Transcripts For BLOOMBERG On The Move 20160630

European financials actually face . They are less than half an hour away from the European Equity market open. Good morning, caroline. Lets talk about where we think this story will go with the equity market open. Go to the wei function. Faire down by 0. 5 on the market value. I would say,. 4 on average. I want to talk about Something Else for just a moment, and that is what is happening in terms of these headlines. You can kind of understand why, that you need to take the next step. And the next step is a really important one. 00 is a global1 index, and this morning i priced it in euros. In euros, we are down by 9 . In japanese yen, we are down by around 20 , but that could be a different story. Lets talk about the 250, because this is an interesting story. 250 is terms, the ftse down by 18 , folks. The pound has been absolutely backwards. This is the way you need to see the market. I would argue not to follow these headlines, to put a positive spin on the ftse 100. Because, lets face it. We live in a globalized world, regardless what happened with t he brexit. Caroline the bps, those are the big exporters. The Global Companies have outperformed. Meanwhile, those exposed to the u. K. Are on the down sid. E that we are looking at risk aversion, we are up 8 . We had outperformed in australia, in particular. Brent crude, still clinging to about 50 per barrel, guy. We are down. 9 at the moment. We have seen oil stage a come back as u. S. Inventories have come down a little bit. Wan isle, south korean your bestperforming major currency today. This is the korean won, and it came in better than expected. Intly, the british pound terms of how it might be misleading us with the ftse performance, that is down. 1 against the u. S. Dollar. Now, lets get to the bloomberg first world news. Federal reserve officials have cleared dozens of u. S. Banks to boost shareholder payouts after conducting annual stress tests that proved too rigorous again for which a bank. For Deutsche Bank. Even Morgan Stanley got conditional permission to boost its dividend 33 . The u. K. Home secretary and former mayor of london will today make their pitches to succeed David Cameron as the conservative party leader. The bank of England Governor Mark carney is stepping up to face the brexit crisis. He will speak to members of the media later in a message of reassurance. Global news 24 hours a day, powered by 2600 journalists in more than 120 news bureaus around the world. This is bloomberg. Caroline . Caroline thank you very much indeed. When talking about the pound, it remains at 30 year lows, but sterling rallied slightly after european leaders called for an orderly british withdrawal from the block. Afterpoke in brussels taking the historic step without the u. K. For the first time. Before we receive official announcement of the u. K. Wishing to leave, no negotiations can take place. We have made it Crystal Clear today that access to the Single Market requires acceptance of all freedoms, including the freedom of movement. There will be no Single Market a la carte. I have very much warned the european places, the markets need to get ready to host some transactions which made a longer be held in the united kingdom. Meetingsdig into those more. Jones, what are the next steps forward, now that we have had this discussion coming from the 27 remaining . They met here yesterday without the u. K. , the first time that has happened since the u. K. Has been a member of the eu. So, unprecedented in those terms. They were trying to map a way forward. Points is they have to wait until the u. K. Formally notifies about their intention to leave the eu. That is not going to happen until the leadership of the conservatives gets worked out, w hich is still in process. What the leaders have done is they have set up a meeting for september. This will be another of the 27 without the u. K. In september. There, they will be how to go forward. In the meantime, they are stressing that it must be orderly and calm. We need to do this in a straightforward kind of fashion to make sure everything is in place. Guy jones, we need to talk about scotland in a second. The line in the u. K. At the moment is that the eus hardened its stance yesterday. Is that the right read . Jones i think so. They are trying to be very firm with the u. K. They need to send the message out that there is a cost to leaving the eu. You have all of these nationalist and populist movements rising. One of the messages that the eu officials want to get out there that it is not easy to leave the eu and that there are consequences. They arene hand, trying to make that clear through the negotiations with the u. K. On the other hand, there is still this desire to have a close relationship with the u. K. , but it is still uncharted territory and we are going to have to see how they map this going forward. Anna a close relationship with the u. K. How close to the want to remain with scotland, jones . Jones this is the thing. Scotland voted to stay in the eu. Of course, the officials want to keep that up. You know, they want to have a close relationship with scotland. The problem is, it is part of the u. K. Still. They can only negotiate with the u. K. At this point. Now, if they have another referendum in scotland and the outcome is different than the one a couple years ago, then we can talk about different things. One scenario out there is, if the u. K. Leaves after two years of negotiation, scotland