Someone from Morgan Stanley. Toid later, we continue focus on farmer with the merck ceo and chairman ken frazier, two important interviews you do not want to miss. Lets look at the markets. Jon futures a little bit softer , down by a 10th of 1 , the footsie with the biggest week of gains since 2011. Switch onof 1 , the the board and get to the bond comet, 10 years, treasury alltime lows, down by six basis points on the session, a softer down to 10 of5, 1 , expectations that a little bit of stimulus in the pipeline from the bank of england coming this summer. Alix that was the big news from yesterday didnt around the world, indepth coverage of our top stories, paul dobson is in london on the treasury yields hitting historic lows and the latest developments on the race for Prime Minister. Beijing, the latest manufacturing numbers in china and julie hyman on the stock move we saw. We begin in the third quarter, individual members. Lets start with paul dobson in london, is record low yields, 30 year, 10 year, what does that mean for the u. S. Economy . Not a sign everything is looking rosy. We have comments from mohamed , talking about how it looks like a murkier outlook and inflation, clearly the expectations for the fed Interest Rate part being revised lower in recent weeks and that is keeping down the yields. S p futures off by a little bit but not the kind of destructive selloff you would associate with record yields on the 30 year and the 10 year, what does that tell you about the shape of cash . Theot just a story about u. S. Economy, about the Global Growth outlook, in japan, yields less than 0. 1 all the way across the curve, sparking a dash for the next highest yields, in europe, record lows, the European Central bank buying are bonds, people looking for field, where will they find the yield, the u. S. Market offering a significant premium for those investors. Alix , dover, 1. 4 . Good to see you come on over, 1. 4 . Good to see you. Jon the london papers in the u. K. , Boris Johnson, brexit acuted. This is the metro that goes around in london, the real game borisones, michael gove, johnson, a fascinating story. Gove he does not expect article 50 to be triggered this year. Sounded aswho never if he would be in a hurry even though he was a lead leave campaigner, he wrote a piece before the results were known suggesting that he would be in no hurry, all the cards were in the u. K. Court and it would be up to us to decide when to trigger article 50, more to be learned on that come after this act of betrayal, michael gove talk, what would his bid before the leadership of the country and tory party, today was less about talks with the eu, more about what his agenda would be as Prime Minister, he says we already hinge in history, we muscle through orlean in or we lean in. Few clues about his priorities if he were Prime Minister. To take back control of our borders, i will in free mutiny, introduce an australian type points bae systems for immigration and bring numbers down. Points based system or immigration and brings numbers much about the single market, the eu says if you want access to the single market, you must have single movement, priority is around immigration at the moment. Jon the question for investors as they look at this for a Party Leadership and the potential consequences, you have the leave , andigner michael gove teresa, the two most popular says 50 willove not trigger this year. This will go to the french election. Why would not you wait and see what the fiscal fallout would be in europe before triggering yet, this is about making sure when you pull the trigger you are negotiating from strength, you want to be in the right place, i think this will not be done for quite some time. Jon for the markets, to the Central Banks we go, governor ,arney speaking, i was there the press pack abscessed with the politics of the situation, not asking about Monetary Policy , a strong hint from him that not focused on bank rates, credit easing elsewhere. He will do a basket of things, you have been talking about the base rate is one option, it is probably the least satisfactory option for his point of view, qe is difficult because it does not have an immediate effect, he goes to the banks and says i will give you lots of money and you will lend it to the real economy, that is the way to get credit into the economy and deal with the downside from the brexit story, i suspect we will see a basket, easing, fairly general, easing is on the table, we do not know which form it will take. Jon bank of england meeting andy results get more interesting. David weston, one month ago, no one knew about article 50 outside of the eu, now this document is the most famous 250 word document in the world. David i carry around a copy with me. In case i have to refer to it. We have another look at the state of the chinese economy. To that we turn to jeff kearns in beijing. Tmi manufacturing numbers came out, what did they show us . Good evening from beijing, i wrote article 50 today, the manufacturing pmi came in on the nose of 50, the dividing line between contraction and expansion, hitting estimates on the nose, that is a little bit of weakening, a little bit higher in the past couple of months, Services Look stronger, the newer economy was much from 53. P towards 54 that is what we look at any personal official look into the economy in june. , itlso got a private report showed more weakening, this is a smaller firms came down below 49, more weakness in that survey, the the old economy, factories are weaker and the services and the consumer economy are seeing a little bit more strength. David thank you. Alix it is the start of the third quarter, a lot of movers in the premarket, julie hyman has a look at what to watch. Story on an incredible this company, it its autopilot feature, this is a driverless