Transcripts For BLOOMBERG Bloomberg Go 20160620

Becoming the newest Stock Exchange in the United States. First, jon has a check of the markets. Jon global risk assets rallying across the board. Check out the mood. Here we are, if you hire the United States across the board. Youre adollar at the moment at around 1. 1328. Equities pushing higher with the ftse pushing up, 86 points. It is a strong pound equity rally. Lets go around the world and check in with our Bloomberg Team for an indepth coverage of our top story spirit nejra cehic is in london on the latest brexit poll. Guy johnson has details on the pound rally. And on janet yellen testifying later this week. Lets check in with the london guests. Nejra cehic begins Team Coverage with a shift in the polls. A shift in the polls break it down for me. Nejra we had a couple of polls out over the weekend. The main one the markets are focusing on is this poll showing a three percentage point lead for remain. There was also another poll from the sunday times, showing a one percentage point lead for remaining. Now this shift toward remain has come with the campaigning resuming because that was suspended for a couple of days after the murder of the mp. David cameron will become the july zynga will be capitulating on this capitalizing on this, when he accused his opponents of turkey joining the eu, one being the cost of membership. Whats hear more from David Cameron. David cameron as we choose to leave, we can leave. But if we do, that is it. We are walking out the door, quitting, giving up on this organization, which, even if we leave, will have a huge effect on our lives, on our children, on opportunities, our businesses. Britain in the end is a quitter. We stay and we fight. On theid cameron flipside, you have boris johnson, the former mayor of london, who said they remain cap has nothing to offer voters and he said they should change the whole course of european history by voting to leave. Jon a lot of people have said that the tone has changed. The tone has not shifted that much. David cameron is still passionate about remaining in the European Union. I do not think the message has changed at all. They are still beating the same drum on either side of the campaign. Nejra David Cameron was impassioned in his speech, particularly when he was emphasizing the fact that they were what he called lies from the leave side. But the debate stay very much the same with the remain cap pushing the idea that a brexit would be bad for the economy, and with the league camp with the leave cap focusing on the economy. To bring in the market angle jon to bring in the market angle, why former tv coanchor guy johnson. What a rally we are seeing. Since 2008. Gest that puts it into context. A lot of this has people going a little bit long, and a lot of it is Market Positioning as well. They are taking profits on cash shorts, doing that on poundyen. They have also taken profits on the dollar swisse as well. Jon you mentioned profittaking. I wonder how much of it is and howng off as much is trades coming on. Guy the market has to be hedging heavily against sterling. People put on a lot of positions. Maybe those are the positions that are coming on. On the 17th there was a high. Those moves are being reflected a number of different assets. Appositeou look at the at the absolute position . The absolute position has levels going all the way back to 2008. Guy you are going to get a big movie either side. Today highlights that you will get a big move in sterling if the remain camp wins out. Remember as well, the risk is asymmetric. You have a bigger move on the downside and you will on the upside. Saying le are still today makes it even more important because sterling is now up, so the move could be even bigger. Jon i was listening to comments from one of the big investment banks of the city, and the trade for them was to keep the options where they are to keep them from the downside. I think the uncertainty has come up a little bit. , i think theyyone would say no. Is you look at what happening with the symmetry of the risk, you can take some of those cash positions off, but you have to have that protection out there. Aside from the move on the downside, jpmorgan Still Believes that if we get a brexit 1. 32, target on cable, eurosterling at 83. Some massive moves. Jon what are you looking for in the next couple of days . Guy i think it will be what the undecideds do. Some of these people will not make up their minds until they walk into the voting booth. Nevertheless, over the next few days, they have to figure out what they want to do. If they get a vote, how they get a vote. Polling will become a lot more interesting over the next few days you may get some big swings in that number. Indicator we have been pointing out this all morning. Come back here, and it rallies. Jon i am blaming this one on tom keenes Shopping Habits. He really went long cable when he got into heathrow. The pound continues to move against me. David . David we will turn away from tom keenes Shopping Habits and go to india. Newsupee is falling on that the governor will leave his post in september when his turn when his term expires. Was this an unexpected move . What caused this . Definitely, this came as a everyone, andto you can see that it was invisible on the market. All other emerging markets rallied on optimism that there may be the possibility that the United Kingdom may stay in the European Union. The rupee was the only currency in emerging markets that was in the negative, and it is also because of clearly, this is a worry. Worried about the policies that he had implemented and a result in keeping the rupee very stable. So with a 5 downturn in the rupee, it shows the position of investors. David as if an Indian Central Bank change in brexit was not enough, we will hear from fed chair janet yellen. Our bloomberg columnist. What do you expect janet yellen to testify to tomorrow and wednesday . The tone of her testimony will probably be almost the fo l to that after meeting last week. Followingill be will the election after the testimony. Take does she have to into account the brexit vote on thursday, in toning down whatever she says . Na she said that it will be one of the factors after the june meeting. Definitely this is one of the factors, and we might hear a couple of questions on that as well. David thank you very much. Now lets get an update on what is making headlines outside of business world. Investigators are hoping to move a step closer to solving the mystery of the egyptair plane that crashed into the mediterranean. Test the keyd to memory units of the flight data and black box voice recorders. They were recovered from the ocean last week. In kabul, afghanistan, at least 14 people were killed when a suicide bomber targeted a minibus. Has recently increased its attacks on civilians and afghan security. In pro basketball, cleveland completed a historic comeback by beating golden state in the game 7. The score was 9389. The cavaliers were the first to rally from a three games to one deficit to win the championship. Lebron james had 27 points. It is clevelands first major title in more than 50 years. Global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus i am amateurrld, andra. Brexit have been seeping into every corner of the market. What will happen come friday . The chilean dollar question. David cotef talk reveals his strategy for a postreferendum market. David this is bloomberg. Lets go to julie hyman. Scotland, bank of lloyds, barclays, are all seeing rebounds, not only rebounds but pretty sizable ones, the 6 to seven percent range the 6 to 7 range. We are seeing a rebound as we see some of the polling swing back in favor of remain in britain. It is affecting not only trading in the u. K. , but trading in stocks around the globe and more. Rebound for stocks broadly, even be on the banks. We are also watching bowling. Is we are also watching boeing. Year to date the stocks down 10 . It may also the company is nearing a 4 billion deal with russias largest airfreight company. It might help expend the life that extend the life of the 747 jumbo jet as there has been waning demand for that kind of jet as well as for aircraft in general. This is all according to people close to the transaction. We could see a formal announcement as soon as an airshow happens in the u. K. Next month. We could be getting confirmation at that point. On this report, we will be looking at the shares potentially to rise today. David global stocks all around the world are rallying as the pound strengthens the most since 2008. This comes after polls show that the odds of brexit are slipping. David kotok joins us. Welcome back to bloomberg. Pleasure, on a solstice and a full nine. David and a full moon. David all we need are druids. Tell us how you are positioning yourself up for thursday and for after the vote. David on the weakness after last week, we bought u. S. Small caps. We owned small caps in europe and japan, the cheapest of the major markets in the world being japan. Because brexit is about a trade union. In the end, if a trade union comes apart, it is tough. If it does not, it is a huge turn in sentiment. We are seeing that this morning. Caps is the buy of small evaluation issue . David yes, and they are outperforming midcaps, which are outperforming large caps since the february bottom. There is a message in the market. After all this turmoil and worry underneath, investors are selectively looking for spaces and taking risk because they see it as being attractive. David do you have a view of whether brexit will happen or not . David i dont know. This is a rapidly changing world when it comes to brexit polls. David what happens to your investments if there is brexit . Have cash reserves. It is prudent to have some and wait this out. 85 , 90 in the market. The cash reserve waits until after the vote. Your positioning in european equities how do you hedge with fx around that . David that is a tough one. If you have to hedge, you have to do with currency risk. Etfs. Etfs can have hedges. We hedge to the weight of the index around the world, and above the index weight, we do not hedge. Jon you have seen investors seek out down sally seek out down side protection. Will they take advantage of the potential birth of volatility if there is a vote to leave the European Union . David there is a Second Derivative here. Brexit, drove money into the yen and japan, and those markets went down. Japan is the cheapest of the three major markets of the world u. S. , germany, japan. I am ignoring the u. K. Because of all the turmoil. Jon in terms of japan, you seem theeasingly exposed to japanese yen moving against the central bank. Is your positioning on Japanese Equities you cannot ignore what is happening in the fx market. Is that the Downside Risk that the yen keeps appreciating . David there is a second part here. The forward earnings in japan are up 14 pe, a seven earnings yield. The Interest Rate is 0 actually minus. When do you ever see the sovereign risk that yield below the earnings yield . 