the risk of a fairly quick move is significant. Anna does that show up quite quickly in the data . Vincent i think so. The economy is all about confidence. When you have such a huge political inconsistency, we dont know what the future of the partnership between the u. K. And europe is going to be. What we saw yesterday is the brexiters did not quite have a clean plan. That creates a lot of uncertainty. It is not a very conducive environment for investment, for corporations to invest in the u. K. Anna at the moves you have seen in currencies, does any of this look overdone . You are expecting the pound to but have some, other things been excessive . Vincent the yen has been the big winner. Japan is the big loser. The government, the bank of japan will not be comfortable. What can they do . The doj meet a lot of internal resistance against cuts. I think the yen strength will fail. I will look for the dollar strength. Anna thank you very much, vincent. Program, we are live in brussels to speak to the European Commission Vice President. He has a bigger role than he had before the brexit vote. That is back here on countdown. . C sv i think probably the rest word would be sadness the best word would be sadness. The ecb president makes his feelings clear. The outgoing u. K. Prime minister David Cameron appears to head for brussels for what could be an awkward eu leadership summit. Rules himself out of the race to become the next Prime Minister. Anna welcome back to the program. This is countdown. I am anna edwards. Lets look at the futures. Asian session has been fairly flat. There are many moving parts. That is what we are talking about in regard to European Equity markets. The euro stoxx seen by up by. 7 seen up by. 7 up by. The ftse 100 seen a little less than that, 1. 1 . An hour to go until we get to the start of the european trading day. Equity market futures are factoring in. He risk the risk radar a pause on sterling. We are seeing it bounce quite well, up. 5 . The japanese yen falling. Nymex up by 1. 62 . Have on the bond markets lets have a look at the bond markets, where we are. These are the yields you get on the u. S. 10 year, 1. 55 1. 45 . He is talking about the chances of a u. S. Recession up 50 . These are to test these are the negative yields. These are the negative yields. Heres Rosalind Chin. Central banks have been reacting to exit. Reacting to brexit. Thele the nikkei has general counsel chairman of the Democratic Party has proposed a 196 billion stimulus package. David cameron is set to face his element european leaders of the First Time Since the shock exit results. The u. K. Prime minister will endure an awkward endeavor after his efforts to calm britain fails to stop the pound from slumping yesterday. [indiscernible] have had their say on referendum decisions. Because of an unpredictable, stable policy framework. Drop his ratings to aa from aa plus. We do longer think that the of thetional strength u. K. Is what we had been used to before. Disregard the suitability, the stability and the effectiveness of policymaking. That is no longer a strength. We think the funding risks for u. K. Entities have been increased. The u. K. Is extremely dependent on capital flows. Rosalind global news, 24 hours a day, powered by 2600 journalists in more than 120 countries. You can find more stories on the bloomberg at top. Anna. Anna Rosalind Chin in hong kong european leaders are holding crisis talks hoping to limit the damage caused by the uks decision to leave the eu. Ryan chilcote is in brussels. He is joined by Valdis Dombrovskis. Ryan good morning. This is the first interview with Vice President dombrovskis since brexit. Announced his resignation. Mr. Dombrovskis is going to take on in his intro. Vice president , thank you so much. What happens now . Do you anticipate that the British Government will appoint a new commissioner for Financial Services . If theyat idea dead appoint a new commissioner it will be for Something Else . Commissioner hill continues his work until the end of july. We are now in a process of. Akeover so i am taking over happen as ofill 16th of july. Ryan heres a guy for the foreseeable future. Balko the british valdis the whether orvaldis not theyre going to nominate a new commissioner. Is the president of the European Commission which then proposes a specific post for a commissioner. Ryan we understand that italy is considering directly injecting funds into its banks. How would that work . Valdis we are monitoring the situation with the Banking Sector in italy. We are in touch with the authorities in regard to they are different modalities of possible actions that are being discussed, so i cannot comment anymore. Ryan would you agree, and there are people out there who are characterizing the situation in italy as exceptional given brexit, and that in some way could allow italy to sidestep some of the bail in rules . Valdis we are assessing carefully. It is a work done by the because mmission, in regard to competition rules and so forth. Ryan you would not rule out at this point the idea of italy injecting affordability 40 billion euros into its banks . Valdis we are assessing what could possibly