The search for yield is creating crazy conditions. Meanwhile, pimco is loading up on treasuries. Who is right . Less than half an hour to go. Take it to the bloomberg and show everybody what we think will be happening. The fair value calculation on the wei says we will see a softer touch. The story yesterday was a very strong day for european equities. The dax was up very strongly, the cac up 1. 57, the ftse flat. The pound is front and center in that story. Caroline it certainly is, and i want to check in on how it is doing today. We have had a bit of a rampup as the new premise to recep to come in today. Some sort of political stability coming into the united kingdom, riskon tradeof we saw yesterday slowed into asia, up a tense of 1 . Despite those cautious notes, they dont believe in helicopter money. Overall, it has been a buying of equities in asia, up for a Third Straight day, above levels the eu exited. Meanwhile, yen is gathering steam, a reversal in the yen rallying after the worst twoday rout. And lastly, i want to look at the german bond yields, coming up five basis points. Still negative, but we get the first ever zerocoupon debt issue. Thats 11 30 a. M. Berlin time. Now lets get to the assets and get into what else is on the move. David ingles. I want to talk about what you just mentioned. The chief cabinet secretary has denied a report that officials are considering introducing helicopter money. This comes after the franklin newspaper said policy is being considered an option. The chief currency analyst warns that the yens credibility would be at risk. It would weaken if japan did pick that step. The u. K. Needs to reimagine its economic model and financial the country that has voted to leave the European Union, according to the outgoing eu services chief. He spoke to bloomberg. Picture thinking caps on and be part of the process whereby the British Government needs t rethink what its offering. With the perspective they have, knowing how the markets work, knowing how International Trade works, knowing what it is that attracts people, they need to and up with their top asks work with the government to come up with the proper strategy. And Bernie Sanders has formally endorsed Hillary Clinton as the president ial nominee. The senator from vermont joined clinton at a rally in new hampshire, saying that while it is no secret they disagreed on a number of issues, shes far and away the best person to address the challenges facing the united states. Global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. This is bloomberg. Guy great stuff, thank you. Just been discussing that britain will get a new leader later today. Theresa may will immediately be under pressure to name a brexit czar who will oversee the exit from the European Union. The pound is headed for its longest winning streak in two months as may heads to downing street following the Political Uncertainty of the referendum. Lets bring in our chief Investment Officer guest. Which is the more Important Role the person who will determine where the eu negotiations go, or who will be the chancellor . In the short run, who is going to be the chancellor. The negotiations with the eu are going to take a long time, and that appointment will be a delicate one. The economy is very fragile, and we know the bank of england has stated it needs to take action. The architect looking for some certainty around the fiscal part, and that comes down to whos going to be in charge of the treasury. Caroline mowho do you view would be a safe pair of hands . Oh, its not my place to say. I think theresa may has a tough job on her hands to identify the delicate balance between continuing with the fiscal prudence we have seen in the last three years and generating some stimulus against the headwinds we have seen in the economy recently. Steven hammond is one person that has been noted as someone who could counterbalance some of those fiscal issues in recent years. Well see who she decides to pick. Guy lets talk about the pound. Caroline has some great charts on what sterling has been doing. My question is whats going to happen with the equity story. W. E. I. The function. Ftse yeartodate in pounds, up 7 , in bull market territory. By 3. 55 . , down thats currency adjusted. Do you think the pound rallies from here, and if it does, does it have to tread water . The value we have seen in recent days for the pound, i think that has come on the back of political stability. The reality is that there are a lot of bumps ahead. We know coul negotiations are going to be easy, and it could come under significant pressure. Whats interesting is that the audio the storm has been brexit, but u. K. Investors have never had it so good. It has been a Good Environment for u. K. Investors. Caroline give me a sense of this chart, then. Were currently trading above 1. 30, this has been the rampup as we get a new Prime Minister, prompting the best winning streak we have seen in two months. Its not much, but we are coming onto it. Give us a sense of what happens even as soon as tomorrow, if we do get a rate cut. Does this sink, or is that already priced in . I would say is largely priced in. Part of the reason for that is that the bank of england has been very vocal in terms of what it wants to do for Interest Rates. From that perspective, it has already priced in. In terms of major movements in the pound, what we would need to see is some progress on the negotiations with the eu. That could take weeks, months in terms of getting it started. For now, it seems that pound will stabilize around these levels until we see a breakthrough around the negotiations. Guy well have to see if the bank delivers on whats being priced in. Stay with us. As britain cuts ties with the eu, europe is seeking new friends in beijing. We are going to the Chinese Capital for the latest from the euchina trade talks, next. This is bloomberg. Its all about stability, one of its major markets. That there is a level of doubt around that man, is a few