away from the open. the brexit news crashing over us this time last week. let's talk about how we will open this morning. the fair value points to another reasonably positive start to the session. bythe moment, the ftse is up a half a percent. thato, click this, and will give you the fair value calculation. england will have a rate cut within months at the tries to shield the u.k. economy from the shock of leading the eu. mark carney said he won't hesitate to act. he is considering a host of measures. it seems plausible that uncertainty could remain elevated for some time. there could be a greater drag on activities than we expected. moreover, the effect will be reinforced by tighter financial conditions and possible negative spillovers to growth. japan, another lackluster month for the world's third-largest economy. industrial output fell. and household spending stagnated. inflation also fell from a year before. andfacturers are confident held steady. the survey was almost wrapped up by the time the brexit turmoil emerged. the latest figures show china's manufacturing sector treaded water in june. the dividing line between improvement and deterioration meaning estimates are for the services sector. it continued to improve rising to 53.7. hisjustice secretary makes case to be britain's next prime minister after he betrayed the previous front runner who pulled out of the race yesterday. the homes are set on secretary the early favorite and three other candidates to head the conservative party. global news 24 hours a day powered by more than 2600 journalists and analysts. guy: thank you very much. i was mentioning, one week since the brexit vote. let's talk about the markets. the markets got it wrong. i think that is a fair comment given what we have seen. this is the stoxx 600 during that time, down. let's roll through some of the numbers. the banks have been a big focus. it is in positive territory. i will show you another chart in just a minute. i will show you a couple of things. put the pound up. a littleff on this bit. the ftse 100 has been affected more by this as you can see than anything that has been happening in the stock market. lets take the terminal. i want to take you to this part of the wei function, which shows you adjusted for the ftse 100. that is pretty much in line with everything else. --is in positive territory year to date in sterling up by 4.2% in euro down by 8%. we have a chart, this is the ftse 100. you can see the gap lower. we are not back in positive territory. you need to realize you have to factor in currency. fact written about the that the ftse 100 has had a good week. sure that isely true. the other area with seen a great deal of action has been the homebuilders. big names have been battered in the u.k.. remember, that is not a currency adjusted number. these are aggressive figures we're seeing. the other thing worth mentioning , talk about what mark carney said in just a moment. cio ats the deputy black rock. what has the last week taught you? thet: if you look at expected return market, the event itself was totally unexpected. liquid strategies like the british pound and the euro and even u.s. treasuries moved about 100 percent of our expected range. some of the asset classes moved much less. about 40% or 50% of what we were expecting. some broader indices move even less. that tells you the market is focused on the implications for britain. there is more sanguine about what it means for europe. guy: is it that the market can only focus on one thing at a time? as would begin to understand the ripple effect, we price that into assets more regularly. the epicenter of the action here in london will not be effected. exactly right. look at the growth implications for the u.k., europe, and the u.s. we will factor in what fair value of the currency and the assets are given that change. the immediate reaction is to mark everything down. and examineme back the longer-term fundamental implications. market what i think the is going to right now. also you have mark carney speaking yesterday. that was very significant. the ecb is contemplating changing their purchases. guy: they can buy different sizes. at the moment, they are linked to the ecb. scott: that is correct. basically, what they're doing is to avoid the -- the german bond market has been very much affected by the qe program. so, what the capital key is is the amount of money paid. they buy on that ratio. they can go for spain at 140 basis points. stillare places with positive yields. if it is true. we have not had confirmation. guy: is there a believe that the pendulum has swung too far in assets? the moves in those are eyewatering, from a historical perspective. these are levels that are simply uncharted. response to the extraordinary monetary policy intervention. the bond market is the most supply and demand impacted. a different story. the u.k. could easily become as impacted. guild yields have fallen very sharply relative, because of the brexit situation. leg lowerother yesterday. the timetableat for a rate cut and qe. thisond market reflects financial repression and market intervention. i'm not sure that the guild markets do yet. guy: let's talk about that then. that is where we are now. how much further is there to run? scott: if the market is pricing not even two full rate cuts, it is hard to say. at a minimum you need to price and another rate cut. guy: with the current account deficit? not likely to go negative. i am surprised we are as slow as we are. lower boundarye with brexit and these are the things has been pushed a sign. they're much more