nasdaq 0.75%. stocks rows because of -- rose because of health care. big names rising. gilead after baron said it would be a great quarter for them. celgene is rising, and merck is rising. at a one-yearg view. i am talking about a one-day .ain for companies like celgene the bloomberg social velocity monitor is a cool tool to look at. to see what people on twitter are saying about a stock. i pulled up celgene, this is a three day view. on the third day, a lot more tweets, and a lot of them are very positive. you can see the green tips of those bars. big social media presence. joe: i do check in on the record low yields. japan 20 year yield, government bonds, is negative for the first time. we see the chart. something else we don't talk about much, danish 10 year bonds . they joined the negative club. you can see a chart right there. and of course u.s. 10 year yields hitting a brand-new record low today. across the globe -- matt: as in yields. if you own those bonds, you are making money. when the bond comes down, the price soars. take a look at currency. we have the yen strength and pound weakness. there is a two-year chart of the pound down 12%, getting crushed after the brexit vote and kind of maintaining that low level for a few weeks, but now coming to all new lows. 1.2933. the yen meanwhile at new highs. when there is a red number, that means the yen is strengthening against the dollar. only ¥101 for a dollar yesterday. today it is ¥102. having a monster year, continuing its rally. it is the highest in two years, $1364 and $.23 an ounce. people are piling back the nichols. minutes.se are the let second deeper dive into the terminal. you can find the following chart using the function you see the bottom of the screen, g #btv, and whatever number the chart is. joe: i'm looking at a remarkable chart, 30 year yield on treasuries versus the s&p 500 dividend yield. the blue york is -- blue line is 30 year treasury. thefor the first time since financial crisis, 30 year government bonds have a lower coupon than the trending developed bond on the s&p 500 dealt that -- dividend yield. matt: i find it fascinating. i did not know this until use did earlier. -- until you did earlier on battle with the charts. stocks are the place to be, you get return. if the momentum continues in bond, yuan price capital gains. --you want price capital gains. joe: we thought we might see this coming to an end, that people are concerned. extraordinary reversal. matt: the other thing your chart says to me is, stocks are moving higher. bonds are moving lower. how can that be at the same time ? that leads us to the correlation chart i have got. 1932. this is a wicked chart. you can see correlation or inverse correlation between stocks and oil or the dollar and stocks, again and stocks, 10 year and stocks. were back to january, they highly correlated, and coming into may, and of june, they get closer to zero. that means no correlation of course. nothing are blowing out again. all of these different asset classes -- if you use this chart, you can click on any of the indicators and see the correlations right before your very eyes. joe: you can see all of these charts and more on twitter. matt: it is back now to the drawing board for investors getting used to markets moving independently, as we said. blame brexit. this rekindled the move between u.s. stocks and other assets. here to explore this is all of a running. ninck. er re reporter: i love that chart. matt: we should have this person on the show sometimes. reporter: this is a great look into what is happening in markets and why there is so much on stocks. by neil going down as well as stocks going up, which is typically a place for you see it a dividend relationship. basically you have all these markets that have been moving in strange ways after brexit. for a lot of investors, that are not particularly at amenable to finding opportunities, finding distinct places were money moves. to keep this macro approach, the chart you have, showing different asset correlations is really interesting. matt: to be clear, you are the author of that chart. i see a lot of my charts i use on tv. if you type that in on bloomberg, you see all of the school charts. you haven't to write this one. oliver: that was one of the great functions. you have this move up you sort of have a very strong risk as it moved, and then a strong one on after these riskier replacements of stocks. they all moved together, which could be the disadvantage of investors if tracking the submarket. another correlation chart, if we can pull it up. this is looking at correlations within the s&p 500. we are getting other asset classes, but let's look at the move between stocks. mrs. put out by citigroup, and it shows the top 50 biggest stocks in the s&p 500, how they are moving in a similar direction. so when that line stops right here -- matt: that is a rising tide. it lifts all boats. oliver: exactly. then you have banks, energy companies, all this stuff moving in as interaction, trading in unison, in lockstep with one another. joe: looking at the market performance, one thing matt mentioned, biotech is doing good, consumer discretionary, a bit of volatility at the bottom. people, are anyone willing to say it is time for a move out of the safety sectors and go back into the risky sectors? oliver: that is one of the biggest questions. everyone is asking that, every equity guest. but it is no, that will continue to be the trade despite higher pe levels, valuation levels in the sense of lower volatility. and if you strayed from that opinion, you missed out on continued value. you look at the staples, 18.5 pe, this is x percent above historical norm, i went to get out -- this sort of within the stock market, this valuation timing is a rough game, because things move beyond their normal levels. that is what you see with those three groups. matt: i am looking at the ymca, the bond yields. yields. the bond people say don't get crazy, don't look for gains. but all of the big banks are forecasting rising yields. if you look at 24, 1 .77. .25. 