Transcripts For BLOOMBERG On The Move 20160713

The search for yield is creating crazy conditions. Meanwhile, pimco is loading up on treasuries. Who is right . Less than half an hour to go. Take it to the bloomberg and show everybody what we think will be happening. The fair value calculation on the wei says we will see a softer touch. The story yesterday was a very strong day for european equities. The dax was up very strongly, the cac up 1. 57, the ftse flat. The pound is front and center in that story. Caroline it certainly is, and i want to check in on how it is doing today. We have had a bit of a rampup as the new premise to recep to come in today. Some sort of political stability coming into the united kingdom, riskon tradeof we saw yesterday slowed into asia, up a tense of 1 . Despite those cautious notes, they dont believe in helicopter money. Overall, it has been a buying of equities in asia, up for a Third Straight day, above levels the eu exited. Meanwhile, yen is gathering steam, a reversal in the yen rallying after the worst twoday rout. And lastly, i want to look at the german bond yields, coming up five basis points. Still negative, but we get the first ever zerocoupon debt issue. Thats 11 30 a. M. Berlin time. Now lets get to the assets and get into what else is on the move. David ingles. I want to talk about what you just mentioned. The chief cabinet secretary has denied a report that officials are considering introducing helicopter money. This comes after the franklin newspaper said policy is being considered an option. The chief currency analyst warns that the yens credibility would be at risk. It would weaken if japan did pick that step. The u. K. Needs to reimagine its economic model and financial the country that has voted to leave the European Union, according to the outgoing eu services chief. He spoke to bloomberg. Picture thinking caps on and be part of the process whereby the British Government needs t rethink what its offering. With the perspective they have, knowing how the markets work, knowing how International Trade works, knowing what it is that attracts people, they need to and up with their top asks work with the government to come up with the proper strategy. And Bernie Sanders has formally endorsed Hillary Clinton as the president ial nominee. The senator from vermont joined clinton at a rally in new hampshire, saying that while it is no secret they disagreed on a number of issues, shes far and away the best person to address the challenges facing the united states. Global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. This is bloomberg. Guy great stuff, thank you. Just been discussing that britain will get a new leader later today. Theresa may will immediately be under pressure to name a brexit czar who will oversee the exit from the European Union. The pound is headed for its longest winning streak in two months as may heads to downing street following the Political Uncertainty of the referendum. Lets bring in our chief Investment Officer guest. Which is the more Important Role the person who will determine where the eu negotiations go, or who will be the chancellor . In the short run, who is going to be the chancellor. The negotiations with the eu are going to take a long time, and that appointment will be a delicate one. The economy is very fragile, and we know the bank of england has stated it needs to take action. The architect looking for some certainty around the fiscal part, and that comes down to whos going to be in charge of the treasury. Caroline mowho do you view would be a safe pair of hands . Oh, its not my place to say. I think theresa may has a tough job on her hands to identify the delicate balance between continuing with the fiscal prudence we have seen in the last three years and generating some stimulus against the headwinds we have seen in the economy recently. Steven hammond is one person that has been noted as someone who could counterbalance some of those fiscal issues in recent years. Well see who she decides to pick. Guy lets talk about the pound. Caroline has some great charts on what sterling has been doing. My question is whats going to happen with the equity story. W. E. I. The function. Ftse yeartodate in pounds, up 7 , in bull market territory. By 3. 55 . , down thats currency adjusted. Do you think the pound rallies from here, and if it does, does it have to tread water . The value we have seen in recent days for the pound, i think that has come on the back of political stability. The reality is that there are a lot of bumps ahead. We know coul negotiations are going to be easy, and it could come under significant pressure. Whats interesting is that the audio the storm has been brexit, but u. K. Investors have never had it so good. It has been a Good Environment for u. K. Investors. Caroline give me a sense of this chart, then. Were currently trading above 1. 