could then be negotiating something for it to leave the u. K. And a stay in the eu. But all of this is totally uncharted at this point and we still have to wait and see what happens. Stuff. One jones, great it might actually take an act of parliament to trigger article 50. Lets welcome wayne bowers. He joins me here in the studio. Good morning. End of the week, it feels like it has been a long week. What do we need to know at the end of this week to make global equities, make global asset, seem investable . Wayne there are still some of the unknowns out there. The words on target territory the words uncharted territory are being used quite rightly. But also, the impact this has on growth, and business confidence. Again, we are still in the very early stages of this. So, it is very much one way. We are saying to people, dont panic, but be careful and be ready. In terms of the flow we can see from a political news perspective, we believe there will be a lot of dialogue outside of official meetings. The negotiations may be 18 months away or two years a way, but that does not stop political alliances from being formed behind the scnes and we saw that in brussels this week. Anna as you are saying, remain calm and dont panic, what is one doing with cash . Is all about the bond market at the moment . Wayne in terms of the investor position, we have been slightly risk on. We have had a very overweight position in u. S. Highyield and equities. We have had some concerns, regarding europe and japan. They are focused more on the fundamental picture and perhaps, some of the currency concerns that we see. From a technical positioning perspective, it is very important for investors to understand that you have the potential to lose more money in the longerterm, versus making money in the shortterm by trading some of these moves. Again, it is trying to hold steady from a Portfolio Allocation and an Asset Allocation perceptive. We have been in the lower for longer camp. Sometimes we get quite bored about that positioning, but is not stop bond yields from tracking lower. Any real lack of inflation and modest growth. There is still an attractiveness from a bond and fixed income perspective, but investors are e gravitating towards the high yield area. Class has not really have any significant negative reaction to the most recent results that we have seen from an equity, volatility, or fixed income perspective. Guy wheayne bowers, joining us. On brexit. Ackrock that is next guy welcome. Blackrock Ceo Larry Fink says the decision to leave the European Union will lead to cash hording. The u. S. Federal reserve is not likely to lift Interest Rates in 2016. I actually believe that brexit will lead to more uncertainty and moderately slower growth. I am under the opinion that it is highly probable they will not do any more tightening this year. K. Y that was larry fin, i want to be where he is in that shot. Wayne bowers is still with us. We are still trying to understand the ripples, how this is going to affect the way we price assets. Most things price off the riskfree rate. The fed, according to larry, is not going to be raising rates anytime soon. We of already touched on the bond market. Talked to me how this flow into treasuries is going to continue. Talk to me about how this flow into treasuries is going to continue. Wayne we had a conversation with investors last week regarding the impact of negative rates. But if you turn that around and look at it from an Insurance Premium perspective, what is the downside of my position in bonds . Or 10 basis points . From a Core Bond Holding perspective, i dont see any significant shift, in terms of people looking to take those positions off any time soon. I do believe people will be looking at that carefully and reassessing what that riskfree rate is, and focusing on the riskfree side and thinking, should we move our riskfree rate down lower . We have more security and mark comfort as we move into, more comfort, as we move into more political volatility. The impact that has on europe, but also we run into the u. S. Election as well in november, which we will all be talking about. Anna wayne, we love to show the wirp function. It shows you what the probabilities are being factored in. I have that on my screen at the moment. Hike in julyf ahik and september. Are be ignoring that the u. S. Focuses on its own country as well . Are we over anticipating the feds view of the world . Wayne i think they will remain global. There was a wary at the end there was a worry at the end of last year. Are the really focused on u. S. Domestic growth . Or are they worried about europe and china . Now they are introducing brexit as a worry. And im sure they will be talking about china growth. The market probability is probably more accurate today, in terms of a fed view. Are they going to be taking into account global and Economic Trends . But also, the potential shock from the Banking System as well. We have not seen at this point and we are literally less than one week away from the result any lehman time moment. Liquidity, which has been captured in changes of portfolio positioning. We have not seen any stopping of the market function, but that is from the Federal Reserve, the ecb, and the bank of england. One of their Major Concerns is we could get a systemic event. That certainly means that their foot, if it was hovering over the should we moderately change policy, will be clearly taken off. Sameyou dont have the stress on the