7 for incredible, little Companies Like toyota and mitsubishi. It is cheap, cheap, cheap in japan. Jon i have heard this so many times over the years, and the only time we have had a push higher is off the back of aggressive centralbank policy. If we wake up friday and the u. K. Is still part of the European Union, does anything really change . Does the market than focus on the next risk event . If we witness a fundamental change in markets and receive risk . Witnessingre political change around the world. In this election in the United States, look at the mix we have. What happens in scotland . What happens in spain . Is the newurmoil ingredient in Financial Market pricing, and we do not have models to price political turmoil. We know how to do it with earnings and Interest Rates and inflation, but how do you measure the sentiment of political turmoil . David kotok is sticking around. Later, if the u. K. Decides to stay in the you . Where do you want to be if the u. K. Decides to stay in the eu, where do you want to be invested . Much more bloomberg coming up next. Jon to our viewers worldwide from the beautiful city of london, with the millennium bridge here in the city the pound that is shining bright. Reen, at 1. 4632 it is a global risk rally. Lets get you up to speed very quickly. Futures in the United States much firmer, up 215 on the dow. Up 27. Rally, up by almost 200 points. The dax up by 3. 5 . Risk show you what this rally looks like cross assets. The stronger pound, the euro at 1. 1 325. Upk on as we begin the week, six basis points in the u. S. 10 year of 1. 67 . What an unwind from the position we saw last week. Goes back volatility and forth. There is a lot of green up there, but i do not see much blue. I do not know about the weather there. Jon we do not do summer. David janet yellen will spend the next two days testifying before congress on Monetary Policy. Give it to talk david kotok is still with us. If you were on the panel asking questions of janet yellen, what would you ask her . David i would go right to a technical question right away. The liquidity coverage ratio has changed the use of bank reserves. Two years ago it did not exist. The highquality liquid asset has changed the alternatives for banks. Chair yellen, what is this doing to Monetary Policy . Longer access . How are banks changing decisions . Does that change your credit multiplier . That is a very technical question for general listeners. David implicit in your question is, it is changing how is it changing decisions . David they now have to hold liquid assets to me to test. Do they hold them with reserves at the central bank . That is no caps off, 100 counts, 100 safe, or do they take risk and have haircuts . We see behavioral changes. We see large banks selling fannie mae and freddie mac because there is a haircut. David because they are too risky, ironically. David from a liquidity test point of view. This whole notion of the size of a Balance Sheet is independent now of whether the Interest Rate goes up and down. People are not grasping that yet. David and what is that doing to yields . David it drives yields to a flatter yield curve. We see it all over the world. But it also suggests something else. Maybe the central bank Balance Sheet is too small. Maybe there is a need around the world for more dollars in reserves that we presently stash than we presently see. Half reserves in the United States are there, through the u. S. Subsidiary of foreign banks. Why . Look at the choices they are making. David that is david kotok. Thank you very much for being here, david. Jon coming up, the brexit follow. Thursday posco is sure to have an impact on u. S. Markets and Global Markets and beyond. The stronger pound and a global risk rally. You guys be good. Ill 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 ] partys 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. Jonathan this is bloomberg. A subtle shift in the polls, but a sea change in Financial Markets. Futures firm up and they rarely firm up. Nearly 206. P look at this move in the pound. Higher,est push almost two full Percentage Points. Youll tire on the perceived safety. My producer tells me we cannot talk about the markets all day. Thank you. Public and president ial candidate donald trump is considering whether to shift his strategy. Staff members tell Bloomberg Politics that trumps in a is frustrated with the lack of coordination. He has not filled key campaign roles. The city of paris wants to make sure it no longer takes your breath away. All the cars and motorcycles are banned from presumed streets parisianhe weekdays streets during the weekdays. In cleveland, they have waited 52 years for this. Lebron james led the Cleveland Cavaliers to a win over golden state in game seven of the nba finals. It is clevelands first title since 1964. They came back from a 31 deficit. Global news 24 hours a day, powered by our 2400 journalists in more than a 150 news bureaus around the world. You. Han thank they sent us both to london and i do not know whose decision that was. We are here talking. The brexit potential . even the first election of even ast obama is not close. Jonathan we have witnessed a subtle shift. I want to get to a quote from you. Experienceon the of scotland, there was a long period of Little Movement when ordinary voters did not pay attention. This was followed by a period of favoring yes. Is awere seeing here suggest in this story is about a shift back to the status quo in line with previous referendum. Tom i think it is more new instant. Uanced. Said this is the dumbest thing, going. Stay within the eu. Others are saying be bold, brings it is a good idea. What i am focused on is the group in the middle who say the hysteria is overdone and there will be a workout whichever way the nation goes. Jonathan i will tell you what the approach outside looking in is that this is a binary event, they either state or leave. The conversations i have had are much more nuanced. Stay and it is close, this is not going away for a long time. The consequences are something we have to deal with. With you coming back, what have you noticed is the big difference over the last three months . Jonathan in london, a much more outside ofn crowd, london, in my own home town, it was like night and day. I imagine that is what we are going to see in the polls as well. Moveties like london, a towards day. Outside, in more regional areas, a much more shift to a leave. That weatherdamant was a major part of the vote. Jonathan it has to do with people able to get out and vote. The older generation, guess where they are stacked . The polarity of the nation, on thehunderstruck airplane, peoples interest and asking me. The gulfstream was in for maintenance. Tom keene, a special thanks. Week, ine with me all the city of london. A big week ahead. Sterling volatility hitting its highest level of all time, that was before the weekend as traders race themselves. Luca, great to have you on the program. Dots, that is the here and now. Referendum and the financial crisis. We have seen a retracement, but we are still at extremely elevated levels. Will that take away . Luca if we think about a micro , u. S. Thinking about this situation that this will move toward hedging possibilities. The probability of a recession will increase. Will buildy shock within the system and clearly you will have a situation where market stress will increase, will have widening spread and a tightening liquidity and higher volatility. To think about the main micro them tick the box is in a brexit environment. This is why we think it is probably too early to be complacent. Clearly the chart shows the cleanest way to play the uncertainty and the hedging you need in your portfolio has been in the fx markets. Jonathan the word i hate is cheap. E had a bit of a repricing extremely elevated levels. Talk to me about portfolios. Luca the environment i was describing before, i think it makes sense overall to reduce the risk of your portfolio, decrease your level of exposure and raise the level of cash in your portfolio and stay with duration exposure. That would be the first move. And then clearly you want option quality optionality. Ing,have been say rightly so, sterling is rich. What were focusing on is mainly looking at the euro, because we believe the negative implication of a brexit on the euro area will be meaningful. We looked at the euro swiss franc as a cross and that is something i think we hedge a portfolio. That make sense you are protected against the decision on thursday. How do you make sure you will are not missing out . Assuming the votes stay in. A great question. If you agree with me that the starting point needs to be slightly less risky, you reduce the overall risk of your portfolio. That puts you in a better position to look at upside potential. As we have seen today across the boards, there are many of those upside potentials out there. What we have looked at is clearly high cyclical albeit risky assets that have underperformed recently. We focus on the euro stocks. We think we put on upside option strategies on the euro stocks end of the same time, we look at the nikkei index, and the effect of the yen dynamics. There is clearly a light positioning from investors. That is where we think we would see the biggest move higher in a case of remain. David with respect to the nikkei and european stocks, what is equities we have seen over the last couple of months, even if the cyclical environment has seen improvement in the euro environment, it was an ok. Period. Clearly the market was very skeptical. There was big risk aversion and left the euro area very cheap relative to the u. S. Markets. If you look at banks, clearly depressed. Are fairly i would look at small caps in the euro area. They tend to be fairly high. They fundamentally have a value to unlock once the certainty of brexit is passed. Allocationssh are high. Does