flexible on that front. in my view, look at france's 10 year yields. they are just positive. it doesn't strike me that they couldn't follow a similar path. guy: plenty more still to come. we will talk to the president james bullard. you can see that at 10:00 a.m. u.k. time on bloomberg. next, sentiment that it is not working as a latest data shows japan's economy is stuck in neutral. is it time to abandon the inflation target? ♪ guy: let's get your bloomberg business flash. is tumbling again. owners of more than 300,000 hondas and acura's made between 2001 and 2003 should of the airbags replaced immediately. tests show the inflator's have a far higher risk of exploding than other models. this morning, the company says executives will take pay cuts over the recalls. oracle has been ordered to pay $3 billion to hp after they found that the company violated a contract to support software for hewlett-packard's once promising chip. jurors reached the unanimous verdict in less than five hours of deliberation. they concluded the decision to bail out of the agreement hurt hp's revenue. oracle says it will appeal the verdict was a disney has agreed to acquire a stake in the digital arm of major league baseball. that values the business at $3.5 billion. agreement underscores the importance of the video streaming business to the future has been's espn, which losing viewers and advertising dollars to online media. bidhey's board rejected a that would've created the biggest candy maker in the world. some observers were surprised hershey offered no rationale, saying only that it saw nothing in it that warranted further discussion. that is it for your bloomberg business flash. guy: thank you very much. has three options, not particularly appealing. he could adjust the 2% inflation toget, or suffer a hit credibility. that last option is already set sail. take a look at the new data. it is now something we need to discuss. jane, give us a sense of the data. what are they telling us? >> we have all the dayta now for may. upiness confidence did hold in the second quarter. most of that survey with took place before the brexit vote. yen soard inhe value. that would've been an extra hit to business confidence. on the other hand, you saw industrial production fell. household spending data was bad. exports data was also bad. overall, looking halfway through the second quarter, it is not a great picture of a healthy economy. again, inflation data has been very poor, back in negative territory. sayinghe boj is still inflation will pick up, looking at the core numbers it is back in deflation. if you strip out energy prices, it is rising. that theoesn't show economy is generating strong inflation. that is what kuroda said he wants. guy: so, what happens next? it seems fairly binary. you either go huge or give up. which one is it? the, honestly, the c entral bank, they are still saying that they will achieve their target. however, the target keeps getting pushed back in time. there is no sign of them reaching that. it to be achieved sometime in the next two years. that is a long way from when they said 2015. could increase to millis again. many we state to say those aren't real options. they would have marginal affe cts. the negative rate was incredibly unpopular. those options which are the only options don't look that great. guy: is there a third option to monetize? they arell, basically, monetizing. they buy all the new issued government debt. they are buying the bond assurances at the start of june. some of those are already in the boj's coffers. leaving aside the few days at some merchant bank, they're basically monetizing the debt of japan. could they do that anymore? i'm not sure how they would go about that. guy: we are actually monetizing the debt, thank you very much very much, indeed it joining us out of tokyo. later we will talk to james bullard who will be talking about surveillance. you can see that here on bloomberg. you can listen to us at 11:00 a.m. chris is still with us. what does kuroda do next? wide range ofs a expectations. markets are not sure what is going to happen. japanese investors are much more sanguine about the prospect of even about further rate cuts in the near term. non-japanese investors are expecting an expansion of the program. say how they to will cut rates. i don't think they are prepared to give up. the full-blown helicopter money, and the middle there is still more ground they can cover. guy: what does this do? this is the japanese curve. under zero.y the curve has continued to move lower, and continues to flatten as a result of thehow much more tdoes this move lower? chris: this is a spiraling function. rates are very well below zero for the japanese banks have a hard time passing on negative rates. effectively, they are stuck offering a zero rate. after some augment their income. the, in effect, lowers borrowing rates they set for loans. it becomes a self-fulfilling process unless we get to be dramatically different. guy: towards switzerland? chris: again, these are hard to say. they are so artificial. they're so constructed by the central bank. again, i don't see any reason why it couldn't continue to flatten. takingy buying, you are a view that we will not get a big spending package. there is a balance you have to strike. if you thought a big fiscal package was going to be delivered, i would suggest the negative suggested less forward purchasing but the bank. it is fine to say we will march on. we could get bigger qe programming. reactow would the curve to a massive fiscal push? scott: the yen would be the big beneficiary. tuch