Can any number convinced the fomc to hike . Good morning, were less than a halfhour away from the European Equity market open. Lets take you to the bloomberg. Let me show you yesterday, positive. Decent closing. Up around. 8 to 1 . Let me show you where we are and it looks like we are going to turn around. We are going to have a softer story. This is a fair value calculation. It looks like we are going to be softer about 1 . London looks like it is going to outperform. Caroline it does seem that risk aversion is going to hit the European Asset classes it already feeding into asia. Test classes. Already feeding into asia classes. Already feeding into asia. What a selloff we saw yesterday. It slumped 7 as u. S. Stockpiles. He dollar index under pressure theus, 180,000 out japanese trading higher, dolly door. Dollar lower. Lets get caught up with haidi lun. Thank you, caroline. The Dallas PoliceDepartment Says two snipers shot 11 officers during a protest, killing four of them. The gunfire broke out at 8 45 p. M. Local time as demonstrators gathered to protest the Fatal Shooting of black men in louisiana and minnesota. President obama says those shootings should trouble americans. We have seen tragedies like this too many times. They are symptomatic of a broader set of Racial Disparities that exist in our criminal justice system. Itshe u. K. Is set to have second woman Prime Minister with the race down to two runners. Ministeray or energy and you let some minister andrea led some it was eliminated from the race. China has reported a big jump in car sales in june. Deliveries rose 19 to 1. 7 million units. A faster than expected growth was driven by electric cars. British decisions britains decision to leave the eu had an immediate effect. Global news, 24 hours a day, powered by 2600 journalists in more than 120 countries. This is bloomberg. Guy . Guy the downgrades on the u. K. Credit ratings in the wake of the brexit, we have seen investors the ratings agencies says credit risk rising, yields are falling to an alltime low. What we saw yesterday, we have seen it this week, very strong take down by the market. It is more to do with positioning and desire to invest in the u. K. We are joined by steven major. We saw therket effects of that in the guild functions . Steven a kneejerk reaction. There is more considered response which is thinking or the data, what it means for the economy. Actually, all of the noise around the guild market has been misplaced. People are focusing on the downgrade comparing it with emerging markets. It is a bit rich, wheres the reality is in a flight of quality and a period of uncertainty, then safe havens for u. K. Investors i am struck how far the yield has come. I thought 1 was a low yield. It is what it is. People need to invest. At the moment, it seems that is a safe place. Guy would you chase it lower . Steven i think we already pricing in very aggressive rate cuts. A 450 is possible. We are at the possibility of a rate cut prior to the vote. It was already moving in that direction. I am not a lot is priced in. A lot of fiscal policy is being loosened. We are going to get the pickup in inflation. It always happens in the u. K. Policy and rate cuts, i look for the curb to go steeper. Dont chase the tenure point. If you want to sit somewhere, go short on the curve. And fords are roughly around 3 on the break even for one year. Our economists have forecast the inflation picking up for next year. That is roughly around the 4 level. This is to meet u. S. Post on inflation. To the 10 year conventional guild, it is probably not a wise instrument. Caroline give me a sense on how much affects is at play here. Is everyone hedged when they are buying in foreign buyers buying into the Asset Classes or are they looking for a bounce in the pound, and therefore that is going to steven the u. K. Market is dominated by domestic. There is a large shift in sterling. I dont think foreigners will be hedging. Number is 120 but we have to get to 125 first. There is the risk at some point there is a huge bounce in sterling. Longterm bond positions will be fairly dynamic. The hedges can be taken off quite quickly. It is really domestics driving the guild rally at the moment. See, preparingd for the rate cuts. I dont think it is foreigners driving the guild market at the moment. Caroline flight to quality is not just impacting the guild yields but we are seeing it across the boards in global broad indexes. We got the bloomberg overall sovereign bond. The record low dish we have seen german, japanese and the negative territory. It is a flight to quality that is what you drive yields down across the board . We be goinghould for . Slightly bearish on the u. K. Right now. Like to remind people that really yields have been negative across q4 for the last five years. Yieldsnegative nominal is a reasonable new thing. Gradually people have come around to accept it. A lot of investors are angry about this. It is what it is as far as im concerned that is the policy rates are negative and therefore it is to pull the bond yields negative. It may seem bizarre to lock in what is a loss, but when youre trying to minimize that loss and maintain your capital, so it does seem counterintuitive. It is an estimate that lose money but it will lose less money than some of the other risky Asset Classes. Think about what you mentioned earlier about indices. If it is true that real estate was to fall 30 , then clearly losing 1 on the bond is much better. Quite simply sickly it is about capital preservation and as bizarre as