that change in a fundamental way come friday . Luca i think it does. Low risks, inning guess. I think it is the right thing to do. It is too early to be complacent. The outcome is still very binary. I think that cost levels are way high and the only for medium to longterm isestors to get some return clearly to shift out of government bonds and cash and start adding equity. Anathan i just wonder, as fund manager, what are you most comfortable about when you lift the lid on your full he a . What is the position you feel really good about . Look, in terms of Risk Management, i think that operation exposure would help you a lot in terms of brexit events. Keeping some duration is something i am fairly happy to do at the moment. Light exposure and active risk in terms of g 10 exposure, being fairly light in sterling is something im comfortable with. Jonathan great to have you with us. David . David coming up, one of the biggest moves in the move of generalpurpose credit cards. Costco moves from amax to visa. What it means for citibank and its customers. That is next on bloomberg. David this is bloomberg. Coming up, ceo and cofounder of the newest Stock Exchange, bra katsuyama. Ones aican billionaire brexit would be bad for Global Markets, not just those in the u k. Fore are very much in favor remain. It would be the most expensive divorce proceeding in the history of the world and the most complicated. U k to leave,the it would hurt his investments. Vladimir putin is considering whether to sell stakes in one of russias corporate crown jewels to china and india. The state owned oil company. It is estimated a sale could bring at least 11 billion. It is a record for disneys longawaited sequel finding dory. 136 million dollars, a record opening for an animated film. That is your Bloomberg Business flash. David thank you. Costco is getting together with citi. Starting today, you can get a new card and costco will only accept your visa card. Joining us is jud linville. Tell us about this new card. Why do i wanted . it is a great card, 4 back on cash, 3 on dining. If you are costco loyalist, it is the car to have. David what is the potential market for you . It is a big deal for citibank, we are bringing 11 cards over. It is aumers, phenomenal proposition because if you are a loyalist, you now have a great way to earn points and cashback. David give us a sense of how important this is to citi. You are pretty dominant in credit cards. Jud one out of every four dollars of revenue for citi. Is an incredibly important business. Tout 11 million new customers in the u. S. Is important. David it has not been so easy with the regulations. We are all looking for growth. What is the Growth Potential for this particular part of the business. Purchase sales were up 12 . Members, 11 million million have cars. Potential. S a big went in at three clock a. M. When we to question it. E tested david there are reports of challenges. Synchrony has taken up its reserves in the month of june. Heavy seen that . What we are seeing, as i mentioned, our spend was up 12 . Some of that means we are taking shares from other folks. Small business spending is still quite solid. Within subprime, we dont have much. David are people paying more slowly . Paydown rates,en people paying down their bill in full, continuing to rise. Across the industry, for portfolios fixed on mass market and above, youve seen it the lowest it has been in 30 years. David what sectors have benefited . Jud discretionary spend is still strong and it is probably a sign Consumer Sentiment is still high. We had not seen that before in our portfolio. Lisa was not accepted and now we have opened to be suspense, it will be very interesting. David how did this come to you . These deals are big and complex and years in the making. This was a lot of work understanding the costco mission and quality of goods and services at the lowest will prices. Management. G the understanding how it delivers for the members, they are immensely committed to their members. Make thew did costco decision . Are you bidding, is it relationship . Heard several people describe it as price. They do not get it. It is how you construct the right products, how you build a partnership with visa and costco and citi. David this works beautifully for you, a total win. What does it look like in two years . It, i think everybody sees there is an incremental upside. 51 million costco members, a leather million are onlying a credit card 11 million are carrying a credit. Card. David that is jud linville. Jonathan great interview. Coming up treasury yield, bills flatter. Global yields flatter. Stronger pound dominating the fx market as brexit chances begin to slip. David this is bloomberg. Time for off the charts. U. S. Government debt is moving in the same direction as europe and japan, where Economic Growth is stalled. Julie . We have been looking at the flattening of the yield curves. We have been looking at some of the countries we have been watching very closely. Japan looks like the flattest, there is not much expectation for growth. David virtually none. Julie one of the things you notice is germany as above zero. Red is the zero line. It has bounced back up as we see come backntiment in. If you look at the flatness of u. K. Isd curves, the flatter as it gets further out. David this is 15 years and then it flattens out. It has implications about sentiment of growth. Us aboutr tells longterm projections and says there is not a lot of expectation . On if there still debate the flatness is signaling the same thing eight used to, particularly in the u. S. Lets take a look at the evolving dot plot. This is the Historical Movement of the dot plot. It looks at the distribution of the dots, reflective of expectations for how many Interest Rate increases there will be. The media numbers are the line. Obviously it has come down considerably. You also see the expectation clustering much more. Came in as the loan dots to expect Interest Rates. David he was saying were not sure we can predict that far. We are doing things we cannot do. Julie he was quitting the he markets. Ng the jonathan thank you very much. Coming up next, Mohamed Elerian joins us looking ahead at the referendum on thursday. . C sv david referendum reversal, stocks surge and the pound sees its best day since 2008 as polls show britain leaning towards staying in the eu. Fallhan indias bonds after a surprise to pressure after one term. David all hail the king. After more than 50 years without a championship, lebron james leaves the Cleveland Browns to a historic nba title. Welcome to the second hour of bloomberg. Jonathan is in london all week as the countdown to the brexit referendum thursday. Up,than this hour, coming Mohamed Elerian will be here what aortly with postbrexit referendum world would look like. A difficult one, david. From the ceo hear and cofounder of the newest Stock Exchange in the United States, Brad Katsuyama. Jonathan lets begin with the Global Equity rally. What a move we are seeing. S p 500 futures up by 1. 3 . In london, what a rally. Look at how the pound is positioning itself, cable advancing up nearly two Percentage Points. Higher. Uch 1. 67 for the u. S. 10 year. Potential about the shift in the polls ahead of the referendum. Joining us is guy johnson and matt miller. What a subtle shift in the polls, but a mammoth move in the markets. The markets were to cheering for a sign that the final week was going to deliver what everybody would expect, a move back to the status quo. That is what we have seen today. Morgan stanley a couple of days ago said were going to kick it up. One month and one week, what you saw were extremely elevated levels, a retracement today, still extremely elevated levels. There is no complacency today. Look at the onemonth risk reversal in the pound. In the blue one week, in the red, the white is one day. We saw the move on friday. Friday morning, we saw the risk on trade kickoff after the tragic shooting of the labor mp here in the u. K. Starklys shifted the over the weekend, 10 Percentage Points. Today was surprised about , the Prime Minister here, David Cameron, came out so aggressively out of the gate. It may be struck too much of an aggressive tone when attacking the brexit camp this morning, because i do not feel like a lot of people are going to change. There are only 1020 that is the critical bit. It is the undecided. Crucial. Re the last week is when you see a swing to status quo. Jonathan i was talking to tom keene about this. , there vote to remain are problems if they vote to leave. If it is tight, there is still a Big Conversation to be had. On, itink, as we focus is going to be the market volatility that is absolutely massive. The move is going to be asymmetric. What were looking at today is a move on the upside. That is the smaller of the two portions of this. Believe, theg to move will be massive. It is already asymmetric. The risk on trade is big and equities are up big, but you dont see a huge up flow from bonds. A slight move. Take a look at the yen, everybody was in it for safety. It is weaker today. It is still very strong against the dollar. Jonathan what have heard repeatedly since i touchdown in heathrow is the auctions on cable and Downside Risk on the pound is still very much there. Maybe people feel more comfortable about a shift. I dont think anyone is taking that off soon. Obviously it is less expensive to put some of those on. Of the risk you are putting on the table. It is less. That is what you would expect. It is the symmetry of the story that is happening. Of course, you want bigger downside protections because you want to pay more for the downside protection, particularly on sterling. Is in favor of people buying down on protection. I think that is going to change. I totally agree. The downside is huge, the upside is not big. You have been hearing that from the campaigners. We aree is a brexit, working this weekend. We are staying. If they choose to remain, there are a couple of things to sort out, but there are things to sort out anyway. Dont think anyone is sleeping in the city thursday night, are they . Thank you. David we are joined by Mohamed Elerian. Welcome back, good to have you here, particularly this week to i want to put brexit in a bigger context. We referred to the junction are coming to, where we have to make basic decisions define where we are going globally in terms of economics. Where does brexit fit . Mohamed we already have fluid conditions, the yen at 104, and now you start putting a big . On the institutional structure, particularly in europe. All of this is an indication when you want an economy at slow time, strangeong things happen and strange risks occur. Brexit is one of them and the antiestablishment movement that gave rise to it. Defensivethis a decision or offense of . . They stay in the eu, do they go to the rights and growth . Mohamed it avoids the left, but does not take us to the right. He still dont solve the fundamental issue. Lost an ability to generate high inclusive growth and until the west figures this out it cant, it is not an engineering problem, it is political unless the politics to up up, we are going to have uncertainty and it is going to stay with us for quite a while. David if you are a european leader, im glimmer go, mr. Toeron, what would take you the right to get inclusive growth going . Mohamed invest in infrastructure, labor market reform. To theetter the will wallet to spend. Complete to the european structure. 