cheaoper if tha happened. crisis thats no would occur. if portugal said they are blowing the budget. our ourselves out of deflation the market would freak out. japan is not going to do that. is one of the most indebted country. look at the borrowing rates, the cost of that debt is very low. issue? big structural i don't think that it is. pathway clearly -- the for them is to go toward some kind of spending package. i would suggest that would have a cheapening impact on the yen, gbd a negative impact on j yields. guy: are you positioning for this? scott: it is like waiting for godot. you keep waiting, and waiting. you don't give up too much in the near-term. guy: thank you very much, joining us from blackrock. we are minutes away from the european market open. at how the market is going to open. looks like we get a fairly positive start. ♪ guy: welcome back, you are watching "on the move." looks like we will see positive start. the broader market in europe up by around 7/10 of 1%. in terms of the surprises out was pointing at we should talk about this. this is the dollar mexico, that moves there. attention to the emerging markets. i am surprised this doesn't show up. we would have expected that. nevertheless, japanese yen looking fairly positive this morning. gold also trending a little bit higher. that is hard to see in the equities. remember, this is bloomberg. ♪ guy: i am guy johnson at bloomberg's european headquarters. we are in the city of london and moments away from the start of european trading. here is your morning brief. governorovernor -- boe implies he will do whatever it takes to get the economy back on track. gove goes for it. ister in the tory leadership contest. will governor kuroda offer massive stimulus, or will he abandon inflation targets? it looks like we are going to have a positive start to european equities one week on from the brexit results. this is the picture of the futures across europe, looking reasonably solid, and it looks as if we are going to be dealing with another decent session. you've got to put the currency story into the ftse story. let me show you what is going on. we rallied into the close yesterday. the ftse is the white line, and the deutsche is the dax. the ftse, just beginning to see whichwill direction it takes. we are expecting a solid start for the ftse 100. it's a continuation of a rally that started back way through yesterday's afternoon session. there's a little bit of arbitrage that needs to be balanced with the united states. we're looking reasonably solid. 1%.ftse 100 is up 6/10 of a positive start for european equities. know, we need to currency adjust that, don't we, nara che hedge? nejra: i will talk about that in the moment. i want to look at the stoxx 600 and see how it's opening up. looking at the imap on the bloomberg, it looks like financials are the best performers, up 1%. this risk appetite, continuing. energys like it could be that is the worst performer at the moment, interesting given the oil price. performer, the best followed by consumer discretionary and telecom. it is energy and utilities lagging. overall, we are seeing gains. if we see how the u.k. 10-year yield is doing, this dropped to a record low. it fell below 1% for the first time ever in the brexit aftermath. we are down one basis point on , looking at yield 0.84%. i wanted to take a look at the ftse 100. refresh this for you. it's headed towards its best weeks since 2011. you've got to take into account the weaker pound. it is still not looking pretty if you are an international investor. it looks like some of the best performers, dickson carr phones, notds ranking -- banks, doing too poorly. looking at the week performers, astor zeneca, diageo, travis, perkins. this is how we are looking at individual stocks. ftse.take a look at the i will refresh this for you. had, thef that news we fund in italy is to be recapitalized with at least $4 billion -- 4 billion euros. not too much of a move. it looks like one of the best performers. guy? guy: thanks very much indeed. , as we firmly and focus have been hearing. jeff dailey says concerns about earnings have caused a significant dip in the banks' shreare prices. speaking to erik schatzker, he said the banks' performances are weighing heavily on investors. >> the important thing is for barclays to be there for the public of great britain, to be there for our consumer clients, small business clients, and corporate clients, with credit, advice, services. we've thought a lot about this referendum, and it obviously went one way. barclays is going into this process with its eyes wide open, its balance sheet strong. motivated,, very committed to the economy of the united kingdom. erik: the answer is, yes, you can withstand the challenges ahead of you. your leadership skills are going to be tested like never before, perhaps. are you ready? >> i will find out. we've spent 13 months getting ready for this referendum, so we created a situation room, which we invoked last week. the full executive committee was meeting four times a day beginning thursday, and obviously through the early part of this week. erik: four times a day? >> yes. it was to make sure we all knew what was happening in our branches, happening in our call centers. loans toe made 1500 small businesses across the united kingdom. friday,arly hours of three times a first couple -- three have foreign times in the first couple hours the volume we have in a normal day. i feel terrific about how the bank handled itself. the other thing which is quite different from what we've seen in previous financial crises