2 everyone is forecasting rising yields. oliver: but they wanted to be right. that is a good point. people at this point after years of speculation with what the fed is going to do, interest rates, they want to see action, something actually change. it has not. butad a one quarter hike, are there sitting down the road? change, in the structure of the market, people are going to continue to say, there is a 25 basis point hike, but it is not a reason for why i should be defensive. like we have this shift where people were saying, the bond markets are telling us one thing, stock markets and other thing, which one is right? it seems like the new paradigm is, the fed is using by everything, fed and stocks. they will sell everything, and maybe we have to rethink the signals both markets are telling us at the same time. oliver: that is great. mohamed el-erian had a great article on this. he talked about wife you are going into the bond market, yields are going down. you look at yields going down, you interpret that as a risk off mentality. that might be a writ -- a bit wrong. rates, easy negative that pushes down yields. it does that mean people are buying bond as they are scared. they want a yielding asset. matt: thank you, bloomberg news reported. coming up, the pound is continuing to drop. hitting lows we have not seen since 1985. we will have a breakdown of the downtown. mrs. bloomberg. ♪ ♪ ramy: let's get to first word news this afternoon. john hickenlooper hasn't job is has a job as the governor of colorado. he told bloomberg he is open to a new pursuit, that his running mate for democratic presidential hopeful hillary clinton. >> if you are someone who is asked that you are one of the people that can make a difference, your country needs you, of course you answer it. briefly. ramy: the 64-year-old has been called colorado's governor since 2011. dropping out of contention to be donald trump through running mate. come fromays she will the senate. tennessee republican senator bob corker pulled his way out of the running as a vp pick for trump. the department of justice is launching a civil rights investigation into the fatal shooting of a black man by two police officers in baton rouge. that was captured on video. was outside a convenience store. they went to the store because he had allegedly threatened someone with a gun. that should sparked outrage. -- that sparked outrage and placed police officers on administrative leave. in pamplona, spain, a mead festival is underway. people are dancing and dowsing each other with wine. there is at midday launching of a fireworks rocket from the town hall balcony. the famous running of the bulls starts tomorrow. than 2600 more journalists and analysts in more than 120 countries. i'm ramy inocencio. joe: "what'd you miss?"? a plunging pound. there is a new 30 year low, dragged by the fears of the uk's leadership and exit on the eu. here to help us navigate this fx market is wilson, the head fx strategist from deutsche bank. pound getting crushed, it doesn't have further to go down? >> i think it does, actually. the forecast is terribly aggressive at one point in time. now it is, 115 is about as precise as it were. matt: that is like a storm forecast. joe: he was looking for 115 in his guardian piece. matt: going into the brexit vote. brexit will -- it is a tricky beast. we'll take a wild swing on the actual night itself. we have got rid of the whole political uncertainty. we need to know the conservative leader september 9. if they will not trigger article 50 before the start of next year . and then we see how that plays out. right now we have got to balance a payment program i think. joe: do you have any recollection when people were hanging on every headline about a conservative leadership election? i'm feeling these are extraordinary. this is the kind of stuff we have to know now. matt: we know the voting is tuesday and thursday. alan: there was a time when thatcher was under stress when john major was in ascendancy. we had the same source of dynamic. we have had this turmoil related to the exchange rate mechanism when the pound drop down. we saw vicious moves as well. politics and proceeding into the pound's performance not unique at all. matt: how much you think it matters? we don't find out until tomorrow at 2:00 p.m. basically if it is a runoff between led some and may or gulf and may. it will be one of those pairs, probably. remain and express. how do you think that appeals to you k markets, the pound and any of the pairs? joe: seeing theresa may as the most likely leader. as not theceived best deal u.k. could get. for this year rather than this year. -- last year. i think it is marginal. you have a large account deficit, previously financed by foreign director investment flows. we can see foreign directors with outflows. you have a terrible narrow base of ballots. that is the main weight the pound is dealing with at this point. joe: the pound has been the main currency in focus. as a political situation quiets down, we will pay more attention to the yen again. and again, dollar-yen was back at 100. which way is that going? if we were selling dollar-yen up takes, we could break 100 and accelerate. a lot of what is going on is japanese hedging with foreign securities exposure. they have too many dollars, too much dollar exposure. when the dollar starts to depreciate, the reinforce the dollar depreciation to become self reinforcing cycle. joe: is there anything you will out? ere kuroda pulls any bazookas to launch in order to change the direction of dollar-yen? alan: i don't think -- matt: isn't as important to him? we just saw a five-year chart, down from 2014 levels with dollar-yen, whereas 1984 levels with dollar-pound. alan: the levels matter, of course a little bit. but the speed matters as well. there is no time like the nikkei matter. and so it is problematic from the financial standpoint. we are tied to financial conditions with the european -- japanese economy needs. so there is some sort of notion that eventually, the japanese look at down to a helicopter drop of cash. the result ordination coronation of fiscal policy and monetary policy. we will get there eventually, probably next recession rather than immediately. matt: go back to the start of the year, the call for a lot of things, the dollar, this big policy gap between the u.s. and everyone else on hold. that did not work out for a while. he did nothing like anyone was tightening. the question of which way the dollar goes is crucial particularly with investors, trying to find out which companies have dollar risk exposure. which way for the dollar, further strength? alan: you must establish between which currencies we are talking about. the yen will be stronger, dollar will be week against the yen, really that's just it. the main currencies people watch are the euro -- we are looking at 105. you have not changed that forecast. in sterling, we spoke about earlier -- matt: 105? alan: that is not terribly aggressive. revisit that. and they can accelerate to the downside. looking at europe in general, political problems have a habit of sticking up in different places. matt: we got the brexit and concerns about italy and france as for his politics, italian banks. what do you think about an aggressive forecast for the euro, if one of five is middle-of-the-road? alan: this is new terrain, as it were. i would say something. and we can get to two different routes. one is that they yen is a ok place, but then it titans. or the world is not a good place, and europe will be terribly positioned for the next place. rates, europeve will have negative race. matt: there are two ways to win betting against the euro. alan: and there is that middle ground we have been in periodically, which is that things are not that strong that the fed is going to tighten, a risk offer. matt: what you think about the positioning of the fed versus the ecb? does mario draghi look more dovish than janet yellen? the minutes came out today, we were thinking about how she needs to look for any excuse to give the market better conditions. alan: they obviously are facing different circumstances. one could say the federal reserve at this point in time has a strong payroll number. they need to rethink things drastically. this can be easy, financial easing. offsets the weakness we saw in may, markets pricing in 2019. it looked way off base. fx strategy atof deutsche bank, thank you for coming in. we look at the staggering amount of bad debt in italian banks. we have a chart you cannot miss. ♪ ♪ matt: i am matt miller. "what'd you miss?" staggeringks reach levels of nonperforming loans. it is truly unbelievable. you read it, the chart is shocking. this is 1907 in a bloomberg charts library. i compared it to what it looks like relative to others, to the u.s., to the u.k., and germany. all of these other national banks have less than 3%. ,e are looking at only 1.5% nonperforming loans relative to the entire book, 1.4% in the u.k., and germany 2.3%. italians, 18% of all their debt is bad. joe: scarlet: that isn't urinary chart. matt: i know. more about to talk u.k. property. take headlines in the last few days have been about these funds trading, halted the halted redemptions. it makes sense because you are offering daily liquidity, but you cannot sell buildings in a day or two. it takes time, especially like now. a closed end property fund. the s&p 500 commercial property, it has a lot in the u.k.. so the blue line is where shares are trading. this is freely on the secondary market. the white line is the quarterly declared net asset value. this is where they declare their worth to be. you can see a huge gap that opened up between where the shares are currently trading and where the last is of the underlying assets that the fund has in london. you can