store losing streak. check out futures markets ahead of the open. ftse 100 futures down by 150 points. dax futures up by 525 points. dax futures up by over 4% to the bond market opening about an hour ago. german bonds are higher, yields go lower. down by 15 basis points with spreads blowing out. we come back just a little bit but look at this for direction. italian yield up by 23 basis points. the yield, the gap, the spread the difference. we have doubled since then. risk aversion and contagion. it is not what the 12th but the move has been pretty severe this morning. euro weakness is the obvious one

in the fx market. euro yen is a bigger move there areas -- there. ftse 100 up by 2.21%. on the cats 40 we go lower by 40%. check out the session in asia. even with that full rate cut on the benchmark the shanghai composite moves north once again. up by over 3% poised to enter a bear market. i will just get you the price on the dax. looking at an equity market that is blanket red across the market. the dax is anticipated to fall by 4% as well. there is only one story in town. a critical day in europe as greece shuts the banks. the move comes as talks with creditors breakdown.

alexis tsipras calls the referendum the lifeline to the country's banks. bloomberg reporters across the region. guy johnson joins us in frankfurt and in berlin, hans nichols is back from the meeting and brussels and is watching angela merkel's every move there he guy, the bank restrictions how easy would it be if this weekend we get a yes or no vote to unwind. easier to introduce and much harder to unwind from here. guy: it is incredibly hard to unwind them and it is probably a cyprus story on stair rights. incredibly difficult and look along it took cyprus to get off that there is an awfully long way to go between now and then. greece has a lot of inking to do over the finance ministry. data plan a and a plan b and the plan c. there are so many options on the table we simply don't know which

direction we will be heading in. we may get a deal for that referendum happens. we may get a no vote in that referendum. there are a series of options on the table and they need to conjure up a plan for each one of those. at this stage, there is an 85% chance that we have a grexit here and that is a very different story. that is the story of introducing a new currency. we have a number of options dealing with currency controls but this is a moment with the economy in the deep freeze. >> when we look ahead to the rest of the week what is it? how significant is missing the imf payment. they have already bungled the payments, does missing it tuesday make things much more serious than they already are? guy: in one respect it doesn't because nobody expects them to

make that payment. if you're heading toward a grexit you do not want to make that payment, on the other hand it changes things. it changes the relationship when the ims still remains part and parcel of the rescue story for greece. it also changes the nature of the banking story as well. once you have the default taking place you start to see it changing the equation. that will be an important story working our way toward the back end of the week because it has take implications which i'm sure paul will be talking about. jon: when you look at the situation, how difficult do you think that decision was not to raise the ela for the european central bank? >> it must've been incredibly difficult because we get the impression that most people knew full well that it wasn't going to be enough and the banks were

not going to be open the next day. the german president of the bundesbank voted against it, so did yanis to norris. either way, they were going to end up in this situation and now the ecb has to deal with the fallout high net. the ecb executive -- fallout behind that. the ecb executive director -- you can see the things on his mind. jon: when i look at the biggest move lower since 2011 if this goes on, do you get to a point where we ask the ecb, what have you got and what do you do next echo -- next? >> the ecb said it will use all of its instruments to and sure financial and -- to ensure

financial and price stability. particularly bond yields. if they write too far, too fast or become volatile the plan will be to step in. it all boils down largely to expanding the balance and buying more stuff. qe is the easiest way to do that across the board. there is the monetary transactions program which is more targeted. these things will be on the ecb's mind. >> i want to bring you in, the situation on the ground in athens, as you look at things with the finance ministers before the weekend they were still talking a tough game. things seem to have softened. i ask that question because it is important. do you think that in some ways this negotiation tactic may actually work? >> i would be

doubtful of that because at least over the weekend there was little interest in extending the package beyond the deadline. if that was their strategy that appears to have failed. we've heard from a couple of the finance ministers this morning and their comments seem to be one part combing and two parts planning. they're trying to make the case that the contagion will not spread. he is now saying he is disappointed, it was a shock and he does not think contagion will spread. but importantly both he and the economy minister in spain are talking about what happens next. what the you do if this referendum is passed. they are both very clear that the negotiations start again anytime. what you are seeing is a great

