Manus and im manus cranny. The pound is in pain. This is what you are looking at, a 31 yearback at low. This just gives you some of the posttraumatic stress in the market. There is no end in sight for the pound, on the downside. Go to bloomberg first word and find out, where are the levels . Mind the gap. 1. 30, we have broken through. A 1985 low. I am not making that call, that is the statisticians call. Median for the end of the year is 1. 30, that is from the bloomberg survey. Anna clearly, mark carney, and others in the market, have become about concerned about commercial real estate in the u. K. Lets start off with the risk radar. Remember, a number of markets in asia are closed because of ramadan. The asianpacific is down by 1. 7 . Yield,year japanese bond 0. 01. That went negative for the First Time Ever in todays trading. 1368, that is where we are on the price of gold there, up by. 9 . High and weo year are near a sixyear high in open interests on the gold exchange. Chinese data, this seems, is getting interested in silver. 46. 44. Mex, the question we are going to have to posture over the next hour and a half is, to what end does 9 billion pounds worth of u. K. Property funds closing the door, what is the impact of that . Is that a systemic issue . And what is the difference between that and your favorite time of year . Anna august 9. Manus she is very specific. Anna we will talk about the similarities with 2007. Lets get to the bloomberg first world news. Theresa might have taken a clearly in the race to succeed David Cameron as the next Prime Minister. She won the backing of 165 mps yesterday, followed by andrea leadsom. Eliminateds been after attracting just 16 months. Email, Stephen Crabb meanwhile, Stephen Crabb decided to drop out of the race. The president of the San Francisco fed says a rate hike could still be warranted this year. John williams says the decision to leave the eu will not stop them, but could lower growth by two percentage points. Ley says the decision to leave the eu could escalate into a wider headwin. The president of argentina says brexit could be an opportunity for south american nations to improve their links with the European Union. We spoke in berlin. Essence, this is also an opportunity because the European Union can expand. They can expand the capabilities towards the region in which there are many links because we. Re all sons of europeans it is natural that we should work together. Britain is publishing the longawaited report into the conflict in iraq. The findings will be announced seven years after the inquiry was weset up. This is expected to heap criticism on politicians in their handling of the invasion. And Hillary Clinton will not face charges over her use of private email while secretary of state, although her actions are described as careless. The news came out i she campaigned for the first time with president obama. He says he believes in her and she deserves to be in the white house. Global news 24 hours a day, powered by 2600 journalists in more than 120 news bureaus around the world. You can find more stories on the bloomberg at top. Manus . Manus thank you, rosalind. Lets check in on the markets. There is a real reality check for these markets. Haidi lum has the latest from asia. Haidi not a great morning, as you have alluded to for asian markets. A reality check coming on the back of the bank of england governors remarks about how these risks rising from the brexit situation are starting to crystallize. That is very much playing out here. You spoken to a number of analysts and the consensus seems to be that yes, there was a recovery rally in yesterdays session, but if you are an investor who has made money off the last week or so, it is time to consider taking profits. And that seems to be the scenario playing out. The nikkei 225, down by 215 . Down by 2. 5 . The yen is starting to surge again, certainly a headache for the bank of japan. They will have to come out and do something where there is more stimulus to get that yen weaker again. Movers, it those really is that story when it comes to the currency. The top decline are there, off by 7 . They are also dealing with another callback related to these takata airbags. Elsewhere around the region we still have Political Uncertainty in australia. Sydney stocks, down by. 9 . We can see a number of the big losers in the mining space. Crudeas the price of continues to slide in this risk off situation. A number of winners, though. Not surprisingly, Precious Metals have been the top winners over the past few sessions. This is gold hitting that two year high. Here in hong kong, some of these big energy names as well, saying this steep selloff. Interestingly, shanghai and the main the market, well its relatively well protected there. 8 , and that is not really too bad at all. Lets get a quick look at the currencies because this selloff across emergingmarket currencies continues. The aussi dollars still has continuing weakness. We see another 0. 5 being lopped off the aussi. And quickly, we spoke about the yen, that we can see downside for the chinese currency. The pboc is really trying to manage. They want to weaken as we have this trade weighted basket. They actually set the daily fixing at the weakest since november of 2010. Anna thank you very much, haidi. Three of britains Property Funds have frozen 9. 3 billion pounds of assets. Energy investments, aviva investments, and Standard Life investments have halted withdrawals because they dont have enough cash to immediately repay clients. Nejra has details for us. The dominoes them, starting to fall, perhaps . Nejra yes, that was one comment from an analyst. The analyst says it takes time to sell commercial property to meet withdrawals. The cash buffers are being eroded by investors heading for the door. As you said, this started on monday with Standard Life suspending trading in the commercial Property Fund. That was followed by aviva yesterday. These are funds that together, total my. 1 billion bounds total 9. 