system we had with lehman. As you said, that has got to be the fear. The banks have been running checks to major the market is functioning. Let me ask you another question. If you were to see more qe happening in the u. K. , why would you sell your gilts to the bank of england . Wayne this goes back to my earlier point and the question about insurance. I dont think you would. I think he would want riskfree asset in your for polio. You look at this supply and demand equation as well. I think the ecb will be very forward thinking in terms of expanding. On the other side of it, the prospect of a multiyear and very low yield environment also enables governments to finance, not only shortterm debt, but longterm programs at an extremely low rate. From a corporate perspective, you would expect refinancing at a very low rate. Why shouldnt countries do the same . Clearly, they are going to come down. In europe, they will come down. What we are looking at, very interestingly, is what is the stick, in terms of the european perspective . Carrot. Growth is the and beating the u. K. With a stick, the message dont leave. This is how bad it can get for the u. K. So, please dont increase your populism to leave. But if you dont, there is more austerity and more progrowth based on the ability to tap into markets, which i think investors will buy at super low rates. Anna we have an interesting bond sale coming from italy. We are now minutes away from the open, nine minutes to be precise. Up next, we look at the potential corporate movers. Deutsche bank, failing u. S. Stress tests. And ubs, reshuffling their management. We will take a look at those market moves, just ahead. Anna welcome back to on the move. Six minutes from the open. It is all about the banks, Deutsche Bank, again managing to fail those u. S. Tank stress tests. Those u. S. Bank stress tests. U. S. Side ofthe things, once again. Well,italian banks as there is reports in the local Italian Press the italy could be boosting the Bank Rescue Fund by 4 billion euros to 5 billion euros. Ubs, the departure of three senior executives. There is a flood of bad news it seems out there today, guy. Guy it certainly does not get any better for the banks. Us. E bowers, still with yesterday we were talking about the italian plan to inject more money into its financial system. Germany seems very resistant to that. Wayne not only are they having to work through significant Regulatory Oversight changing programs, in terms of the fact that most banks are global in nature. It is not just one regulator they are dealing with. The stress tests place additional burdens. But youve also got again, a market environment where a prime function of the banks earnings and interest functions. We have seen obviously, a compression, in terms of riskfree rates, very high quality and high liquidity instruments collapsing. That revenue line is going and gone. They can make it on liquidity and volatility. Guy wayne stays with us. The market open, next. Guy good morning, youre watching on the move. I am alongside caroline hyde. She is in berlin. Caroline, she has your morning brief. Caroline back to reality on brexit. The risk rally runs out of steam as investors absorbed the hard line taken by the eu leaders in brussels for the throwing their hats in the ring, Boris Johnson very to launch bids to become the next Prime Minister. Will either of them commit to triggering article 50 . Falling short again. Syntheses subsidiaries of Deutsche Bank, how much more bad news will europes financials face . It looks like a flat open. Slightly negative will probably be the story. The value looks a little bit negative. Here comes the European Market open. We rallied into the close yesterday. That is the opening point. What will we get for the open . See what the story looks like. We are just starting to get the market opening up. Slightly negative seems to be the picture at the moment. Morewe go, getting softness creeping in. The ftse looks like it is following. Another lef l leg lower. It looks at the rally we saw just beginning to unwind. The ftse down by not much. The cac down by. 3 . Nejra will tell us what is going on. Ejra this gain seems to take in ipods in europe. Taken a pause in europe. If we dig down, it is telecommunications that are the worst performers. Consumer staples closely following come off by. 3 . The only Industry Group that into thee it is edging green is energy. That is pretty much flat. A bit of a subdued open. I want to take a look and see how the u. K. Markets are opening. We always want the 10 year yields. We have one basis point higher. Remember, it fell below 1 for the first time ever. Now, lets look at some of the stocks we are watching at the open. Am starting with banks. After the stress test proved again too rigorous for subsidiaries of Deutsche Bank and suntaantander. Broad openinga across the Capital Planning process is according to the fed. We are keeping an i on those two bank stocks. Also watching some mixed calls on this from analysts. We got some numbers. Some have been highlighted. The project remains on schedule. Caroline, guy . Guy lets bring back in wayne bauer, the international cio. Are opening up. We seem to have run out of steam on the rally we were seeing. That is understandable. The market rarely goes in one direction for very long. If youthe equity story, look at what is happening here. The market has clearly made up its mind. They are downgrading the financial sector, and the housebuilder. Aw easy