feature that is cars have, autopilot is the name of it in in an accident on may 7, the first fatality in a driverless car system. Noticetopilot failed to the white side of a tractortrailer i guess a brightly lit sky and did not apply new brakes and the 40yearold driver of this car in florida was killed, the National Safety missed ration is investigating this and some car Safety Experts are saying the company may have to issue a recall. It raises questions about Driverless Cars in general. Not just at tesla, shares are down 3 this morning. A wall street journal report that they are in preliminary exploratory talks to but to delete by title, the musical streaming service controlled by jayz, apple shares down a third this morning, this would give them access to artist like beyonce and rihanna and they have struggled however with subscribers, jayz has said the previous owner misrepresented the number of subscribers at the company when he bought it, micron we are watching, a fiscal thirdquarter loss and predicting another one in the Fourth Quarter, down 10 , rolling with another chipmaker but analysts say they are so different and therefore it has been problematic for micron to cut costs while doing acquisitions and integrations. Alix lots of movers to watch, thank you, julie hyman. Coming up, the bond market rallies, the story of the day, the yield in the u. S. 10 year and 30 year it is lowest level ever, up next, allianz global Mohamed Elerian joins us. David record lows in u. S. Treasuries, joining us is mike mckee. Setting record lows in government bonds around the world. Is this the ultimate risk off trade . it is, when you have this much uncertainty, you find under the bed and they are the low, if theree so is any inflation you will lose money but what else will you do . 1962, thego back to lowest yields in history, we cannot go back farther but Michael Hartnett of bank of america put together a yield chart that goes back to 1790, it it shows that we had never had anything like this, even if borrowing to finance your education, i know youre an 1790, if abc news in you were using it to finance your education, you would take more than you would now. David Alexander Hamilton was running the show. 1. 4, 1. 37 . 1. 3784. David compared to what . Of thisan explain all in one chart, you look at government bonds around the world, a question for investors, what will you buy the highest yield if you have indifference to where you are looking, yields low in other places you suggest people are doing most of the by, the german yield, the ecb buying up,. Jon breaking news in the u. K. Planningof england easing the bank capital demands on the brexit vote, the decision set to encourage lending in a potential downturn, the bank of england said to announce this as early as next week, reversing a decision to boost the countercyclical buffer. In march of this year, the bank toengland raised the buffer 0. 5 percent, for anyone not from the your with this, the concern at the bank of england that when there is a downturn, banks pull back on lending and when there is a boom the increased lending and the introduced a countercyclical buffer, in the good times, the banks caps on back and in the bad times they would be able to loosen the strings so to speak. It looks like the bank of england will ease that demand and reverse a decision that was brought in in march of this year , the bank of england said to plan easing the banks capital demands after the brexit vote, therefore bringing down the countercyclical buffer over the bank of england, did i do that right . Beautifully done. Jon a little bit of credit easing coming from the bank of england in the near future. David it what i am curious about, this is a concession by a central banker that Capital Requirements do affect lending . We have had regulators from the fed saying it does not have any impact but if they are saying we want to give a buffer, are they saying implicitly, by reducing some capital demand, it will increase . Possible, more psychological 70 levels of what we are talking about. Capital held back is not capital you cannot lend. Just the description of how you raise the money, you are lending out money from equity or from deposits as opposed to money that you have raised from the bond market. Alix to the u. S. , extraordinary measures around the world, it is not necessarily we are in a recessionary world in the u. S. Which would be implied by the flattening of the yield curve, it is more a function of all of these other centralbank policies . Problem, the st. Louis fed chair was telling us the same thing, so must a man, so much demand which distorts thing, if you are savor or a pension fund manager, you have real problems, you there are others that say this could be a tailwind for the Global Economy and make it much easier for you to buy a house. David thank you for being here. Our economics editor. Jon coming up, much more on the bloomberg scoop and for digital easing at the bank of england and the big question post brexit playbook, the snp biggest threeday rally in more than four months, now down less than 1 since the uks decision to leave the European Union. Up next, the Morgan Stanley chief strategist guesses outlook for q3. From london and new york, this is bloomberg. Jon from london and new york, this is bloomberg, the chart, barclays, up by 2. 