see essentially this sort of liquidity premium or discount, how much off of the price is, people willing to sell these shares for it. i was there the past few days, shows the gap between the current market perceptions of real estate value -- matt: i always kind of wondered how etf is faring when they do the course on a daily basis. with commodities, john what's more liquid, not like tragedies. this is much more fascinating. -- which are much more liquid, not like -- to pay out the people who are leaving, everyone who is still in the fund much more highly leveraged than they wanted to be or by regulatory allowances, can be. joe: remember this junk neutral funds last year. this is legacy and underlying -- liquidity and underlying assets. matt: now we can get flats in kensington. all the focus has been on frexit lately, and another bigger -- , and another storm is brewing in italy. we are not talking about the banks. what you need to know about the country's upcoming referendum v. you guy's be good. i'll see you later [ bark ] [ bark ] bye. see ya pal. ever wonder what your pets do when you leave home? [ laughing ] aw you cutie pie. aw. aw. aw. aw. [ barking ] [ washing machine running ] party's on! know what your pets are up to with xfinity home. xfinity. the future of awesome. see the secret life of pets, in theaters july 8th. get a quick check on how the markets closed today. s&p 500 up .5%. you can see coming back from the red earlier today, there are several new lows in bond yields around the world. the markets were led by some of the riskier sectors like biotech and technology and energy. matt, over to you. matt: pepsi is out with its earnings on thursday. it will bring back a diet pepsi with aspartame. it masks a harder truth for the soft drinks industry. pepsico in these numbers do not lie. soda, allales of diet of them, coke and pepsi in recent years have come down. pepsi replaced aspartame with sucralose in its diet pepsi products. but it backfired, sales fell nearly 6% in 2015. the orange line, there. but not just diet soda has seen this decline. the overall soda market fell to a 30 year low to read of these global sales, pepsi is a clear number two to coca-cola. coke is dominant in sales volume, holding nearly to -- pepsi only accounts for 21% of all soda sales. declined sales have since early 2013, because of the stronger u.s. dollar outweighing higher sales volumes. even with the strong dollar hurting sales abroad, there free -lay divisionto that makes chips rose 3%, beating the total sales gross for the company. branded snack foods represent 53% of total sales. embarking on a sweeping productivity program, targeting $1 billion in savings annually, operating margins have in part toread do the productivity gains and low commodity inflation as well. we will be watching his numbers when pepsico releases its numbers before the u.s. opening bell. joe: "what'd you miss?" deals with brexit aftermath, another referendum coming up. potentially, italy. sometime inl happen october and will deal with constitutional reforms, including reducing the number of senators. joining me now from london is vincenzo scarpetta, who previously worked at italy's foreign ministry. thank you for joining us, explained to us the significance of this referendum. we know the prime minister has stated that the government -- why is it so important? vincenzo: it is important because it is one of the fromhip promises made february 2014. to put things into context, italy has a unique parliamentary and lowerre the upper chambers have absolutely evil powers in practices. a deal needs to be adopted by both chambers, which tends to slow down the lawmaking process. especially when the election in january, no party has a commanding majority. so we have this reform now that has been approved after a lengthy process. and reform itself is far from perfect. it falls well short of the initial promises made, which was to scrap. but it does achieve the objective of significantly reducing the powers of one of the chambers. system be fair, that sounds a lot like the u.s. system, which is an major gridlock. -- to getant is this further reforms done? let's say the referendum passes his way, what will that allow him to do in terms of further reforming italy's government? it will strengthen his position as leader of the party and prime minister. course, with having to pass yous in only one chamber, would expect it to speed up the lawmaking process. it is a significant referendum, the upcomingment, campaign and winning the referendum looks like a bit of a challenge for the current prime minister because essentially, all of the main opposition parties are set to campaign against this reform. no'spinion polls show the are ahead. and many are still undecided. it is far from won. joe: when he came into power there was a lot of excitement about him, his young and new face in europe, could take italy in and you direction. what happened to his popularity, and why is he having a hard time convincing voters this is the right thing to do? there was a lot of , just to give you one figure, in june 2014, around the time of the european parliament election, when it was was winning, his approval rating was over 70%. now the honeymoon is over, and over time, he has been resorting to a polarizing and