30, this has been the rampup as we get a new Prime Minister, prompting the best winning streak we have seen in two months. Its not much, but we are coming onto it. Give us a sense of what happens even as soon as tomorrow, if we do get a rate cut. Does this sink, or is that already priced in . I would say is largely priced in. Part of the reason for that is that the bank of england has been very vocal in terms of what it wants to do for Interest Rates. From that perspective, it has already priced in. In terms of major movements in the pound, what we would need to see is some progress on the negotiations with the eu. That could take weeks, months in terms of getting it started. For now, it seems that pound will stabilize around these levels until we see a breakthrough around the negotiations. Guy well have to see if the bank delivers on whats being priced in. Stay with us. As britain cuts ties with the eu, europe is seeking new friends in beijing. We are going to the Chinese Capital for the latest from the euchina trade talks, next. This is bloomberg. Its all about stability, one of its major markets. That there is a level of doubt around that man, is a few minutes ago a press conference wrapped up with john cloud younger, jeanclaude where he said he is ready to work with theresa may. Aside, lets talk about the possibility of the treaty between china and europe in terms of trade. What are the major areas of concern, of opportunity . There has been glacial progress on this. Europeans have been pushing on this for quite some time. The key issue for the europeans is for chinese steel makers; europeans are angry about this. The president said that the europeans would do all they could to defend from their own as chinese steel has flooded into those markets and that is a key concern. They also want to access chinas market there are so many that remain effectively sealed off, particularly telecom, finance, and logistics. They want to see more than just words because investment on the other side is growing at a fast rate. Then for the chinese side theres a question of the Chinese Markets as part of their wto agreements and the europeans are saying they had made no there has been glacial progress ondecision; the chinesg they can push them forward on this crucial issue. But for the moment the europeans are saying no movement on market, because that would make it easier for china to export more of its cheap oil into european markets. Guy tom, thank you very much. Tom mackenzie joining us out of beijing. The chief Investment Officer at kabul benson is still with us. Break it down for us. Europe is potential losing 20 of its economy, and you wonder how, for external forces, they view the situation. How do they negotiate with an eu in such a state of flux . I dont think other countries can be in waitandsee mode. The reality is that these negotiations will take a long time, even after triggering article 50. Countries like china are not going to sit and wait. In america, we have the interesting dynamic of the elections, which could change its trade negotiations. We know trump is a very strong voice against the chinese. So those things are going to happen, irrespective of the brexit negotiation. Caroline how do you view the stability of the remaining 27 countries . Do you think there is still risk for an unraveling, the concern around italy . Or do you feel they are managing to show unity . Ini think the concerns European Union have been that, irrespective of brexit, you have weak banking systems, you mentioned italy, you have a weak economic picture, the central bank easing against that backdrop. The issues are a bit more accentuated, so at times like this, its how the politicians react; we know that in crisis mode they will spend a lot of time having summits and discussions to try and navigate, but this is going to be a bumpy ride for the next couple years. Guy how do i invest in europe . Do i buy volatility . That is what we are going to see. Volatility is one way to invest, but the value is in european equities as well. What we saw in the last five years where the economy has been fragile, European Equity markets have fared pretty well. If you look at the banking system, although it is in deep trouble, some of those companies are trading at. 4 times book. Guy so this is one of your down here, and this is the equity column its all european markets. European markets have been big underperformers. Is that an opportunity or threat . When you do your fundamental research, you can find opportunity, but at the moment, it has been pretty horrible. I would see this as an opportunity. You have the stress valuations in some areas, a prevailing mood of negativity which is often fruitful and everybody is expecting europe to be week. The surprises the upside but there are some surprises to the upside and we could see markets rally quite significantly. Anna breaking news coming from the other key area, japan. The bank of tokyo mitsubishi will exit with the primary dealer to japanese government bonds. That they will see a return, 21 primary dealers to remain from july 15 in japanese government bonds. A bit of a shakeup when it comes. O the government auctions now we are going to be looking ahead to what is the stocks on the move. 10 minutes away from the opening of the session today, and we could see some significant moves, particularly on the eye on pound land. And burberry Beat Estimates on its firstquarter sales. Weve also got to keep an eye on housing. One developer expects a strong year; this is bloomberg. We are 53 in london, minutes away from the open. All important eyes on the pound, jumping 12 or 13 , a premium being offered by a South African retail company. Its trying to get into the european discount market, offering some 794 million for poundland. Keep an eye on the stock as we enter the