is it to build barbell strategy at the moment . Some clear areas will lose and others could be reasonably safe. Focus in on that. Wayne reasonably so. You can analyze companies on only in terms of their domiciliaries but also where their expenses are for my currency perspective. Our revenues being derived from it, you can look at a companys activities in many different ways. That, from an Overall Index perspective may not give you a true picture. That points to why the ftse 100 is different from the ftse 250 or 350. Where of the revenues coming from . What currencies of a dominating in . You clearly have some winners and losers. Investors, one of the things we stress, it is not necessarily the country we should be looking at. It is the company. Academic clear look that can have a clear look. That can translate into some interesting results. Revenue, aonu. K. Flow through in terms of how it will impact share prices. On the other side, companies exposed perhaps more domestically. Theyr, or pound based, will have to pay more for oil, energy, raw materials. That has a detrimental effect in terms of the potential for profit. Again, the devil is in the details. There are no clear winners or losers. You need to understand both the geographic split exactly. Ayne, that is interesting. Digging into the key movers today, you can see the individual movers on the stoxx 600. Rbs once again one of the key pains here, down by almost 3 . On the other side, upgraded. Rbs, tell me, we dig into the banks much more. Let me know about Companies Potentially the scotland angle, and if we will see companies when you are looking to do business outside the European Union. Could we see active Companies Moving outside of london to do that business . A two seconds on banks, the regulators have been very at ensuring banks are more domestically focused. Has loan deposits based in the u. K. Quite rightly. We will not see any significant risktaking in the u. K. Economy by u. K. Based companies. There will be a lower level of credit requests and approvals. That will flow through to earnings. In terms of the scottish angle, it is a very good question. The Regulatory Environment that you want to be in, make sure you have the ability to operate under. At the moment, the questions being asked are if there is a separate referendum for scotland how does that work from a regular perspective . Theirnks pass on Regulatory Oversight relationship . These are questions that are difficult to provide answers at the moment. Again, the Financial Services industry has a very good ability manyrk across border with regulators. Those already exist today. It is mpore more of the case rathering up or down than the correction of any regulatory relationship. Harder. Next, must try the fed flunks deutsche and santander. Moore, next. Guy let me give you an idea of what the story looks like. Everything is down. I come back to the id need to be careful of the global index. This is seen over the last couple of days. Whatever was behind it seems to be fading this morning. Juliette the u. K. Home secretary and Boris Johnson will look at bids to succeed David Cameron as the party leader. For theg to a poll times newspaper. The bank of England Governor Mark carney is gearing up to face the brexit crisis. Reassurance,of market turmoil and political carnage. United overseas bank since at least agers thirdlargest bank by assets will temporarily halt loans. Due to the uncertainty caused by the brexit the vote. They monitor this closely. When they will reinstate the london offerings. Italy is set to double the amount it is putting into its bank funds according to republic a. Willaper said the funds the recapitalize with as much as 5 billion euros. It also has about half of the initial 4. 3 billion euros to support the troubled lenders. This morning on Bloomberg Television will talk to the man at the center of the italian Banking System. He is the head of the country state lender. That is on the pulse at 9 30 u. K. Time. Guy i will pick it up. Officials of clear dozens of u. S. Banks after conducting annual stress tests that proved too rigorous. The u. S. Arms of deutsche and santander have substantial weaknesses across platforms. It relied on assumptions and analysis that are not reasonable or appropriate. Those are harsh words. Lets talk what the banking story more broadly. The couple of quick questions. First of all, the banks have broadly passed, any kind of wrinkles that are worth thinking about . Stanley you have a conditional nonapproval with a must reinstate. A couple of large banks had to go through that over the last couple of years. It does add another wrinkle. Caroline michael, give us a sense of the european angle. The subsidiaries of deutsche failed again. Nder it wasnt that much of a surprise. Michael not a huge surprise. They have had issues in the past. On one hand, there is not a lot of punishment. These subsidiaries are trying to build up capital in the u. S. Theyre not trying to return a lot of capital to the parent. There was not much they are giving up. The if you are the investor, you want to see some movement on these. Abouthe bank talked continuing lessons about the process. The u. S. Banks have been doing this for seven or eight years now. Someope they can make steps towards being a will to pass it. Guy we were moving in that direction. All over thetprint place. The Banking Sector is becoming increasingly vulcanized. Does that carry on . Michael i think it does. They want to ensure that