1 billion pounds, or almost 1 12 billion. Just to give you a bit of a sense of scale of that 9. 1 billion pounds, according to the investment association, about 24. 5 billion pounds is allocated for u. K. Real estate funds. Manus beware people are beginning to use is systemic, and whether this has become a fullblown crisis. What is the difference between now and 2008 . Nejra there certainly are echoes from 2008 and that is because during the financial crisis, real estate funds were forced to freeze operations when withdrawals surged. That contributed to a Property Market slump that thought values dropped 40 from their peak in the u. K. What industry commentators are saying now is that London Office whil values could fall as much s toy percent within three years of the u. K. Leaving the eu. We are hearing from people familiar with the matter that regulators already met yesterday with the u. K. s largest asset managers. This was a preplanned meeting to discuss the effect of brexit. The chief executive actually told reporters that while the fund suspensions were not a panic measure, the regulator might need to look at a design of Property Funds. There are some that say this is a concern. They are others that say, if you compare this to the financial crisis, this is much smaller and much more localized. David, great to have you with us on the program this morning. Lend us your thoughts and compare and contrast 2007 to what we are seeing now. How systemic does this seem to be . David the issue in 2007 was the Banking Sector. The Banking Sector went down. This is a very different thing, this is localized within commercial real estate. The bank was warning us of this six months ago. There are always openended funds, either commercial or market. And i did not understand. Wthese are not liquid investments. But obviously, it is an issue for the investor and an issue for the market. A collapse in the sector is more concerning. At the moment, it is not systemic for the Banking Sector. The Banking Sector is in a very different and it was in 2007. Raq werehe raci ar inquiry is today. The litmus i paper of an explosion in the marketplace. The deep rooted concern is about the banks. You say it is not systemic at this stage, but it is about confidence and pricing, and u. K. Assets. D david absolutely. Change inthat sort of the Capital Buffers obviously releases 5 billion pounds of capital, which could hopefully withstand what is going on in terms of the correction in the economy. I think we all know the u. K. Is slowing sharply and we have a q1k in q4 of this year and of next year. The bank of england is trying to make sure that there are no problems. The commercial market has been underpinned. The Banking Sector is not all inr this, in the way it was 2007 and 2008. Anna one thing we do not know is how much the sector can sell it services. The concern about the commercial real estate starts with how much demand is in london. The trouble with this is it is going to be a long time until the get the answer to that. The latest i have been reading is it takes some time to negotiate out of archer out of the eu. And only when that is done can we start having conversations about trading relations with the eu from the outside. So, we have a long way to go. David absolutely. That is why the banks would be happy with a fall in the currency. They do not want it to collapse, but they want it to go low because the lower it goes, the more it attracts commercial real estate. Inus but david, anna and bryand the show with saying there is no end in sight to the pound. This time last year europe was at the bottom at the euro. There was this great disaster of debasement in currency. I would challenge anybody that says a debasement in sterling is enough to bolster this economy. It could bolster the Property Marketin the interim period, but it cannot bolster the services driven economy. David that is also true and to the extent that the brexit is a supply shock and it is a supply shoshock the Exchange Rate can only do so much for the economy. Those things are necessary. An Exchange Rate will help the adjustment process in the sense that if you are an overseas investor, the gilt market will look more attractive on a relative basis. Also remember, back in to 1985, we were all betting at that point. The u. K. Is quite happy with sterling trading against the dollar. Anna you think the bank of england is striking the right tone right now, david . There is a lot of political conversation around this, but , some have been critical. He says he just wants to be honest. David i think he has to be honest. Most people in my position say the bank is quite right to warn of the risks. Thes not only hitting target, but stability. You veryvid, thank much. That is david owen and he stays with us. It is a big day for Central Banks and we have the highlights for you anna. Anna draghi will be speaking at 8 30. Governor the riskbank will be speaking right here at 10 45. Anna manus at 7 00 p. M. U. K. Tom, we get the minutes from the feds last meeting. Anna this is bloomberg. Manus it is 1 20 in th afternoone in hong kong. This is a very lovely shot from victorino harbor. It is 6 20 in the morning her e in london. Now, lets get to the Bloomberg Business flash. Reporter three of the u. K. s largest real estate funds have frozen 9. 