market open. Also keep an i on the other u. K. Company burberry. This could be on the move after we saw thirdquarter sales still lackluster, down 30 , better than expected. The market is looking for a 5 decrease in like for like sales. Profit underlying 415 million pounds, the estimate coming in higher than that. Change at the top, new ceos to come in. Burberry looks like it beats the first quarter. Lastly, housing. In profit is whats expected on a pretax basis. Notably, its too early to gauge the impact; the outlook is less clear. Our guest is still with us. Is it too early for companies, whether they be in housing or any other sector, to feel what the impact of brexit will be . From one perspective, its too early, because the data has not out. From another perspective, its clear that the next few months well see a slow down in the u. K. Economy. The bank of england said this, and institutions are saying this Political Uncertainty will provide an an easy backdrop. From that perspective its not too early, and they otherwise need to plan for that slower growth. Guy stay with us. Plenty more still to talk about as we work our way through the program. Minutes away from the start of european trading. A number of stocks to keep our eye on. Homeland, burberry. Lets talk about what the terminal is coming up. We think wednesday morning a softer start,. Euro stocks down by 2 10 of 1 , ftse down. Remember, continental markets were a very strong yesterday, up 1. 5 . London was flat. That was the pound story. Today, theresa may becomes the next uk Prime Minister. This is bloomberg. Guy you are watching on the move. I am alongside caroline hyde. The start of european trading. Caroline has your morning break. Caroline a date with downing street. Theresa may will become that u. K. s next Prime Minister. Who will she choose to lead the exit from the eu . The yen rallies as the chief cap that secretary says tokyo is not preparing for helicopter money. The boj has to deliver even more stimulus before they meet on the 29th. The search for yield is creating crazy conditions. Pimco is loading up on treasuries. Guy where do we think futures are going to be picking up this morning. It looks like we are going to see a story. The pound a big factor in all of this. Lets see how these european markets open up. Is actually going down. The footsie is now down. We will see what they do as well. Massively outperformed the footsie yesterday. The market rate is the sending. The ftse 100 south. Lets see what we are going to get from the other continental markets. Dax dropping as well. Lets take you through some of the stocks. We saw a real rally in asia. In a golden cross. In europe, it looks like it is read on the industry grid. If we take a look how it is shaping up, i. T. Stocks up. 2 , not huge gains. Health care up 0. 1 . Consumer staples and telecoms that are down. Down 0. 4 . Aples actually, it is energy down. The rally we saw in asia not coming through in europe. Lets take a look at the u. K. 10year yields. It looks like we are moving ever so slightly higher on that, up four asus points. We are at eight basis points. 1 s yield fell below for the First Time Ever in the aftermath of brexit. The stocks we are watching today. I have a couple of u. K. Ones. Lets start with verb very. It reported firstquarter revenues that beat analyst estimates as shoppers in the u. K. Stepped up purchases in the final week of that first quarter. Burberry surprised investors by announcing Christopher Bailey would give up his role as ceo and would focus more on Creative Design as chief creative officer. Burberry, 3. 8 on that. Ismy bloomberg, it said it giving dividends today. I wanted to check on icap because it said revenue from electronic targets declined 3 as the boost from brexit failed to outweigh the headwinds from low Interest Rates. To keep an eye on that. It is up 2. 4 . Oundlandnt p was called up 10 after there decided tony that purchase it for 790 million pounds. Caroline we have some breaking news coming out of asia. China and updates to its imports and exports. We have seen june exports rise 1. 3 year on year in you one yuan terms. Meanwhile, the trade Service Remains around 311. 2 billion yuan. Of it managed to end the day up 0. 3 at the market is closed. An interesting centralbank move. We have the u. K. Tomorrow. Malaysia surprised the markets by cutting rates to 3 . Most economists have seen it on hold. The asia stock index, little change. We want to bring it back to the property sector we were discussing with barratt developments. They reported earnings earlier today. It said it has another strong but brexitout 20 makes the outlook for its industry less clear. This as aberdeen lifts its more than weeklong suspension of the u. K. Property fund at noon. Will there be a scramble to get money out . The chief Security Officer at kleinmann ensign. Will they be looking to exit the property sector . Real estate sector is liquid. We have seen vehicles to create liquidity to enable Retail Investors to get into the market. Weare going back to where see these gape and make it harder for investors to exit. We see this in times of stress. We have seen it already. As funds open, someone to pull out their money before they close again. That will be a reality of the real estate market. Hasreal estate sector offered very good returns in the past few