1. 5cannot run a eurozone on legs of a stool. You have to complete that, fiscal and political integration. Of the brilliant things you do is portfolio construction. Bring in your experience from the imf on political risk, event risk, and put that together for us and explain how you would construct a portfolio around what is quite clearly a huge event risk. Mohamed this is a key question and a hard one. Any Committee Meeting stay has to start with the simple question, what portfolio construction results in a mistake we cannot afford to make . We are living in such an uncertain times. What the six can we afford to make what mistakes can we afford to make . Fromtions are starting artificial levels. You have uncertainty on top. Response to that, ahead of thursday, if you are sitting around the table, where would you go for the hedge . What kind of conversations would you have . I would look at the extent of the correlated risks we have in the portfolio and high cashs a cushions, as most people have. People are defensively positioned for this. I would look for how much cash to we have and how much agility do we have to move quickly. Thursday and friday are going to be historic. David Mohamed Elerian, he will stay with us. Outside the update business world. Thank you. The u. S. Government will least partial transcripts that told lawat mateen enforcement during the shooting. Investigators are hoping to move a step closer to solving the mystery of the egypt air airplane that crashed into the mediterranean. They are preparing to test the cockpit recorders. They were recovered from the bottom of the ocean last week. In basketball, lebron james aid good on his promise two years after returning to cleveland and vowing to win at championship. He led the cavaliers to their first nba title. In the win7 points over golden state in game seven. They made history, winning after trailing in the finals. Global news global news 24 hours a day, powered by our 2400 journalists in more than a 150 news bureaus around the world. Jonathan thank you. Coming up on this program, we have more with Mohamed Elerian. Just three days until the brexit referendum. Janet yellen gives her statement to congress, that starts tomorrow. Will we hear anything new . Jonathan good day, this is bloomberg. The pound is a much stronger pound dominating the fx market, the biggest upward move on a daily basis since 2008. Lets go to the board as the polls start to slip away from brexit odds. Positive, up 217 points on the session so far. A Global Equity market rally. The pound is much stronger. Switch up the boards and i will show you what is happening. The yield shifting higher on a u. S. 10 year yield. Risk goes to commodities. Extended gains from a onemonth low. It is the fx market and volatility i want to discuss now. Still with us. N i want to put a chart on the screen and talk to viewers about the elevated levels of volatility we have seen. This is the implied volatility, the red dot is where we are now. The one inside that is the in scotland in 2014. It shows, even with the retracement, we are in extremely elevated levels, devils we did not see in the depth of the financial crisis. What is your take away . Mohamed it is a specific issue, brexit fundamentally addresses the uks trading relationships and therefore fx prospects. That is understandable. Lets remember this is happening in an incredibly fluid Interest Rate world. The fed is giving different guidance on where it thinks rates are going to be, depending the week it of is. Janet yellen is going to have a hard time in congress. Is the fed inconsistent, or, in my view, is it overly data dependent . You are going to get fx volatility in a big way. The question is if that then imparts lots of genuine volatility on to other Market Segments that have their own implications for price action. Jonathan there has been massive discussion about liquidity in a market, specifically more so the bond market rate the fx market is highly liquid. You are looking at the pound versus the dollar. The expectations if the u. K. Eu, you could see a seismic move in and fx market. Talk to me about Market Structure and the ships we have seen. It is something you have spent a lot of time on. Mohamed the main thing to remember is the structure of the markets. In the old days, the dealers were big and the end users were relatively small. With a change in the paradigm, the middle has shrunk by regulation and Market Forces and the outside has grown as more money has gone to Asset Managers. When the paradigm changes and everybody looks to go to the cope. , the pipes cannot that is why small events can cause such large movements. Most professional traders understand that and add a liquidity premium to this. I dont know if the Retail Investor does. David in response to jonathans question, you said that the fed is to data dependent. Focusing on janet yellen, is it with theg that ability markets and congress . If so, what could she do to regain that . To maintainis hard credibility if the signals to give to the market changed so much. I have sympathy for the fed. As fed is trying to be honest and transparent as possible and because of that, it is being accused of not just inconsistency, but a slave to the market. For the fed tois have conviction in their vision and start guiding the markets rather than overreacting to shortterm data. The continues to react to shortterm data, it risks becoming japan. You are the reverse of looking far . Mohamed we know we are stuck in the low growth equilibrium and the pressure and tensions produced are becoming quite noticeable. A range ofks live in being effective, ineffective and counterproductive. A key issue is credibility. I think the fed has a difficult time. It is better off than the bank of japan. At the bank of japan has become either ineffective or counterproductive jonathan . That is a big statement. We will continue that conversation. Later on the program, Brad Katsuyama sits down with bloomberg. It is an interview you see first on bloomberg. Plus, volatility surging to the highest level in four years. How the market looks following the brexit referendum. Kit jukes joins us for what he sees in the fx market. David this is bloomberg. We are back with mohamed we went to pick up on the last point you made, a powerful point. He said you are concerned the bank of japan is somewhere between ineffective and counterproductive. Explain why that is and what they could t due to improve their situation. Mohamed with the bank of japan already in negative territory when it comes to policy rates, you have to ask the question, how has it gotten here. I dont think the bank of japan ever envisaged such a stronger yen when it took Interest Rates negative. Now, it does not know what to do. Been basically paralyzed and sidelined after such a counterintuitive outcome. The critical issue, david, is not the Central Bankss fault. They are caring a huge burden. It is the politicians that are not delivering. They not delivering the third arrow. David if they called you up and said give me advice, what would you tell them . Mohamed what i would tell mr. Draghi, chair yellen, you have to get the other elements of policymaking in place. Whether you look at japan, the u. S. , exit, what happened in india with the the pressure of the governor, this is messy politics getting in the way of the Economic Policy. Messyall about politics and Economic Policy finds it hard to be coherent. Jonathan there has been a conversation about what Central Banks should and should not do. They will keep pushing stimulus busts. Theyre going to corporate debt. Do you see anything, a catalyst for change, in japan . Real catalystnly would be structural reform. In terms of what the bank of japan will do, i suspect they will try to do qe. I do not know if they will go more negative. They will try to do more qe and i do not think it is going to make any fundamental difference to the outlook. Jonathan looking at the global bond market, david was looking at flat yield curves. Are is the message you taking away currently from a flat Treasury Curve . Mohamed the messages, dont take out the usual method. Anthe u. S. , it is usually indication of recession. I do not think that is the case this time. U. S. Rates are influenced in a major way by what is happening in europe and europe is a completely different outlook, andeen a very active ecb rather sluggish economic outlook. I can explain europe on the basis of european development. In the case of the u. S. , you cannot explain it, you have to speak to europe as well. In frontnet yellen is of congress, willis make a difference . Mohamed yes. Is there a likelihood the fed will flip again if the next employment report is strong . People want to know how deep is the conviction of this fed. Thank Mohamed Elerian, you so much for being here. Coming up, Brad Katsuyama joins us to explain how his newly approved exchange will slow down trading and much more. It is an interview you will see here first on bloomberg next. Okay, ready . Whoa [ explosion ] nothing should get in the way of the things you love. Get americas fastest internet. Only from xfinity. By switching to xfinity x1. Rio Olympic Games 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. Jonathan to our viewers worldwide, this is bloomberg go. Lets get a check of the global Financial Markets. The polls swing back towards remain for brexit. It is a market shift. Futures up 1. 