it might seem, money is still going into these bond markets. Guy this is the japanese curve and the swiss curve currently. The japanese curve hit zero yesterday. It fully followed the swiss curve underwater. To continue your thesis, why would you put money here and you can put money into the treasury . The japanese investors are putting money into the treasurys. In the longer and when they can hedge and get a pickup and yields. That is a key dynamic. Treasury looks like a highyield are in this game of g4. You can see why treasury yields are being pulled out. To me, i am a little bit disturbed by the fact that everyone is chasing extra bit of yield. All of the people were telling me that yields would rise. Now they are talking about yields going down. Me, it does seem a little bit unsophisticated what is going on. It is what it is. These negative yields, i think we will come to get used to them a bit. In a few years, we will probably idea probably reinvent the of Interest Rates. Making steps toward helicopter money, it is not what it used to be. In the fullness of time, we will find out. Guy will stick around for that. Steven major is going to stay with us. Job stay in the usa. The focus on the fed we focus on the fed. Brexit dominating the fed which is an interesting story. Unmovablescuss the federal reserve. This is bloomberg. Caroline dax futures showing a lower day here in germany. It might be a downbeat they. There is a packed crowd behind this date. Thats behind this date. Nevertheless we are going to move on to lumber business flash with haidi lun. Eco klum thanks haidi many shortlisted bidders pulled out. That is according to people with knowledge. They say they are still keen to sell the business and will hold a Board Meeting to discuss what to do next. Air france has announced its ceo cfo has resigned. November. Ain until at the same time, on its june operating result of 14 Million Euros here it euros. A major blow to the Embattled Health company Elizabeth Holmes has been banned from running a blood testing operation for two years. Wasately owned the run us valued at 9 billion with just a few drops of blood. More Capital Management has signed brett barnum after reports of a party he hosted in the hamptons over the weekend. In a statement, the company says his personal judgment was inconsistent with the firms values. That is your Bloomberg Business flash. Guide . Guy dwell on that for a moment. Job stay in the usa and after the weakest jobs day in the the after the weakest estimate is for 180,000 jobs as it added. Head ofajor, global hsbc is still with us. Data dependent . Steven people have not learned by now not to waste their friday lunchtime in europe sitting there looking at the screens when for some wisdom waiting for some wisdom from the payrolls number it is a shame , because data dependency is something for the fed kept talking about, but it is misleading. We know the ford guidance was suspended the Forward Guidance was suspended. Was february 2014. It is quite some time. , i thinkndency ultimately youve got a bunch of economists who are going to be data dependent, but the market is looking through this. It is looking through the cyclical patterns and focusing on much more of the structural story and has been. That is how you can get to talking about these other bond markets and their focus on the treasuries. That is how you can talk about the terminal value, because the terminal value try to focus in on the real natural rate of interest. That is where the debate has been for a long time did in plain english, that is where it should be. It isnt what the fed is going to do in the next few months. My argument for the last three years has been if the fed everyday get around to hiking, it would be difficult to see the height actually stick and for them to follow through with more rate hikes. That is what we have got now. Obody a new term rate hike it is going to be difficult to see one this year. At best, youll see people forecast one hike in 2017. One hike is saying nothing to a traitor. To a trader. To an economist, one hike in a year is validating the idea that the fed is trying to normalize if nothing. As we have learned in the u. K. , can turn the decisions only a couple of months ago. Caroline stephen . Right. Exactly factoring in what the market is showing. Went look at the world probability function, we are getting less than 12 expectation of a rate hike come this december. Just 12 down from 70 earlier in june. When is your call it hsbc for a rate hike . Do you think there could be a rate cut . Steven the official view from our economists is one hike in june 2017. As i said, that is the equivalent of saying no hikes because it is a term premium when youre out. It would not take much for us to flip toward rate cuts. I was thinking about the Global Outlook for rates. If you look at every single country, there is an easing path in place. Of the emerging markets, we can find two or three where rate hikes are likely to you got to go to south africa to get a rate hike anywhere. And slow and using Global Growth, everybody has slashed their Global Growth forecast. That doesnt speak to the idea that the fed is good to be normalizing rates. Why isnt there massive demand for credit . Steven we looked at this before. To get a big refi boom. To get people to switch their mortgages to a new product, you did it we need to get the u. S. Tens down to 1 . To slow theway Housing Market down, you need the tens outside of the range of 3 . In fact, because of refinancing, there has been nothing going