years. It has been a good income generator. It for our in clients but we exited earlier this year. There was some complacency. Any asset clause that has the mood of the only way is up is dangerous. That is what we saw in real estate earlier this year. There is downside. Guy if you are not in it for capital gain, you are just in a for yields, which some people are. It kicks out better than treasuries, 3 , 4 . It depends on what youre using it for. If you use it for capital gain, i take your point. Yield can only go so low. The search for yield is creating bizarre anomalies and people are wondering where they should put their money. All of these have difficulties. Mouhammed you are right in terms of being in a traffic being attractive after losing yield. At what point do you exit . Total return is what counts. This correction has led investors to reconsider the importance of yield versus total return. To bring yournt attention to a bit of an and a m anda a. The upper former is pound length poundland, surging even higher than the premium being offered. It is matching exactly 221 pence after we saw that offer coming from steinhoff, the South African Company looking to get into discount retailing. Are we going to see more m and a . Is the u. K. The appetite for the rest of the world . Is it looking cheap considering the battering we have seen to the pound . Mouhammed uncertainty breeds opportunity. We have seen selloffs all over the world and that creates opportunity for chief execs who have been sitting on a high levels of cash to put money to work. M and a good see a boom in the coming years. I know that sounds counterintuitive, but value will emerge and that will lead some companies to invest in others. Guy do you think u. K. Companies look more or less attractive if theresa may decides to follow the german model, not as far as the germans have gone, but there is an argument that says that would encourage investment and buyback. I am wondering what the arguments look like were we to go down this particular position. Mouhammed if she was to succeed and implement thing those policies, it will create political stability, which will make the u. K. More attractive from an investor standpoint. In addition, it will create the governance many investors like to see in the companies. We are quite bullish on the u. K. Economy. We think there is Good Opportunity for investors to have a good return in the current environment and this uncertainty will be shortlived. We will think about the long run. Guy thank you very much indeed. U. S. Stocks hit a record high. One money manager says things are about to change. We will get details next. This is bloomberg. Guy lets take a look at some of the stocks that are on the move. Thisedit up very nicely morning. Burberry trading up 3. 66 . Paris has had a good run burberry has had a good run. Berkeley, all trading lower. Up with whatght you need to know. David the u. K. Will get a new leader later today. Theresa may replaces David Cameron. She will immediately be under pressure for the brexit, and who britainsee exit from the European Union. Some Political Uncertainty following the eu referendum. Mark carney and the bank of england beginning the meetings before the right decision tomorrow. They are expected to cut for the First Time Since 2009. That is according to the majority of economists in a bloomberg survey. 30 out of the 54 predict a 25 basis point cut to 0. 25 . Chinas exports stabilizing in june. The worlds secondbiggest economy is steady. Overseas shipments rose 1. 3 in yuan terms. Imports fell 2. 3 to leave a trade surplus of 46. 5 billion. Bernie sanders has formally endorsed Hillary Clinton as the democratic president ial nominee. The former candidate joined clinton at a rally in new hampshire, saying while it is no secret they disagree on a number of issues, she is far and away the best person to address the challenges facing the united states. Global news 24 hours a day powered by more than 2600 journalists in more than 100 countries. This is bloomberg. Guy investors sent u. K. And analystnew lows say it will reverse. The euro stoxx 50 index is seen joining us is alexander. Lets start off first of all is this a lone wolf call or are other people coming to this idea . We also had jpmorgan Asset Management say a similar thing. They look at different valuations, they look at how cheap european stocks are. They look at earning potentials the impactve looked that stimulus might have on european growth. They are saying that all of these factors are flashing by. Jpmorgan management said a similar thing. They are bullish on european stocks. Over the next six months, the u. S. Stocks 50 euro stoxx 50 will overtake the s p 500. 