A very warm welcome to bloomberg daybreak europe. Im anna edwards in westminster. Manus im manus cranny in london. The question is of course, today is a critically important moment for the union. I am talking about the Democratic Union party from Northern Ireland meeting theresa may today. This is the linchpin of forming good government. Anna yes, indeed. Can theresa may get those 10 mps on site . She will need them if she wants to get her more controversial policies through parliament. Northern be seen in ireland as a onceinalifetime opportunity for Northern Ireland to influence the policy agenda, perhaps taxation and investment, and also influence the brexit conversation because they also wanted something that could be seen as a slightly softer brexit in terms of keeping open trade relations and keeping open the border between the north and the republic. We will talk all about that. We have a great guest to talk to us about that. Theresa may, focusing in on this d. U. P. Meeting, after that mea culpa yesterday, where she took responsibility for the mess that was created around the election. Manus, we have seen this tech sell off. It sort of came like a a little bit from the blue. This is the technology fund. The ticker on it is xlk. What you saw here was the worst week of outflows in 18 months. That is the money coming fast and serious. Rattled by the move on friday and the money just literally whips on out, 737 million was drawn last week. 560 million of that went on friday, the most of any of the u. S. Equity lifted products. This is relative to the s p etf. It is the third highest for the etf since the start of 2015. Definitely we have had a moment so,essation and hostility there has been a flight cessation in hostilities on the tech side. Lets move over into the risk radar, because it has had a nice impact in terms of the msci. Just easing back a little bit. The nasdaq had its biggest two day drop since september. Semiconductor also getting a little bit of reprieve, but check out the canadian dollar, extending its gains. One of the strongest performers in the g10, hawkish comments coming from the. Deputy governor. They are going to assess whether all the considerable Monetary Policy stimulus currently in place is still required. Lets have a look at oil. We have a nice chainge around in the oil complex. We are waiting for the inventories today. Oil etf, as the market dumped last week, we some money come into the etfs, nearly 270 million, the largest inflow into the oil etf. And we have the fed meeting today. The gold market is really just on a little bit of a shaky footing at the moment, the longest losing streak in him of three months. That is the state of play on the markets. Juliette saly has your first word news. Reporter thank you. Euro denominated derivatives may be forced to relocate to the European Union after brexit. A person with knowledge of the matters set under the proposals to be rolled out today, some seemed systemically important to the european Financial System and could be subjected to direct oversight by the eu authority. The Trump Administration has laid out its highly anticipated federalich urges overwrite loosening grading rules and tearin back the powers of the watchdog. Donald is planning to scale back his predecessors effort to open cuba to tourism and trade. The the president s advisers says they are preparing options, including new limits on American Travel to the island and restricting partnerships between u. S. Companies and those with ties to the cuban military. Final options have not yet been presented to trump, though he is expected to make a decision on friday. U. S. National Security Agency chief mike rogers met behind closed doors with the Senate Intelligence committee. Senators made clear they want him to answer questions about any possible interference by donald trump with the fbis investigation into russias role in the election. Ist came as Jeff Sessions expected to appear publicly today before the panel to explain his role in the firing of james comey. Qatar has struck a defiant tone as the crisis in the gulf ended a second week with no sign of a diplomatic resolution. The foreign minister expressed his governments frustration at not receiving specific demands from the saudi alliance. The finance minister and the central bank said they could defend the currency and economy, while the head of Qatar Airways accuse the u. S. Of exacerbating global tensions. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. You can find more stories on the bloomberg at top. Reboundsian markets today, those tech heavy indexes, like the hang seng and cospi all doing well. Australias asx 200, leaving the gains by 1. 3 . It does not have many tech stocks, that we have seen good buys coming through. Looking at some of the stocks in hong kong rising the most in two months. There is a lot of speculation this could be the next short target. Lg display coming back 7. 5 higher in korea. Focus in resorts is in sydney after the Gaming Company says the employees who have been detained for some time have officially been charged and will face the Shanghai Court on june 26. The pboc has changed the way it has been fixing the yuan. Detailart shows you in how we are seeing the gap close each day. Gap you can see reflected here shows the countercyclical factor has been introduced in the new way the pboc is determining its fix. Anna thank you, Juliette Saly. Lets talk more about the u. K. Toresa may has apologized her own lawmakers, as we said at the start of the program, for last weeks election results. She will stay on only for as as she is wanted and she signaled she is willing to have a meeting, as far as brexit is concerned. She is set to meet with the as e d. U. P. Today to secure the boat votes needed. She will then go difference to meet with president macron. We are now joined by chris wyllie in the studio, with manus on set. I want to ask you a little bit about this rethink on brexit we are reporting today. She is looking