1 billion pounds. M g investments, aviva investments, and Standard Life investments do not have enough cash to immediately repay investors. The remaining stake in smb miller. This would consolidate their lead in the largest beer market. Confidentiality agreements have been entered into with parties that have expressed interests in the biotechnology company. They will then be sent into more cordial negotiations. In the long quest to find a new owner for his Football Club appears to be close to a conclusion. That is as the former Prime Minister says he has agree to deal with a chinese group. He also says a condition of the sale is that the new owners invest at least 400 Million Euros in the club over the next couple seasons. That is your Bloomberg Business flash. Anna japans 20 year Government Bond yields have dropped below zero for the first time as they a look Global Growth has been clouded by the decision of the u. K. To leave the European Union. Manus the 10 year Government Bond yield has revealed a record low. David owen is still with us. I was in dubai and listening to anna. Rear. Japansere we are with in aearyear bonds negative level. Daivd the brexit decision put more pressure on this market. The bundesbank now has less than two months before it runs out to actually purchase in the open market. The ecb will have to respond in july. Of course, that might inversely put more pressure on yields in some of these markets. There are systemic issues, obviously for Insurance Companies and pension funds. This is not a Good Environment and in some countries, Insurance Companies have guaranteed returns, which in this environment, they cannot obviously meet. What these Central Banks want is to governments to step up the plate where they can and expand fiscal policy. Anna when you look at the curve, does it tell you anything about the u. S. Economy . Or are there too many structural shifts that you cant read anything into it . We have a chart here, dont we . Recession risk, tumbling to 2008 levels. Is that what this signals, or is it structurally very different . David it is structurally very different. Central banks and others have been debating the extent to which we have this access globally. In the eurozone and germany, they have these excess savings. They are putting in part, downward pressure on yields globally. You even had a consensus with the president of the ecb highlighting a way around these situations with cabinet controls. Whether it is excess savings, you might want to have control so the money does not flow out of your reach, pushing down yields everywhere else. Part of the problem with the u. S. Is it is pushing to yields in the u. S. The break the decision actually does further damage. Manus i have just pulled up the Bloomberg Financial conditions for the united states. Let me take off some of the scribbles, which are they moving averages. What i am trying to understand is friction at the fed, which is what we have got. They are tightening slightly. We have had a little bit of volatility here. Williams says the 2016 hike is in the cards deadly. Dudley on the other not bee says there will a rate hike. What is it that flashes contagion this time around with brexit . What should we be looking for as the Morning Light of contagion, the you think . David i went to dinner last week in london. The hid highlighted that at that point, the fed was not a major concern. But if you have a situation with a lot of concern about the global economy, at that point, the fed becomes much more worried. This week, we have the release of the non pharm payrolls again. Manus we have not talked about that david there could be more speculation that the fed, at some point, will wish to raise rates. To raiseoes want rates because of this point, they do not believe the brexit is a major game changer. Anna when we come back, the italian bank risk surges. That is next. This is bloomberg. E manus welcome back. It is 6 30 here in london and 1 30 in hong kong. Lets get the bloomberg first word. Reporter all three of the u. K. s largest real estate funds have a frozen 9. 1 billion pounds of assets. M g investments, aviva investments and a Standard Life investments do not have enough cash to immediately repay investors. Taken a clearly in the race to succeed David Cameron. Mps. N the backing of 165 the former defense secretary liam fox was eliminated after only receiving 16 votes. Tophen crabb has decided drop out of the race. The president of the San Francisco fed says a rate hike might be still warranted this year, brexit or no brexit. But new york fed chief William Dudley says the u. K. s decision could escalate into a significant headwind and create wider Financial Market turmoil. The president of argentina says the brexit could be an opportunity for south american nations to improve their links with the European Union. Marci spoke to bloomberg in berlin. The European Union can expand the capabilities in the region. We have lots of links because we are all sons of europeans. So, i think it is natural. We should work together. Britain will publish the longawaited report into the iraq war conflict. The findings will be announced seven years after the inquiry was set up. The report is expected to heap criticism on politicians and the military for their handling of the occupation. And Hillary Clinton will not ofce charges over hurrer use private email while she was secretary of state, though the fbi describes her actions as careless. The news games as she campaigned for the first time president obama. He says he believes in her and she deserves to be in the white house. Global news 24 hours a day, powered by 2600 journalists in more than 120 news bureaus around the world. You can find more stories on the bloomberg at top. Anna . Manus . Anna thank you. The pound has fallen to the lowest level against the dollar in more than three decades following the brexit vote. For more on that and the rest of the market moves, here is nejra. Nejra the pound is taking an absolute pounding today, we are at 1. 29 now, that we dropped as 98. As 1. 27 some say there is no end in sight for the sterling downfall. We can see risk aversion pretty much across the markets. Asian stocks are down for the second day. The pacific index is down 1. 6 . Japan, leading losses on the stronger yen. Money is moving out of sterling and into the yen. It is also going into bonds. Another day, another record fo r bond yields globally. Japans 20 year bond yield, that has dropped past zero for the first time. Then, we have the 10 year treasury yield. We have tracked that as well in purple. That is at a record low at about 1. 