Live from bloombergs european headquarters. We are getting breaking news. The i8 monthly report out. It is important because it gives what they are expecting what theyre expecting that she gives what they are expecting for 2017 gives what they are expecting for 2017. A lot of economists, goldman sachs, just six month ago was expecting the market to rebalance in the second half of this year. They came quicker. What we saw in nigeria and other parts of the world. In its latest monthly report is the first time we hear about 2017. The market balanced in 2017 and cuts the estimate of oil oversupply. This is euro market check. One hour and one minute into the trading day. This the picture for crude oil. A little bit on the downside. A lot of pressure on everything across the board. In one word, risk. That risk is off today. 1 . Pean stock down it did go into negative territory for the First Time Ever. It all has to do with brexit and risk aversion as the markets are trying to understand really whether there is a possibility of a brexit in the upcoming vote on june 23 good lets get to the bloomberg first word news with nejra cehic. Nejra Barack Obama Says the orlando nightclub killer was inspired by propaganda. The president says omar mateen was a homegrown terrorists that authorities have long feared. At the last minute he announced allegiance to iso isil, but there is no evidence that he was directed. There is no evidence that he was a part of a larger plot. French authorities started an investigation into the killing of a policeman and his partner in northern france. The attacker was killed by police and the couples threeyearold child was saved. A french governments Spokesman Says it was an act of terrorism. The attacker had claimed allegiance to the islamic state. Brexit concerns are dragging on assets around the world. The chinese currency has moved closer to a fiveyear low just as britains vote compounds fears. Concern that authorities will not add stimulus even at the economic even as the Economic Outlook deteriorates. Global news, 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. You can find more stories on the bloomberg at top. Francine. Francine the pound has fallen toward an eight week low put the campaign to leave the eu ahead of remain. The sun, the countrys biggest selling newspaper, has on its to vote tothe urge leave. To stay in the eu. There is such a strong case for the u. K. To remain as a member of the European Union and to remain a part of the single market. Geopolitically, economically, many aspects francine first, speaking at the event yesterday, the best campaigner, Boris Johnson says remain campaign is misjudging the british people did ask people. I think that they are woefully underestimating the ability the francine the lack of concern of the brexit is a little puzzling. Think itsy is a much for coming on to do the markets are starting to fear the possibility of a brexit more. Richard the concerns are finally starting to come through because the results is now perhaps slightly less obvious than it appeared to be a couple of weeks ago. That is showing through in developments and currency markets. And also in bond markets. Francine the problem is, you are in the markets and active, who do you believe . The polls . Difficult to judge because this has not happened for 30 years. Richard many people around for the markets were not able to vote in the last referendum. It is interesting and it is clearly a political event with very profound potential economic consequences. The economic consequences dont just come through if we voted to leave the eu. They are also there will be constant as if the referendum votes for the status quote. The status quo will start to change. This may be is a situation that is prompting rethinking over the eu and its political structures. Francine what does it mean that you want to put your money to . I made this chart for you. Japan and white. White, u. K. Apan and in blue. For the first time, it went below 0 . However we pricing these things . Richard people are going for what they perceive to be the less risky assets. I am not sure in the end these will be the less risky assets. It is offering you a zero yield when we expect inflation to be positive over the next 10 years. We can debate how positive, but if there is a positive inflation rate, you are taking a real risk by investing in bonds as close to zero yields. One of the things you might want to do is try and take yourself out of the european debate at the moment and focus more on dollars. That is not to say that the u. S. Economy wont be unaffected by what is going on in europe, that it has a lot more momentum and is less likely to be affected. Francine do you believe the dollar yellow the dollar rally will be back once janet yellen raises rates . Richard it is difficult to foresee the outlook for currency. They are always difficult to predict. They often do the less obvious thing and we set up a scenario and say in this scenario the currency is going to do that, and it does exactly the opposite. This is the backdrop for the time being. You expect the dollar to be a strong currency. Francine brexit concerns. Would you be buying yen or gold . Richard gold has been interesting and it has rebounded. We have had a greater focus on gold. To a certain extent, it has achieved what we wanted to. Wanted it to. It is always able wake. A bull wake. Days,st the next few until we get to the referendum. It is dependent on what opinion polls are indicating which way they are swinging. This is a period that is going to test of the nerves. Francine think you so much, richard jeffrey. He stays with us and we will be talking more about china. The imf warns on chinas surging debt. Well ask the Deputy Director if the world should be