In london with tom keene in new york. The pound dropping to a 31 year low and we are back at levels we saw post brexit. Workwe begin the fourday week after your one Day Work Week yesterday. Arkets really moving yesterday the italian banks are front and center, arent they . Francine they are important because there is a feeling among certain investors this could be one thing that breaks the eurozone, not brexit but the fact the italian banks cannot find a solution. Lets get straight to the bloomberg first word news. Nejra in the u. K. The conservative party takes the next step toward electing the next Prime Minister. All 330 Parliament Party members will vote on one of five contenders. Energy minister Andrea Leadsom is in the lead. Grassroots conservatives will pick the leader once the field has been whittled down. Been rocked bys three terrorist attacks in one day. A suicide bomber blew himself up near the prophet mosque. Five security people were killed , and there was another attack near a shiite mosque and one near the u. S. Consulate. The death toll has risen from the deadly truck bombing. At least 157 people were killed and almost 200 wounded. Islamic state claimed responsibility in the most deadly attack in iraq in more than a decade. Prime minister mark in turn so is billt ill shortens labor operation. A have just started to count more than a million mailed ballots. Leadry clintons national against donald trump has narrowed accord to the desk according to the usa today. She leads 4640. A dayly as 24 hours powered by more than 2600 journalists and analysts in more than 120 countries. Tom thank you so much. Equities, bonds, currencies, commodities, a big jobs report on friday but nobody really cares. Futures 14 right now. A record low on the 10 year yield. The euro not part of the story. Yen removed as well. Where are we in the equity markets . Up at least through friday on the down your 18,000. Ever 10 spread shows the flattening curve in the United States as well as germany. Francine this is a picture of european stocks extending nose into a second day after the rally had lifted them by the most since february. The main story is the pound dropping to a 31 year low. Selloff is resuming and we are seeing a lot of the havens. Mark carney giving a News Conference in about an hour. Tom here is what is not happening. Sometimes that is more important than what is happening. Yen is not as strong as you think. I call it the kuroda chart, bank of japan option, a weaker yen, abenomics did not happen. We are right now making new, stronger yen. We are not through the intraday strength and we are getting this down 100 level, when a 1. 73. 101. 73. The yen francine this is a little bit like the vix index but a little bit different. It is the skew index. Traders andhow much option markets are willing to pay to protect against rare but extreme events. This is the week of the 28th of june, basically right after brexit, and it rose to the highest since the 1990s. If you look at average prices in june they are the highest on record. The market has come down a touch that is the week of the 28th. Sterling just led to its weakest in 31 years. Lets discuss these moves with come all sharma, the bank of. Merica come all sharma it seems that there are something the markets are anxious about, we do not have a plan b. Kamal if you look at the breadth of news we have had over the past 24 hours, the pmi number was not as weak. The anecdotes suggest that Consumer Confidence was very weak following the referendum and Manufacturing Confidence was very weak, and we also have the news on Standard Life this morning. We are starting to see the pervasive impact of the Eu Referendum starting to hit. Francine what happens to the pound . Kamal i think it is going lower. 1. 25ongerterm target is but we certainly see the risks are that we get that sooner rather than later. Tom lets bring up the 15 day chart. This is not a dynamic chart but is most interesting to show how we came back off the bottom of the drama we saw on the 23rd and 24th, and we have rolled over again. You know you never see it coming. The elephant in the room are the italian banks. What else are you looking at to be that exogenous shock that makes things unravel . I like how you mentioned Standard Lifes property real estate run. Think the key from a u. K. Perspective is the financing of the current account deficit. About 6. 5 and that ultimately needs to be financed. There is more supply of pounds than demand. That, weooking beyond have been looking at the political event which we think is surrounding the european economy over the next year or so. We have the french and german elections coming up next year and the dutch elections. We also have the Australian Election which could be an important focus as well as the italian referendum. Timeline is different than the urgency this morning before Governor Carney speaks. When you look at your team, ethan harris and all, what is that thing you are looking at within europe . Is it the german 10 year going down to new negative yields . Lt in the u. K. S . The pound is attracting a lot of psychological market interest at the moment. The data is going to be very important. Salese weekly john lewis coming out. That would be another nearterm anecdotal story as to whether the u. K. Economy is starting to turn over in terms of Consumer Confidence. Looking broader, it is going to be this steady flow of information from the markets regarding investment plans and decisions and portfolios. The japanese payments numbers are coming down from thursday. Overall, is there anything mark carney can announce