on because it they are still in the old range for 10 year bonds. The old range established if he years ago. New purchases required new mortgages which is what i think you are talking about. I guess the question is why dont people go out and throw a load of money to buy assets occurs the money is cheap. What i would say is turn the question around and say you should worry about with the what the low Interest Rates are telling you. Somebody else will gain out of that asset. You will be looking in an asset at the wrong price. They rightfully should be concerned that the Housing Market might weaken. Guy stephen, stay with us. We are minutes away from the equity market open. Up next, we will get some of the corporate movers including air france after the Company Reported numbers earlier this morning and its cfo announced his departure. Caroline it is 7 54 in london. We are minutes away from the open. These of the stocks to watch. All eyes on france, not because of the defeat where from germany the france. Because of air france, keep the eye on the cfos the parts are. He leaves come november. On the other side, we are getting reports, total june passenger traffic. They said the impact of a pilot strike in june will that operating results by 40 Million Euros. Farewell to the cfo. Farewell to 40 million on the strike feature. Strike future. Guy italian banks will be the story of the brexit. Mpseeking a deal seeking a deal. Definede effectively what is the nonperforming loan sale will ultimately look like. The number keeps getting bigger. That is going to be one of those stories. Steven, did you expect italian banks to be this much in focus postbrexit . Steven you could not have addicted this pdf dressing thing is only a few months ago we were talking about bailing in . And now we are talking about bailing out. The brexit vote caused this flight to quality risk off. It exposed the italian banks as another example is how the example of how the Global Economy is working. Uy up next, the market open it looks like we are going to open up a little bit softer. That is with the futures are telling us. The opening is next. This is bloomberg. Guy . Welcome im alongside Caroline Hyde in berlin. We are moments away from the start of european trading. Caroline has a brief. Caroline i do. Two snipers are shot 11 Police Officers, killing four at a protest in dallas. The demonstration was being held over the Fatal Police Shootings of two black men. The markets remain mixed as you can political chaos gain some clarity. So data dependent. Its johns day in the usa, but can any number convinced the fomc to hike . Is a down day otherwise in futures. Guy dont waste your friday lunch; you can do Better Things with it. Lets talk about where we are expecting markets to open. The cash open, lets find out whats happening. We saw the equity markets selling and the close yesterday. You can see a quite clearly on my screen. Here it comes, any second now. And what we are starting to see is the negativity we saw on the back end of yesterday continuing. As you can see, the Market Makers are getting the prices out there, a little bit of a softening up, the cac moving lower. London is expected to be weaker. Were seeing a little bit of weakness creeping into the equity market, a rally yesterday before it sold off into the close. Lets get the details of nejra cehic. Nejra when we look at the asian it looksrgy stocks, like its the same here in europe, Energy Stocks leading the losses, down almost 6 10 of 1 followed by financials down for tenths of 1 . This is looking at the imap on the bloomberg. In the red for the majority of industry groups, only telecom edging into the green. Most of the others are heading lower. This risk aversion has pushed money further into bonds. We have seen the japanese 10 year yield fall to a record low. We saw the 10 year treasury yield cut down a little as well. Looking at the u. K. 10 year yield we are seeing it open up,. The line tells me we are dropping quite a few basis points, and the number doesnt show much movement. In any case, we are almost at 76 basis points. Chart, and weday saw the yield dropped below 2 for the First Time Ever in the aftermath of brexit. Lets take a look at the stocks we are keeping an eye on. Airfrance up first. We have some passenger numbers from air france, the total passenger traffic up 1 to 8. 3 million. The other piece of news that people are watching is the cfo resigning,ching continuing only until november. We are also keeping an eye on aveva. ,et cash of 133 Million Pounds and they named david ward as cfo. They see a currency benefit in 2017 with rates at current levels. Reportsa monte paschi that this is about aiming to sell its 10 billion euros in nonperforming loans. Guy lets talk about whether you invested in equities or bonds. Why would you have them in your portfolio . Normally you would expect the safety in the field in the bond market is something you would want. The story is getting turned around. If you want to find this on your terminal, the u. S. 30 year yield, and the yield on the s p 500. The two lines have now crossed. Lets show you this. A higher yield in the s p 500. If we go all the way out, you can see just how this chart has changed, a massive spread out here. This is the 1980s, and gradually they converge. Stephen major with hsbc, what does that tell you . Before we dive into it, bear in mind that there is only one measure. The other thing is for that dividend yield to be right, it has got to be paid. It has to be at the level we are assuming its going to