is the coordination between the large banks and the regulators. we run the phone actively with the new york fed, etc.. there's a recognition to avoid the next financial crisis, banks and regulators have to be collaborative. during this referendum, that has shown its colors. guy: jeff dailey talking to erik schatzker oh. jeff teal is still with us. the market work. the market did what it said it and all the do, preparations for this event delivered. >> it's a big win for the financial system. what mark carney said yesterday supports this idea that we saw tremendous volumes from basically when the story started to break that the outcome was leave versus remain. the volume in foreign exchange, the market was incredibly orderly. volumes were very high. as i mentioned before, the pound, treasuries, they moved 100% of our expected range, but part of that, they moved freely. there was a clearing price. i know the city staff to itself accordingly. i came to work at 3:00 in the morning, and there were people all over the place. that's an important thing, because it allows the bank to assess what is going on here as opposed to having to jump in right away. him carney, it was smart of to come out and over communicate with the market. that was a significant meeting he had yesterday. he didn't have to do that on the night of the referendum because of the orderly functioning of the market. yes, prices have to go down, but i think that is very significant. it gave them some breathing room, which suggests why we have seen such a ferocious return to some of these. guy: the night before, for a big liquidity provider, they said, don't step into the mountain -- market tomorrow. liquidity was over communicating, as well. don't think we are maybe going to be providing the normal services we are. allowed the plumbing of the function. >> we want the market to clear. we want to find equilibrium. then the market is reflecting investor views, and when you get these gaps, that is what is hard to deal with. liquidity -- it was extraordinary given the circumstances. guy: we are going to talk more about carney in just a moment. coming up, we are going to hear what mark carney had to say, what he's doing in terms of his view on the pound. it was an interesting discussion that he delivered. this is bloomberg. ♪ guy: welcome back. you are watching "on the move." we have a broad positive picture in europe, as you can see. we are up by 4/10 of one thing percent -- 1% at the moment. we are doing with a relatively positive story one week from brexit. i urge you to go to your bloomberg. let's get you caught up on what you need to know. here's the bloomberg first word news with nejra cehic. nejra: data out of japan shows a lackluster month for the world's third-largest economy. industrial output and exports fell. retail sales and household spending stagnated, and inflation fell 0.4% from a year before. manufacturers' confidence held steady. the latest official figures show china's manufacturing sector treaded water in june. the pmi fell to 50, the dividing line between improvement and deterioration. as for services, the sector continued to improve with the gauge rising to 53.7. the justice secretary michael gove is set to make his case to be britain's next prime minister. that is after he betrayed boris johnson who pulled out of the race yesterday. his sights are set on the home secretary theresa may, the early favorite, and three other candidates to head the conservative party and the country. global news powered by more than 2600 journalists and analysts in more than 120 countries, i am nejra cehic. this is bloomberg. talk about the bank of england. the bank has signaled a rate cut within months as it tries to shield the u.k. economy from the shock in the eu. governor mark carney said he wouldn't hesitate to act and is considering what he called a host of measures. to slowing growth at the npc identified as a risk associated with the referendum now looks likely to be our central forecast. it seems plausible that uncertainty could remain elevated for some time with a greater drag activity than we previously projected, and moreover, its effects will likely be reinforced by tighter financial conditions and negative spillovers to growth in the uk's main trading partners. monetary policy cannot offset the economic implications of a large negative shock. moreover, the future potential of this economy and its applications for jobs, wages, and wealth are not the gifts of monetary policy makers. these fundamentals will be driven by much bigger decisions, by much bigger plans that are being formulated by others. we will do is to relentlessly pursue monetary and financial stability, and by doing so, facilitate the adjustments that are needed consistent with those plans for this economy to reach its full potential. the economic outlook has deteriorated, and some monetary policy easing will likely be required over the summer. mewould be irresponsible of or any of my other colleagues to walk away from those obligations, because those are our obligations under statute. guy: governor mark carney. showed alip statement and his q&a session. he was very column, very relaxed, very methodical, very clear about what the bank will look to do over the next couple months. the markets reaction was somewhat surprising in that it was short sterling and front end u.k. rates dropped 10 basis points as he was speaking, which suggests the market had and priced in a full move in july and had and priced in another move for august. what he is doing is he's going in julyyou -- cut rates and then make their