We have a most interesting day because we have a record low for the 10 year yield, and we have quite a lot of movement on currencies. It is very nuanced. When i was suggest is we are looking at charts from denmark, charts from new zealand, charts from south korea. It is a global new wants to day with a letter attention to it. Most people are saying do not look at tech valuations, it is negative rates that are putting in boko haram yields. We will discuss that next. Lets get to bloomberg first word news. Ramy israel is cracking down on palestinians of during the first major attack. They opened fire in an tel aviv shopping district killing for his release. In response israel has revoke permits for palestinians to visit israel and travel abroad during robin done. Those who want to u. K. To stay in the European Union warned that it breaks it could cost jobs. Some companies have already frozen hiring in u. K. While others are using shortterm contracts to fill jobs. Meanwhile the deadline to vote on the referendum has been extended by two days. Voters know how went till midnight tonight to register. The registration website crashed tuesday night. That vote will be held june 23. And in france there is no side of protest that will end soon. They will interrupt the european football temperatures that begin this week. Now walkouts are to scripting crack are disrupting trash collection. China andsion in japan. Earlier this week three chinese ships entered what japan says are its territorial waters. Tom thank you so much. Lets start with the data check. Futures hold up pretty well. You would think they would be weaker. With the dow closing at 18,000 of the 10 year yield is stunning. Mentioned, the record low in that 10 year. Stability,ing with oil reaches out with commodities doing a better recovery. On to the next screen. The vix for the equity markets. Is 10649. You wonder where it is going to end up coming even the adjacent of korea. We have not gotten to it yet. What type. 03 handle on the german bonds earlier this morning. Francine this is six extremely important because it can reverse how we look at risk around the world. Stocks are a little bit down, but on the week they are of. We are also seeing a lot pressure on these yields. The you referendum is nearing an end. We saw of taking crude oil. It is down slightly at 51. 10. Tom lets take a look from 42,000 feet of what were facing right now. Thank you to this idea. This is usually the fiveyear review of where inflation will be. This is not that. This is the expectation or price of a tenyear vision of inflation. Heres the beginning of the financial crisis, down we go ofh the about of expectation disinflation and outright deflation below zero. Stability, we do better. Here is the reason rollover about ready to go to a negative 10 year yield. That is a big deal. Very symptomatic of the global system right now. Francine it is an important conversation and one will have the next couple of days. I have picked out something a little bit different when we look at earnings. As your First Quarter earlyseason rises up, some analysts have lowers that. Means they will start downgrading their forecast. It is slightly edging out higher. Lets get more on these earnings. Really good. Lease it shows these strange markets when the idea that things are pretty good for profits was very smart. Francine the problem is if you have good profits that depends on whether the Company Gives it back to shareholders. That is the question we are asking the chief investor officer will stay with us for the hour. That is very brave. [laughter] what is one thing you think is being mispriced in my . The market . Central banks up staying put, they are ready to act and do more. Is that deterring competition from doing structural reform . The root cause essentially is still a very broad sense of north asian economy selling prices that are below the reasonable price consistent with delivering longterm profitability. We either need these Companies Read these back. Or they will simply end up as they were. Mr. Bevan i think politicians are going to say if youre not going to light by sensible rules, we are to deal with this and you were not be selling products like that in these markets. Ive plenty of evidence that china recognizes that this deflationary adventists will satiate with overcapacity, and significant inventory and it will be destructive. Tom you have to fold in the market moves we are seeing this morning into a better idea of corporate profits. Where are we heading on negative rates . Gore do you envision we will when we have the commerce banks storing cash . Where does this end up . I think the negative Interest Rates are extremely dangerous, but 25 now its covered by an rate policy. I do not anticipate that they are leading to a bubble in bonds. I think theyre much more sensitive and meeting to rational behavior. When i think about negative Interest Rate policy within the euro system, i see the target essentially allowing fiscal bonk for payment. You can borrow and get back less borrowed. Ave i will do everything you said except one thing. You have a leakage of sort into the Foreign Exchange system. Ons price like the u. K. 10 year, at some point it leaks and is expressed in Foreign Exchange markets. Twowe not seeing that with standard deviation moves on euro danish krone, or what we are seeing with the new Zealand Dollar this morning . What i worry about her you are brought up in a world where they were all to do with his assessment of what was going on in terms of domestic and economic activity. And what was going on in export prices. And what we have are economies that have falling export prices and local currency terms. Deflation,enuine global traded prices. We have domestic inflation continuing to rise. Implying that all in economys of facing rising rates exchange rates. Do get policy growth, companies that can cope with deflation as they have done for