be, whereas with the bond yields you will get the coupon. Having said all of that, it does argue that bonds are looking british. Is looking a bit rich. Im going to be careful how i say this. Im not going to call the end of the bond market rally. Its not the time it could well be that we have a scenario where the bond yields stays low for a long time, and im talking five or 10 years. You can imagine that bond yields stay at these levels for a long time. That should be good for equities and certain kinds of companies for those that are going to pay the dividend on a reliable basis, it should be very good. Gambit, you said about the mix i know someone who was talking about zero equities and all bonds in gold, that doesnt make any sense. This is an argument for thinking carefully about how you balance your portfolio. It is favorable for equities. That. But withept all this noise in the post brexit world , people are going to be thinking carefully. You have this kneejerk reaction in markets and then you have a period of more considered response and reflection back to last a few months until the next bailout, whenever. For the next few weeks and months, it should be good for riskier assets. Caroline stephen, good for riskier assets. Some company is going to benefit on the equity side of the equation. What about the Corporate Bond issuance . Will we see more companies leak where arek you seeing it going . We look at corporate said think that if we were searching for value we would favor the u. S. Investment grade over europe at the moment. The your pain Investment Grade was quite rich. It cheapened for about half an hour, and then came all the way back in. In terms of issuance, if were to see a repeat of the pattern we have in the u. S. , we should get share buybacks and bond issuance, and maybe that is what they would like to see. The sizes were enormous in the u. S. Last year, it was Something Like 800 billion in share buybacks. That clearly fueled the equity rally we had. We need to look at things a bit differently, which is why the dividend yield versus bond yields an interesting development. If you are looking at weighted average cost of capital, surely some of these companies should be thinking carefully about whether they should be turning out debt and buying back stocks. Cases, its always the that we could be missing something very big by just focusing on the same old stuff. Markets are fascinating. In many ways this could be one of the factors. Caroline stephen major staying with us. Up next, the eu faces a balancing act after spain and portugal are found breaching their budget deficit rules. We will bring you more and dig deeper with stephen major, in his views on peripheral palm. Caroline welcome back to on the move. 10 minutes into training, and we are going into the green after a lackluster start. Currently trading slightly higher. Dax and ftse outperforming, miners and Auto Companies leading. Dig into the movers for us. Guy and for the downside, we anticipated that before the break. Stat oil weakening, u. K. Banks a little softer. Weve got others down as well. This story on the upside, italian banks are in the mix. Mix. Iners are in the paschis in there. You have some of the continental, peripheral banks rising. Lets get the details of whats happening around the world, more updates on dallas, with haidi lun. Haidi thanks. The Dallas Police department two snipers shot 11 Police Officers, the gunfire breaking out around 8 45 p. M. As demonstrators gathered to protest the Fatal Police Shootings in louisiana and minnesota this week. The uks said to have its second woman Prime Minister, with the race down to just two. Conservative Party Members will likely choose as the next leader. The leading Brexit Campaigner came in second to last in the second round of trading and was eliminated. China has reported a big jump in deliveries, rising 19 to 1. 7 million units. The faster than expected growth was driven by electric cars. Britains decision to leave the eu had an Immediate Impact on the u. K. Economy, according to be the advisory firm. It was the worst june result for more than a decade. 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 go. Caroline haidi, thank you. Lets focus in on peripheral debt. Its damned if they do and damped if they dont. Theyre considering slapping fines on spain and portugal permitting budget targets, which risks giving life to even more antieu sentiment while also failing to act could jeopardize its credibility spain has been on the extended deadline to close its deficit to thousand nine. Since 2009. Stephen major remains with us. Stephen, answer me this. I am looking at a peripheral nations debt, at their yields, at spain and italy. , deemedseen a race down a haven, different from what we saw back in the previous crisis when we have spanish yields training at 1. 