forecast in july and look at the rate market and potentially qe. it is interesting. it speaks to the free functioning of the gilt market. the market really expected one rate cut over the next couple months until he foreshadowed the change. that suggests the market was comparable with what happened up to that point. guy: carney's job has been to be a plumber, to kind of -- the market has helped him. markets. thisthe feelslike a different scenario. you can very clearly see what happened during the financial crisis. this is the point at which the financial system was getting close to cracking. nobody believed that the market was functioning. down here, yeah, we are elevated. very different scenario. >> obviously, the financial crisis had a huge or growth impact than the euro referendum does, but i would say we need to look at, going forward, as he suggested, what is the impact on growth? what is the impact on u.k. growth? estimates are between 0.5% of gdp this year and 1.5% next year. what does that mean for the eurozone? 4/10?lower, doesn't have any impacts on the u.s. economy? that will help us to formulate, what is the longer-term impact of the situation for the european economy and the u.s.? -- marks is telling you carney's press conference wasn't the day after the referendum. it was a couple days after. he seems very calm and very relaxed in the sense that this is what he wants to do. adjusted, prices have but we haven't had a liquidity crunch or squeeze anywhere near what we have had in previous episodes. guy: do you think that the market is being hoodwinked by the reaction we are seeing? this expectation now builds into isn'trket -- the fed going to do anything for ages, this year, next year. it's interesting that pimco is coming out saying, the market is still mispricing what is happening with the fed. >> in the early days, a lot of what happens in the market is reflective of hedges being unwound. quickly,ll move very because it is about flows and technicals. as that settles down, we get to look at the longer-term fundamental picture. i would suggest the fed is on hold for the balance of the year. >> i think that is probably a little bit too optimistic, if you want to use that word. to dovish for what is an economic situation that continues to be positive. are an interesting investment. the inflation expectation hasn't moved despite the stronger economic data. you have to look at the u.s. -- how does the eu referendum affect the u.s. economy? it could potentially not be that significant, so we have to focus on the fundamentals. the initial reaction has to be to remove monetary policy tightening and to bring any tightening further back. guy: that is the u.s. 10-year breakeven --you think that is the wrong price? >> looking at the church tree of nflation -- i think that number should be higher. coming up, it's the short of the hour -- chart of the hour. details, next. this is bloomberg. guy: welcome back. you are watching "on the move." it has been an interesting week, hasn't it? nejra: in an interesting first half. what my chart shows is how you would have gained or lost depending on where you put your money. blue line, bank of america, global abroad index. countryot the msci all world index in pink and red. if you look at bonds, that index we are tracking, the global market had its strongest quarter since its inception and 1997. if you look among the major world currencies, we are slightly below zero, but the real gained the most. britain's pound had the biggest loss. looking at stocks overall, e.m. outperformed developed markets. guy: it depends on where you are starting from. you mentioned it early on. the commodity drop and move, the bass effects story and how it feeds into inflation and feeds into what is required on the fixed income market, how does that work its way through? >> what was mentioned earlier about how the fixed income market has had a big return in terms of percentages, which is extraordinary. if you look at where yields started from, they were very low. the reality was, despite yields being low, the bond market has had this consistent and even better risk adjustment. the return speaks to concerns -- the lack of concern about inflationary pressure and central-bank policy response. i think it's extraordinary how well bond markets have done especially if you take into account where yields were at the beginning of the year. guy: you took about the trillions in negative. again, how far -- markets have a very long-term view of the world moment, and we are prepared to accept coupons -- negative rates for years and years to come. economists are not particularly great at projecting where economies go. how good you think the bond market is? >> investors by risk-free assets, kilts, bonds, treasuries. they are willing to accept a negative return over a period to make sure that principle still remains. to do is takehave a deep breath and look at this long-term. this is something for the central-bank community. do negative rates to relate the economy, or does it to the upset? we can debate this. guy: you've got 90 seconds left. >> it's a long-term debate about whether that is stimulative or restrictive. what i would say is it does represent -- central-bank policy has been a huge driver on the performance of fixed income. with mark carney going down the qe path, i don't think that is likely to change. guy: it's been great to see you. nejra, great chart. a couple of headlines i want to bring you. savos is saying that central london home values are down 1.4% in the second quarter. they say the central london home values -- they are still talking about prime -- down 8% from the peak. not all of that is brexit, but some of that will be. the interesting thing will be whether or not that carries on. whether be more demand for prime -- will there be more demand for prime london or less? maybe it is reflective of the u.k. economy. what it is reflective of his the flows into the u.k. up next, a country in turmoil as brazil suspends president dilma rousseff, and we prepare to see testimony before the senate on the impeachment story. we're going to talk about how businesses are dealing with the economic crisis. this is bloomberg. ♪ guy: you are watching "on the move." we are minutes into the trading day in europe. let me show you picture of the markets, broadly positive, up by 0.5%. 