perhaps more domestic accountability. That means you may need to create a legal entity structures that sit within countries. Think there is a requirement to reduce from a regulators perspective the Systemic Risk that banks brought into the system. Theyre trying to control that not just by monitoring oversight but the stress test of you and the need for Capital Insurance that banks have to have. Also, responsible constructs as well. You have the right people in the right place controlling risk from a banking perspective. Thatthink you will get regionalization overtime. Caroline michael, give us a some fascinating bank news out there today. The italian led banks seems like we could see that eating boosted once again. s reshuffling their management. The head of Investment Bank today saying it is a perfect storm of challenges when you look at regulation, competitors. Is this a perfect storm for banking . It appears to be. Youre not only the things like that, but brexit throws another wrench into that. People are expecting a lot of deals will be held up by the brexit risk. Bankss the last thing the needed. It was a tough start to the year. On a trading side, and an Investment Banking side with negative rates hitting the margins. Holdup,ave another that is why you are seeing these restructurings. Lets wrap that back conversation up at the moment. Thank you very much, michael moore. I want to draw peoples attention to what im seeing. Dollar versus the offshore chinese currency. Fewg move over the last moments. Im still trying to nail down exactly what is happening. Sense of the scale of that move. Of thegetting an idea scale of the move we have seen this morning. It looks like we are seeing the chinese there is a weakening of the chinese currency taking place as we speak. I want to wrap things up with a couple of quick questions. First of all, currency wars back on . I agree. That is not surprising. It is a Good Condition for china to do that. They dont want to be pulled down from worry. Guy will the u. K. Win the currency war . Of activityw a lot at 135. Again, that is black swan positioning. A surprise to see some of those levels tested. Into that,ing back how does it affect the u. K. Economy . Parts of theel,s, economies importing will not be particularly good. You have that lock in effect. Significanthold u. K. Exposure today with the fallen sterling i dont think they want to crystallize that. If you did to get the move that we have seen, if that becomes the new normal, it could potentially attract flow in. From a liquid market perspective people are saying there is some value here. I am being paid to take risk. Guy thank you for sharing your thoughts with us this morning. The ceo of Northern Trust investment. Today on Bloomberg Television we are joined by the chairman of rbs. That is after 10 00 a. M. U. K. Time. Ahead will hear from the barclays chair. He is addressing the u. K. Conference talking about brexit. Guy welcome back, you are watching on the move. George soros is speaking this morning. Let me give you some headlines. Shot, he said buyers has set in postbrexit. Eu should not penalize u. K. Voters or ignore their concerns, george soros says. Brexit has unleashed a crisis in Financial Markets. With that comparable of 2008. He is drawing parallels between that. That will be a bit of a worry. They will have to contend with the impending slowdown. The of heard mario draghi talking about what it could mean. System ing Continental Europe will be severely tested according to george soros. Europeaneaking at the parliament right now. If you want to watch it, live go on your bloomberg. Caroline a man who is pretty bearish. Lets turn our attention now to technology. The annual Technology Conference in paris helps Companies Grow their business. Showing off achievement and potential. The ceo and founder is joining us now. Frederick, is it now the time for the tech hubs of berlin and paris to win out over london . How much will london lose its halo, and place . Frederick what we can say is that it has been blossoming for two years. Now it is really extending. It is clearly something that is growing up. Be thet know what would impact of brexit. We have seen activity the last few years. The Financial Markets startups are here to build the longterm value. This system is really blooming. Caroline how worried are you about the euro and the british consumer at the moment . Concerns about the effect from an economic point of view. Thingsc those are which could affect the activity. We are not worried. We are doing our job. Were redistributing technology. Team. E a when you work at a company like a startup, you go day after day the activities of tomorrow. That is very useful. That helps people save money. Sharing rides in 22 countries. That has activities in lots of countries. It does not depend on one original. Eu clearly needs a growth plan. We have been hearing from many that that is what is going to be delivered. Do you believe the brexit will create a better environment for your company to operate within the eu . No, well, i dont believe it is better or worse. Anything that can bring unity is good for startups. You you build a startup, have to rebuild the new company in each country. Unless there are some unified rules. When you go abroad you have to adapt to new currencies. Also new metrics, new cultures, new regulations. The less differences you have, the easier it is for european startups to grow. The u. S. Startup in versus growing a start up in the eu is like comparing running a hundred meter race in the u. S. And the 110 hurdle race in europe. We need to unify things. That doesnt mean the rules could be very different. We need to look at actually what the rules are. Guy thank you very much, indeed. George soros is speaking at the eu parliament, lets take a listen. George soros insufficient funds yearbyyear. There is a strong case to be made for using the Balance Sheet of the eu itself. Aaa credito tehe muchneededroviding economic stimulus for europe. With a global interests at historic lows. 