165. Could thisee eu votes potentially dean the likes of spain not a haven . On tuesday next week, there is a meeting to talk about these deficits and you pointed out that they have not actually reduced their structural deficits enough. It looks like it will be a bit of a wash and there are mitigating. It seems ludicrous that they could be fined for this and the fine will only make things worse. , guess he can get through this and there are special circumstances that both countries could focus on. Italy is slightly different because we know that the Banking System has been a focus and nobody really predicted that the u. K. Vote would trigger that flight to quality. To answer your question on what are they doing so well, why have italian and spanish bonds rallied, theres been a local flight to quality, which means from stocks to bonds, and that is something that we didnt really expect. If youd asked me the day before the vote in the u. K. What would happen if there was a leave, i would have said that italy would selloff, and it did for half an hour. In the flight to quality, and also dont forget that you have the pspp from the ecb buying italian is finished bonds. In the last month, they bought a bit more than they would have had. Theres that, in there has been discussion in the market, chatter around modification around the program. Theres no smoke without fire. One wonders whether it was a deliberately, or if they are looking at the modification. There could be other ships the modalities like buying through the floor. The peripheral market, theres a lot more to it in this world, and i take carolines point based on some of the fundamentals in things like fiscal sustainability, you wonder whats going on. There will come a time when this is not sustainable, and its not now, because the whole ring about solvency is inability to roll. Thats not supposed to be happening, but it is the fact that the ecb is there means they cant issue cheaply, and they will continue to do so. Guy quick question. This is italy, germany, the spread. Butaw the tightening here, the broader trend has been to spread. Thedo i trade btps in runup to the october referendum . And how should i see them in that runup to the bond market . October is a long way away. On the experience of the Scottish Referendum and the u. K. Vote to leave and the january election, and all of these european elections, it seems the markets cant focus properly until a couple weeks before. Theres more than enough stuff going on. The referendum is really come to center stage for us until september. Then we can start worrying about it. In the meantime, Everything Else being equal, bgps are a nice carrier trade. For the next few weeks, it should be that it can stay nice and tight, and with bund yields where they are, you will get more people looking for kerry and return. In the back of my mind, it does seem like a very low spread, but lets not argue with it. What is going to happen for it to blur out . The issue for italy is the banks. And is the big question, going to. Take many more weeks for that to be resolved in the meantime banks is italian could it be systemic . Could you see it spread . Italy flagging that they felt germany had an issue. Will we see more consolidation . What is the answer . This is very controversial. You can see the emotion coming through with those comments about italy and germany. Its true that there are banks that have links across the italiangerman border. So of course, if there is a problem in the italian bank, it could spread elsewhere. We know that there are many, many fragile banks around. This is one to look at. What concerns me is how quickly we have shifted from talking about fading into eatin fading out, and you start to think about contingent liability again. Where does the money come from . And that is the concern. I dont think theres enough there to trigger a spread widening yet. Guy stay with us. Thank you very much. Up next, will the pounds pain continue . Sterlings eightyear cycle sees post brexit collapsed enduring until march next year. We will talk about that next. Bloomberg. Caroline welcome back to on the move. The market is currently trading relatively flat, stoxx 600 being the lead up by autos and miners. U. S. Bond yields are currently down, all eyes on nonfarm payroll. Stephen major tells us to take a oneshot; no point watching these figures anymore. Airbus down. Traveling numbers arent looking pretty. Currently trading lower by 1. 25 . Meanwhile, the pound is trading up 1 10 of 1 , but it is lower on the week for losses, down 2. 5 . Guy yeah. Amazing moves. Airbus will be at the air show next week and he will see how many orders that they can take. Lets talk about what could be a story with sterling. The seven year itch is what we normally talk about, but the pound is set to fall and probably wont have a major low until the First Quarter of next year, according to analysis of its longterm movements. I need to walk you through it to show you its happening. 31. 461. Gebtv, ill getget here the director to take the strap off. This is the cycle. As you can see, it is neatly lows at theo some beginning of the turnofthecentury, then the 20092008. Stephen, does this ring true . It fits with my memory. I dont know if it will go above the eightyear cycle, but i was thinking in 1967, 1976, 1982, 2008, now 2016. Its not quite as smooth passing, but i get the idea. U. K. Authorities, whether its the treasury or the bank of england, they know fully well what the playbook is here. Theyve seen it and done it. This is what happens. The u. K. Has to reflate, and it reflate through fiscal policy, and its happening again. Guy a bit of a productivity problem. You have a referendum ended bills quite quickly. If this had been a few weeks ago we might have been accused of starting a currency war, but no one can say that now, because there has been evoked no one expected and the devaluation was done very quickly. Thanks very much. The question is when the balance comes. Caroline could it be political stability that brings the bounce . What about the vote, we could get a new leader at the helm. Would that be enough to start the swing around and in u. K. Assets . It would be a start. Its not my call, is for david bloom to tell us the effects. Hes