divisive rhetoric. saying that everyone else, anyone who does not agree with him, does not want italy to change. this kind of polarizing rhetoric has in turn polarized the whole political debate. single vote in ballot, including local elections, we've seen the mayoral elections in rome, every single vote is done. political career on this referendum as we saw in october, i do not think will help him win it. joe: speaking of local elections, we saw surprise victories for the five-star movement. beppe grillo.y me about their rising popularity, what did they stand for, and what does it mean that they are doing so well in these election? we could call it an antiestablishment party. in favor ofhey are holding the referendum on the eu, a single currency. and, they will be campaigning against the euro. happened in the mayoral elections, especially in rome, it is very interesting. with the election of the mayor, rounds,twough two ballots. hadhe second round, renzo expected them to coalesce around the central candidate. voters seen center-right backing the candidate of the movement. so i think that is a bad omen. , again, everyhat single vote becomes a vote on the government and on him, himself. voters few center-right have not backed his own candidate. joe: we've been walking -- watching this story for a while. thank you for joining us. now, let's get to first word news with ramy inocencio. ramy: president obama says he will slow the withdrawal of troops from afghanistan. earlier today, he said he is military personnel there at the end of the year. the initial plan was to leave 5500. president obama: this is to make sure my successor has a solid foundation for continued progress in afghanistan. as well as the flexibility to address the threat of terrorism as it evolves. ramy: president said u.s. troops will continue their efforts on training afghan forces and counterintelligence missions. donald clinton says trumps a background in atlantic city is a clear demonstration of what he might do to the american economy. newton also took a swipe at jersey governor and possible trump running mate chris christie, saying, if your governor would start doing his -- instead of holding his coat, maybe we could get new jersey's economy moving again. many voters disagree with fbi director james comey's decision to not recommend charges against former secretary of state, hillary clinton. 54% of voters say the fed should've filed criminal charges. that is compared with 37% who did -- who agree with that decision. syria's military agreed to a three day truce at midnight. it coincides with the muslim holiday that marks the end of the holy month of ramadan. but isis is not observing that truce. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 20 countries. i am ramy inocencio, this is bloomberg. ahead, is the u.k. economy in a better position post-brexit. deutsche bank economist tells us why he disagrees with the negative sentiment. this is bloomberg. ♪ matt: time for the bloomberg business flash, a look at some of the business stories in the news right now. u.s. chemical manufacturer pharaoh is driving final round capital.from roan a private equity firms are expected to finalize offers this month. they make products ranging from ceramic tiles and dinnerware to smart phones and cars. frankfurt is the favored destination for banks, considering a move out of london after brexit. according to boston consulting group, the german city beat new york and dublin. i am not kidding. the report says 77% expect relocation within two years. and, london could lose 80,000 jobs as a result. snapchat, the mobile app for sending vanishing photos and videos says it will let people hold onto what they receive a little longer. out ampany is rolling memories section. users can store and search photos and messages that would normally disappear. 150 millionsays its users are already saving their creations. snapchat's plan will move that activity inside the app. and that is the bloomberg business flash. joe: a lot of uncertainty and negative sentiment around the brexit, but it may not be all doom and gloom. in oneconomist weighed the impact of brexit on the economy, and white may not be so bad after all. >> you take a step back and look at the u.k., for instance. we should have seen this coming a long time ago. fromme sense, the benefit globalization over the last 20 years have been enormous. 100 million plus people at a property, lots of countries that were subpar have come out. they haveoblem is, not succeeded in redistributing those gains evenly. we see various crises emerging in the world. in u.s. and europe, and the u.k., as well. that is at the bottom of all of this. >> david, you mentioned the -- if yountral bank will join us here in a number of minutes. this speaks to a adjacent nations being buffeted by these crisis, whether it is south korea or sweden adjacent to a crisis. here with how these adjacent nations that should react to what we see with italian banks, or the united kingdom? two adjacent areas, if you look at that, both blocks were soft because of brexit. the u.k. is not and not bad of a position. i disagree somewhat, fundamentally the u.k. does not look that bad. 5% unemployment, 10% youth unemployment. a very powerful weapon and flexible exchange rate. could still have a long