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. Guy welcome back, you are watching on the move. Rally we saw over the last couple of days has run out of steam. There is a significant move in the dollar versus the offshore and china. What this seems to be telling us that the chinese are prepared to manage the currency in a positive way from their point of view. It is interesting to see how this is being reflected around the world. The brexit could accelerate the war currency war story. Needs au area also budget of its own. The esm can be seen as the such a budget. It is subject to the be due of national parliaments. You should encourage Member States to bring esm under the control of the European Commission and the european parliament. To go tod also allow other purposes that the creation of a european unemployment scheme. Stand outwo items among the legacy expenditures that crippled the eu budget. 32 ofon policy, with expenditures. And agriculture, with 38 . These need to be sharply reduced in the next budget cycle. The refugree crisis poses a next central threat to europe. Disintegrateeu to without utilizing all of these resources, throughout history governments have issued bonds in response to national emergencies. Aaa credit of the eu be used if not at the moment when the European Union is in mortal danger . Thank you. Thank you very much, mr. Soros. Georgee that was soros speaking to the european parliament. He says that each to be a budget to contend with the slowdown. He is pretty riskaverse at the moment. Lets get another viewpoint and now. Joining us now is a founder of the European Democracy Lab. Thank you very much for joining us today. What is happening within the eu at the moment . The 27 leaders seem to be that much tougher. Would you agree . A i think they want to send threat signal to other countries that the avoid and dont think about a possible referendum in their countries. The numbers from the pew center said that other countries have emerging societies of citizens for a referendum. I think the stigma is the british question. There is no cherry picking. Therefore, the situation is also to avoid what follows. Caroline the talk is tough. Will the actual agreements, will the affect after if we see article 50 triggered, will it be as tough . Dont know. This is the first time we are experiencing this. We dont have any experience. I think the brits are supposed to put on the table the request to leave by october. Perhaps they are selecting a new Prime Minister before. Years isl years two negotiate a huge number of treaties. Nobody can say, as of now. Are we seeing at the moment from eu leaders is the idea that they need to punish people to make sure that the ideas that are floating around europe at the moment do not come to fruition. That seems an odd way to run a democracy in europe, to me. Ulrike i would agree. Clever has kidspunishment doesnt function. I think that the reaction of the European Commission is probably a sort of reaction by trauma tourism traumatism. Ofgree there is a point curiosity which is that people have spoken. Whatever we may think about the socalled populism that goes around, people are not in control of the european system. The eu should take that seriously. They should look for further theking of how to deepen parliamentary processes on the european side. Yesterday, after the summit, there was no thinking or no renewal. I think that is shortsighted. Guy how do think that will manifest itself in the future . We have all kinds of things happening in 2017. French elections, german elections, ulrike i agree. George soros said it. Unleashedh referendum forces which we do not have control. There are Market Forces and citizen forces. France is more serious than the u. K. It is in the euro. If something similar had to happen in france, the referendum would Gain Momentum in the president ial elections. That would be even more annoying. It is a big partner for germany. What this case tells us which has a referendum forthcoming in 2017. There is a momentum of regionalism. I think that cannot be kept under control by continuing as usual. Caroline will more countries leave the eu . Ulrike the question is about a very different eu. It is not about countries leaving. Hink you go from these thesis to antithesis to synthesis. A lot of talkis about this. Creativityre in the of a new process of thinking. Europe wouldrocess be in. Caroline that is amazing. , theerspective coming founder and director of the European Democracy Lab at the European School of governance. Up next, british Prime Minister David Cameron calls an emergency meeting with Business Advisory groups. Can it mimic the brexit fallout . We will discuss that, next. Welcome back, lets talk about what is happening in the markets. Weve seen a little bit of a spike in the dollar versus the chinese currency. That is now just beginning to unwind. As you can see, we are looking a decent spike upwards. That is now completely unwinding. We are trading down here right now. That is the dollar going higher. Quite an opportunity on the fx market. Have a look at the sectors on the move. Banks being crushed today. The worstperforming sectors, banks down 1. 