got 120 at yearend. Office a bet in the about the u. S. 10 year treasury versus cable, what will be the lowest at yearend . Guy which side are you one . I should think the yield would be higher than cable. Makey, the point i would is that its either going to be the politics or a combination of politics and economics. It will take a few months to figure out whats going on and the inflationary report in august will be the first guess. You have to wait until september and october before you have any idea how much damage there has been. Id. Will get the aggressive balance very soon but to me the interesting bounce will be cable and what happened there. Guy briefly, to that bet, why havent you lowered your forecast . The growth forecasts were dropped. A smashed their forecast, everyone around the world is doing it. My sense is that the bond yields were already telling us that Global Growth has been challenged. , are is a lot of information 10 year piece of paper. This year is important but its not the only one. My sense is the bond market was telling us that growth would be week anyway. I am not rushing into it. Guy a great pleasure, as ever. Hsbc. Up next, we will talk about the ukip property story. This is bloomberg. 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. 30 minutes into the equity market trading session. How are things shaking up . Futures pointed negative; we see a mild bounce off earlier lows, dax now trading up. It looks like we are finishing on a quiet note. Payrolls were up a little later. Steven major says dont waste your lunch, but the market will be paying attention. Heres nejra cehic with details. Nejra im starting with the Danish Company that provides telecom solutions, one of the best performers on the stoxx 600 this morning, up 7 at the moment. This is after we had some headlines crossing the bloomberg saying that a firm is and thatd in buy, is possibly way we are seeing the shares gaining. One ofmonte paschi is the best performers of the stoxx 600. We know it is working with authorities on a solution for its bad loans. Only heard today, and this is in a report in an italian newspaper, it aims to sell 10 Million Euros in a dea npls. The plan was discussed on thursday and is to involve the new bank fund. We are keeping a close eye on that. Airfrance klm. A few things will come out for them today; i suspect the stop loss could be down to the cfo resigning. He will continue in the job until november. What we also got from air france was total passenger traffic numbers up one sent, but then also i talked about the pilot strike in june, and that impact was about 40 Million Euros. Guy thank you very much. The u. K. Property sector has been in focus over the last few days. Aberdeen one company that has been dealing with dating its funds, and has said that what it will do is ask and two or 3 is extend to or three days by around 17 and it is getting people to think about what they will do. We have seen dating up to and over 20 days, access the liquidity story is front and center. For what is really happening . We saw a lot of excitement, but what is the story surrounding u. K. , and in particular u. K. Commercial properties . Lets talk to someone who knows a thing or two about it. Hes ahead of city capital markets, and joins us on set. Good morning. Price discovery is difficult in the market that is dealing with huge assets. The funds are having to deal with shortterm liquidity issues. What is the story out there on the ground . Its difficult, you wouldnt want to be at value at the moment. That said, transactions are starting to happen. We have seen two or three go through now, and there is more activity generally. A handful of deals did go, probably most of them in the event of a leave anyway. I think what is now happening is that there are renegotiations, involved in deals we are aware of where theres a pricing shift of 5 to 7 why pricing reason should move at all . Clearly the riskier stock arguably should move, and that seems to be the turn. Guy but with the sterling drop as well yeah. Its a slightly overplayed point. A fantastic time for it overseas invest, particularly dollar just. Dollar driven. Theres some excitement about retail; we have been in the market prior to the vote where there hasnt been enough opportunity for buyers to buy into decent stock, and these do ,enerally have any prime assets unlike last time when they were g in large lots that were difficult to shift. They are focused on asset that will sell quicker but inevitably a property asset cannot be sold. ,here is this logistical issue getting the property sold. I think theres a perception that these funds have a chance of going bust and it almost feels like that is lets being put out the investors when it is simply a logistical issue. They can sell the property of someone can press the button. Caroline nick, how much do you think fx will be at work . You are saying that foreign buyers might be looking at the enough factor we have seen in terms of the price drop, but do they think they can get even more upside to ridiculous sales . Absolutely. Were getting a lot of inquiries from north american investors, from middle eastern investors, quite a bit of excitement about the retail funds. I dont think it is overstating it to say that we have buyers, not quite queuing up, but a lot of inquiries coming in to pick up some of the stock that the retail funds are telling because there havent been enough around. The overseas buyers are gearing up for some parts of the world. They have been quieter with london but i