to avoid a recession or soften the blow . Kamal we think there is going to be a recession. Evidencet ignore the that is mounting that the data is starting to turn over and demand is starting to weaken. I think it is a matter of how deep that recession will be. Tom bring up the current account deficit. This is the chart we have shown before. This is simply the longterm chart of goods and services and investment. That white line will drive ever lower. You will see how much of that is investment flows. Now this is how the pros folks look at how what has happened over the past few years. This is the obd currency surface chart and we focus on how much red there is. This was not like this three days ago, this amount of red on the skin suggesting a short sterling is extraordinary. That is an extraordinary worsening if you will of the bet on sterling over the last 72 hours of trading. Kamal we would agree with that. If you look at some of the momentum, there is a lot of bearish sentiment. The question is, is that currently justified in looking at the data . It probably is. 1. 25 could be sooner rather than later. Francine thank you so much. We will be talking about italian banks next. Coming up in the next hour, boe governor or carney set to speak. We will bring you that News Conference live and in full. Francine this is surveillance, tom keene and new york, Francine Lacqua in london. Nejra the Italian Government may inject fresh capital into the countrys thirdlargest bank. It could failrned when stress test results come out at the end of the month. Traders saysop oil prices will not rise much further. Ian taylor spoke to bloomberg tv. Yes, i think stock levels are going to come down but no, i cannot see the market roaring ahead because we have so much oil. Nejra taylor says brent crude will rise to 60 a barrel by the end of next year. It is not a great sign to be a banker in london. Executives and recruiters project that bonuses will be cut by at least 25 . The uks decision to leave the eu has slowed down dealmaking and another round of job cuts is likely in september. Francine thank you so much. This has to do with access to the Single Market and the passporting writes. The conservative party will vote on who will become the next Prime Minister. They will vote on the five contenders and the one receiving the fewest votes will drop out of the race today. Theresa may is the bookmakers favorite. Andrea leadsom topped one survey. Oining us as anna edwards thank you so much for joining us. It heats up today. The process of elimination is basically every time they vote one canada drops. Candidate drops. Anna it is not the public at large voting, it is mps initially. We have five contenders, 330 members of parliament which told the list down to two. Then it is put out to their broader conservative Party Membership and then they get to vote on the final two. We get the first results of the it mightnd at 7 00 but not be until september that we know who may lead the company country. Francine Boris Johnson threw his support behind the energy minister. Anna Andrea Leadsom was seen as an outsider. She has not got as much experience in government as theresa may. She has Financial Services experience. Boris johnson says she has the zap and the drive to lead the party. One of the debates has been the role that eu nationals living in the u. K. Will have and u. K. Nationals living and the rest of europe. Tom we are baffled. We were celebrating the colonies leaving yesterday, i do not know if you are aware of that holiday here in america. Here is on mr. Cameron, the Prime Minister who likes to think of himself as a modernday Winston Churchill had little understanding of historical forces and goes on to say britain has always been at the edge of europe and has led the way in questioning the value of the eu. Each of these candidates is the ey . Which is the most antieu . Anna Andrea Leadsom is certainly seen as the person who is to the right of the party and she was supported by a lot of people from ukip. She is seen as somebody on that side and michael gove led the campaign in a slightly more hope highprofile way but he is fallen out with a lot. Tom is this like a Trump Republican Party polarity or is everyone more on the same page . Anna they are on different pages and starting to find their dividing lines. One is how quickly you trigger an article 50. Andrea leadsom has been saying we need to trigger this sooner rather than later and others are saying to take their time. Bestine this goes to the possible person is to get the best outcome for the u. K. And that means access to the Single Market. Who would be the best person to bridge the divide . Kamal that remains to be seen. As we have seen in previous euro area crisis, there was a meeting of minds somewhere in the middle toward the european side and the greeks had to eventually give way to some of the demands from the eu. It very much depends on the starting position from the british government. They all agreed the u. K. Will leave. Brexit will happen. The question is the timing and terms. Francine i have to say my favorite overheard story is that apparently Alexis Tsipras had to deal with possible grexit last week. At the eu summit he went to David Cameron and said, i cannot believe you did not have a plan b. It is a funny way of seeing it. Of i just wonder if any them will have twitter feeds as entertaining as donald trump. Anna edwards, thank you so much for briefing us. We will continue with mr. Sharma of bank of America Merrill lynch. On Bloomberg Radio, a conversation with Carl Weinberg who has been way out front on the disintegration