34 . We can all see 10 year japanese and aussi yields at record lows as well. I have tracked the bloomberg sovereign bond index, and the has reached a record low of 0. 4 . I am sounding like a broken record with of these record lows, but that is what we are seeing. Finally, sticking with the safe havens, gold, jumping to a two year high. Silver, gaining as well. That hit a two year high earlier this week. Manus nejra, you could never ever sound like a broken record. Anna we would like to play a different tuen asne as well. Manus measures of debt for the italian bank has surged. Euly is talking with authority is getting the approval to provide capital for the thirdlargest bank. Anna lets get now with our reporter, who is in rome. John, great to have you on the program. What is the latest on the governments plan to deal with the italian banks . Well pressure is building. We saw market shares lose 1 5 of their valued yesterday. The very latest plan, though there is no official confront yet,irmation there will be a capitalization. There would also be a capital increase. Again, this is all up for discussion. Manus and how much room is therefore maneuverability . How much has he really got . He is going to have a referendum later in the year. What is his room to maneuver . John yes, well, right now there are daily and continuous talks between rome and brussels. Between the european commissioner president junker. He has to try and win permission to try and avoid the bending of state aid, but the situation of dire that thes so italian officials believe they have a strong case. Of art that, the concern is also to try and limit, or prevent, any burden sharing with investors, particularly small investors. That would have disastrous political consequences for him. Anna john, thank you. David owen, still with us. Lets talk about the italian Banking Sector. Out, itrexit rolls seems that weakness that was already in the system, extra spotlight is being dshown on them now. David nonperforming loans have stabilized at a very low level. The cam dome down exceptionally sharply. The situation is that italy has hardly recovered. We were hoping there would be some solution before the brexit vote. Obviously, that would have been the sensible thing to do, but it being europe, that did not happen. Everything is washing out from you know, what we saw in the u. K. Only a few days ago. And the risk of the bank failing is very high. Anna the bad loans and capital reserves, illustrating the size of the problem, well above 100 for some of the banks. David unfortunately, the is where things at the moment seemed to be going. A lot of these recent investors are tempted to buy bonds because they are yielding more than their own Government Bonds. But the banks themselves are not in a safe space. Manus that is the real cultural difference, that in italy there mom,is robroad base of dad, you. This is ratcheted higher, indicating 63 probability within five years. My question to you is this. Default and recapitalization of italian banks versus the recapitalization that took place in ireland, the recapitalization that took place in spain. Is italy a systemic european credit event . David at the moment, no. It is a little bit like the thetio commercial question in u. K. Europe willy in get their house in order and allow italians to recapitalize in an emergency matter. David it does have the money to actually do something with the Banking Sector. But, can they actually do this . Anna do you think european politics are getting in the way here . David yes, absolutely, yes. Anna i am exhausted by that. David yes, this should all be addressed. The italian Banking Sector has been well known for a long time. This should be easily manageable. As i said, it is a wealthy country. They should have the wherewithal to resolve this problem. The Banking Sector initially is not be making sector in france. The Banking Sector in italy is not the Banking Sector in france. Manus well, lets move on. Lets go form the holidays in the mediterranean to the chills in sweden. We have the riksbank decision later today. The consequencesof everybody es of everybody elses actions. This is like a neverending nightmare story for the swedes. David absolutely, and they set up the bond buying as well. The risk is, they are going to have to cut rates at some point. Maybe in september, though that would coincide with the ecb announcement as well. The ecb will be extending out qe potentially. Everybody is following suit. Anna a survey of economists has shown they see native 0. 02 they see negative 0. 02 . Is moving bond buying towards the euro areas. Do you sense we are going to get the changes in the way the ecb i s doing its bond buying . David well, what we highlighted yesterday was basically, the Central Banks slowdown obviously, the Corporate Bonds buying program has kicked off. But in germany, the netherlands, france and so forth, even after the brexit decision, we had assumed they were stepping up and doing more bond buying. It actually did not come through in the data. All of the Central Banks had to extend out the maturity of their purchases because they cannot find enough bonds. More and more of these yields are going negative. As i said earlier, they are going to have to change the program, probably this month in july. The bundesbank could end up buying 70 of all outstanding bonds. Obviously, this is not the situation where the bundesbank wants to be. Manus one final question then on negative rates. We have been told time and time again of the destruction, the valued destruction, the lack of the yield curve moving. It all destroys value for banks. If we have such colossal, as well as aggression, towards negative rates, with a turn to negative rates . David well, mark carney does not think rates can go negative. Also, they will be very ever still, are we actually going to cause more problems for the banks, in general . The situation with the bank rate is at zero, the 10 year is yielding in negative territory. That is certainly possible in this world of increased aggregation. Anna it is a shame we cannot wait for the Academic Research to be done in japan before that decision is made. David owen, sharing his inside. Manus yes, and we will have a conversation with of the governor of the riksbank at 10 45. The Rate Decision, right here anna plus, a flurry of post brexit selling. This is bloomberg. Anna welcome back. This is countdown. It is 1 47 in new york. Futures, suggesting we will be down. 2 . We will get to the european trading day, but first, lets get up to speed with the Bloomberg Business flash. Reporter China ResourcesBeer Holdings plan to raise 1. 