500 is up 5 and on monday reached a new alltime high. They still seem to think that is doable. Caroline this seems to all be based on valuations at the moment that are lower for europe. When you are hearing from these investors, what are they feeling is going to be the driver . Is it the valuation . Is it the weaker euro . What is turning them around when it comes to european shares . Aleksandra pick take is looking historically at the cap between earningspershare for the s p 500 and the euro stoxx 50. As we can see from the chart, it has been widening for a while. They think that this gap is going to start to close. That is where they see the earnings potential. As i said, it is not just these technical valuations. In terms of the environment, they think that brexit they call this the Silver Lining from brexit. They think that brexit might spur more integration, globally and across europe, for governments to come together and find a way to together Work Together and spur european growth. It is the big picture and technical valuation they see combining to support european shares. Guy lets talk about these charts. This is the u. S. On the blue line here. This is europe on the white line. That looks like a decent forecast spread. This speaks to what you would be talking about. Mouhammed this gap has been building over the past few years. When you look at it, it is actually the correlation between eps growth and market performance. It is not necessarily as straightforward as one with a. If you think about 2013 when the european eps is going down. European stocks had a strong performance. It goes to show that what drives markets typically in the long run is all you asians and there is more compelling valuation in the long run is the valuations and there is something more compelling valuations right now. Different than back then in terms of performance . Mouhammed what you saw back then was a huge amount of negativity around europe. This is around the europe rate cut. Valuations were quite low and distressed. The European Central bank came in with a policy and did what he could and that saw a huge rally in european equities. Today we are in a similar place. Valuations are more compelling. Central banks are stepping up. That can be positive in the equity market in europe. Caroline when you are talking to the investor base, not only mouhammed next you, but j. P. Morgan Asset Management, are they talking to individual sectors . Are they going over the most beaten up stocks . Aleksandra they have refrained from recommending individual sectors. It is more regional over way. J. P. Morgan asset is neutral on European Equity. In terms of specific stocks and sectors, they dont want to tie themselves up into such recommendation. If the value, the opportunities they are looking for, which makes sense. Not everyone is bullish on the region. It is still a very divisive region when it comes to whether there is value in the share. While we have j. P. Morgan assets being bullish, we have a surveys fromth major banks that are bearish on the region and slashed their forecasts from last month which makes sense because of brexit. Even though they were predicting declines before the u. K. Voted to leave the European Union, they have slashed their forecasts even more for the year to date, losses of indexes such as the euro stoxx 50 and stoxx 600. Guy is this something they have been toying around with for a while . Aleksandra for europe, they have been overweight. They upgraded u. K. Shares after the referendum and they upgraded Global Equities after the referendum. Guy it will take time to correct. Thank you very much indeed. To stick withoing you. Coming up, mass psychosis in the bond markets. Who is right in the discussion . Caroline welcome back to on the move. Lets talk about debt. Bondsors who rushed into will face a hard time making money. Market findse the bond rates begin to rebound. There is something of a mass psychosis going on related to the socalled starvation for yield. Call me oldfashioned, but i dont like investments where you are right, you dont make any money. Pimco is on the other side. The general return fund has increased its holding of u. S. Government debt to its highest level in a year and a half. It now accounts for 39 up from 36 in may. The fact earlier on that it is the only area where we can find some sort of haven. U. S. Yields are significantly higher than those we see in japan, germany. Is it still a buying opportunity . Mouhammed the bond market is one of those great mysteries that will essentially be studied for decades ahead. The reality is it is a very expensive asset class. Yields are near alltime lows. As you rightly pointed out, as investors have to make choices. If you are concerned about the volatility that comes with equities, with some of the riskier assets, you are left with little choice and the bid for government bonds we have seen in recent months. Guy why am i going to the government market for Capital Gains and equity market for yield . Mouhammed i think it is because the yield and equity markets, depending on the region you look, is between 3 and 5 whereas government bonds are at 1 . With that comes the risk of capital losses. We have seen a lot of investors go up the risk curve, which is part of the environment the central bank has had to navigate because it creates a fragile state in years ahead. Government bonds continue to be a safe haven. If you want to preserve your toets, that is one place put your money. Caroline we had breaking news that the biggest bank, tokyo mood to be she tokyo mitsubishi, is getting out of being the primary dealer. It shows the stress of the market. We will look at German Government debt. Today we see them auction their firstever zerocoupon bond. This is a new coupon. A big fat zero. They had been auctioning at 0. 