2 in the United States. In london, the footsie experiencing its biggest pop since august. Switch of the board and get to the other Asset Classes. Eurodollar 114. It is the appreciation in the pound that is a dominating the effects market. If we close like this, biggest pop since 2008. Treasuries last week, some of that coming out, yields higher. 66 is the yield as market moves cross asset brexit odds start to shift a little bit. Here is first word news. Republican president ial candidate donald trump considering whether to shift his strategy. He meets with his top advisers today. Trumps inner circle is frustrated with a lack of communication and coordination. There is growing impatience because he hasnt filled key campaign roles. In italy, a setback for Prime Minister matteo a renzi. Virginia iraqi will be the citys first female mayor. A five star candidate with the elected mayor of turin. Comeback by the golden state beating the golden state in the nba finals. The cavaliers are the first team to rally from a three gamesone deficit to win the championship. Points es had 25 in 27 points. Global news, 24 hours a day, powered by 2,400 journalists in 150 news bureaus around the i am a much andre. David . David a big win for the heroes of flash boys. The ie x group gained approval to become the 13th official Stock Exchange, one that hopes to shield the risks in highfrequency trading. Bloombergs editor at large is live with the ceo of ie x group and you will see him first here on bloomberg. I am here with brad Mohamed Elerian Brad Katsuyama. X receiveid ie approval from securities and Exchange Commission to operate and exchange, it received unconditional approval. Why is the unconditional part important . There was a lot of speculation about how we would be approved. Having an additional approval means that it is much harder to get people to buy into the model. They are not sure if it will exist in the future. Having it on the way it was done, we couldnt be happier about that. Teams a big moment for our and the people who support us. Part of getting unconditional approval is the protected quote. What does that mean . We are part of the National Market system. We have the best price, it is mandatory to trade with us. People are forced to connect. They have to trade with you as opposed to choosing to trade with you. Even the firms among your critics. We are a fair access market so it is their decision to connect and from the very beginning, we have been fair access. It is entirely the industrys choice whether to connect or not. We have grown to the secondlargest nonexchange and this is the next step for us to grow. Explained to people what you can do now as an exchange. Why is it important to be an exchange as opposed to what you were before . Part of it is scale. There are limits to how big dark pools can grow and we no longer have a limit to how large we can grow. The other part is competing at the highest level. We are focused on serving multiple constituents, so we look at our best relationships are with the brokers and Asset Managers but there have been a number of Trading Companies that have expressed interest in working with ie x. You have about 2 . You account for 2 of all equity trading in the United States. Where should that number be a year from now . It is hard to predict. We dont offer the same incentives as other exchanges. We are not paying people to send us orders. We have to earn those a different way. Part of those is people understanding the execution quality on ie x. A lot of large Asset Managers have expressed higher execution quality, so it takes time for that message to sink in. It will take some time but we are confident that we can become one of the largest markets. Your critics are vocal, powerful, and deeppocketed. They include citadel, nasdaq, and others. How do you expect them to respond . We have seen a lot of the strategy and the strategy was to aggressively oppose. Public investors, which forces the opposition to be public about why they didnt support idx despite us being backed by some of the larger investors. Part of this was about misinformation. We read a lot of things that werent true and we expect that to continue. Outcome, influence the which was iex getting approval to become an exchange. Nasdaq and others have threatened to file a lawsuit challenging this decision by the sec. The fcc. How are you preparing for it . It is hard for us to comment in particular. From our standpoint, it is is a companyasdaq that actively pitches the fact that they are a Technology Company they pitched disruptors in Silicon Valley and this is their response to facing disruption themselves. We would be surprised if it took that pass but at the end of the day an empty threat in other words . It is clearly a threat. Whether it is empty or not we will see. It is an interesting response. How about this other potential response that other exchanges there are 12 of them might set up their own speed bumps. You have the bump of your own, which will draw to your exchange. What do you think they will do the same thing . Nasdaq owns three, thats owns four. It is odd to set up a speed bump competeand i think to in a genuine way, you have to look at what they do principally overall. It is about Investor Protection or the things that we have done . The order types and these other things . Doing it in one of your three or four markets, that is not an approach they would like. When you look at the way they make money, makertaker is a huge part of the Exchange Model but they earn more money from selling speed than from actually trading. To set up a speed bump means that is not your priority. Be, again, we will see how it all plays out but we hope people can see through lipservice. Now that you have this approval, you are going to get your exchange up and running in midaugust. What is your next ambition . We are focused very much on u. S. Equities. We will make sure we are ready for a long and drawnout out battle because that continues to be our primary aim. We have looked at other Asset Classes and geographies but our goal from day one was to get it done right here. Expansion is a possibility that we really dont want to. What would be the next logical step . This is all for us to look at in the coming months. There are other marketplaces and other things that have popped up. Devoid ofhe market is trust in different markets. Where . I dont know if i could say exactly where right now but there are some things in the works. I would look forward to when the time is right. Are you going to go public . There is no plan on that in the near future. It is about being focused. We will have to think about in the future but it is definitely nowhere on our radar in the near future. We are focused on watching the exchange and working with our partners to continue to grow. Great to have the opportunity to talk to you. Avid, that is Brad Katsuyama he is trying hard not to get too far ahead of themselves. David thanks very much. Facebook is holding its annual Shareholder Meeting today. Lets bring in tom giles, executive editor of global technology. A lot of news has been about this new class of shares. Explain what that is. What this does is this gives facebook the opportunity to issue 5. 7 million shares in a 31 shot stocks chair. What this does is this ensures Mark Zuckerberg doesnt lose his control of the company as they issue stock, lets say for acquisition or compensation. Those new shareholders that doesnt dilute his stake. So you get economic interest . Absolutely. Proportionally you get some say in proxy votes, which is important, but you are never going to be able to kick him out of his job. David this is Mark Zuckerberg saying trust me, let me run the company. So far, when you look at the performance of the company, they turned it around in mobile. They said we havent quite mailed our noble our mobile strategy but we understand how it works and they delivered results. Ever since that didnt, you have seen stock perform really really well. David timing is everything. Tell us what else we might expect out of a Shareholder Meeting. There could be some debate around this, some question about the longterm. What facebook wants to deliver, whether they talk about it today or in future calls, he issued his 10 year plan for the company. Very ambitious. They are monetizing advertising and social media. In the future they have more they want to do. They are already working on this messenger bot, this ai fueled tool that will help you interact people. Ebook and other theyve got instagram. , they aret whats app delving into virtual reality. Mark zuckerberg has a plan to connect the world with the internet, he is running the trouble with that in india, so that is what he is spending a lot of his time working on. He wants to return 99 of his wealth back to initiatives that he and his wife believe in, including during world diseases. David thank you very much to tom giles. Bloomberg news executive editor of global technology. Coming up, global currency with more last week then the last year. Joins us next to reveal his forecast for the pound. David this is bloomberg go. Hour, up in the next capitalist mark mahaney was tell us what he expects out of the facebook Shareholder Meeting. Plus which tech stocks he likes. To the fx market we go. Volatility and currencies reaching the highest level since 2011 last week on brexit concerns. Oining us is kit juckes still, i have set up for the last few hours, we are at incredibly elevated levels still. Various things going on, thoughts that the dollar was giving up the ghost and yen buying, but the brexit story of the u. K. Referendum generally has ceased to be solely about the u. K. It has been a much wider risk. In amsterdam and regret, the impact on Spanish Government bonds and Eastern European pharisees and yen european currencies and yen. Jonathan i am reminded of a phrase of yours, trades coming off rather than coming on. It is hard to gauge the nature of the traits that are going on today. The positions are rolling over quite fast. A lot of people got very frightened last week that it was very big in the market and you can see that at the end of last week, the pound was stabilizing. In that sense, when the market couldnt get more short or the shorts couldnt get more traction out of the polls favoring the leave campaign, those are the positions coming off. Jonathan they think it is all over. It isnt yet. It isnt over yet, is it . It is not as dramatic as the price action we have seen today. The polls are dead level. And neck. K for the last few days, it was peoples wallets