for a National Consensus, whatever that might be. Are you excited by this idea that we could have a slightly softer brexit, or do you think a softer brexit is another name for a have your cake and eat it wish list the u. K. Will never say yes to . I think they have cast a pretty clear vote that they would like a softer brexit. Last week, as we were moving toward the election, we saw this narrowing in the polls. Meanuestion, what would it if there was a Hung Parliament . It would mean a much weaker pound, but we were not so sure because we thought people would look to the other side and conclude a softer brexit could be in the cards. I think the markets would like to see that and we certainly see it from the business community. We see unity there, pretty much, as far as there is any unity to be found at the moment. And they are beginning to lobby much more strongly and cohesively than they have in recent months because they feel the door is now open, where it was not before. Manus the other phrases used in the story overnight, i speaking with a National Consensus, to that end, looking at what a softer brexit is is a discussion on its own, but to seek a National Consensus, what does that take to materially shift this above 1. 30 or below 1. 25 . That is what i want to know in terms of the movement of the market. I think what would get the aund above 1. 30 would be reasonably stable conservative government committed to a soft brexit. That is what the market would like to see. Unfortunately, there is significant doubt. Where it gets really complicated is if you start to think of maybe a labour government, which is no longer inconceivable, which would also probably be a soft brexit. It seems to be the policy in the economic area of europe. But the markets would have to grapple with the fiscal side of things, which is a lot less supportive. National unity, sounds great. No doubt over the weekend that that concept has gained grown. Im not sure where that consensus really is, because the ironing of the referendum is we never really staffed these variables of brexit at all. Im not sure where you would find that consensus. Anna on the fiscal side of things, you mentioned a Labour Party Government is no longer inconceivable in the u. K. Even if we dont get one, does it seemed that the debates around austerity have changed . Overnight have been talking about how inflation is on the rise and because of the voting public seemingly turning against austerity policy, we could see more borrowing, and more gilt issuance from the u. K. Government and that could add two reasons not to buy gilts now. What do you make of the austerity debate now, in the context of the vote we saw thursday night . A austerity is probably sound nd back lasted when we initially we the brexit results, felt that at the time, that we had seen the high tide of austerity and we started to get a movement, in terms of the conservative agenda. Now that has been given an almighty shove in the back. Now, we are going to see a lot less austerity and more generous fiscal policy. Because the conservatives were definitely con off guard during the Election Campaign by this ve ry ambitious manifesto from the labour party, certainly ambitious in terms of spending. They were not able to neutralize it. Conservatives will probably dawn a few of those clothes. Manus the emperor would need to find some clothes, some with a at the moment. The eu has plans to force the relocation of euro clearing. Firms that are deemed to be systemically important to the eu Financial System could be required to accept oversight and move. This is the latest european maneuvering. The kite was flown just a month ago. This could raise clearing costs by as much as 20 . This is a strong bargaining chip. It is a very political bargaining chip for the market. Yes, it is. You mean it is a strong bargaining chip manus it is a bargaining chip for the europeans. This has been knocking around, it is one of the first things people thought of when they contemplated brexit. Because we are getting close to the actual negotiations, it is coming to fruition. I think it is highly likely. It will be hard for the u. K. To retain that role in clearing, which we have had up until now. They will be clear employment implications for the city. And yeah, i think theres not much the u. K. Could do about that right now. What they should probably focus on are other issues surrounding the, which could help to sustain the citys preeminence. This is a lost cause, probably. Manus chris wyllie stays with us, the chief Investment Officer at connor broadley. U. K. Prime minister, well, it is a busy day. She meets the du. U. P. In a bid to shore up her government. The new parliament meets with the election of the commons speaker. The fed starts its two day policy meeting and there is also a Rate Decision out of argentina. Coming up on daybreak. Anna and i discussed tech with our guests. Was it a blip, for a sign of a bigger problem . We discuss. This is bloomberg. Anna welcome back. You are watching bloomberg daybreak europe. Im anna edwards. Manus cranny is in london. We have the markets and the politics covered. The mea culpa of theresa may. That will be followed by the d. U. P. Meeting, more on that later in the program. Lifted up to speed with what is happening in the world of business with Juliette Saly. Reporter thank you. Three former currency traders in britain who were accused by u. S. Prosecutors of conspiring to manipulate markets have reached an agreement to surrender this summer to american officials. Jpmorgan, citigroup, and barclays employees have agreed to be arraigned this summer in a manhattan court. The Irish Government plans to sell shares in irish banks were between 3. 90 and 4. 