2 billion to purchase the remaining stakes in the chinese venture with s p miller. Medivation has entered confidentiality agreements with sanofi, and other parties that have expressed interest in the deal. The announcement brings to the end sanofis hostile takeover efforts and turns them into more cordial negotiations. Lusconi long quest appears to be close to a conclusion. That you says the former italian Prime Minister says he has agreed to deal with a chinese group, which includes a state backed enterprise. The condition of the sale is that the new owners invest at least 400 Million Euros in the club over the next two seasons. That is your Bloomberg Business flash. snus three of britain Property Funds have frozen 9. 1 billion pounds of property assets. Anna energy investments, aviva investments, and Standard Life investments halted withdrawals because they do not have enough cash to immediately repay investors. Great to have the on the program, as always. Tell us a little bit about the background here and what are these funds going to be doing next . People put part of their pension into these funds. But post brexit, there was a huge surge in redemption requests from people because property is a parn area on shaky ground. S who see that, they are obviously going to wonder what is going to happen with their money. At this stage, negative almost 1 3 of the Property Fund interes industry in the u. K. Frozen. Manus we have this rushing sense of give me my money back, but we do not have enough in the sense of liquidity. Is Property Funds these Property Funds hold their assets in near liquid assets. But this is what they invested in. A lot of the money was invested in the reinvestment trust. Mean, calming oldfashioned i mean, call me oldfashioned. David it was obviously a yield play, but you have to question why you are investing in the very asset class that you are holding the underlying assets in. Anna it is the cash risk. Id these are even more liquid, so they are the first thing people went out on. So, they are down an average of 20 . You are getting hammered on the liquidity front and then you are getting all of these redemption requests. Andrew bailey, saying this is not a panic measure. What can you tell us about the underlying assets that are being feared for here . The reason we are seeing this is people are worried about the value of commercial real estate. One issue is the Central London values. They looked very steamy, even before the brexit vote. Investors have driven down the yield value rate. With thes valued off taiwanese and chinese were paying lower and lower yields. They were waiting so long to get approvals, that they had higher prices. Are you going to expend at the moment . Probably not. That is going to have an impact on values. Manus neil, thank you very much. That is our head of european real estate. Theresa may has taken the first round in the race to succeed David Cameron. Anna she won the backing of 165 mps. Liam fox was eliminated after attracting just 16 votes. Email, Stephen Crabb meanwhile, Stephen Crabb chose to drop out of the race. Joining us now is the head of political research. We saw you early in the morning on june 23 and i dont think many of us had much sleep then. Then, there were three in the race. Without we would get down to four, but now there is only three. Stylehave an xfactor contest. These members will make the final decision and that is where the most interesting dynamics are taking place. The moment they appear to be prioritizing things like unity and experience over the allimportant elephant in every room, europe. Manus are they really putting unity, sorry. Psychopathic,k that is how she was referred to. Which is why they are not going for him. Manus i know. And yet, she was a reluctant remainer. She did not Campaign Strongly for remain, but she did not vote leave. As the campaign moves on, will question cost her the contest . Manus might there be a general election that gets in the way of that . Some conservatives have talked about how they need a new mandate. Thes closer we get to this process, the more it is said, we dont need a new mandate. I think this would provide a package that has sufficient gravity and a concrete base for the members to vote. The promise of calling an election immediately and perhaps, not triggering article 50 after the election could raise enough uncertainty and they might vote for anybody else. Manus at the moment, what is it . Theresa may, 64 . That is over gove. The other dynamic is women, women in power post crisis. You have yellen you have Hillary Clinton, potentially. There is a female aspect to this as well. Absolutely. Is a cause for concern for conservatives. And there is no doubt that there is a recognition that a change would be good. Anna getting a few questions over from the other side of the atlantic these days. Which one of these is the next Margaret Thatcher . People want to know the similarities. No secret has been made of the influence that thatcher has on her. Michael gove, also, even quoting her in his speech, where he declared his intention to run. Is, and