6531, arading at different story if you currency adjust it. let's talk about some of the stock stories we need to be watching. here is nejra cehic. nejra: we are seeing a lot of moves in italian banks. love the best performers are a telling banks. i have highlighted this one. last i checked, it was the best performer, up 3.8% at the moment, this after some news crossed the bloomberg that the italy finance undersecretary has told the media italy is considering boosting a fund. "la republica" reported that atlante is to be recapitalized with at least 4 billion euros.we are seeing a lot of moves and italian banks. in terms of other corporates,, noss group, -- corporates, temenos group, one of the best performers. it has a new contract with standard chartered. it's been selected for deployment in more than 30 markets, a specific wealth sweet -- suite. that is gaining off the back of that. jvc, some headlines crossing the bloomberg, notification of transfer to a premium listing in a packed with cerberus to extend 2018 and alsoto plans to refinance the facility before the existing maturity date. this also, one of the best performers. guy: let's talk about what is happening in south america. brazil is suffering its worst recession in more than a cent ury, but the reality is up against the u.s. dollar. it has outperformed every major currency the first week after the brexit vote. what happens to inflation is another factor we need to be thinking about, and as a result, what will the rate path look like? how is business coping with this political unrest? let's bring in the chairman and founder of union group, juan santori. good morning. let's stay with brazil. then i want to get a little bit more detail about what is going on. let me get you a little bit of information. the 30-year treasury bond in the united states has declined to record low. we are going to talk to james bullard very shortly. let's get back to brazil. how has your business been affected by a huge market move in the currency, a significant change in the fiscal story, and the political turmoil your country has faced? >> somehow, this is business as usual for us in south america. we are used to big changes in the economy. markets move very fast because they are relatively liquid, and what you see in brazil is a typical example. -- thesion lost recession lost 10% of gdp. it was dramatic for the biggest continent.the the currency lost around 60% and now has recovered very strongly. the president was impeached. a new president is in power with the ongoing lawsuit and criminal investigation over half of the congress -- guy: what you are saying is this environment is business as usual because that is what happened before. this isn't new. in brazil, it was in that situation for the last six months. for now on, things will start to stabilize. the mandate, whether it's a transition government or permanent government come is quite clear. they have to reel in government spending, put financials in order. they have to go through the olympics without too many pr problems. it's going to take a couple of years. i think we have seen the worst in brazil. guy: volatility creates opportunity. let's talk about the positives rather than the negatives. >> when you are looking for value, that's a big challenge when we talk with most of our investors. everything seems expensive. equities are very often at historic high multiples. commoditiesalue, seem to be among the cheapest asset classes. emerging markets are now cheap, although not as much growth as is possible. brazil in particular is the biggest market and is presenting a good value opportunity. guy: do you worry about with the u.s. political story is going to do to the region? it was interesting to see the rates going up much more than anticipated overnight in mexico. as it ripples through the economy, clearly, mexico is on the front line, but nevertheless, do you watch what happens in washington? >> our continent is prone to changes in liquidity flows. whether the stance towards latin america is one of integration or one we've seen in the trunk thatign of protectionism, is going to affect trade flows over the coming years, and it's an important part of potential growth for latin america in general. guy: what is the upside of the commodities book that you hold? atwe are very aggressive making a call, making investments in the commodities sector. we are a private equity firm. we are in, we can't really get out so quickly. we believe multi-year lows and commodities present an incredible buying opportunity, mostly in the valuation of the commodities itself, and we've been acquiring a lot of oil production assets in south america, peru, paraguay, bolivia. you are talking about a strong recovery. guy: can i just stop you there? i'm going to take you to another part of the world. i know you do a lot of