90 euros each, giving them a capitalization in londons largest ipo this year. The final price will be announced june 23, which starts unconditional trading on the london and stock exchanges four days later. General electric and baker hughes have cleared a second major antitrust hurdle in the effort to create the worlds secondbiggest oil services provider. G. E. Has won approval to combine its oil and gas business with baker hughes. The plants comes two the clearance comes two weeks after a similar decision. The architect will step down as ceo. Dior hasf christian told bloomberg he is optimistic about the new french president. Sydney was beginning exclusively to rachel chang in shanghai. The French Market is important. We have a new president. Be verythis could positive for the economy in france. Start some reforms and bring in some working rules, things like that. That is your Bloomberg Business flash. Manus thank you. Lets talk tech. The global selloff in technology stocks, showing signs of easing. Samsung shares edged up overnight after leading declines in asia. Tencent holdings, which tumbled 2. 5 , also managed to gain. The question is whether the sudden slide was a blip, or represents a more fundamental crack in the u. S. Stock market . Was it a moment of distress . We look at the etfs and the flow of money at the start of the show. We saw 737 million disappear last week. Those are the worst outflows in 18 months. How do you personify the tech moves . Certainly an important moment. You have nailed it in saying, is it a blip or something more important, i. E. An Inflection Point . We have seen this extraordinary leadership from the tech sector in the u. S. , and extraordinary valuations on tech stocks. That has worried investors latent they have had a concern about the level of valuation int h the u. S. There is a possibility that a correction here could be a good thing. If its allied with rallies in other sectors, big sectors of the stock market thinking particularly of the banks and energy sectors, and that has happened in the last few days i would say that plays into the benign script. When you see these shifts in the sands of the market, you have to think, is this the canary in the coal mine . Is this the first one risk aversion is creeping in . Right now, we are seeing other sectors rally as these come down. We will certainly be alert to that possibility. Manus anna . Anna chris, do you worry about the size of some of these Tech Companies . I get concerned when i see descriptions of the tech selloff we have seen going off, when the selloff in the nasdaq comes down to five names. And it is not just the u. S. We look at asia, and they are beholden to their big tech stocks, like tencent. It speaks to that point i made now just about valuations. So, high valuations lead to big market capitalizations. That means these things have become bigger and bigger components of the index and have led the industry. When you look at some of these individual valuations, they give you pause for thought. And we have been here before. Dotmber, 1999 to 2000, the com boom. I dont think we are in that territory, but it is reminiscent of that. That set alarm bells ringing in the minds of investors. The good news, there are other large sectors which are still on low valuations. Even these big individual companies that is extraordinary about the tech sector. There are big companies, but there are other sectors that also have big companies, like energy and the banks. They are quite lowly valued and they can rally and offset what is going on in tech. Then we have what we call a washing machine market, when we rotate from one market to another. As i said, you have got to be careful here because sometimes this is where it starts. I saw this in march of 2000. It was a different landscape then. Actually, many investors did not do as badly because you had the whole value sector of the economy that came to life between 2000 and 2002. There is always that Silver Lining to the cloud. Manus would you spend money on protections . The touch of the horse, being bolted and it is already gone. This is the option value for anybody out there. That aggressive hiking in protection, buying protection, is that folly or smart . Protection has been pretty cheap in recent months. Volatility has been low. Ise problem, if you do that, to spend the money, of course, but you have that window of opportunity, which you have to nail. You have not only to say that volatility is not going to go up, but then you have to buy protection, and it gets more expensive. Then you get back to, how long will this low volatility stay . Anna chris wyllie stays with us. When we come back, we will talk more about the fed. The central bank is expected to raise rates tomorrow. We will talk about that, and the bond markets. This is bloomberg. Dollaryen trying to find a trajectory. There is a new edition of daybreak reedit you have the tv in addition with anna edwards and myself. It is on your mobile call on bloomberg. The u. K. And the eu failed to agree on a start date for the brexit talk at a meeting in brussels. European officials expressed frustration at the delay of amid uncertainty over theresa mays postelection plans and confusion of what she actually wants after the divorce. The queens speech has been moved forward a bit. What is that about parchment and inking the speech. Anna apparently it is traditionally written on goat skin. You have to work out what youre going to write on it a few days before it is read. That could be a bit of a challenge. Will and gas business with baker hughes. The key sets to creating the secondbiggest oil field. Ceo satter ge says the down. Hughesof the new baker channels a vote on the tie up. That is the way we rule on daybreak. They are not. To offer easy returns. Finance ministers in luxembourg on june 15 to discuss the belief measures. Really measures. Measures. Opportunities there, the fallout from the election in the leader will meet the today as she seeks an agreement for the tenant lawmakers to back the conservative program. Our next guest could be a useful ally to the tories reduce the focus on reporters. A professor of politics at the university of liverpool joins us on the phone. Great to have you on the program.