100 debt financed. Is draghi now driving mma . Good morning. Less than 30 minutes until the European Market equity open. But show everybody what is happening, in terms of where we think we will be opening this morning and a much more positive picture for european equities. The ftse 100 is up by 1 . Tehe cac is up by. 8 . The dax is up by 0. 5 . Equities, at least back on the front foot, though it has been a difficult few days, hasnt it . Caroline it certainly has been. That we have a little bit of Risk Appetite in asia. Talking of mma deals. Being fueled by that ceaheat debt. Mma . E ecb driving equities are pushed higher as Energy Stocks do particularly well, but there is some risk aversion. Movement into that haven that is gold. Software see, avast for 1. 3sing avg billion. It is so easy to access the debt markets right now. First, lets get to the bloomberg first worrd news. Reporter u. K. Business confidence sank to a four year l ow after the brexit vote. This is the lowest since december 2011. German Industrial Production unexpectedly fell in may. Production adjusted for seasonal swings a fell 1. 2 from the previous month. 1 omists had predicted a rise. This is a sign of Political Uncertainty in europe. S P Global Ratings has lowered the outlook on australias aaa Credit Rating from negative to stable. This is after the outcome of the saturday election. As in th says s p says there is a one in three chance that they lower the rating in the next two years. And danone is to purchase whitewave foods in a deal worth 12. 1 billion. Growthe targeting sales of more than 5 by 2020. Consumers are seeking healthier eating at home. Global news 24 hours a day, powered by 2600 journalists in more than 120 news bureaus around the world. Bloomberg. Guy . Guy thank you very much. Property Investment Funds have been suspended, meeting the large market is now frozen following the vote to leave the eu. We are now joined by neil ofs x saxothe cio bank. Give us the latest now. We have until midday today to find out what our investors are goniing to think. Have frozen at the moment. Investors from tuesday at lunchtime that are going to be affected. I take it as a sign of panic that followed afterwards. But now clearly, more and more investors are taking money as more and more funds close. All eyes today will be on the last big fund that has not frozen for redemptions yet. Anna clearly, the funds sin to seem to be affecting each other here. We cant actually analyze the full impact of the eu referendum. The numbers look relatively strong with the amount of completions they are doing. How much is the underlying risk building here . It is entirely a question of sentiment. If you are an investor, first of all, 45 of the Property Investors are overseas. Many of them wanted to get out of the assets, and that is contributing oto this. Secondly, if you are a mom and pop investor and have had a good run, you are wondering whether it is coming to an end. If you look at the house prices on an income basis, mortgages are cheap, but they are expensive based on historical averages. Thes steve, the canary in coile mine . I doubt it. I think the fact that you now assets list foreign is adding to the noise around the property market. Than a more of a buy sell. Was already, this happening. What else was . The brexit seems to be shining a light on things that we already kennew about. We were scratching our heads about what was going to happen. What else is there out there that we already knew that is going to be impacted by brexit . I like to say we have the fast track to the core of the problem. Last time we had a surplus was 1982. Is, itthink it does resets the ability of the u. K. To compete. Priority andhe top sterling will benefit. The inability to do anything politically over the next one to two years. If you look historically, sterling has a spent very little time below 140. Anna steen, u. K. Assets look to. Look u. K. Assets cheap. How about the pound . How much has that been paid out at the moment . Steen i think sterling is the number one thing to go to. Dollar, with the the fomc minutes out, is showing the fed is not going to hike this year. I think they are more likely to cut rates than hike rates. I think sterling is going to be just fine. Theif you look for fundamental values, sterling is the goto for the next five yeraars. Guy thank you. Neil, it was been tracking this entire story with his team, some great work being done there. Us. N jakobsen, staying with more on the central bank minutes, next. This is bloomberg. Anna a sunny start her ein berlin. You are watching on the move. Finally, after three days of losses, the dax is up. 6 . Lets get to the Bloomberg Business flash. Reporter danone will purchase whitewave foods in a deal wo rth 12. 5 billion. Based danone is targeting a sales growth of 5 by 2020. Quarter sales fell 1. 9 from a year earlier. Food sales fell by. 9 . Meanwhile, the british retailer says it is early and they cannot yet couple of by the implications of a brexit. It is also too early to assess the impact of the brexit on the u. K. Housing market. The sectors fundamentals remain strong. And the associated british foods, the owner of the clothing chain, has raised its earnings forecast for the year. The pound is weakening in the wake of the referendum. As revenueoming grew 3 year on year at Constant Exchange rates. That is your Bloomberg Business flash. Now, the Federal Reserve is losing confidence in its need to tighten. Minutes from the fomc meeting last month showed officials facing rising uncertainty about the outlook for growth at home, and indeed, abroad. Jobcymakers want proof that creation has resumed at a healthy pace, and the inflation will eventually hit their 2 target. Bill gross said sovereign bond yields at record lows are not worth the risk. He told bloomberg, it is too risky. High durations, which we have now at low Interest Rates, even a small change in terms of yield can produce a significant loss. The sovereign bonds are not up my alley. Not up my ally. Steen jakobsen, still with us. Are they up your ally . Absolutely. Think about japan. The chinese continue to devalue their currency. 