deal of emphasis being placed on the planning areas how would you get these negotiations back on track. they are assuming there will be a yes vote. i saw a note from jpmorgan that they had about a 14% margin for supporting the creditor's position. the conversation here in germany seems to be shifting onto what do you do next week? in some ways, this week is too chaotic. jon: when you look at the politics, the negotiation tactics, there have been misjudgments on both sides. not just with the greek government. as you look at the political situation, who do you expect to move first? hans: on misjudgments, it is unclear if there were misjudgments or public announcements that were expected to be optimistic.

of the comments we saw next week everyone had an interest in pretending it would get across the finish line. it is not getting across the finish line for now we have a few recriminations. we will be hearing from meta-merkel later today and then she has to address and have conversations with all of the party factions. at 1:30 she is expected to give the press conference after for the official germany europe view. right now it seems the emphasis is on being in calling and saying that contagion won't spread. that gets me back to what i said earlier that no one really knows. in the same way that finance ministers said last week a deal is at hand, saying don't worry about contagion. you have to discount both of those statements equally.

jon: thank you. let's bring in a guest. morgan stanley's head of global fx strategy. great to have you with us. when i woke up this morning the big question on my mind was that it spreads wide but if this continues, at what point does the ecb look at this and think about an increase in qe? guest: i think that ecb will look at it and when you look at it we are in the middle of quantitative easing. you can bring purchases forward so it won't be the first technical move. it means a combination, it does not make me too worried about the threat widening. there are implications simply because you know that the ecb

has to do something. this is not about a trade on the spread widening, but it means you wouldn't have that ecb on your side. it actually means that the ecb will lose. it actually implies that the euro will weaken. that is the most important message for the day. you mentioned in an earlier part of this program what is happening in china. it is very significant in the context of europe because isn't europe an important manufacturer globally? we have potential problems with domestic demand in europe which means the chinese equity market is already taking notice. they are saying that there is a global message here. jon: when you look at the

weekend move, do you think in some ways it wasn't just about a friday equity market lunch? -- plunge? guest: i think what is happening in china -- if the put that on an agenda. it is an economy with a lot of problems. that needs to be set, but what i wanted to tell you here is that when europe is getting problematic european policy is at risk. jon: equity is at risk jacob >> the economists have increased the probability of a greek exit. that is important. an earlier sessions of this program i talked about sleepwalking into a greek exit. what i meant is that the

positions do not understand each other. when you look at the suggestions made by europe on friday evening, there were very generous proposals. it became possible nonetheless greece walked away. does that tell you that greece has a very different agenda. >> it is an agenda because they want to have a very different currency union. it is at the moment a mood-based currency union. they wanted to change it into something else. i guess these elements of looking at matters -- the question is what will be the outcome. the outcome was sennheiser, the political class in greece will fail with that so you have a replacement with a new government or alternatively

tsipras sit supported by the greek population and then either you make a deal with greece which changes the character of the currency union or you make no deal with greece and then you have a greek exit which would mean irrevocability being gone. jon: for the people right now they look at you and they want to know what you think about the fx market. is that the trade right now jacob >> i am not so concerned about euro swiss. but we are promoting a euro-yen simply because we thought this was a possibility. when you look into the fx market, the message here is very clear. we are in an environment of temporary risk aversion which means you need to look into those countries where there is a foreign liability position. you need to look into those

where there is a foreign asset position. that means the yen goes up. it goes out and moves higher. then you have the euro being directly impacted. if irrevocability goes, it means we're headed into a type of vulcanization. we have one currency union which is implicitly a currency risk. so the bank has to think about how do i hatch my per reference -- peripheral currency risk? that is what we call vulcanization. that has a significant negative implication on the economic performance and europe. jon: and credit conditions? guest: absolutely because it makes the conditions absolutely sub optimal.