inc. This will but i think this will boost it. Caroline how worried are you about heads turning to other future Financial Capital . We are hearing that frankfurt is suddenly the desire, to have your offices there. Amsterdam might win out, terrorists. In berlin, we have seen advertising detect the cities. Are you worried about other cities gaining . We have to stay competitive all the time, but i think that it boils down to the next question, whether we are going to stay within the Single Market and whether we retain the rights for the Financial Services industry in the u. K. Lose thosetentially allimportant passport rights, then i would see a risk of sizable elements of the Financial Services industry will have to move. But i cant see, politically, anyone really setting their fallout as that being the way forward. They might suggest that is part of the discussion because they have some serious negotiations to be had, but i cant see anyone killing off the golden goose and quite that way. Guy lets go after that a little more. High rates in frankfurt exit easy. How do you see supply and exit developing from here . Do you think products will get pulled . Do you think they need to take a regional map to see where supply is being formed . An ongoing debate. Pre the vote, there was a consensus that there wasnt enough being built at the moment in a london context, not enough offices. We havent been at that level for 15 years. The biggest concern was the about new Speculative Development about to start, and clearly with the rent having risen as helpfully as it has, a a lot of developers have been focused on trying to get news skin to live in. But i think the reality is that, post the vote, we will have a delay to those schemes and the market has been advantaged for some time. If that balance was redress with more supply, it would be better for the 10, but i think thats unlikely now given the uncertainty of developers starting on these other huge schemes. Guy this is a much more general question, but Government Bond yields continue to fall and property is ultimately a yield driven story. Give us a sense of where you think yields will be going. What can i expect . You talked about the fact that there are prime qualities out there with longterm leases. What is the yield story . Of course there are property asset that are bonds like in their characteristics. It should behave much more like a bond. You get assets that are short with refurbishments which are more equity style investments. It depends which end of the scale you are. I think that the more equity end, that is where the bigger price changes are being debated. There is certainly evidence of 5 7 movement. I can see that getting bigger as more supply comes onto the feel that if we get a little more certainty of a , theres a growing comfort that we will remain in the Single Market, i think people will start to wonder what has really changed. Remained, thenad there would have been a sudden boost to the market, because people were really gearing up to make new occupations, to make new investment moves. I think what has really changed, and yes, there has to be some risk that the move will come out, but i think most people feel its diminishing. Guy great to see you. Thank you for taking the time to see us. Nick braybook. Up next, we are live in warsaw as the summit kicks off, challenges including a fraying eu. This is bloomberg. Caroline welcome back to berlin. 5 ,re currently trading up dax currently trading that much higher as well. Adidas company could be being tied up. On to haidi lun to get a market check in a moment. The stoxx 600 currently trading flat, renminbi moving on to tenure treasuries. s quickly run everyone around the function. The first place you should start your day, lets talk about what we are seeing. This is one of the standout stories, brent and wti both on the upside. We are waiting for payroll data, for what we are seeing is the Market Selling out of some of the safety we have seen. The swedish fiveyear, swiss 10 year, japanese thirtyyear, yields rising. This is the gmm function. The russian ruble was one of the gainers. As caroline says, the dax is up. Lets get you up to speed with everything you need to know with haidi lun and the Bloomberg Business flash. Haidi thanks, guy. Tata still has temporarily halted its u. K. Assets after it is pulled out due to uncertainty in the wake of the brexit vote. That is according to people with knowledge of the matter. They say they are still keen to sell the business and will hold of our meeting to discuss what to do. Air france klm has announced its cfo has resigned. Hell remain at the airline until november 4 while his successor is being found. The company says a pilots strike will have an estimated impact on the june operating sales. Sales are trading lower. Si reportedly seeking a deal with its 10 Million Euros of bad loans in two weeks. Its quoting financial sources as a struggling italian bank that a to give strong signal. O the market u. S. Health regulators have dealt a major blow to a founderompany, whose has been banned from running a blood testing operation for two Regulatory Approval has been taken from its oratory. Laboratory. Lov ironCapital Management has Portfolio Managers in the word of a party he hosted over the weekend. In a statement, they say his personal judgment was inconsistent with the firms values. He didnt respond to phone calls or email request for comments. Thats your Bloomberg Business flash. Caroline that last story needs more investigation. Thank you. Leaders begin a