5 . Digging into which are on the move, this is the index. Union credit down 5. 4 . There are talks over all that it will be boosting the rescue fund. Know at the they moment going on in the italian Banking Sector. Is under pressure. Clear moves in the Banking Sector, pushing lower once again. Lets dig into some of the other moves. Tte Federal Reserve officials declare dozens of u. S. Banks to boost shareholder payout after conducting annual stress tests that proved too rigorous for Deutsche Bank and santander. Even Morgan Stanley must sure up internals. After the biggest overhaul in ge is noear history, longer too big to fail. The Oversight Council has removed the designation as a systemically Important Corporation whose collapse would threat u. S. Instability. Ge welcome the decision after it sold off 200 billion of lending assets. The treasury secretary said it is now a smaller, safer company. At least three prominent hedge funds parted ways. Used Artificial Intelligence to gauges sentiment on social media and conducted a prevote poll. Discovered how the rhythms to track voting districts. Profit andenerate minimize the losses. The Pharmaceutical Company plans to bring more product to china. This book to bloomberg at the World Economic forum. One in ten president is said to be diabetic. We are eager to make sure if they can be brought to the market. There is a strong need for them. At the moment, new products come to china approximately five years later than to the eu. There is a slight delay that benefit chinese patients if that were not the case. Thank you very much. Lets talk a little bit about what is happening with the u. K. Financial sector. Barclays one of those right in the eye of the storm in terms of the way that shares have been treated. There is some concern about what happened around the u. K. Financial sector. What is the Regulatory Environment . This is a subject we will all have to be worried about. People in positions around the with the brexit. We will hear from a series of business leaders. Of of those is the chair barclays. He clearly has a number of issues he must resolve at this point in time. How does he move forward from here . In a moment, he will be speaking. He will give us an idea of what he thinks will be happening. We are just waiting for that to happen. He is being introduced. The moment we come back and well tell you exactly what is happening. At the moment, the stoxx 600 is down by 1. 21 . We will from mcfarland, next. Guy john mcfarland, the chairman of barclays is speaking. John the rent to bet on thursday a short by the markets that by the morning it would be business as usual. We woke to find that the u. K. Saw its future outside of europe. It, this has about been a serious geopolitical and economic shock. That would require a court netted response. We must now build a new International Model for the u. K. Naturally, looking globally, but also remaining a strategic link with possibly different partnerships with the eu. Deal ofains a great political uncertainty. We need things to settle down. A newd to find equilibrium. Business, of course, this is a shock. It is not selfinflicted. It raises uncertainty, which is the enemy of business wil. At this time, we know neither the direction nor the shape of things to come. We dont know if exit is inevitable. Nor the shape of an exit, if it occurs. In the event of the former, relationships with the eu will need to be repaired. In the event of the later, a new paradigm needs to emerge. We can only hope that whatever transpires is in the best interest of the country. Certaine, we can be that this is a time for leadership. For cool heads to prevail, markets tend to overreact. Enough evidence that this is true in politics. Things eventually do settle and recover. Rarely do they return to the previous state. In approaching the period ahead, we must be realistic. The bottle. Out of things may not be the same as before and our relationship with the eu. Given such a shock to the system, some things will change. In formulating a response to the situation, clarity is needed on what outcomes we want from the upcoming eu negotiations. Some not exhaustive, gradient of the following are likely. Access to the Single Market and eu access to the u. K. Some restriction on the Free Movement of people, ability to employ talented workers from europe and the rest of the world. For financial and professional services. Following the past few days, there can be no doubt about the discontinuity this issue has cause. Fallen, Financial Markets have been seriously d stabled. Time, it is now more likely that Interest Rates will be lower for longer. That reflects future economic activity. As a result of this increased uncertain date. The u. K. Credit rating has been downgraded. Sub sovereign52 u. K. Entities. In turn, the rating of 12 banks, leading building societies, and life insurers have been put on negative outlook by moodys. We now have a selfinflicted wound. Politics are now in disarray. The issue of independent of scotland has reared its head. This is a political crisis. It has the potential to create an economic one. Unlike the previous crisis, in this instance the city does not feel accountability. We have experience in external shock. We have