worried. To a. K. Is moving closer brexit, we ask the president of business europe what the eu would look like without britain. The biggest purchase and microsoft history but is it too much for linked in . Francine welcome back to the pulse. Chinas nearterm outlook is being supported by the doc. The doc. Lets head live to beijing where thank you so much. I know you just wrapped up a news conference. The thrust of what you are saying is chinas nearterm Economic Outlook is being reported on the government, but mediumterm prospects look very uncertain. Talk to us about the main risks facing china. David chinas Growth Continues and what is important is that it be not at the fastest rate but at the fastest sustainable rate. It is important that china deal with its own vulnerabilities in order to keep growth going and we focused during these discussions in recent days on the growing corporate debt. Corporate debt is now at 1. 5 times gdp which is high for a country in country of chinas income level. The composition of that debt is largely stayed on enterprises to have more debt relative to gdp them their conservation to gdp than their contribution. We are concerned with the present rapid rising credit in the economy, it will go to companies who do not have a basis for repayment. Debt that we think is manageable could become unmanageable. Francine when will we see progress in reining in this credit . David the first step which i think they are stepping thats their taken is rick they have taken is a recognizing the problem. Recognizing the problem, saying they really need to deal with the zombie enterprises. I think the problem is not just about companies that need to be shut down but also about companies that need to be downsized or right sized. They have developed a program for Closing Companies in the steel and coal sectors which are sectors where they know theres too much capacity. We want to see them go ahead with those plans and then broadened their efforts to address the restructuring needs across that part of the corporate sector, where profitability is not going to be where it was in the past. Francine talk to me about the currencys. Are they in line with the fundamentals . David we think that the currencys broadly in my broadly in line with fundamentals. The currency has not moved and effective terms, meaning against the basket of currencies that reflects chinas trading partners. It has not moved much over the past year. In moves against the dollar or another currency, it is currency, as cross currency moves across global markets. It is stable and ineffective stable and ineffective since. They just more possibility into the market so that forces can guide the currency in the future as fundamentals change. The currency can be guided by the market. Some levels are consistent with fundamentals. Francine how concerned are you about brexit and how much of an impact can it have on the World Economy and china . Dish david the votes david the question about the brexit has introduced some uncertainty. We dont know what the british people will decide on june 23. If they were to choose brexit, we think there would follow a. Of uncertainty follow a period of uncertainty. The impact would probably be the Economic Impact the Economic Impact would be important for the u. K. And secondly, for the eu. There would be some reverberations. These are Economic Issues the british people will decide on. Looking at it from an economic standpoint, we think there could be some significant effects. First in the test first in britain and secondly in the eu itself. First in britain and secondly in the eu itself. Francine some kind of snowballing effect that would lead to a recession or practically no growth. David i dont think the impact would be that significant. Further afield from the u. K. And europe. Of course the Global Economy is recovering, but recovering in a way that is too weak and too fragile. It is never good to add another straw that may break the camels back. Our view is the Global Recovery will continue, brexit or no brexit. Every effort should be made to strengthen the Global Recovery. That is going to be the key topic of discussion when g20 finance ministers meet and just meet in china in july meet in china in july. Francine what will the action this week tell us about the state of the World Economy . The german tenure going to negative territory for the first time german 10 year going to negative territory for the first time . David i think there are a theof factors that safe haven considerations around uncertainties in the world, including brexit. You are right. Central Bank Decisions are likely to be a reflection of centralbank judgments about the strength of recovery. The fed is the fed has said its decisions would be data dependent not date dependent. They will be assessing what is going on in the u. S. Economy in terms of employment, wages and inflation. They will make their decision it would be good news if the economies of the world were strengthening enough for normalization of Monetary Policy to go forward. Well have to see whether that is the case. Francine what does one of two fed hikes this year mean for china . David i think that there are the two affects that you have to take into account, a stronger u. S. Economy is good for china. By aat is modulated a bit normalization of Monetary Policy, unbalanced, we still think it is good for china. There are going to be affects as Interest Rates begin to move up. When they begin to move up, both in terms of the Capital Market and in terms of exchange rate, the strengthening u. S. Economy be good news for the u. S. And for the world. Lipton, avid whether to include chinas domestic equity. Is it time to include them . Is really not something for me to determine. It is