24 , the bank of england set to start easing banks capital demand following the brexit vote on friday, the stock higher, the bank of england looking to ease capital demands, potentially as early as next week, look out for that decision, the stock has moved in barclays, bank stocks moving in europe. Pulling back some Capital Marks on the uks lenders. Joining is adam parker, Morgan Stanley chief equity strategist from new york, is this what you would expect from Central Banks, to pull back Regulatory Authority to ease some demands around banks at a time like this . Do not think that is surprising, there is a debate among u. S. Investors about how the head will react, a couple of weeks ago, are you dovish or hawkish, now the consensus is the fed is on hold indefinitely, to million or 3 million in the u. K. Deciding to leave has changed the fed tap, i think that is not the case, i think the fed will raise rates but we will see how things go over the next months. Jon looking at this from london and over to york with the financials in the United States and the way have they been hit come in make sense in the u. K. If there is a growth risk with uks based lenders to be hit in terms of the lease, were you surprised that some of the reductions in bank stocks over in the u. S. . Adam i was heartened by yesterday, yields going lower, you still saw financials react pretty well and finally people are saying, some of the positive results from sea car with the huge growth of shareholder, there are fundamentals back and mitigate some of the issues with the level of the curve. The financials are not pricing in a whole lot in the way of economic growth. If they go yields lower it will put a pressure on the financial but there are positives for u. S. Banks which are clearly way better capitalized than european ones. David on june 23, you came up with a note that you thought by the end of the year one year from now we would be at 2050 at the s p, are you still there and have you get there . Adam i will logic, we think earnings can grow 4 this year and 4 next year, we have not changed that number, on february 10, we thought people that we were stupid at 4 growth by the market went up and we have not this it, it if you go 4 year and next year and you trade at 16 times those earnings 12 months from now, that gives you around 2050 plus or minus where we have been trading recently. Has ak the u. S. Relatively better market than other places in the world any challenges on the year you want to pay for those earnings but i think earnings will grow as a best case in the u. S. David what are the fundamentals, nothing close to that in recent quarters in terms of Earnings Growth. Adam Earnings Growth it is unlikely the energy drag will be as substantial this year as last year, we should have some still went we should have some tailwind. At 105 and march of 2015. Rates, oil is the wildcard, likely that you will see some modest Earnings Growth against the backdrop of low expectations, part of the formula will be earnings could maybe grow in the next couple of quarters. Alix where you want to pay up for that safety, utilities in the snp are trading almost 20 times price to earnings, one argument is that they are expensive but i will pay up, bonding rise who are probably coming into the equity market because of the volatility or i have to look for value, which side are you on . Adam if you phrase it that way and have a choice between buying expensive or value, i think if those are your two choices, what you mean by value only works of rates back up, you can sit there and say, i do not buy expensive defenses, i wrote a note in 2012 call our expensive defenses offensive, this has been happening for four years or five years, still going on and rates are lower. The way you underperform is by being all high and mighty about valuations. And owning no defenses. You will only be right if rates back up, to go over utilities because when i look at what people are paying for when they want to buy defensive stocks, pay for low volatility are a we, low volatility Earnings Growth, bandate dispersion, narrow is good, paying for low stock volatility, when you compare the defensive industries, food, household project products, utilities, they are five, 6, 7 turns cheaper with the underlying fundamentals the same. I think i have to have some exposure to expensive defensive as a pm or i will underperform if rates back up. You. thank adam parker, Morgan Stanley usg equity strategy. Englandhe bank of planning to ease capital demand on u. K. Based lenders as early as next week, a bloomberg scoop and the markets moving, berkeley higher, lenders in the u. K. Trading much higher after that headline crosses the bloomberg, from london and new york, this is bloomberg. Jon from london and new york, this is bloomberg. By 2. 34 . Tock up the bank of england said to plan easing following the brexit vote. It could happen as early as next week. We will be talking about the capital buffer very shortly. Want to get into the market reaction. Beginning with equities future softer by 1 10 of 1 . In london, up six cents of 1 . Potentially, biggest gain for the ftse since 2011. Stoxx 600 banks index up for percentage points. In the bond market, low, low, low, low, alltime lows on tenyear treasuries. Trading on yield at 4. 2 . On headlines, outside of the Business World started vetting potential running mates. The Associated Press says the likely Vice President ial nominee says the likely republican president ial nominee is considering chris christie. About 5000 Syrian Refugees have been approved to move to the u. S. According to Homeland Security secretary jeh johnson. He says another 6000 more will follow if they Pass Security checks. Republicans have criticized the Obamas Administration policy. A last full day of campaigning in australia. Shows turnbulls is tied with the labour party. The campaign has focused who can best managed australias economy. Global news 24 hours a day, powered by 2400 journalists, in more than 150 news bureaus across the world. This is bloomberg. Jon thank you there he do much. Thank you very much. The morning must read is a shameless plug. The bank of england Just Announced its plans to potentially the bloomberg story suggests that the bank of england is set to plan easing demand after the brexit vote last week