do you want to the invested in a sub optimal currency union? they are investing into the euro because they thought the currency union would be the revocable. if there would be a greek exit it is no longer the revocable. you've a system with a possibility to exit. that is what investors were not buying into and that could have locations going forward. jon: coming up china on the brink of a bear market. why the central bank rate hike is not working this morning. a trip down memory lane. we will talk to the ceo about surviving controls and what life is really like on the ground in athens. stocks are down heavily. the footsie here in london down by 2.2%.

jon: good morning and welcome back. we are about 20 minutes into the trading session. futures markets indicating a much lower. ftse 100 down by 2% but it is mainland europe taking the biggest abuse. the biggest one-day selloff since november 2011. it really feels like that in the

moment. let's bring up the bond market and have a look at yields. about an hour and 20 minutes ago, the bonds got out of it and yields surged on the periphery areas the 10 year in italy is still up about 20 basis points. spreads are widening as yields and germany fall by or teen basis points. a 20 -- by 14 basis points. a 20 point drop since 2011. as far as the periphery is concerned, the spread has widened by a lot. the big question is at what point does the ecb need to act? for now let's get you up to speed on some of the top stories. greece has shut its bank and imposed controls. the move comes after alexis tsipras announced on july 5 referendum.

the banks will be closed at least until july 6 in the measure limits daily cash withdrawals to 60 euros. greece is likely to be forced out of the eurozone. the ceo and bloomberg columnist spoke to us early this morning. >> if you have to put a gun to my head and say give me a probability that greece is in the eurozone, i will tell you it is about 15%. there is an 85% probability that greece will be forced to leave the eurozone. not because it wants to but because it is no longer able to stay in the eurozone. >> chinese stocks close down for the day with the composite entering fair market territory. the central bank cut interest rates and the move was set to view share prices with mainland shares ending the longest ever bond market. let's get more on this story

from the bloomberg news reporter in hong kong. i have to ask what has been driving these huge market moves if i look at it this morning maybe it is about the ipo. together with the fact that we just had a massive rally. give me her thoughts. >> when we had spoken before, it wasn't easy to explain why we had such a large rally but certainly we had a huge increase in borrowed money and particularly by retail investors this was a rally that would never end. it has now ended. down 22% from its peak and a lot of those declines came in the past three days. people were looking for an open to see -- it was debatable if this was aimed at stemming the routes in stocks. it did not help and people are now looking to the government

and the central bank as to what they can do to shore up this market. we had people familiar with the market tell us that the regulator in china is looking to suspend or cut back on ipo's. we waiting to see if that is what they actually do. jon: the motivation for the rate cut. were a lot of people anticipating the rate cut after the next month that came after a huge selloff on friday. are we at the point where the people's bank of china is implicitly admitting that the equity market means a lot for economic growth. going forward is it what some people are calling the people -- pboc put? >> the expectation was that the

government would back it from all manner of reason to debt strapped companies but others said that the pboc does not want to be drawn into this. they have been trying to step up reforms of the economy and they don't want to repeat the error of 2008 when they dumped huge amounts of money into the economy that led to the huge explosion of debt. people did link it and we had a 7.5 -- 7.5% plunge on friday. whether this was linked or not has not been seen. not sufficient and the sense of panic we have been seeing in shanghai and shenzhen as well. jon: thank you very much. back with morgan stanley's

global head of ethics strategy. hans, when you look at the situation in china, have they cut rates because of the equity market? can you link those two? guest: i think that the authorities look primarily into the economy. they gave the signal earlier this year that they wanted to have a higher stock market and that could encourage consumer credit a man. when you look into what happened in the past year, we did see that credit demand was increasing but you did not see corporate deposits increasing at the same time. when you have a credit demand deposits not increasing, you can assume the replacement of existing credit is taking place. so one credit becomes new and then rates are lower and again so it has a zero effect on the economy.