1 to 2 is still the best game in town for risk. Guy i want to show you this chart here, which we created here on bloomberg. This is the 30 year yield for the United States, the s p 500 dividend yield. Down here, those two lines cross. Let me zoom in here. This is the bond market for yield. Ewed up in a very crudscr world, dont we . Steen this is clearly a very different game. The best performing portfolio this year is a portfolio that has a little bit of everything. Over0 year has performed 12 . Gold is up over 20 . Equities are just flat. I think you must have a balanced view. Lets go to japan. If there is no reform and no productivity, it will sink ever lower. Equities are a better place to go if you want dividend yields, in terms of pick up. Caroline you brought our attention to japan. You are looking at japanese yields at the moment, showing you how across the board, global sovereign debt, we have got 10 trillion worth of sovereign bonds with negative yield. The blue line, show and japan is trading significantly in the negative territory. Overall, you have the overall sovereign bond index at a record low. Income. O show the fixed where is the best opportunity . Steen i think again, you have the balance fixed income portfolio. But shy away from anything that has a negative Interest Rate. I should understand it, but i do not understand why i should be paying people to lend the money. Im just back from emerging markets i am just back from south africa. This is a country which has seen the worst of everything. So, i would probably add that what i am looking at is emerging markets and countries that offer the bigger risk in terms of t hat. South african yields are about 9 to 10 in an economy that is clearly slowing down. Guy that is not local currency. Do you want to do the local currency bonds . Steen i will do both. Guy what does this number look like in six months time . Steen it is bigger. We are crowding out the ability to actually be productive and i dont think there is any solution coming through. Everything is about debt, issuing debt. Usedf all debt issued is to service already in place debt. We are going absolutely nowhere. Guy to quickly follow up, draghi is underwriting this effectively. Is this the logical conclusion that everybody should come to . That Debt Financing should be accelerated, not decelerated . Steen everything has an infinite upside, right . When the Interest Rate curve does change, when we do have to reform, when we are beyond this Political Uncertainty, the rate will go up. Before the next six months, i dont think so. Why wouldnt you be doing the Debt Financing . Guy stay with us. We are minutes away from the open. Up next, we will look at potential corporate movers. We just spoke about danone purchasing whitewave foods. 11 minutes until the market open. This is bloomberg. Caroline welcome back. It is 7 51 in london and 8 51 in berlin. Lets get a look at the stocks to watch. Subdued consu t seems, that will only ramp up this post brexit tune. Also guy, danone, mixed calls. Some say it will rise 1 and some say it will fall 1 , but it 19 lashing the cash, a premium for the owners of these particular brands. They will be purchasing whitewave. That is 10 billion. Mma on the agenda. We have another mma deal on the agena. Give us a sense of what the targets are. I think it is expensive when you operate in a world with zero Interest Rates and 100 Debt Financing. I think, i have a hard time understanding these deals. This market share is globally falling. I find it very concerning. I actually think we are looking for canaries in the coal mine. It is probably more of a coal mine event, than having the Property Funds in the u. K. Being closed. Guy they have rich currency and cheap debt. Shouldnt they be out there purchasing the world right now . They should be in the airport, waiting to grow currencies, absolutely. That is what we saw the swiss do last year. That is what Japanese Companies should be doing. Caroline fascinating, were going to be getting the swiss foreign reserves a little bit later. Will we see more intervention coming from the likes of japan . Maybe they will be looking outside mma. Will the government be trying to keep them lower and start to push down on the yen . I think everybody is waiting for the elections in july. Post that, i think the government has a plan ready. Rumor has it they will have a 2 expansion. Of course, that is the road to nowhere, but that is what they do. Policymakers and Central Banks continue to be very pragmatic. The analogy to the press officer in iraq, he kept claiming they were not going forward. I think the central bak and nk and policymakers are doing the same. They have saturated the world with debt. To some extent, we can see that in the political scheme. Im i dont might what is going on in terms of the macro sector, that we have to watch those macro structures. The companies are doing very well and the cash flows are good. Guy weak industrial data out of germany this morning. The bond markets are signaling a number of things, that are they signaling and i am assuming that they are incredibly large growth for a long period of tieme. Germany is a huge exporting machine. They will do better for longer than the rest, but generally, the yield curve is indicating we have a significant slowdown. People have to realize, brexit or not, that would have happened anyway. The whole set up was doing that. Guy it short circuit ied the whole story. We are now minutes away from the equity market open. That story, next. This is bloomberg. Guy good morning. Welcome. Youre watching on the move. Im guy johnson alongside careline hyde. She is in berlin. Careline has your morning brief. I do. Property panic. Four more u. K. Real estate funds squeezed in the brexit vote. Can carney do anything to stem this tide . Too risky. The Growth Market is to expensive. Is it time to sell . Buying organic growth. Danone catches white wave in a 12. 