of the european experiment. From london and new york, this is bloomberg. Francine i am Francine Lacqua in london, tom keene in new york. Oil trading slightly below 50 today but we spoke to the Worlds Largest independent oil Trading House ceo ian taylor. About whether there was Systemic Risk in some of the Trading Houses and where he saw the price of oil going. Expected to be a little bit higher assuming demand continues to increase which i think it will, maybe at a slightly lower rate. I think it will be in the high 50s or early 60s. I always give this trader health warning. That would be at the end of next year, you see 60 oil . Of 2017, i could see 60 oil. Francine it is great to have interviews like that because it gives us a sense of the market. I think there has been a change in focus over the last two or three weeks with the likes of the aussie and kiwi. ,e have been kneejerk selloff but if you look at the g tens fear we have the u. K. Eventually going to go back into its currency so we have positive weg care yielding think the aussie and kiwi remain supportive but over the dollar ofthink it is overvaluation the kiwi and aussie to correct itself. Tom i look at the markets this morning and i look at record lows. Does this signal global recession . China is not going to save the day. Kamal if you look at some of the pm eyes that came out from asia, chinas were not that bad. I think with the market is looking at is for the contagion fallout of what happens to the u. K. Spreading into europe and the rest of the world. If it is more pervasive there are risks that we do not foresee a recession. Backtheless we have pushed particularly from the fed. We are seeing a flatter profile to Interest Rates over the course of the next 18 months. Tom we are going to come back with kamal sharma. The german tenure has broken down to new lows. It is 0. 162 . These are amazing screens, the 10 year u. S. Yield an hour ago, record low yields. From new york and london this is bloomberg surveillance. A tom good morning, everyone. Bloomberg surveillance, from new york and london. We will have Governor Carney for you in the next hour and he is focused on the markets. Market vigilantes are telling him the propers sobriety of his tone for the bank of england. Year,out the german 10 two year, u. S. 10 year, to send spread . There is the joy of brexit off to the left of the chart and here is the run rate of rationalization, and we just rolled over to a 0. 161. It is remarkable how the markets are speaking this morning. Just getting be a we headlines out. They released boe headlines out. Carneye hear from mark and we will bring you that life. Their cyclicalg counter buffers from zero to 0. 1 . Carney mark rmb mark was the adult in the room that kept the markets appeased and help the banks. The capital buffer is to zero from 0. 5 . He is trying to prevent a bank crisis. Sterling rolling over as well, not all that having to do with Governor Carney. Standard life of edinburgh shutdown redemptions from a property fund, a real state fund over the threeday weekend in the United States. That is a back story and on the front story with Bloomberg News is nejra cehic. Nejra it is the first test for the five people who want to succeed David Cameron. Or than 300 conservative Party Members will vote today and the candidate that receives the fewest votes will be dropped from the race. Andrea leadsom finished first in one poll but bookmakers say teresa may is favored. Saudi arabia is the latest targets in a series of terrorist attacks as a suicide bomber kills himself and for security individuals. Two other bombings caused minimal damage. In baghdad, the death toll has gone up from the truck bombing. At least 157 killed and 200 wounded. Islamic state claimed responsibility. Minister hasrime opened a fourday tour of africa. Netanyahu is trying to drum up business for Israeli Companies and will travel to kenya, ethiopia, and rwanda. Angela merkel says a post grexit European Union us be open to the balkan nations. It is assigned she is not giving up on a diplomatic push to stabilize the region. She spoke at a french conference on the balkan. Powered spacecraft entered jupiters orbit. It will spend 20 months circling jupiter and its goal is to explore the gravity and medic field of the planet. Global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. I am nejra cehic. Tom thank you so much. This has been one of the quiet technology. American the first images i saw were absolutely extraordinary, from it being a yellow blob. 40 years ago it was not much different than it was for galileo 500 years ago. It is amazing how far we have come. Francine it is amazing and yet i would say there is a difference between the space race and have a technologically advanced we are. When you look at the political system it has not advanced that much. There is a lot of backstabbing in the u. K. The brexit vote has turned londons future into question. Tech Companies Really thrive post brexit. Us asn manus is joining well as kamal sharma. Thank you so much. Around thewalking square was a billboard saying startups moved to berlin. Are a lot of them looking at berlin because brexit will mean the taxing will go up . Illian i think berlin and think the next pm has a tremendous opportunity. They have a choice, they can either isolate or innovate. I think they need to build more bridges outside of the eu to the u. S. The u. S. Has come on and said, its create a freetrade with you post brexit. Francine how do you innovate . The only thing that Tech Startups want his tax break so this is something George Osborne hinted at yesterday. We