way to go. from 1980 to 1984, sterling sold, and that love -- that led to a boom. in terms of the central bank policy making, it is very precise, very professional, very tock to adjust and quick react. unlike what you see in europe, where the decision-making process is very slow. from my point of view, you look at the in a manner -- intermediary run. it is relatively better than of the eu because the eu is very fragile. >> that is very refreshing. you look at a lot of manufacturers, they are foreign-owned. owned by germany, or owned by the chinese. they do not get access to a single market and they relocate, so there is not much to export to read a -- export. >> you have to think that a exchange rate of 30% is going to bring about a systematic change, both in what the u.k. produces, how it produces. it is not just a question of the currency, but saying, what will it look like over the next two years? some of them will be deemphasized, others, emphasized. >> over 10 years? >> more like five. the economy adjusts much more quickly now with the technological advancements we have now, as opposed to 10 or 15 years ago. these estimations tend to be not worth very much. economies react much faster now than they did 10 years ago. i believe that we are underestimating the profound that sterling will have. whereas, the euro is the other way around. you have one exchange rate for 19 countries. for some it is appropriate, for some it is not. you get a spotty or adjustment to this. from that point of view, i think the u.k. is in a relatively good position. joe: that was deutsche bank's chief economist speaking earlier. coming up, three more firms leastded trading and at $7.4 billion of u.k. property funds. that we tell you why asia has a major interest in the state of london real estate. this is bloomberg. ♪ joe: i am joe weisenthal, "what'd you miss?" investors have a lot riding on it u.k.'s real estate market. nearly $14 billion of direct real estate investment in the u.k. in the first quarter. joining me now to discuss the issue, and fears growing about real estate, betty liu. this is a global story, another angle of that. we keep finding more and more angles to the brexit fallout since june 23. we have heard for so long about chinese money leaving the country, and finding investments outside of china. that has fallen into u.s. real estate. do not forget, it has already gone to europe. in particular, in the u.k.. you were mentioning your estimates of how property prices could fall by about 10%, given the uncertainty surrounding brexit. companies have been developing the london property market. they have accounted for something like 12% or 13% of that. also that, there is another head wind for chinese investment. i have an interesting chart, we were going over it before the show. shows 1920 6, 1 of the most interesting points in any market. matt: what you see here, the blue is prices for london office space. betty: that is expensive. matt: the white line is transactions. this started before the brexit vote. this is right when the referendum was announced february 18. you can see that transaction plummeted. is moving as far as buyers and sellers. although prices remain elevated. betty: but for how long? matt: exactly, that is the question. it is one of the most interesting points of any market, when the buyers and theres are so far apart is no action. they have to come together to start doing deals. betty: exactly. that if those prices start to fall, that may prompt. if the buyers need money because of redemptions they have to unload buildings. joe: how much of the chinese interest in london is about investment, and how much is the desire to simply own assets that are not in china? a significant amount about having capital overseas? -- doesextent does eat the u.k. leaving the eu at that attraction? it is a great question, joe. some of it is to find a safe place to put their money. that is what you see the chinese look for some assets outside of their country. if theret is because was a place to find and see your money grow, you want to be smart going into the london office mark. -- market. and i think there is a third option, london may be the greatest city in the world. a lot of people absolutely love london, and they throw their financial concerns to the wind and move there no matter how expensive. you betty liu for joining us. two new in for 7:00 p.m. in new york for bloomberg daybreak asia. coming up, what you need to know to gear up for tomorrow's trading day. ♪ matt: i am matt miller, "what'd you miss?" do not miss this, u.k. industrial production is out at four: 30 -- 4:30 a.m.. this next round of the conservative party votes which will eliminate another contender, and it will be down to two. tomorrow, at 7:30, challenger job cuts. and it a: 30, initial jobless claims. those have been really steady. that is all for "what'd you miss?" mark: i am mark halperin. john: and i am john heilemann. but with all due respect to hillary, james comey had better material. mrs. clinton: his campaign is, selloff america's assets. we sell the statue of liberty? he wants to make america great again, maybe he should start by actually making things in america again. crickets] mrs. clinton: we need to write a new chapter for america, but it should not be chapter 11. ♪