that is standard tactics. If you are appeasing to the conservative members, you are not going to do anything else. It is worth pointing out of course, that the Margaret Thatcher we all remember was not like that when she became leader. To develop into that role, that persona, and that popularity. It will be interesting to see if theresa may or michale gove can develop into that. Manus theresa mays tagline is brexit beat brexit. Borin johnson, they have all gone, as has farage. They all want their life aback. What is the possibility that we have a referendum based on the brexit . Another one . [laughter] immediately, it is unlikely. I can see constitutional pathways, how we would get there. On of them are likely, but at the same time, none of them are outside the realm of possibility. Anna joe, thank you very much. Manus up next, japans 20 year yield goes negative. Treasuries make a new record. That is all to come. This is bloomberg. . C sv manus the town thinks to a 31 year low while japans 20 year bond yields go negative for the first time and shares in asia sink. A 12 billion freeze. Three of the uks largest real estate functions halt. And fed friction. Rate hikesco says a is still on the table for 2016, calling the brexit a modest risk. Dudley warns that the referendum aftermath could escalate. You are watching countdown. Anna it is 7 00 here in london. If you are watching in germany, we start the hour with data. German factory orders, month on month number highly flat. It was a 1 increase predicted so it is weaker than estimated and factory orders year on year were also weaker at 0. 2 with the expectation of arise. Declining from euro area countries jumping, unexpectedly failing to rise in may as uncertainty deters demand for goods, tepid earnings, impending u. K. Referendum, all waiting this year and they could further weaken the economy. This is data for the month of may that shows a mess. Where does that leave us in the futures . Manus we saw a realtor risk of momentum in the asian trading session. We have all the european futures indicated lower, london down, over and frankfurt down by 1 . Obviously theres a great deal we already have a discussion about Systemic Risk from the u. K. Funds. We already have a conversation with one of our guest that said it is not a Systemic Risk because its not all the u. K. Banks lending to all the investments in terms of commercial property. Equities have a tougher start. About howere talking similar was this to the night of august, 2007 which heralded the start of the financial crisis. He said this is different. Lets show you where we have been on markets, a charging session. A number of markets closed because of the end of ramadan but many are open and we are down by 1. 4 on msci. 20 year yield over in japan going negative for the first time. Its positive now, but it did go negative earlier. Gold. O buy an ounce of a flight to safety continues. Were near sixyear highs in gold futures, the exchange the testing appetites for more. Manus fields around the world. A 20 year Government Bond yield in japan going negative, the Bloomberg Gold sovereign bond index is up from about 9 trillion per week. The average yield across the Bloomberg GlobalDevelopment Sovereign bonds hitting a new record low. Bund unchangeds, Government Bond yields in japan negative, u. S. Treasuries where will they end the year . The average yield across the developed bond market is a record. 4 . The dollarpound is flirting with your lows Rosalind Theresa may has taken a clear lead in the first round of the race to succeed David Cameron. She won the backing of a hundred 65 mps. A former was eliminated after attracting just 16 votes. The pension secretary has dropped out of the race. The president of the San Francisco fed says a rate hike could still be warranted this year brexit or no brexit he says the decision to leave the eu will not derail the u. S. Ball could lower growth to just under 2 . But a new york fed chief says the uks decision to leave the eu could escalate to a significant had went if it triggers wetter turmoil. Wider turmoil. The president of argentina says brexit could be an opportunity for south american nations to improve their link with the European Union. He spoke to bloomberg in berlin. This is also an opportunity because the European Union can expand its capabilities for the which they have lots of links, because we are all sons of europeans in latin america, or mainly. Its natural that we should work together. Rosalind recrimination over the iraq war are said to be revived later as the british weighted to the conflict. Due to announce his findings seven years after the inquiry was set up. It is expected to heat criticism on politicians, officials, and the military for their role in the usled invasion and the handling of the subsequent occupation. And Hillary Clinton will not face charges over her use of private emails while she was secretary of state, although the fbi described her actions as careless. The news came when she campaigned for the first time if president obama, who said he believes in her and that she deserves to be in the white house. Global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. You can find more stories on the bloomberg at top. Manus well done, thank you. Breaking news coming across the bloomberg, sterling getting lower. Will have a rights issue to fund this, 86 per share for a diversified manufacturer and distributor of building products. 86 per share. Anna you mentioned plans to raise 1. 