twoday summit today with talks set to focus on boosting the alliance presence in eastern europe. The follow from britains decision to leave the eu is also on the agenda. Heres what the nato secretarygeneral had to say about the vote. Will of coursee change u. K. s relationship with the european union, but it will change uks position within nato. The u. K. Will continue as a strong and committed a tilnato ally, and the goal has been clearly stated. Beenine cameron has talking about that sentiment as well. Ian, the u. S. Ambassador to nato has called the summit the biggest Inflection Point since the fall of the berlin wall. Whats at stake here . You can see why he might say that. When you look at all the problems across europe at the moment, this newly aggressive russia, Islamic State, populism spreading across the continent, and now we have the u. K. Voting to leave the eu. You can see while these leaders gathering here in a stadium in warsaw today and tomorrow consider this a real chance to look at the existential threat facing europe. The established governments across your insecurity forces, so you can see why, when they come here to talk about what to deterrence, they know this is a rightful time in the history of europe. Guy making it clear that brexit strengthens nato, doesnt weaken it. That is the assessment of most people gathering at the summit . I think strengthening its might be an exaggeration, but it might be a bit of a stretch that it weakens it. Its fair to say that the u. K. Is, will be, not much longer the eus strongest army. Taking it out of the eu is going writtenme sort of wont be able to be a yo global player, but they will be reasserting its poised within global defense. To a certain extent i dont think it really changes the uks role of the nato. Guy one of the things that has particularly annoyed is that the europeans have not been spending how much they should be, according to the rules. We are getting noise out of berlin that that will be the case. Talk to me about whether we will be pulling its weight. They come here, when the leaders come to these big summits, they always talking good game. Thats about how europe must pull together across the board. Its very easy to see that when the threat from Islamic State and terrorism, and when they go back to their budg ets, what they will spend on its things like difficult to sell to the stay true toe must our commitment that we made two years ago to raise defense spending. I think theres some optimism and i dontalso think theres any uncertainty. Caroline thank you very much. Ian wishart, looking like hes going to a football match. Great to have you on the show. Breaking headlines throughout that meeting in the discussion, we will bring it back to the italian banking story the italianthat government has indicated it will respect eu law, talking to reporters in the hague and about the italian banks not being an immediate crisis. Paschi trading up. Usa. Xt, job stay in the we preview the nonfarm payroll numbers after the enormous mess last month. Guy welcome back. 180. Thats the number we are looking or out of payrolls later. Theres the predictions. Last month was a little bit of a shock but do we really care . Does the market really care . The fed, is it really did a dependent . Lets get another view on this with our first were strategist, richard jones. Steven major thinks he should go out and have a late lunch. Richard i think hes definitely onto something. I dont think its the payrolls number that will shifted off. I think brexit has changed the entire narrative, and we are analyzing everything. I think we could get some shortterm noise, bond yields are low, the fed rate hike is even lower. You might get a little bit of shortterm noise, but i think longterm its not going to be a lot of impact. Caroline richard, what do i look at . What are the data points . How global in its perspective has the fed become . Richard i think the fed has always been extremely global. I think we underestimate how global they have been. The fed only looks at global issues from u. S. Context. I think that they have acknowledged more and more this year is that, realistically, even though the American Economy is outperforming everywhere else, its not immune to the slowdowns and shocks leaders in your elsewhere. I think realistically, the data becomes potentially in the short term less important than all the political and economic machinations going on globally. Once we start to get a better feel for brexit, then perhaps we will get a little more guidance from the fed, but that could be many, many months before we get a clear picture. Guy many years . Richard i was going to say could be, but i will stick with months, or think you might be right. Guy ok. We will wrap it up there. Richard jones, from bloomberg the first word. Stay with us. What to we have coming up next . The pulse. Jonathan ferro and i will be on the radio, talking about the big stories. Lets wrap up the week with a quick look at where we are with the market. This is the picture around europe up by around one half of 1 . As i say, it is friday, it is payroll day, markets are probably going to be quiet, but will it really move the dial . We will find out a little bit later on. Francine lacqua the pulse is next. Shotine four snipers have 11 Police Officers at a protest in dallas. A protest was being held over a Fatal Police Shooting of two black men. Can todays jobs number lift the postbrexit gloom . The conservative partys Theresa Andrea madson battle it out to succeed him. Welcome to the pulse.