be wrong . Ryan what should italy do to restore confidence . Valdis you look at the european Banking Sector, especially as they compare with several years ago. The Banking Sector is much more resilient in terms of capital, liquidity, it has gone through. Uite a substantial stress test also the problem of nonperforming loans is a being what we are seeing now, we are seeing some market following the british referendum. We will see whether there is processesfundamental taking place behind that market turbulence which is relatively given the outcome of the referendum. Ryan with the british leaving the table, you can now be more ambitious in terms of Financial Services, what you can come push in terms of regulation. Would you agree echo what areas do you think you can make headway with the british out of the way . Valdis first of all, i would the discussions with the commissioner and my intentions is too large expand continuity of his work. Quite intensive agenda in regards to Financial Sector revelations. The agenda which is already in the pipeline. There is no intention to come with some radically new proposals to entirely change direction of the work of the commissioner. Ryan i want to ask you about a couple of different areas. Banking of brexit Structural Reforms . Balko this i note is being discussed already for quite desperate valdis this i know is being discussed for quite some time. File which is being discussed. Progress has been relatively slow. We continue to work on those. Ryan money markets . Valdis the basic intention is continuity of what the commissioner has been doing good ryan is this an opportunity to get more opportunity to the European Banking Authority . Valdis youre asking very specific questions in a situation where im still only taking over the files. Beingmmissioner is charged fire Financial Services. Will not go into detail ryan to what extent are you concerned about the british economy now and contagion . Areas in regards to your Economic Growth forecasts two euro area Economic Growth forecasts, it is worth noting that fundamentally, economically , nothing has changed right now, in a sense the u. K. Continues to be member of eu and will continue to be so for at least two years. Ryan there is uncertainty out there. Valdis theres turbulence which i think was unavoidable with this kind of result. The question is whether this kindlence will take some of substantial change in Economic Growth ratios for you. Say, i would not rush. Ryan youre sticking with the 1. 6 . About at this stage, of course. Valdis at this stage, of course. You some me ask broader questions to do with brexit . Do you see any opportunity from the eu perspective for the u. K. To remain in the European Union . Valdis it is a decision of the member state. We know the procedure is triggered by u. K. Filing notification. It is for the u. K. Decide when and if they are triggering this. Ryan if the u. K. Does not trigger article 50, then as far as eu is concerned, the u. K. Could remain in the European Union . Valdis it is for the u. K. To decide. See the results of the referendum, we respect the result, but thatshat do you take what you make of the pressure on president yunker to resign . It is a question of the British Government. Ryan do you think David Cameron couldve done more in the lead up to this to avoid this result . Valdis i think the commission has said we regret this does this result. We will not go into some kind of blame game. Some officials do not take conclusions of the situation could ryan do you think the commission should gone rather in terms of accommodation with britain to avoid this result . Valdis first of all, it was an agreement of state and government which was reached in february. David cameron himself also considered a sufficient for him to campaign for remain. Ryan how concerned are you that other countries could follow britains lead . Valdis we show no indications for that could ryan it has to be concerned. Obviously one of the reasons leaders are meeting. Valdis of course, the postreferendum situation will be main topic of todays and tomorrows summit. Clear that we need to discuss what our consequences politically, economically. It is not linked with other countries leaving the eu. Ryan we just got 15 seconds here to how dangerous is the rhetoric heard from some of the since thepoliticians u. K. Result . Valdis certainly we are we have seen in some parts of the european political spectrum. It is to work to show to the people that it is better for us to Stay Together in the eu, instead of starting to split up. Ryan thank you for that. Vice president Valdis Dombrovskis joining us for his since back to you at anna ryan, thank you very much back to you. Anna ryan, thank you very much. Interest ine of those in the Financial Services industry. We got breaking news. Lets revisit some of that. Rollsroyce total trading in the first five months broadly in line could be First Six Months underlying profits nearly breaking even. 2016 that could be interest. Brexit had no immediate impact. They are saying. We are getting breaking news on the Japanese Corporate ipo world. Had to line business delay the pricing of its ipo amid the turmoil we saw in equity markets. It now sets the price from 2700 230 ¥200 per share. Brexit the pound gains and features pointed to a start for stocks. We look ahead to the European Market open. Anna welcome back everybody. 