traveling in china. the you one, declining to 6.6591 versus the u.s. dollar, the lowest level since december of 2010. what is going on in china?talk to me about what you see . >> we have chinese investors, and we've been there almost two months. what we have seen is a slowdown in foreign investment. what is their strategy? i think what they are looking at , to have to focus on their economy. we will see them much less thick -- active in large international investments. they have problems with particular areas of focus. agriculture, we still see them as large investors. they are much less of a force than they were four or five years ago. guy: is this just a temporary shift we are seeing? china is a massive economy. the absolute growth rate is huge. they have huge numbers of people being brought into the labor force and brought into the environment. the economy is changing regardless of whether the rate is 5% or 8%. that changedoon the way everybody did business around the world. your position towards this new china? i think now they are an established player. still growing at a moderate rate. they are part of any strategy, but they are not going to generate what they did in the commodities market in 2008 and 2009, buying and selling in a significant way. guy: do you spend much time in india? >> not really. interested in where you see the growth areas coming around the world. >> in south america, as soon as a country starts growing, we see investment flowing in whether it to we haven't seen indian companies doing business in south america. they are focused on other things, not so much buying assets overseas. guy: we will see how that develops. argentina, new boss. how do you rate him? what do you think the investment opportunity is? >> i think the honeymoon is over. he did what he promised and what he had to do, was put argentina back in the international market, rebuild communication. now he has to deal with a much more difficult problem, which is to turn around the argentinian economy. he has elections again in six months. the last thing you want to have is a president without parliamentary majority. that is the risk for argentina. we have to wait and see over the next six months. there's the possibility they will continue doing a great job they are doing, but they can fall into some leadership problems with the parliament. guy: lots to think about as you go around the world. plenty of interesting things happening. thank you very much indeed for coming to us, juan sartori. later, we will talk to president james bullard. he will be with us on "surveillance" at 10:00 a.m. u.k. time. why boris johnson's dramatic exit from the u.k. leadership race could make room for a brexit u-turn. that is next. ♪ >> the material slowing growth the npc identified as a risk associated with referendum now looks likely to be the central forecast. and now seems plausible that uncertainty could remain elevated for some time with the greater dragon activity than we projected. moreover, its effects will be reinforced by tighter financial conditions and negative spillovers to growth in the uk's major trading partners. does not fully offset the economic implications of the large negative shock. the future potential of this economy and its obligations for wages and health are not the gift of monetary policy makers. fundamentals will be driven by much bigger decisions by much bigger plans that are being formulated by others. what we will do is to continue to relentlessly pursue monetary and financial stability and, by doing so, facilitate the adjustments that are needed consistent with those plans and for this economy to reach its full potential. the economic outlook has deteriorated, and some monetary policy easing will likely be required over the summer. me,ould be irresponsible of for any of my other colleagues -- of me or any my other colleagues to walk away from those obligations. guy: mark carney speaking yesterday. let's talk about with the markets are doing today. it feels like a different day than it did a week ago. i'm going to take you to the bloomberg gmm. there is a standard deviation element to this. you are only going to get big outside moves showing up on this. smallves are relatively in terms of the relative size compared with recently. i think this is a much more interesting column. you've got fairly big moves in the bond market. your see the japanese at the front and to the curve pushing lower. we've seen a big move in the u.s. 30-year. you are also seeing a big move down on the back end of the gilt curve. a very strong bid for the u.s. 30-year and the u.k. 30-year, and those are two things you need to pay attention to. there is a bit of buying at the front end of the japanese curve. all of those things are worth thinking about. a decent move in gold, up i 1.1%. it's not in the fx story. .t's in the back end here's nejra cehic. nejra: takata's tumbling after an urgent warning from the u.s. owners of more than 300,000 honda accuras should have the airbags replaced immediately. have ahow the inflators higher risk of exploding than other models. more than 100 million vehicles have been recalled worldwide. oracle has been ordered to pay $3 billion to hp. that is after billy -- a jury found billionaire larry ellison and his company violated a contract. jurors reached the verdict and less than five hours of deliberation, concluding that oracle's decision to bail out of the agreement hurt hp's revenue. oracle said it will appeal the verdict. walt disney has agreed to acquire it one third stake in the digital arm of major league baseball in a deal that valued