minutes ago a press conference wrapped up with john cloud younger, jeanclaude where he said he is ready to work with theresa may. Aside, lets talk about the possibility of the treaty between china and europe in terms of trade. What are the major areas of concern, of opportunity . There has been glacial progress on this. Europeans have been pushing on this for quite some time. The key issue for the europeans is for chinese steel makers; europeans are angry about this. The president said that the europeans would do all they could to defend from their own as chinese steel has flooded into those markets and that is a key concern. They also want to access chinas market there are so many that remain effectively sealed off, particularly telecom, finance, and logistics. They want to see more than just words because investment on the other side is growing at a fast rate. Then for the chinese side theres a question of the Chinese Markets as part of their wto agreements and the europeans are saying they had made no there has been glacial progress ondecision; the chinesg they can push them forward on this crucial issue. But for the moment the europeans are saying no movement on market, because that would make it easier for china to export more of its cheap oil into european markets. Guy tom, thank you very much. Tom mackenzie joining us out of beijing. The chief Investment Officer at kabul benson is still with us. Break it down for us. Europe is potential losing 20 of its economy, and you wonder how, for external forces, they view the situation. How do they negotiate with an eu in such a state of flux . I dont think other countries can be in waitandsee mode. The reality is that these negotiations will take a long time, even after triggering article 50. Countries like china are not going to sit and wait. In america, we have the interesting dynamic of the elections, which could change its trade negotiations. We know trump is a very strong voice against the chinese. So those things are going to happen, irrespective of the brexit negotiation. Caroline how do you view the stability of the remaining 27 countries . Do you think there is still risk for an unraveling, the concern around italy . Or do you feel they are managing to show unity . Ini think the concerns European Union have been that, irrespective of brexit, you have weak banking systems, you mentioned italy, you have a weak economic picture, the central bank easing against that backdrop. The issues are a bit more accentuated, so at times like this, its how the politicians react; we know that in crisis mode they will spend a lot of time having summits and discussions to try and navigate, but this is going to be a bumpy ride for the next couple years. Guy how do i invest in europe . Do i buy volatility . That is what we are going to see. Volatility is one way to invest, but the value is in european equities as well. What we saw in the last five years where the economy has been fragile, European Equity markets have fared pretty well. If you look at the banking system, although it is in deep trouble, some of those companies are trading at. 4 times book. Guy so this is one of your down here, and this is the equity column its all european markets. European markets have been big underperformers. Is that an opportunity or threat . When you do your fundamental research, you can find opportunity, but at the moment, it has been pretty horrible. I would see this as an opportunity. You have the stress valuations in some areas, a prevailing mood of negativity which is often fruitful and everybody is expecting europe to be week. The surprises the upside but there are some surprises to the upside and we could see markets rally quite significantly. Anna breaking news coming from the other key area, japan. The bank of tokyo mitsubishi will exit with the primary dealer to japanese government bonds. That they will see a return, 21 primary dealers to remain from july 15 in japanese government bonds. A bit of a shakeup when it comes. O the government auctions now we are going to be looking ahead to what is the stocks on the move. 10 minutes away from the opening of the session today, and we could see some significant moves, particularly on the eye on pound land. And burberry Beat Estimates on its firstquarter sales. Weve also got to keep an eye on housing. One developer expects a strong year; this is bloomberg. We are 53 in london, minutes away from the open. All important eyes on the pound, jumping 12 or 13 , a premium being offered by a South African retail company. Its trying to get into the european discount market, offering some 794 million for poundland. Keep an eye on the stock as we enter the market open. Also keep an i on the other u. K. Company burberry. This could be on the move after we saw thirdquarter sales still lackluster, down 30 , better than expected. The market is looking for a 5 decrease in like for like sales. Profit underlying 415 million pounds, the estimate coming in higher than that. Change at the top, new ceos to come in. Burberry looks like it beats the first quarter. Lastly, housing. In profit is whats expected on a pretax basis. Notably, its too early to gauge the impact; the outlook is less clear. Our guest is still with us. Is it too early for companies, whether they be in housing or any other sector, to feel what the impact of brexit will be . From one perspective, its too early, because the data has not out. From another perspective, its clear that the next few months well see a slow down in the u. K. Economy. The bank of england said this, and institutions are saying this Political Uncertainty will provide an an easy backdrop. From that perspective its not too early, and they otherwise need to plan for that slower growth. Guy stay with us. Plenty more still to talk about as we work our way through the program. Minutes away from the start of european trading. A number of stocks to keep our eye on. Homeland, burberry. Lets talk about what the terminal is coming up. We think wednesday morning a softer start,. Euro stocks down by 2 10 of 1 , ftse down. Remember, continental markets were a very strong yesterday, up 1. 