5 . Is drag towards these havens pulling down the yield and you get nothing for your money. How difficult can the bond market come . How crushing is it to the Banking Sector in particular . Greatmed this is a market if you are a borrower, especially if you are a government and you have fiscal challenges as you can borrow at 0 or even a negative yield in some areas. In terms of the Banking Sector, there is a challenge in terms of bad loans and especially in the European Union. These negative yields are a major challenge for banks. Even though yields have come down, i have not passed that on. There is a Holding Pattern where all the rates are holding their rates and defending right now. All it will take is one or two to move them down and you will see a rush to the bottom. That will create stress in the banking system. Guy why do governments spend money on infrastructure now when they can borrow . Private equity sectors are ready to go. Mouhammed perhaps these low yields give them that opportunity. This is the Silver Lining. They can borrow much more cheaply and invest in their economies, their infrastructure. The development is well behind what we have seen in the imagined world. All it takes is a politician to have that vision and to carry the populace with it. Guy we will see who the new executor is. Maybe later on in the united kingdom. We should is the show be focusing on. Thank you very much. Great to see you and spencer much time with you. We will get back to the subject. Theresa may headed to downing street today. 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 you are watching on the move. 30 minutes into the trading day in europe. Let me show you a picture across the continent. It is slightly softer, but not as bad as we thought. The 600 is in positive territory. What you are seeing is the german 10 year down by 2. 8 . Treasuries are down as well. We are getting a move into the gumby market right now. Nejra im starting with one of the best performers. Play tech has risen the most since october. This after it buys best gaming tech. It bought it for 138 million euros. We have seen the stock rise presumably on that acquisition. E have banca monte paschi. They are negotiating the purchase of 10 billion euros of underperforming loans. Jpmorgan could help on the bank loan deal. That is one of the best performers on the stoxx 600. One of the worst, barratt developments. Housing isimpact on too early to call, but they said it does make the outlook for its industry less clear. To ave taken measures they say they are reassessing land approvals. Stock is falling with other land builders as well. Caroline thank you very much. Lets stick with the u. K. Theme. Britain getting its new leader today when theresa may replaces David Cameron as Prime Minister. She will be immediately under pressure to name the socalled brexits are brexit tzar. It has been ruled that Jeremy Corbyn will automatically be allowed to stand in leadership context. Anna edwards is in westminster. O many details still such political gridlock on one side of the house. It looks like we are getting stability coming from the top. Anna good morning. Theresa may getting ready to take over the ruling of this country and the leadership issue will become only the second female to hold that particular role. She has exteriors at the international level, ready to take on the top job. Who will be the brexit tzar . Will it have to be someone from the brexit camp . Michael goes is seen as a little too machiavellian. Allyp hammond, a longtime of theresa may, the foreign secretary right now. He is on the wrong side of the campaign when it came to the europe question. What will his future be . Will he be the chancellor of the second . You might hear a lot of female names being mentioned today. Theresa may puts together the finishing touches to her cabinet and justin greening. No rush. That will be the message no matter what the candidate look like. They are talking about triggering article 50. We have a long time to wait before we get into those nittygritty talks. Guy let me focus away from the brexit story. Many of the markets will be as interested in who will live next door to the Prime Minister as to who will be the brexit tzar. Who will be at number 11 . Person at number 11 is the chancellor and executor. Whether it will remain in that job will be question. Hammond has been talked about as being one of the frontrunners. Thenows how it is to be at top table. The turmoil at the other side of the political spectrum also here in the u. K. As mentioned, Jeremy Corbyn fighting for his political life as leader of the labour party. That could be critical in terms of where the political story goes from here. Theresa may says she does not want to call a general election right now. She wants to stick with the parliament act. Will she be able to told that line will be a good question. We will focus more on the end of the week as to what Jeremy Corbyns role might be in that particular race. Guy anna edwards at downing street. We are expected to hear from the new Prime Minister in downing street after she has been to visit with the queen. David lee, Senior Analyst of ofth control rep birmingham rent is here. Is the brexit issue the most pressing concern she is going to focus on . David i think everything you know about theresa may is she is onagerial and very focused keeping her own task at hand. Issue, and she is going to be determined to manage the whole game. That is one of the reasons she is going to appoint the brexit tzar. They will focus