important that chinas Capital Markets grow in size and sophistication. They are managed in a way that maintains stability and integrity of markets. When that can be recognized by those who make decisions about the inclusion and indices, that a positive step. Francine of course. We understand that you cannot have an opinion on that. David lipton, think you so much. Great comment and and thank you so much. Great comment and analysis. We willj and fed talk Monetary Policy and the prospects for Global Growth with my guest host. Francine we have been talking to the imf about central bank action. David lipton lets get more from richard jeffrey. Richard, thank you so much for sticking around. We talked before about how sometimes Central Banks put in policies thinking that it will go another way and actually the markets completely flipped on its back and go another way. Chart made especially for you. It shows yen focus. This is q4 and the fact that it has not felt the trajectory. This is Second Quarter and you can see it is not falling back. It is at 105. 84. What happens next . This is a haven. Andard through my career investment markets, the one thing you know is currencies are very difficult to predict. It is quite difficult to explain after an event in the currency market as to why it has done what is done. Given the changes in centralbank policy in japan, people expect the yen to weaken. What is behind that . Expand started evil started inventing people started inventing explanations. Francine going for, were reaching the limits of Monetary Policy. We are reaching the limits of textbook Monetary Policy. What comes next . Richard we are now in the period in which maybe the Monetary Policy that is the followed by some Central Banks are counterproductive. Francine the boj . Kobe theo the ec ecb. They are acting as if the european economy is in crisis. It has been gaining momentum. The ecbs activity has not injected confidence into the system. It is behaving as if theres a crisis. Negative Interest Rates are counterproductive. Francine counterproductive. Is it market psychology and saying that we are not getting better. Richard there is the impact on psychology, yes. It is the wrong signal. I think there is the impact on banks. It does not enhance accessibility to supply credit into the economy, because it weakens the lending model. On both fronts, i would question what ecb has been doing. I would interpreted more in a political sense than an economic sense. Francine richard, thank you so much for joining us. Up next, crude optimism. The iea balancing. We talked the future of oil. We talk the future of oil. Get ready for the rio Olympic Games by switching to xfinity x1. Show me gymnastics. X1 lets you search by sport, watch nbcs highlights and catch every live event on your tv with nbc sports live extra. Im getting ready. Are you . X1 will change the way you experience nbcuniversals coverage of the rio Olympic Games. Call or go online today to switch to x1. Pulsee welcome to the live from Bloomberg European headquarters. Lets get straight to the bloomberg first word. We have a little bit of inflation figures from the u. K. They are pretty much unchanged but everything in the next nine days, in the runup to the referendum will be taken apart and of course both parties remain, and the leave cap will try to bring it to their side. Stays atation rate 0. 3 . That is the breaking news and you can see the pound, one point 4142. Nejra britain appears to be on course to exit the European Union with four polls putting the leave campaign ahead of remain. In a fresh blow to the proeu camp, the biggest selling newspaper has backed a brexit. Chinas nearterm Economic Outlook has been buoyed by support but its nearterm prospects are becoming more uncertain. A plan to a dress high and fast rising corporate debt is imperative to avoid serious troublings down the road. The International Agency says the oil market will be a most balanced next year as Oil Continues to rise. Iea says the in inventory overhang limit any significant increase in prices. Says the orlando nightclub killer was inspired by extremist propaganda but there is no evidence he was part of a wider group or directed from a broad. He said omar martin was the kind of home grown terrorist authorities have long feared. He was able to buy a handgun and Assault Rifle legally because he had no criminal record. 49 people were killed in the nightclub shooting. President obama at the last minutes he announced allegiance to isil but there is no evidence so far that he was in fact is noed by them and there direct evidence that he was part of a larger plot. Nejra global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. You can find more stories on the bloomberg at top. Francine thank you so much. Weekd you this was the where we had to look it yields. Not only did the german 10 year bond yields fall to below 0 for the First Time Ever, but for the First Time Ever the 30 year guilt in the u. K. , the yield trapping below 2 . How crazy is it that you think ,uch longduration on a guilt but this is the story of the week. It all ties back to brexit and concerns on the market. This is 10 year. Japanese in white, you know the story, it has gone down. Germany is where we saw negative territory and the u. K. In lower territory. I want to show you my chart of the hour, the average probability of a brexit based on betting odds. Gamblers believe there is more than a 40 chance that britain will vote to leave the eu. The momentum seems to be with brexit. This morning we have seen britains biggest newspaper the sun backing a brexit. What would a brexit mean for the continent . My next guest is a famous italian businesswoman, president for business europe, mmr to go ugly a. Rchegaglia. Ma ma we are absolutel