the business at $3.5 billion. that's according to a person familiar with the matter. the agreement underscores the importance of the video streaming importance to disney's espn. in on the weighed pharmaceutical industry's drug pricing. he sat down with erik schatzker in boston. >> the current system, despite some extreme cases, have properly been labeled as an appropriate. i think the current system is better than most other systems one could imagine. curing hepatitis c, this is a phenomenal thing, and now you have multiple drug companies competing in terms of the quality and the price of that offering. the drug companies are turning out miracles, and we need their r&d budgets to stay strong. they need to see the opportunity. nejra: that's your bloomberg business flash. guy: thank you very much indeed. i want to talk about what is happening in the market right now. this is a story that is being reported by reuters, and it's having an effect on the market. the ecb is said to not be debating abandoning the capital key in terms of the qe buy. each country puts capital into the ecb. has been buying in the qe program in a proportional manner to the capital key. there is some speculation the ecb may the coast of abandoning that, which would give it more ability to buy on the periphery as opposed to the german 10-year. move. this it dragged the spanish 10-year lower. i just want to bring that to you. it is a significant move. let's talk a little bit about what is happening. the pound has declined for a second day versus the dollar after the bank of england said it may need to loosen monetary policy to contain the fallout from britain's decision to leave the eu. seems to be no going back. let's get more with our european government reporter john a four lane. theresa may said exiting is accomplished process and triggering article 50 wouldn't happen before the end of the year. there is some speculation brexit may never happen, but does boris bowing out mean that is less likely? >> yes, as theresa may said, brexit means brexit. he view was with johnson, was not fully committed to leaving the eu, including the signals he made on migration, and there was speculation that he would be the one politician dho could pull off a fudge and an eu-turn. with the horse race between may and gove, that process seems unlikely. guy: there is brexit and brexit. .he is the home secretary she is tainted by the idea that too many people have come into the u.k. do you understand what brexit means to may and what brexit means to gove? >> that is the question eu officials are wondering about. toare waiting for gove speak. the indication is that both of these are hawkish on immigration. may within the remain camp, but from brussels, it does seem it u.k. tohard for the negotiate the kind of norway deal that has been floated, i.e. keeping access to the single market while committing to free movement of labor and people. guy: we will leave it there and listen to what mr. gold has to say later on this morning. a couple of things you need to know --negotiate the kind of noy deal that has been floated, i.e. keeping access to the single the first is that the french data are coming out. manufacturing pmi -- this is the second reading. the prillaman are reading was 47.9. a little better. up next, brexit has been a blessing for u.k. mega-caps. what about a more surprising story and what has been the knock on effect? we will bring you the brexit winners and losers. this is bloomberg. ♪ guy: 54 minutes past the hour. we know brexit has propped up ftse 100 companies by weakening the pound while pushing down the value of uk's smaller cap companies. what are the more unexpected outcomes? joining me, bloomberg's european equities reporter, sophia record to. what is the best way to make money in stocks this week? what has been the best way? >> the obvious story here has been the low currency, and what has been surprising is how quickly the ftse 100 recovered from those losses. although the good caps on been doing real well -- have been doing well. a surprising trade has been the continued bullish outcome for gold. gold producers, up quite a bit again. that has been a winning trade. if you short banks, even though they are getting a little bit of a boost, barclays, rbs, they are deep in bear markets. that's another way to make money. guy: what surprised the market the most during this story? hasn't been the fact that the market was quick to respond? of howbe the swiftness -- it has been an obvious trade. the currency trade was flagged by many contacts i spoke to throughout the year. the fact that the dust settled so quickly and central banks, within hours of the vote, were saying that they were ready to increase stimulus, how quickly markets recovered has been a surprise. let's not forget that spain had a vote on sunday, and that was a good turnout for the spanish market, which is the second-best performing market in the developed world this week. brexitbecause maybe shifted people towards establishment parties rather than the unknown. guy: great stuff, thank you very much indeed. just remember the footsie is a i-4 .44% in sterling terms -- ft 1.44% in sterling terms. "the pulse" is coming up next with francine lacqua. this is bloomberg. ♪ carney channels draghi after a quick i told you so. govece secretary michael makes a case he is the man for the job. thanks aft -- banks after brexit. it says it does not need more capital. we will bring you our interview with the ceo. of barclays. live here "the pulse" in london. i'm francine lacqua.

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