who spoke over their hearts. The wallet often has the last word in many peoples decisions. People betting on remain are concerned with. 95 of the bets that have been taken by book makers are on remaining so that is what is pushing in of people to think this could happen. Weve never done one of these before. The margin of error is big and they are dead level. Jonathan the conversation ive had over the last few weeks is asymmetric risk. The downside are potentially a lot bigger than the moves to the upside. With that in mind, even with the polls, what you see is risks to the downside much bigger than upside potential. I thought the nearterm risk had become more symmetric because once i got bond yield solo, we will put that asymmetric risk back because as soon as those bearish or negative bets came this morning, i agree. There are a lot of people buying yen on the back of this. There are a lot of positions that i see where the euro is growing, the yen is growing. Euroyen is going to be bought in sage markets. I think people are trying to have trades of that nature, possibly some buying in the old market that looks like it would be an ok that either way. Big that there so idea that there is anything that is fine either way, jonathan from one of the major banks, take the cash shorts off but leave the options on. Is that when you would prescribe . If youve got bets on, take some off and if youve got your options on, then you are winning already. Bet now,now to there is not an easy volatility trade. Jonathan what is the stockton guide to getting thursday night . Dribsre going to get drabs of results. Some of the voting comes out early from areas and we will know age groups. I am going to infer with tiny confidence that i would very much like to get some sleep before i find out something more solid. Jonathan one thing i can guarantee is kit juckes will be getting no sleep. The Global Stock Markets rallying on recent polls pointing to the u. K. Remaining in the European Union. We show you what is happening next on bloomberg go. David this is bloomberg go. Time now for the battle of the charts. This is the first time we have had judges on two continents. Julie hyman . Julie i was determined to not talk about brexit this morning, so this is a brief shining moment of nonbrexit related talk. Im talking about the s p 500 bond yield. This is what sean darby pointed to this morning. Year rollinge basis and it looks at percentage changes and correlation between them. It goes back to the mid70s here. It is a negative correlation most of the time. Bondu saw stocks go up and yields go down or vice versa, in the 2000s we saw that turnaround. We are near highs at this point in terms of the correlation. He thinks that is not necessarily going to last. This is one of the reasons he said investors should be concerned about longterm equity returns. Whats that correlation. David money is not coming out of stocks and bonds or vice versa anymore. I am looking at brexit odds. The market moves were so drastic this morning even though we get ready to open here. Looking at the s p, euro stocks, and the nikkei, looking over the s p futures, the brexit odds you can find this on the terminal you can see this huge move down here. It makes me wonder what we are going to see over the next couple of days if they remain in the eu. Are going toat we see everyday, this is huge. David that suggests it wasnt just a poll over the weekend. It started before that. I am voting for julie because i like this idea of correlation of bonds and stocks. So john . Brexit chart did a without realizing it. Julie with awith little asterisk. Coming up in the next hour ago, mark mahaney joins us to reveal his expectations from facebooks Shareholder Meeting. A global risk rally. We continue the coverage right here. A shift in u. K. Voter sentiment to remain in the eu is driving markets higher, sending the pound up the most since 2008. Jonathan oil is searching for a second day in a row rising from a onemonth low last week. Facebook ceo Mark Zuckerberg meets with shareholders today at the companys annual meeting. Up for a vote . A new class of shares. We are now just a little under 30 minutes away from the opening bell in new york. I am david westin and Jonathan Ferro is joining from london. Jonathan what a week we have lined up. We count you down to the u. K. Referendum and what a way to kick off the week. Futures firmer, much much firmer. Approaching the cash open in new york city, dow futures up 216 points. S p 500 positive 1. 29 . The ftse up three Percentage Points. If you want to see a oneday pop, go to the fx market and pull up the pound against the dollar. 1. 46, 52. The biggest oneday gain for sterling on a percentage basis against the dollar since 2008. 10 year yield up five basis points. There are the big market moves. Here are the three stories right here and right now, beginning with number one. Brexit driving markets higher and all highs on the yellen testimony all eyes on the yellen testimony. With us to discuss it all is Oppenheimer Fund Portfolio Manager alessio. Our first story is in the u. K. The remain vote is swinging three points ahead of the leave camp in a battle for britains future in the European Union. That shift is driving markets higher with the pound jumping the most since 2008. A lot of people, yourself included, have constructed portfolios for the risk averse. Has the story changed your mind . Story isekend highlighting that the Market Reaction is in line with what he would have expected. You are seeing a percent of historical volatility. The fx markets are the ones that are supposed to react the most. Have structured our portfolio to be resilient to either outcome in the nearterm by buying some hedges on either direction. The reality is we didnt see brexit to be immediately in the short run a systemic event because even in the event of a leave, it would just begin a two yearlong process between the u. K. And eu. We have structured the portfolio to be fairly resilient and focus on fundamentals but the reaction today is what you would expect. David we are already seeing a reaction going towards risk. Would vote is to remain, you expect that to be a further pop in the riskier assets. We will continue to see a pop in risk assets . Friday, we have seen a generalized improvement in Global Growth momentum going into this referendum. Regs it was holding back the ability of Financial Assets to rally to reflect that mediumterm sentiment. On the currency side, we know has the shift from the fed the potential to weaken the dollar in the coming weeks. So a remain vote would probably fuel more dollar weakness, more emergingmarket fx than equities outperformance. The question i would ask is a question i asked the guest earlier in the day. A 2001 cash allocation high i would wonder whether post breaks it changes anything at all . At the end of the day you will remain an environment where valuations are fairly expensive everywhere. Cost stands on a global allocation for you. All to remain in the event of a remain vote. David what is your immediate toction if there is a vote remain and risk assets will continue to grow . My first desire would be to probably reduce the long dollar exposure. Having we have already expressed an over emerging market equity as the beginning of a longterm trade versus developed markets. What we would do is look for tactical opportunities to add to that risk on trade between aem ndm. Between e. M. And dm. Tomorrow, janet yellen has to capitol hill for the first of those two days of testimony. Investors are going to be playing be paying close attention to what she has to say about the u. S. Economy. Looking at this, one of the what she this is would respond if these numbers pop back up . What do you think she will be saying . I think she will hint the need for more than just one pop in the unemployment peril number but regardless, i think she would try to communicate to reiterate this dovish into iteration. From the fiveyear forward metric in the market to the consumer surveys, the longterm michigan expeditions, everything is coming in by half a percent. This is not supposed to happen at a time when the Unemployment Rate continues to fall and oil prices are rising. Already, the way these relationships are working is not intuitive. I think she will reiterate that we remain in a hiking bias but that these will be extremely gradual and it is going to be a tangle with the market. As the dollar weakens, they will be no room to hike one more time but the market will respond and the tangle will continue for a long time. Jonathan much has been made call,usly of the bernanke the yellen call, the idea of what you are talking about. The markets rally and the Federal Reserve may then step in and tighten. . E make it too much unfortunately, we are in this reality and the fed is ox in this reality and that would make complicated. More low, that rates remain when the market will take when the economy will roll over and the market will follow there is not much we can do to offset that unless we talk about unconventional policy measures. David if you got to ask a question of janet yellen, what is the one thing you would like to know from her . How is the fed thinking about this disconnect between folding falling Inflation Expectations and a time when all the easy to grasp indicators such as the Unemployment Rate are suggesting we should be heading at least stable Inflation Expectations if not rising. That is what i would ask. Yellen to the politics of d. C. , the race for the white house. Rough couple of weeks for the Trump Campaign, he is meeting with top lieutenants to plot his path forward. A recent number of missteps has staff and donors complaining they arent organized enough at a critical moment in the race. The politics of the u. K. Is one thing, the United States is the next event risk on the horizon. We spent the morning talking about high implied volatility and the question of whether this goes away with or without a brexit. Is the u. S. The next thing we spend too much time worrying about . Election is less of a clearcut driver of markets than something binary like exit or the greek referendum. If you were to come towards that election with a very close somewhatyou would have of a risk premium. No politician really follows the script of the campaign but if we were to take prompt at his word, we would be going into this trade,n with train protectionism, the threat of renegotiating trade deals with the largest trading partners of the