acquitted ourselves admirably. It is perfectly understandable that it will take time for the country to find its feet, we urgently need stable and effective and inspirational Political Leadership to steer the way forward. Unfortunately, it is far from certain what we might be able to secure in our discussions with the eu. Important forless us to understand what options exist and to plan prudently for all contingencies. Fortunately, we do have a great deal going for us. ,he u. K. Is with the germany the largest european economy. Recently, it has outperformed most developed economies. As such, it is a highly desirable place to do business. Access to the u. K. Market will be in demand, and highly price. Particularly, the eu has a trade surplus with the u. K. Airbus will, and wish to continue to export their products to the u. K. Tariff free. Europe is certain to be our main trading partner for a long time. U. K. Is the leading Financial Center globally. It is europes Financial Center. Europes Capital Markets are not in frankfurt, paris, or dublin. They are in london. This capability, together with our professional services, is a genuine wine competitive advantage that has been built over centuries. It is incredibly difficult to replicate or misplaced. Some firms have enormous presence in the u. K. To serve the u. K. Market. It is the preferred location for their european headquarters. English is, and will remain, the language of his nest. Of as a whole relied business. Europe as a whole relies on security. This is a strong card for us to play in discussions. For our part, we could play a pivotal role ahead. After all, we are the largest millionwith 2. 2 employees across the country. Mckinsey areth producing a strategic paperwork on the attractiveness of the u. K. Financial school versus Financial Services sector. We will offer clear recommendations about how we should set about the task of reinforcing the u. K. s competitive advantage. This naturally includes focusing on preserving our position, particularly londons role as the times Financial Center. Government, regulators, and business are all in this together. We need a way to develop our common interests. Achieving this, i had the fortune to live recently in asia and australia. We could learn a great deal from the investment and enthusiasm they are developing. Inevitably, the u. K. Will need to think more globally and look into the wider world. New to us. The u. K. Has always been a trading nation with strong historical links to the andicas, the commonwealth, the emerging markets. At the same time, we need to ink about europe. To think about europe. A strong u. K. Strengthens the world and advances europe. A strong europe and International Environment strengthens us. At its foundation is an economic and political partnership. Im delighted we have our political colleagues here with us to develop this further. I know you will share my gratitude that he has joined us at such an important time. Please welcome economic secretary to the treasury. [applause] thank you very much. Caroline that was John Mcfarlane discussing the Important Role he thinks the Capital Markets will remain in the united kingdom. Interesting thoughts coming from the chairman of barclays. Bottle, asut of the he says. The check on the markets. We have one hour we are currently seeing a downgrade for the stoxx 600. There is lower trading particularly in the Banking Sector is the worst performing once again here in europe. The stoxx 600 currently trading lower. They will have this across the board. 3 . 600 up by often by the dax is also trading lower. Were seeing risk aversion. Trading lower. Particularly, the italian banks are in the eye of the storm today. Our local press, as we digest what is happening in europe, i want to have a look at the biggest asset manager in the world has been assuming about how u. S. Rates are out. The probability of a rate hike seems to have completely diminished sense of brexit. We spoke to the black rock ceo yesterday. It could be the beginning of the end. I think the chancellor was talking as a european to make sure we fortify europe. Younger did the same thing. Seen would say we have voices of stability. Can voices of stability prevail . I dont know. I can say with certainty we will have uncertain the on the brexit in particular. There are many ways this could shake out. Three main scenarios, one is that it doesnt happen. Europeans ande britons find a way to muddle through in true european fashion and the end result is moderately negative. The third is a brutal outcome. Politically, a be the unraveling of the eu. Which of those three would you bet on right now . Not be the falling out of the european economy. Ofwill be some mechanism restabilizing europe. Do you think britain leaves . We will have to see who is the next Prime Minister. 5248 vote is not an important facet whether it is leave or dont leave. The u. K. Government so there is plenty of time to finding a solution that is less harmful for the european countries, but if they cannot find an agreement, we have to it means greater uncertainty. What do you think . You have a view of source, what you think is priced into markets . Which of those outcomes is being priced in . Markets are pricing in weaker local economies. That clear to me corporations are going to be investing less for the future, because they do not know the futures here at they do not know how they should be investing for the future. Overall, this is not a good outcome