years. Well,ies that could do deliver a show for value and not been focused on inflation. Next hour,p in our an extensive conversation with our bs chairman. Mer director. Tom this is surveillance. Time now for Bloomberg Business flash. Ramy thank you. Chinas 10 is discussing whether states that would create a super cell. That is according to people familiar with the matter. Softbank 73 of super cell. Danish utility dong energy has become one of europes biggest ipos this year. Amazon. Com is jumping into the most competitive grocery markets. Fresh Food Delivery Service will central andable in east london. It is the first time the company has offered the service outside the united dates. They are draining a crowded customers withsh whom they have been in a price war for years. Francine ky. These days everyone seems to be fine. Stocks,ets have some and our chief economics correspondent is still with us. When you will get centralbank policy, it seems like there is so much being done. We believe mario draghi when he says he will do whatever it takes. And it is distorting market. It is up today, it has been up since the jobs report on friday. Francine it seems that agents and cultural banks are going to be on hold, but possibly cut because of the links to the u. S. Is a little bit more difficult left out there, you have a slowing china. The willts of that have to introduce more stimulus as we go into the selloff. Mr. Bevan what you are wonderful at sticking policy and linking it into what people actually do. I would suggest this morning were seeing banks react to negative Interest Rates. The rex centralbank theology. With your years in europe, are you surprised how german banks are reacting to the reality of negative Interest Rates . Is well within the playbook of german economy. You may not believe in god, but they believe in the bank. And certainly, that is a problem for mario draghi. He is trying to make that case. What is true today was actually in the interest of germany. We have never done this chart. Euroeuro jms chronos danish krone. Twoave come down to standard deviations. Strength versus the euro. It is one little butterfly flying within the system. When you look at what the policymakers we do to react to market over they have to adapt and adjust. When do they react . They are the most reactive centralbank involved in the last few weeks. The got the euro area right on their doorstep. Good story about how for the rest of the world, and not been too many negative effects out there. Some questions but realistic trail. Francine now we have big entrepreneurs, the paypal. Ounder, the facebook negative Interest Rates. That is the real bubble. When you look at someone like peter thiel saying dont look at us, look at negative yields, he has a point . To lend money to the British Government for 10 years and then bonds or report value, which is why bubble is increasing back to explain. Buy theas they had to Government Bond market here in cover is very hard to see the doubleblind time soon. Mr. Bevan . Tom when you do a data check, the backdrop of futures are a little soggy. The 10 year yield really moves in from 171 into u. S. 168. A record low in the u k. Stay with us on Foreign Exchange. Francine these are life pictures from the city of london, overlooking the millennium bridge, where we are you less than two weeks from the u. K. Referendum. Tom keene is in new york. This is when it picked out for my morning must read. It is focusing on some of the political upheaval in the u. K. This was a week ago, but nothing has changed. Arguments are not getting through to the mainstream, and a group of undecided workingclass women assumed the party was for leaving the you. The poll goes back to that was really sick days ago, saying almost half of labor voters do not know what the party stands on the referendum. How damaging is this . Can the u. K. Remain in the uv does not appeal to labor voters . It is extraordinary the amount of policies that has made available. But people do not want to read and find out, then they will not know. One of the most fascinating challenges is because there is lack of clarity about the economic consequences in a longerterm view, everyone is excepting the shortterm kyles. Accepting the shortterm chaos. This does mean that this has become highly emotional and sentiment driven. Are you even more concerned . Do not know what they vote on, they dont show up at the polls. Most people do not understand the consequences of leaving would look like. The first dayders a cd of science and the downsides of the move. When i look at the ballet, we are getting into the final weeks before brexit. What do you see from the Prime Minister . Change ore would dashes rhetoric for a real name. Cameraman will come to the table and be much more strong king of all the real benefit, which can have been very substantial. One of the things we dont talk much about it was very hugely in my. This will be canceled if it to leave, and whereas we have a deficit so weak and we manufacture. He services we action francine thank you. Later today, the commissioner for economic affairs. A. M. ,ts of 00 okay, ready . Whoa [ explosion ] nothing should get in the way of the things you love. Get americas fastest internet. Only from xfinity. Francine straight to our first word news. Mark the general election has delegates rallying. They are asking to match with a mandate to the primaries by the end of this month. They want to raise 1. 1 billion total in november. They are going to manage prochoicers debt crisis. Meanwhile, the false is and will try to resolve their differences over funding to fight the zika virus. The senate voted to write 1. 