5 . London was flat. That was the pound story. Today, theresa may becomes the next uk Prime Minister. This is bloomberg. Guy you are watching on the move. I am alongside caroline hyde. The start of european trading. Caroline has your morning break. Caroline a date with downing street. Theresa may will become that u. K. s next Prime Minister. Who will she choose to lead the exit from the eu . The yen rallies as the chief cap that secretary says tokyo is not preparing for helicopter money. The boj has to deliver even more stimulus before they meet on the 29th. The search for yield is creating crazy conditions. Pimco is loading up on treasuries. Guy where do we think futures are going to be picking up this morning. It looks like we are going to see a story. The pound a big factor in all of this. Lets see how these european markets open up. Is actually going down. The footsie is now down. We will see what they do as well. Massively outperformed the footsie yesterday. The market rate is the sending. The ftse 100 south. Lets see what we are going to get from the other continental markets. Dax dropping as well. Lets take you through some of the stocks. We saw a real rally in asia. In a golden cross. In europe, it looks like it is read on the industry grid. If we take a look how it is shaping up, i. T. Stocks up. 2 , not huge gains. Health care up 0. 1 . Consumer staples and telecoms that are down. Down 0. 4 . Aples actually, it is energy down. The rally we saw in asia not coming through in europe. Lets take a look at the u. K. 10year yields. It looks like we are moving ever so slightly higher on that, up four asus points. We are at eight basis points. 1 s yield fell below for the First Time Ever in the aftermath of brexit. The stocks we are watching today. I have a couple of u. K. Ones. Lets start with verb very. It reported firstquarter revenues that beat analyst estimates as shoppers in the u. K. Stepped up purchases in the final week of that first quarter. Burberry surprised investors by announcing Christopher Bailey would give up his role as ceo and would focus more on Creative Design as chief creative officer. Burberry, 3. 8 on that. Ismy bloomberg, it said it giving dividends today. I wanted to check on icap because it said revenue from electronic targets declined 3 as the boost from brexit failed to outweigh the headwinds from low Interest Rates. To keep an eye on that. It is up 2. 4 . Oundlandnt p was called up 10 after there decided tony that purchase it for 790 million pounds. Caroline we have some breaking news coming out of asia. China and updates to its imports and exports. We have seen june exports rise 1. 3 year on year in you one yuan terms. Meanwhile, the trade Service Remains around 311. 2 billion yuan. Of it managed to end the day up 0. 3 at the market is closed. An interesting centralbank move. We have the u. K. Tomorrow. Malaysia surprised the markets by cutting rates to 3 . Most economists have seen it on hold. The asia stock index, little change. We want to bring it back to the property sector we were discussing with barratt developments. They reported earnings earlier today. It said it has another strong but brexitout 20 makes the outlook for its industry less clear. This as aberdeen lifts its more than weeklong suspension of the u. K. Property fund at noon. Will there be a scramble to get money out . The chief Security Officer at kleinmann ensign. Will they be looking to exit the property sector . Real estate sector is liquid. We have seen vehicles to create liquidity to enable Retail Investors to get into the market. Weare going back to where see these gape and make it harder for investors to exit. We see this in times of stress. We have seen it already. As funds open, someone to pull out their money before they close again. That will be a reality of the real estate market. Hasreal estate sector offered very good returns in the past few years. It has been a good income generator. It for our in clients but we exited earlier this year. There was some complacency. Any asset clause that has the mood of the only way is up is dangerous. That is what we saw in real estate earlier this year. There is downside. Guy if you are not in it for capital gain, you are just in a for yields, which some people are. It kicks out better than treasuries, 3 , 4 . It depends on what youre using it for. If you use it for capital gain, i take your point. Yield can only go so low. The search for yield is creating bizarre anomalies and people are wondering where they should put their money. All of these have difficulties. Mouhammed you are right in terms of being in a traffic being attractive after losing yield. At what point do you exit . Total return is what counts. This correction has led investors to reconsider the importance of yield versus total return. To bring yournt attention to a bit of an and a m anda a. The upper former is pound length poundland, surging even higher than the premium being offered. It is matching exactly 221 pence after we saw that offer coming from steinhoff, the South African Company looking to get into discount retailing. Are we going to see more m and a . Is the u. K. The appetite for the rest of the world . Is it looking cheap considering the battering we have seen to the pound . Mouhammed uncertainty breeds opportunity. We have seen selloffs all over the world and that creates opportunity for chief execs who have been sitting on a high levels of cash to put money to work. M and a good see a boom in the coming years. I know that sounds counterintuitive, but value will emerge and that will lead some companies to invest in others. Guy do you think u. K. Companies look more or less attractive if theresa may decides to follow the german model, not as far as the germans have gone, but there is an argument that says that would encourage investment and buyback. I am wondering what the arguments l