5 billion deal that will be 100 debt financed. Is draghi driving m a, guy . Guy lets talk about where we think these equity markets are going to open. We think it is going to be a positive start to the day. That is the futures. We rallied a little bit into the close yesterday. This is where were expecting the soy to go here. The cac is open higher. The ftse is climbing as well. Were expecting a decent 1 gain for the ftse this morning. For the Market Makers initially pushing us up around. 8 . There we are. Back to where we were just before the close yesterday. Equity markets at least on the front foot this morning after the panic of the last few sessions. All climbing around just over 1 . Lets see what is moving these markets. Negligence ra tells us everything we need to know. Nejra look at the i map and how various Industry Groups are performing. Up. 9 followed by utilities up. 8 and lacking a little though still gaining healthcare up. 3 Consumer Staples up. 6 and industrials following closely up almost. 6 . Now lets take a look at the 10year gilt yield. Looking at this down one basis point or two basis points now on this as the market opens. Well keep an eye on that as the day goes on. Were at 76 basis points right now. Now down four basis points. Lets look at the stocks that were watching today. Danone agreed to buy white way foods for about 10 billion, 12. 5 billion if were talking enterprise values. It is one of the Fastest Growing food companies. Danone expects 300 million in synergies by 2020. Also sort of sticking with the Consumer Sector, ab foods has raised its profit forecast on the post brexit decline in the pound. This company gets half of its profits from outside the u. K. Were seeing that gain this morning. Keeping an eye on m s. Same store sales of clothing and home good have fallen almost 19 9 . Analysts expected a 5 decline. It is worse than expected. Guy, caroline . Caroline thank you very much indeed. Well bring you all the news coming up. Angela merkel will be speaking from poland. Well be talking about italian lenders now. How much it has fallen year to date. It is now down to less than a quarter of its value from the start of this year. Talks between italy and the European Commission to recapitalize the nations struggling banks have reached a Sticking Point according to eople familiar are the matter. The smufe higher. Get in on my screen at the moment. Every single bank is in the green as we speak at the moment. Every lender trading higher. The italian lenders leading the harge. The italian banks are starting to surge but not one single bank is in the red this morning. Fascinating moves youre seeing on the Banking Sector. Lets dig into more whats happening in italy. John joins us now with details. Remind us of where the talks are about the recapitalization of the Banking Sector. John yes, well, the pressure is on of course with the declines in shares that you mention and we have been told by people familiar with the talk that there is a Sticking Point, basically who should foot the bill. The plan according to these people familiar is to design a plan which would help to verhaul banks and possibly european banks afterwards. The Sticking Point right now is where the burden sharing should kick in. Where there is state aid. It is an explosive political issue for them. Guy talking about the fact that u. S. Funds could be interested in buying up some of the italian banks. How realistic is this given the uncertainty that surrounds them . John the a pool of four u. S. Funds which are interested in buying up two banks and this interest has apparently been reportedly been with expressed already in the spring and their advanced talks. It is a possibility. For the moment it is an expression of interest. It is not actually a formal offer but it is being seen as encouraging news that Foreign Investors could be interested in italian banks despite the crisis of the sector. Guy thank you very much indeed. Jpmorgan in a note this morning says that the italian banking issues are political and not financial. The sums involved are relatively small compared with greece and that italy can foot the bill itself. It just needs the political will elsewhere. Is that realistic . Im sure it is at some point. You have a constitutional vote coming in at the ends of the year. Needs this to be placed. You have the state aid that is impossible under the e. U. Laws. Given another month or two of crisis. Guy it is not impossible. It just needs somebody else to say this crisis is big enough. I think he will get his banking deal and then well have to look at the referendum that happens later in the year. That is a big event still for italy. Italy still remains a political issue. To say that the nonperforming loans is a mere financial note, i think is also a little bit honest. O be caroline there is a political and economic issue. What do we do if were trading these sorts of stocks . Today were seeing very volatile stocks. Italian lenders in the green. Is this a buying opportunity or do you just wait and see what unfolds . In addition this case the answer has to be what is your horizon . In the shortterm it is probably a little bit overdone. I think there is a deal at the end of the rainbow. If you look at the Banking Sector, certainly banks are under pressure. We keep talking about this. We have Regulatory Framework and zero Interest Rate going into negat