6 billion pounds. Melrose is operating this Investment Company and underperforming businesses in the manufacture in the united kingdom. Manus brave men and women, in the eye of the brexit. Anna lets get a check on the Market Action in asia. How weak is the pound . Haidi lun has the details. The eye of the brexit is sixth of the Asian Session at the moment. We just had japanese markets close a few minutes prior and this is how we ended up for the day, the nikkei down. This was one of the biggest losers of the region given that relentless yen strength is very much the story of the day, strengthening up to 1 against all 16 Major Trading partners. A huge headache for the bank of japan. Analysts say they will have to come out and leave additional stimulus measures or possible intervention. Elsewhere, sydney stocks of the low. F slow the days we get closer to some sort of conclusion from the weekend election. Lsewhere, steep losses kong, we are off by just about that much as well. Keep in mind that we do have some good news, Mainland China bucking the trend, buffeted in terms of being protected from the global turmoil. The only saving grace is that we do have a number of markets being closed. Ion , theck look at the movers yen sensitive currencies in the 6 yo session down by over and producers are leading the declines across the region in the sydney session, Origin Energy down. We saw a decline in crude anding out as well plummeting overnight. Some of these asian refiners are feeling that drag today. Manus haidi, thank you. Haidi lun. Three of the uks Largest Real Estate Companies closing, this after britains shock vote to leave the eu started a flurry of redemptions. Anna mng and Standard Life are both halting withdrawals because they do not have enough cash to repay investors. Lets bring in the ceo of sem assetmanagement. Great to have you. Give us your thoughts on where we stand, a couple weeks after the vote. What isolks think happening in these property sectors, this is the start of something, the dominoes starting to fall . Or do you say, look at the Banking Sector . We havent seen a big spike up, and things arent too bad . Yesterdays from carty and also about Property Funds is not great so it is a risk off day. Markets are down since the referendum in the u k and in europe, depending on which an dexia look at. Property funds is interesting because most of the investors who go into it are quite riskaverse. They see it as an alternative to cash. We had a wonderful rally in the last decade and there are going to be the most sensitive to a fence around brexit. It doesnt surprise me following his comments and what has happened that a lot of investors want to regain funds. Consequently we have had gains imposed. Its not great news but it is limited to Real Estate Markets at the moment. We are concerned about european banking systems. We believe there are issues , not goodregulations items on the agenda for any investor at the moment. Its a falling knife. You have to wait to see what happens. Manus beginning of these u. K. Funds is going to have, i would imagine, a significant psychological impact in terms of expenditure, asg t people begin to understand what brexit means. Lets talk about the this is the pound. There is no end in sight. Levels 31 years ago, at a three decade low is there an end in sight for you if rate cuts come through . How low can she go . This market is pricing in rate cuts. Its pricing in quantitative easing as well. We were surprised to see a break mark at 30; we thought there would be supports overnight and it has surprised us. Can i go further . Of course it can. But purchasing pricing parity, fair value, sterlingpound, 142. 1. 42. Manus theres a long way between fair value versus the psychology of utter clinical chaos. Agreed. So do you base on fundamentals are sentiment . We go back to fundamentals. We do believe theres a floor on the Exchange Rate. We can see its going lower based on sentiment and psychology, constance at a low point. But from our perspective the u. S. Is looking quite robust. Its impact should be quite limited. Anna in terms of the time horizon, if you were looking at the pound and working out how much downside there could be, you can see this lasting disaster lasting for a long time. Weve got to find a leader , weve got to have a conversation with the eu about how we leave, and only after that we have a conversation about trade terms. If you are looking for any certainty on which model of the pounds value is on, we could be waiting a long time. We could do, if you think the issue was political. I think we will get a new conservative party and a new Prime Minister quite quickly. The whole issue around negotiating trade agreements and article 50 will take a long time to play out, several years, up to 10. But the reality of the situation right now is austerity, which has worked in the past, is not likely to work going forward. Freebie; it has to be financed. Lendingdo it with bank and fiscal spending. We get no clarity on fiscal spending when we have no leader as soon as we get one appointed i suspect we will see a whole range of announcements anna we got noise from george osborne, but manus we dont know when we will get to that. A couple different interesting things coming through that i think are worth making note of. German 10 year Government Bond yields reach a new record low. 18 . Aviva play us to increase their 2017 dividend payout ratio to 15 . Two pieces of news in suspended isolation they encapsulate everything in terms of risk. How do you view this prism of markets, forget the ftse 100 . In terms of the broader market, where are the biggest opportunities . Do i go for gold . What do i do . We would not be allocated to traditional safe havens. Going out and buying the swiss franc, gold, the yen, those traits have been done. Manus you dont think there is more mileage and then . There is limited mileage. You are more likely to preserve money. U. S. , a 17o the trillion economy, growing well, unemployment now below 5 . Brexit, when you look at the s p 500, and how reliant they are on sterling, thats 2 3 of revenues. They have very limited impact on roger prices. Anna if this remains a u. K. Phenomenon, the pound bombs, and we managed to roll along and resolve this, i can see your point. But if we start to see dominoes going across the channel into europe, and we start to have