u. S. If that was true, economic script would tell you you see a folding dollar because protectionism is bad for the u. S. Dollar. You would see rising expectations in the longhand, a steepening in the yield to build risk withction are a our largest trading partners such as china and mexico. But it is a stretch because this is not something that happens overnight and it is not clear that a politician would the able to follow through on these kind of threats from day one. David are the markets reacting the way they would in another president ial election . Volatility within the Trump Campaign, reports just today that senior people within the campaign are sitting down with trump today and saying we have some problems. Do we not know what would happen . In theory they would but at this stage in the cycle, and given the other matters on the market, i dont think this is something the market is worried about. David lets head over to julie hyman. Julie i want to start in europe canuse then we can we extrapolate. Travel and leisure stocks are leading the games as we see Financial Services and insurance banks but it is interesting that travel and leisure are leading. Thomas cook is a prime example. Here we have the stock today up by 8 . That is feeding through to the cruise lines United States and the premarket. ,eve got Royal Caribbean carnival, and these particular benefits. A lot of folks went to see finding doremus weekend finding dory this weekend. U. S. Andllion in the in canada. I am sure this is one of your regrets of not being here in new york and you didnt get to see the movie. The one thing i was thinking about was the fact that it was raining here in the city and it was missing the premier. Lets get some first word news. Investigators are hoping to move a step closer to solving the mystery of the egyptair plane that crashed into the mediterranean. They plan to test the memory units of the flight recorder. It was recovered from the bottom of the ocean. The u. S. Government will release partial transcripts of calls between police and orlando shooter omar mateen. Attorney general Loretta Lynch will go to orlando tomorrow to meet with victims and be briefed on the investigation. In cleveland, they have waited 52 years for this. Lebron james leads the Cleveland Cavaliers to a 9389 win over golden state. It is the city of clevelands first title in the major sport since 1964. They battled back from a 31 deficit. No other team has ever done that. Global news, 24 hours a day, powered by 2,400 journalists in 150 news bureaus around the david coming up, facebook shareholders me today. They will be voting on a new class of shares. Brexit sentiment is driving the markets higher. The cofounder of the leave. Eu website will be joining us here on bloomberg go. David time now for features in focus. Crude gaining 2 this morning. Joining us now from the cme is scott bauer, Senior Market strategist. Tell us about what is going on in the markets. Is this brexit . It is all brexit right now. In the last week, we are going to see oil trade not on fundamentals but on brexit. Seeing it you are today is all the positivity that there wont be a brexit. There is more risk aversion to this market place right now. What you are going to see is an opportunity for investors or actually get long oil on any sort of get that we are going to see if rex it doesnt happen. David how cheap could it go on about to leave. 46 will be the next stop. Will you will see big buyers coming in because again, the oversupply issue, that is kind of balancing out now. We need to get oil trading back on its own merits rather than on brexit. You will see the gut reaction right away on any sort of brexit dies down,verything once the shakeout falls out of that 43 and a half44 level. Brexit, i would expect that we see oil shooting on a big rash move to the upside. David do the fundamental support that 5354. A balanced now between supply and demand which is what we want to see and that is what it has been shifting to. Soly off the last month or and we see high demand. The prediction is for high demand going into the third and Fourth Quarters this year. One it starts to trade back fundamentals, we are going to see oil at least maintain these levels if not shoot back up over the. Coming up, he is known as the bad boy of u. K. Politics and the cofounder of the leave. Eu campaign. Eric banks gives his reasoning on why a brexit should happen. Jonathan from london and new york, the Brexit Debate dominating Financial Markets. Odds of a brexit slipping over the weekend. Equities reacting. Futures high in the United States. Footsie in london the biggest top by august. A stronger pound story in the fx market. The biggest oneday pop since 2008. Andd high in the u. S. Less crude 4890. David cameron try to capitalize. N the recent camps he voiced his prostration with the lead his frustration with the lead campaign that leave campaign. Turkey is going to join the eu not true. Give 350 Million Pounds a week to brussels not true. If we want to vote to leave, lets vote to leave but not on the basis of three things that are completely untrue. For more on the argument to cofounder eric banks. A lot of lies apparently. What is your response . Is that wrong . There wont be an army . Turkey one join . In response to turkey, they pump lots of money into getting ready for membership. They clearly have an intention to bring turkey gain. Turkey in. There are refugees in turkey and turkey will use it as leverage to speed up the accession into the European Union. People have talked about a shift in tone following the tragic events of last week that you see Prime Minister cameron you at one point had a look at the orlando tragedy and said that and happen here if the u. K. Exited the European Union. Do you think those help the debate . I think it is wrong to shut down the immigrations debate. When we pull people it is the number one thing people are concerned about does coke, four our hospitals and services. It is wrong to shut down the debate. The situation in europe with borders and immigration and what is happening are Major Concerns to normal people. Jonathan if you look at sterling and the footsie, the trillions of dollars that see it as a dominant risk. You see the move today on a swing back towards remain. What do you say to the investors . First of all, of traded currencies its wings up all sorts of days. I would also say be wary of the polls. We are doing polling that shows the leave campaign as very strong. How are you gauging . Up to 10,000 people. When we first started, we hired a big firm in america and they actually helped us with social Media Outreach and how we analyzed things and immigration remains the number one issue. I am not hearing much about the postal vote. Grapevine is strong for leave. You they knowls what is going to happen, they are lying. Jonathan the polls could be wrong. Is it right to perceive it as a risk when leave leads in the polls . You report this all day long. You got negative rates of return, u. S. Bonds, record low deals, Interest Rates zero or negative. Something is wrong in the financial world so if it requires exit to pointed out, i would say there is something wrong with the whole system. Jonathan you dont think it is a reflection on the u. K. And the future . It is a reflection of how weak the Economic System is. Jonathan ahead of thursday, are you still feeling confident . I am buying gold. It wasnt to do with brexit but huge amounts of dislocation in about every asset market everywhere. Jonathan great to have you with us on the program, thank you. Coming up, is the market open at new york city . What brings it risks are sliding. How market risks are reacting. Jonathan i and Jonathan Ferro. Is the market action. Futures are looking solid, up by one percentage point on the doubt. But wise on the s p 500. You hear the opening bell and look at the session and how it develops in europe. Ftse 100 up by a full three Percentage Points. Board, look at the action in the fx market. A much stronger pound. You have seen it become highly correlated with risk more generally. Polls are swinging, a big shift in markets. Over six basis points higher on the 10 year, 1. 67 . Low, 1. 8 oming on a at 48 and . 85. Strip it back. Every single Industry Group here in europe is gaining. What are you seeing in the u. S. . The rebound extending to the u. S. As well as futures indicated. Major averages are higher and the nasdaq in particular has been on leading the gains. Just out of the gate this morning, the down the s p down by. 9 . It is likely to be a broadbased rally in the u. S. In the early part of the session. Still a rebound effect coming from pulling out i want to look at teachers as well. Steady still seen a climb and gaining strength. Gains, we with earlier at the cruise lines. Earlier at the banks, we have seen a big boost in european banks. Bank of america, wells fargo, citigroup all rising this morning. Back toward 50 per barrel. Analysts saying this morning that 50 is a base case we will see rally beyond this level. 2 . S up by an individual stock is lending stock. Ever since they left the company amid concerns of loans there. Boost despite a company affiliated with it upping their stake to about 15 . An average cost of four dollars 4. 