on the whole country and brexit is not the only story. Caroline she really did seem to perhaps talk against George Osborne and where he has been in a fiscal environment and talking more about spreading the wealth. Where do we think the chancellor go . Where will her team come from . Yep to play the cards of dividing between the brexit winners and those who campaigned to remain in the eu. David it is a Difficult Assembly job for the cap. The cabinet. A lot of to promote female faces, which is a good thing in mind view. It makes that job of piecing it together more difficult for her. I think Philip Hammett is probably the clear figure for the chancellor to except that. Beyond that, we are not sure how things will pan out. Are other big offices of state, that we will see from there. Guy in more detail, to carolines point about how you bounce this story out, if she would have put hammond in at number 11 and there are rumors about whether she sent osborne isthe Foreign Office, she just on the remain campaign. That is three remainders. How does she balance those heavyweight positions . Is it the Foreign Office that ends up being a lever and how does that interact in terms of the relationship that the u. K. Projects forward from here . David i think this is one of the real problems of the l eavers leaving. Johnsongo, boris probably not in the picture at the moment for really high office. You have people, Chris Grayling, prominentthe most members of the leave Campaign Still left. Most of them have serious questions about them. Is going to beer the senior job. One of them will probably be it. Caroline or indeed, the brexit tzar. Many feel that Chris Grayling could take that home. Our thatt is tzar interact with the eu . Article 50 triggered before we will formally negotiate. It looks like that will not be triggered until the end of the year. Is that too long . Reasonableink it is for the eu to look at that their own interest. Wish to trigger article 50 as soon as possible and minimize this period of uncertainty, which is recessing europe, particularly the u. K. But europe and the whole of its markets, that is an entirely understandable wish. In germany, they will want to trigger article 50 as soon as possible. No one ever thought that people would take this bold, brave, democratic decision and then knock it about for six months. Guy interesting game that we are playing. David, stay with us. We need to talk about what is happening in france as well. Senior analyst at control risks. We will switch our focus to france. The economy minister has given his biggest hint yet that he will run for president next year. Guy you are watching on the move. I am told the weather is going to brighten up over the weekend but the market is down. Lets check up with what we need to know. Get started in japan where the biggest bank is quitting its role as one of the 22 primary dealers that underwrite auctions for the countrys bonds. Mitsubishi will withdraw on friday. It is the First Financial institution since the central Bank Introduction of negative Interest Rates this year which caused yields to tumble below zero. On is being odie a chinese billionaire. Amc is the Worlds Largest operator of movie screens. They had been negotiating for three years. The plunge in the currency helped to seal the deal. U. K. Discount chain poundland has agreed to a takeover. The deal comes after the third attempts to take over the retailer. Steinhoff has offered 40 more than the Closing Price in june of 2015. That is your Bloomberg Business flash. Willine French Economy minister economy minister Emmanuel Macron says he will move his movement to victory in 2017 but stop short of declaring himself a candidate in next years president ial election. He wants to set out a full program for france by the end of this year. Caroline connan is live. What was the mood like . Caroline the beginning of the meeting with a little tense because you had a little protest outside, a few dozen people protesting against emmanuel theon and the labor law and room was far too small. A lot of supporters of Emmanuel Macron had to stand outside in the pouring rain. When he came on stage, the crowd he came instantly very enthusiastic. He received several standing ovations. When he spoke about the french paidity and when he tribute to the former socialist minister who died last week, everyone was expecting to hear his candidacy for the next president ial election in 2017. He did not do that. He gave a big hit saying that he wants to carry the political movement, which means on the move, like your show, all the way to victory in 2017 even though he did not officially declare himself as a candidate quite yet. Guy we do not endorse into individual candidates on the show, despite name checks. Lets talk about the odds. The bookmakers and everyone else not particularly good at this point in time. What are the odds of him succeeding . Caroline it all depends on direction from the other people in the government. Prime minister manuel valls is not particularly happy with his littleeting, rebels. Some ministers have criticized him. Just before the rally, when he was asked about the rally, they said it had to stick. Were ministers before him pushed out quite quickly after criticizing the government. Emmanuel macron is staying on board. He is probably thinking it is too early for him to