13 and every save it, and philadelphias one major u. S. Ity to fill in his six maybe all of this leads back to the courage to change markets, and james abbott knows this. In the Investment Business thising money, i look at and everything is said and done. It is about the European Banks needing to clear. Lets bring up our single best chart. We will feature this in 40 minutes. The idea is europe is rolling over and rolling over again. What will it take for the European Banks to clear . Clementn a much more economic environment is. Generating an appropriate with Business Opportunities for the banks to build for their value. If you were look to the history of the spanish Banking Sector to offset the Global Financial ratio improvedns because the banks called back the law of g robby mook to be pressured. Investors determined they would rather hold cash that worry about what was going on in the room ahead of us. E recently they have ended up buying bonds and a fore lying were in the trenches of this right now. Go back to discuss sumner article and there is one single sentence about loan demand. Indication on this thursday morning of the idea of this loan demand weather in the United States and critically weather in europe and all of this is his financial engineering. Absolutely correct one was worried about two answers. The booking reports on your. Roductivity said had the they have depressed prices because it is not led to an increase in demand in the market. A fascinating challenge. Toave to make some money avoid the brexit trip. Should i own European Bank stocks . I would discourage you from that. Banks are highly risky trades. I would actually encourage you to look at the european stocks and some of my heroyearold. Lays tom i want to talk about the ecb. Francine we had a record for the u. K. 10 year. Will go further . Mr. Bevan there are three buyers. The mesh the liabilities because they dont do it, the paper they do. And then there are people who worry about deflation, and im happy to support the burden on their farm. Francine they are mistaking when you took the heels. On the ecb how much is he distorted market by buying bonds. . Mr. Bevan hugely. He will have 2700 Corporate Bonds issued. They change the structure and function and create a bubble. Francine today we find out that he is buying books like insecurities. Talkinghas been about this. . Rendan i think you will buy a lot of everything. In japan, they want to take it easy and program is being ished the german yield of 4. 5 on the bloomberg right now. When does this party and . Where in does the Central Bank Theory this morning this yield structure, when does it end . Happen is the macro change in terms of the structure and function of the north asian economy. Is that will be protected the first signs of that from the end of this year. That will give us a significant height and inflation. And every path of history, this always ends with some form of banking adjustment. Whether it is airings or call bank, it is always about some form of banking drama, which is where the policymakers have to finally act. Francine this is something you have been trying to explore. Consolidationama, that it it seems to me will be much more difficult to have some kind of Cross College consolidation of big banks. They may have to go under. Mr. Bevan so long as Central Banks lend rights, it will continue. I disagree that this will be banks that cause the issue. I think will be the politicians chosen by the people. There will be a big shift in. Francine the party has to end at some point. Tom it was continental, illinois. This was a million years ago. But the idea, i take his point, the drama of the bank that may have been. I look at a lot of tension in this. If you were to play devilss advocate, you would say brought,at the 2008 and we do make sure theres nothing systemic in their because of the insular know is asian of our Banking System. Coming up with full here from google director. We will be talking to him about all the political risk. He made of those mario draghi comments earlier on. Francine tom keene is in new york. Straight too brussels. This is where mario draghi seems to ask for help once again from politicians, saying he is doing all he can, but he cannot go it alone with these reforms from politicians. Is director of the economic think tank. Thank you for joining us. When you look at what mario draghi keeps saying, i am in business, i want to deliver, but i need support from the politicians can that support is not coming. What will it take for them to take it seriously . Clearlff i think he made that support is needed, especially to reach Inflation Numbers more quickly and close to close the output gap together. People will lose their jobs and just give up particular jobs. That is bad for support. Getting we keep told this, and nothing happens. Mr. Wolff i think were in a catch22 situation. On the one hand we know that governments are afraid to act and the other hand they need to act. Alreadyl support is quite weak. The Economic Cost of reform and of delaying or for missions too high what is the chatter where you are at the summit . Do they talk about brexit . Mr. Wolff i think a lot of people are talking about brexit and donald trump. There is a lot of fear that this will happen and if it happens people are afraid the the policy system may not be able to respond to this. There is a real danger. There is a little bit of complacency. Tom good morning. Thrilled to have you on the program. Research a at your good 10 years ago, you speak of endogenous shocks. I want to explain to our global audience the import of france writing europe right now. What does france need to do to assist in germany and the United Kingdom to a better europe . Mr. Wolff this is the center of the country for the European Union and the euro area. The key question is after leaving, whether germany and france will work more closely together and find political trust, find the will to really move the european project over. Germany really thinks of france a stage where they are not doing enough reforms, but they are also afraid they are turning their back one way or another to the European Union. This no wondero wha