a whole, big, existential conversation about the euro, that is something that the u. S. Would feel the shudder from. Of course it would. But you are underestimating Central Banks and all they are doing. Look at what happened with carney, the impact he could have. They wont just sit and wait; there is a risk in the way you have highlighted, which is why the markets have responded as they have. Our view is that things arent as bad as they look. We have had a negative sentiment post brexit, and now the fallout will be longterm. People are waiting to see what happens. In the u. S. , everybody seems ok. People are talking about rate hikes still. Manus theres a lot more to take up on their. Hold those thoughts. Yogi dewan. He stays with us. Expectp next, what to from the Rate Decision later today. Yogi says dont underestimate Central Banks. Ahead of our interview with the governor, Stephen Engles joints bloomberg. This is bloomberg. Manus a live shot of the european parliament, where they are speaking about banking the eu will implement. It tries to make sense for europe, the eu must keep up momentum to finish banking. More europe, more unity, thats the message. Financial regulation must strike the right balance, and it hopes the u. K. Can remain a close partner of the eu. Anna his comments are being watched increasingly, because he has taken over the role of Financial Services commissioner. Well keep an eye on what hes saying over there in the parliament. 7 21 in london. Lets tell you whats going to happen in sweden. The swedish bank had been preparing to raise rates next year, but those plans they have to be scrapped after the brexit both sent markets into a tailspin. Manus those we surveyed say the central bank will use the policy announcement to delay interestrate increases until at least 2018. The swedish economy we are joined now from stockholm. This is going to be one of those days when the rhetoric perhaps is more important than what they physically dont do. Yes, thats absolutely right. I think they are really going to stress again that they are on high alert to do more should things deteriorate in europe. Anna and how long do we expect rates to stay negative in sweden . They were pioneers, along with others, in negative interest rates. Whats the expectation . I guess it depends on if you are to believe the analysts that are looking at the bank. The bank itself is saying theyre going to start raising rates at the middle of next said, thoseke i plans may have to be delayed today. A lot of analysts think the forecast is still too optimistic, and that they may have to wait until the end of 2018, maybe even into 2019, before they start raising rates. Manus lets see what they say. Later on today. The swedish economy minister joining us are stockholm. We will talk to the governor the riksbank. Stay tuned for that conversation. Anna you just promoted him as the economy minister. Manus im very generous with titles. Anna a you highlevel positions going in the u. K. [laughter] anna before the break, we were talking about the negative rates environment. You remain quite confident on the u. S. , but where does the ecb stand . Does is go further with a negative rates . I think we do. We go further with more quantitative easing. I suspect we will see a whole range of announcement around fiscal spending to promote markets. Everyone is very concerned about the european banks, and that seems to be the focal point. Manus at what point do we wake up and say, actually, Monetary Policy is spent . Negative rates are not delivered in japan, in europe. If you sayeasing the word contra factual, you will never be invited back. [laughter] manus went we wake up and realize that negative rates are disruptive, quantitive easing has put a floor under it . It clearly hasnt been in this environment. We need to see some confidence reappear around the future of europe following brexit. The political environment is key. I go back to the comment i made at the beginning of your show; growth has to be financed, and that needs to be the focus for the ecb and the European Central bank. Its financed through fiscal spending, which is incredibly important, and also bank lending. They have to find a way to get banks to lend. Anna we need a political solution for italy. Completely. It is one of the wealthiest sovereigns in the world, however it can spill over on the sentimental basis and everybody is already anxious across the board. Manus 64 probability of default is this a moment when italy says, enough, we need to deal with banks and rollback legislation . Yes, i think we will see that happen and that there is strong leadership because too much has happened. This is a vulnerable time in the markets for all of europe. We do expect to see that. Anna years ago, we might have looked forward to a quiet summer. [laughter] manus oh, you make me laugh. Anna whats your biggest fear . Is it around the Real Estate Market in the u. K. , around italian Banking Sector . Could all this be dealt with nicely . I think the biggest fear is sentiment takes over. We are concerned about whats happening politically. We are concerned about the weakness we are seeing in sterling. The biggest concern is european banks in this environment, but we are very upbeat about the u. S. Anna you have said that a few times. We got the message. [laughter] anna yogesh dewn. Manus thats it from an and i. Equities are indicated half a percent lower. Where will the italian banks lower . \ 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. ; 30 in london, we are counting it down to the European Market open. Im guy johnson alongside Caroline Hyde in berlin. Heres what we are watching. Hurricane brexit its the markets. Risk off sentiment smashes global yields and sterling ducks below 130 against the dollar. How do investors weather the storm . None are spared. Italys banks are pummeled while investors flee uks Property Funds. Where are the biggest risks . And mayday