84. David thank you and we will talk about a world after the grexit vote. A manager is back with us. You see real indications of Global Growth momentum being held back by grexit. Take us after thursday. If in fact the u. K. Remains in eu, how doesn the it go back . Not believe in the first case that a grexit event, despite the first month volatility, we do not see it to be this cascade effect of. Ystemic risk of trade flow it is just the beginning of the twoyear yearlong process with the eu. With the eu. On the core of the portfolio around the longterm fundamentals. Roughly neutral. We have expressed positions overweighting emerging markets equities. David you are overweight emerging markets. And develop markets both equities and fx. A series of metrics such as relative equity valuations. The current cyclical momentum that seems to be favoring emerging markets, hanging on the faith of the china credit boom and how that has managed in the few months. Secondly, how do we handle grexit as a risk . It is on the Risk Management side. We have hedged all of our british pound exposure. We underway the euro almost entirely. Duration side. On the bond side, if there was safety. David we have an allimportant vote thursday and we are focused on that. When you talk about larger , how do issues, china you build your portfolio to make sure you protect yourself and take advantage of that . On a tactical market side, which i focus on, we try to get right in the equity markets, in the three to 18 month time. Period. We are seeing a cyclical and a massive credit stimulus that happen in q1, which is still helping the economy. What were seeing most recently improvement in the developed world momentum. That may help left the overall sentiment from a global perspective. We monitor very carefully a series of indicators both shortterm and lower frequency indicators, telling that someones financial instability is beginning to emerge. In china, you monitor Corporate Bond spreads, you monitor property prices on the property sector. The Wealth Management products pace, beginning to impact the banking system, in our opinion, you want to be along the integrating of the emerging markets cycle, you are paid to take risk, and until it proves you wrong, you said youre really inerested in an upturn emerging markets. Not all are created equal. We are particularly interested in some of the countries that offer currency and equity valuations. Most of the doing commodity countries such as brazil and south africa, colombia, chile, and south asia. The Commodity Exposure is embedded in the currency, which you can play. In the edge and hedged equity market, they have been dramatically impacted to the negative sentiment overall around these countries. These are the countries we like to overweight. You are getting paid double digit yields on the currencies. Hedging is not appropriate at the moment and the picture is beginning to improve. You see it in south africa and brazil where we are dealing with political risk. Off are no longer falling the square off the cliff as they were a few months ago. Wanting to improve. 500, the the s p biggest in four weeks. It always strikes me that we look at the emerging market risk and people are increasingly comfortable with the risk associated with e. M. So as confident even less the week progresses around developed markets. I wonder why that is and if that will continue . Maybe the complacency is emerging markets because people are so concerned about what is happening in developing markets . It is an excellent question. Part of the reason why one has show nervousness is evaluation. Everything is functional, the risk you are taking is a function of what price you are getting in. In developed markets evaluations, things are on the expensive side. It is difficult despite our positive nearterm growth momentum, it is difficult to see a meaningful rearranging of property markets and emerging growth. Be on neutral to ,asis on a market level risk the upside that you can see in developed markets is very little. Then you at all sorts of unknowns such as exits for allergies around the fed, and japan andes europe are materializing. The political risk. Brexit, we may pass this event. The socialiable momentum is there. A lot in europe and you saw it even with elections this weekend. The Antiestablishment Party 12 major cities. Won two major cities. This does not work and change is needed and that is what is causing difficulty in the developed markets. It sounds like you are talking about emerging markets. Ask is whethert you can get a decoupling with development and risk rally in general. I have been thinking about the risks and in my head, i think eventually the china risks will materialize. When the developed world rolls over and goes into a recession, which is inevitable. The Global Economy is synchronized, despite good global momentum in the developed markets. Could we see a contemporary time of a couple of years when emerging markets take the lead despite developed markets not going anywhere . It is possible but once they in ther, i am afraid emerging world, they will also come out. You onn great to have the program. Really appreciate your time. , shares Mark Zuckerberg will be put up to a vote. Big moves across the board. Day, 29. 6of the , asen percent depreciation Nigerias Central Bank faces a 16 month long currency six. If you want to fix the currency weakness, go to nigeria. David coming up, u. S. Trade representative michael on what a grexit could mean for trade in the United States. We are about 14 minutes to the equity markets session in the United States. Gains across the board following from europe. Isry single Industry Group marching higher. Bond yields are higher. Starting essentially in the same. Lace those are some of the groups helping to lead the gains here. As for individual movers, there are individual moves to us besides the macro moves moving the market. Boeing up 2. 5 after people are Company Nearing a 4 billion deal with russias Largest Company for 747. It has fallen a little bit out of favor. A couple interesting moves to mention this morning. Under armour, despite the loss of the Golden State Warriors last night, under armour who sponsors him is up this morning, being upgraded among other reasons. Thing pricing will stabilize in the Fourth Quarter and elevated promotions at various retailers related to Sports Authority liquidation parent analysts this morning, we are looking at yelp, being up rated. Bank,ime it is deutsche boosted to 33 among other reasons. Stabilize salesforce productivity. Finally, upgraded to buy, to levels and this is after an which ouracquisition, key concerns Cyber Security company. Thank you, julie. Facebook. Joining us from san francisco, mark, welcome back. Good to have you here. , cing on the agendas shares. Give us a brief idea of what they are. Be idea of whether this will approved . It is very similar to what sharesdid adding c about six or seven years ago. They give extra economic and to the majority shareholders today, which is essentially Mark Zuckerberg. To give away some of the shares without diluting voting control. An extra of shares that has which has hers super voting structure. That is the goal here. Shareholders and facebook are pretty happy. The company has done well. In general, people concerned about Corporate Governance do not like these structures. Have any of these institutions come forward to raise questions . I am sure it is an issue. We started off with an issue. A onevote, one share shareholder, you never should have gotten involved in facebook in the first place. Those were always the clasp he shares that zuckerberg had. , justs an evening night giving him slightly more voting control or troll over the company. You have always had dual with the stock. Proposedw much of this change is driven by the zuckerbergss for their fortune . I think it is a most entirely driven by that. He wants to give his his stock away over time but main Train Maintain control over the company. He is transparent in saying that. That is what shareholders were given the chance to vote on today. You think he has done a good job, do you think he should have extra Voting Rights in the future, most shareholders will agree. They already agree when they bought the stock in the first place. What are the other issues likely to arise . One is all the board of directors are up for renewal. But itay be controversy seems likely the entire slate of the board of directors will get extended. The other one that could come up, the company has laid out a fair amount of cash and acquisitions. Later, there will be questions and they put out about 25 ian in cash and at these or these. These are longterm and very interesting trends. As investors, when do we see returns on that . Important. Completely to lay out a timeline for or instagram, or do they just say to trust us . They have an thoughtful about laying out timelines, 10 year horizons. It does not mean we will see the results in the timelines. These will take many years to play out. Focusing was one of the areas for the developer conference two months ago. Also a major focus a year and a month ago. There is very little traction. This will take years to play out. Investors will want to do those returns. That is a lot of return. David thank you. Coming up will be Bloomberg Markets with vonnie quinn. What do we have to look forward to today . Vonnie a lot a on grexit, four days left. How will airbus be affected . How will things pan out there . We want to ask market little bit about other things and not just the grexit. Of course, janet yellen is speaking tomorrow. How will that impact the markets . How is he present for a potential grexit . They are slightly different from polling numbers. Voteo they see the grexit turning out . Thanks to her we look forward to that pair were talking about Donald Trumps campaign earlier in the program. This campaign issued by the Trump Campaign saying they are replacing their campaign manager. There was indication earlier therep supporters has been disorganization and a lack of medication. A statement is coming out that they are replacing the campaign manager. We will have more coming up next. Jonathan this subtle shift in the polls. Futures, that is what we got , 24 minutes into the session,. He s p 500 up as we go toward the close, we are still seeing significant strength and significant positives on the market. The ftse up by 2. 7. Very quickly, strength dominating the fx market. This move on the pound, to full Percentage Points higher. Just a little bit higher up six basis points. 1. 4 . Subtle shifting a in the polls. Momentumeen the regained. The big for anyone involved in the market thate there more pulls would come out . More pulls to come. The narrative i would suggest is what suggests that actually the following things. People ignore it and get excited about change in they intend to vote in the following way and as you get closer, they worry about risk and they go with the status quo and that is what you wonder if that is what we are starting to witness. Is not that the polls are tight from what they ares team. Were in for a big surprise on thursday. They probably like with their seeing in the polls. We have got a big week ahead. The country is consuming this, is that right . Jonathan absolutely and we will be all over it. Bloomberg markets is up next on bloomberg television. From new york, i am vonnie quinn. i mark i am mark barton. This is Bloomberg Markets on bloomberg television. Mark new polls show the chance of a grexit is declining. Since 2008, we will hear from the veteran investor. Then, janet yellen goes before congress and could yield questions mark the impending grexit vote, we will hear from the president plus