7 19 in london. The pound bouncing a little bit days todays after two of moving in the opposite direction. Lets get to Bloomberg Business flash with juliette saly. Juliette an eye, thanks. Volkswagen price tags after breaking over admissions tests. That is according to two people familiar with the negotiations could 5 billion more than previously reported. The move would bring vw crisis to the 17. 8 billion dollars to cover the cost of the scandal. Ceo. E has named the next the move hands the rains to an outsider for the first time in nearly a century. He will join the company from Health Care Provider on september 1 and start sco at the start of next year. Thats start as ceo at the start of next year. Start sco at the start of next year. Said one of its funds saw i 5. 1 gain on friday. Trillions will watch after uks brexit vote. That is your Bloomberg Business flash did anna . Flash. Anna . Bring back into the conversation vincent chaigneau. Lets return to the conversation around the u. K. And focus on what is happening with the gilt market. I put up this chart showing yields dropping below 1 for the first time. The increasing demand for guild shown for the shown as a safe haven. Shown as a safe haven. Vincent the market should really reprising the outlook for the bank of england. We had a very Strong Performance in fiveyear. 10 year has followed that but is still quite spectacular. Im here i would be more. Autious with the u. K. Curve we had a very severe downgrade from s p last night, two notches. That is very unusual. This is the first time that a downgraded byt two notches. I dont think it is good to hurt today but i would be more cautious. Fiveyear, 20 year, for example. I prefer treasuries. Anna interesting with the downgrade. It is the politics when they calmed down a little bit, disregarding the uncertainties in regard to the relationship with the u. K. And the eu. Would there be room for a broader outlook for a brighter outlook . In terms of the rating down makes is not going to change. Before, this is still a low probability for the markets, so the rating dominics it is not going to change very quickly. Fast the bankow of england cuts costs. And how much they come. [indiscernible] i would be a bit cautious. I prefer treasuries. Anna talk is where you want to be talk us through where you want to be. Well, to yesterday as what extent is that the rallying cry . Vincent i think there is some room in treasuries. Also the long end of the european curve and we have said that brexit scenario would rally toward 125 to 140. We are not too far from their too far from there. From there i would be more cautious. That is still about 20 to 25 basis points away. We have seen a substantial flattening of the european curve yesterday. I still think there is room there. Wouldar bund around i ind that the tenyear gdb below the negative rate with japan. There is room in boones. Yielding 14 1. 44 right now. It seems to be in line with what you are saying. 140 good i said 125, believe that is the risk markets continue to suffer which is more economicet news that would be subdued. That is likely we go toward 125. The treasury is driven by the international developments. Will offer further support to treasuries because it will be discretionary. [indiscernible] if we have a another week report, the second one in a row, that would feed the rally. Anna talking about a 30 chance of a recession in the u. S. In terms of the impact on the us economy, also another lehman moment. Some increased risk of a downside. Highnt 50 seems quite did i can believe in a scenario where growth remains subdued. The Growth Outlook in the u. S. Has often has softened in the past six months. Quite see as we going to the u. S. Election in november, Business Investment would pick up significantly. We could see a bit more cautious behavior from the consumers. The risk come i think, the u. S. Continues to disappoint. Yetssions, we are not there patch. Oft path soft i think is quite likely. Chaigneau, that is it for countdown. On the move is up next. A quick look at the futures it were up less time we checked in futures. They were up last time we checked in. We see a bounce perhaps in the European Equity market. Yesterday, the focus on the Banking Sector could how much of a bounce will be seen the banks this morning. Banking sector. How much of a bounce will be beast will we see in the Banking Sector this morning . You guys be good. Ill see you later [ 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 ] partys 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. Guy welcome to on the move. We are caps on you down to the European Equity market open. I am guy johnson alongside caroline hyde. She is over in berlin. Signs of stability. The selling stocks and the pound of 50 is called higher. Is it time to buy or double down on those shorts . David cameron has to brussels to see his european rivals. L the speedup negotiations will he speed up negotiations