resign from president hall on president hollande. It is safer for president hole to keep them on rather than firing him. Guy thank you very much indeed. Lets talk about this with david lea. Presidency isnch littered with people who have up that break leftright duopoly over history the last time we had someone who was a teacher of french politics, and who remembers him . It is one thing to carry this forward, but with the pf and hollande still quite down in the ditch, he has probably got less to lose. Caroline give us a sense of how the political land is lying in france post brexit amid concerns of the rise of the National Front and calls for their own referendum. Is this more a less stable or a less more stable country at the moment . David i think the france situation is playing out in many other things we saw in the brexit referendum. There is a left behind constituency if you want to call it that. They are favoring the National Front increasingly. There is also a very large, solid, conservative base, just like i think in the brexit referendum was paid to be forgotten north and the rest of the country voted leave. As far as the picture goes, i candidate,epublican , i thinkhey choose whoever they choose has got the best chance. I think the idea that le pen will advance to the second round and be defeated, i think that still holds true. . Uy is the brexit the trigger will it have an impact . David it almost certainly will. Penill have, i think, le will try to campaign on that and talk about increasing freedom for france. We have seen the initial coverage on between the france. Brexit has been written on the tour de france. Exit has been written on the road. The National Conversation could be triggered in the Second Quarter next year. Clearly it is going to be something to talk about. Guy thank you for spending time with us this morning. Urgest, kashkari patience. He says the central bank can wait on raising rates. Caroline Neel Kashkari says investors are nervous and fear the euro area getting smaller after the brexit vote. He spoke in michigan. People are nervous. They dont know the future with great clarity. They are less likely to take a risk. The reason that brexit in the u. K. May be a big deal for the Global Economy is that if it means that other countries in europe might leave the eurozone, the eurozone might get a lot smaller. Caroline we are joined by richard jones. It looks like brexit is taking up so the thought processes of the fed. How much are we anticipating . I think there has been more of a view that we could see rate hikes coming sooner or later. The future market could get a little more positive but we off the 50 mark. Richard i think what mr. Kashkari said is something that will linger with investors for quite some time. Have article 50 triggered until 2017, if you were to believe what the Prime Minister said previously. I think he is right to highlight the impact on europe. The optimistic view is that it will impact the u. K. Alone, but i think that is too optimistic in the market is nowhere near pricing anything substantial from the fed until next year. Guy what did you make of the auctions last week . Less demand . Richard i think price matters. It was not long ago that we had 10year and other maturity auctions being very well received. Yields were a lot higher back then. With yields at record lows, the demand is probably reflective of that and people are more concerned about that. They would rather invest at a better yields. The yields are proving to be a bit of a deterrent. Caroline we also have germany auctioning 10year debt at a 0 coupon. How is europe digesting the bond coupon . It seems there is more of a search for safety going on this side of the atlantic. Richard i think as we have seen global yields rise over the last few days, europe has a big meaning to that. We still have a big buyer in the market and i think you still probably have investors thinking there are some gains to be made in the bond market. I think this move has probably been fairly healthy and i suspect that we could get a little more of an increase in yields before buyers start to return. Guy Philip Hammond is widely picked and something of a political hawk. Richard i think it is more of a bank of england story. I think there are expectations they will get qe, certainly some easing in coming months, and i think that trumps anything we get. If we dont get a rate cut tomorrow or commentary from the bank of england, then we could see a squeeze higher in yields that we have seen in the last couple of days. Guy richard joins joining us from bloomberg. We are going to get numbers from germany later on. The gmm wrapping up. Equity markets not doing much. That is not where the story is. The story is in the gummys. 10year germany is down 3. 5 basis points. Decentsized move as well in the u. K. , down by 4. 4 basis points. There is something going on there. Treasuries are down a bit as well. We are now at 1. 478. That is a decentsized move. Stay with bloomberg. Up next, we have the pulse. We have jon ferro and myself on the radio. 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. Francine a new conservative party leader, theresa may prepares to take over as Prime Minister. Who will she appoint . Life after cameron. The pound rallies. Diagnosedone like last weeks while pimco loads up. Francine welcome to the pulse