they try to get the consumer on board and maybe the equity market is playing in here. but it is quite a risky game because you have an overvalued housing market and your inflating the equity market and it becomes expensive that one point. it becomes an additional inflationary threat. the measures being taken are a mixture of all of that so the economy did not search the signs of life it would like to see. but there is another point and that is the reserve requirement -- you actually make more within the liquidity available. the question is why are they using that instrument so dramatically? the reason for that is you have in china and increase of

short-term dollar liabilities that need to be replaced. jon: stay with us. we will talk about the experience with capital controls. ♪ .

jonathan: good morning and welcome back to "on the move." i am jonathan ferro. 30 minutes into the trading day. things are shaping up. the full c1 hundred down by over 2%. the debts off by 458 points. -- the ftse is down by 2%. the bond markets. spreads widening but not as brutal as one point. the 10 year in italy is up. the yield and journey goals -- the yield in germany goes south. a lot of stock stories to talk about. let's lift the lid with mark

barton. mark barton: it is indiscriminate. travel companies, down by almost 8%. the biggest drop since 2011. you know what have at the end of last week. tourists found in tunisia 27 killed. shares are falling today in response to that. tuni is down pretty it has created a crisis. tunisia is a big holiday destination for tourists especially from france. it had 1500 at the time. thomas cook, the biggest drop since november. down by 7%. besides that the selloff is indiscriminate. every single sector is declining on the stoxx 600.

it is the worst-performing spectrum. every single bank on the stoxx 600 is dropping today. all 45. 46th is the national bank of greece. no shares are trading today. the best-performing european stock is covered see banker. it is down the by 2%. the best-performing european bank bank porsche gas -- portuguese, 3% drop. it is the biggest drop since 2011. every single has fallen pretty difficult to be discriminate. jonathan: thank you. an echo of 2011. less of that back to the top story. greece banks shut until at least the sixth of july and capital controls imposed. we are joined on the phone by the ceo of the bank of cyprus.

john, the last time we spoke was april as cyprus was unwise and -- on widening capital controls. in your experience, you can introduce them by the wicked, how long could it take to unwind -- by the weekend, how long could it take unwind? guest: to have implementable measures as a key question is we have them in place and now what are we going to do to create the conference to a the banking system can be stable and the country can remedy the issues that they are putting in place. cyber and has taken two years and we were moved to the domestic capital controls more quickly than we did the national capital controls. in cyprus, very strong government actions and a proper tax collection regime and changes to the laws and

developing rapidly within restraints of a memorandum of understanding. not the conditions today in greece. jonathan: as you look at the situation, recapitalization was a big factor in cyprus. do think there would need to be a big recap as far as greek banks? john hourican: i think it's too early to determine that it would be wrong at this stage. we need to shore government action is clear at what program we will put in place at a national label -- level. following liquidity and it is a big sort of europe's hand in the game. they're certainly an reduction in confidence that has been very significant during the course over the last few months. it gives rise to asset pressures and question marks if there is capitalization bring those

questions cannot be answered inside of the vacuum of what will happen in a country program level. jonathan: if you look at the capital controls introduced a couple of years ago, 60 euros of atm limit. is that is severe and paints a pretty ugly picture and greece compared to was cyprus experience. isn't there a sense of that though force has bolted? -- the horse has bolted? john hourican: it has been very clear to anybody observing that the banking system was losing confidence slowly over the course of the last few months. and the requirement over the weekend to introduce such a restrictive euros per card. that is a small amount of money. it was 200 and then increased to 300 in than 500 and lifted. a severe issue and we need to do all we can to restore confidence

and the country in the banking system. we will see what happens. jennifer: wrist -- jonathan: across europe as well. how do then it will affect other banks even if exposures are contained, what are you expecting to see? john hourican: fairly important we regard greece as a specific sort of issue. in cyprus, so different to greece, they only share the language and common culture. the law in cyprus, the actions of the government as speed differentiate from greece. if we look across the rest of the periphery europe, spain and italy and ireland, is the intent of the populations is different than degrees. we do not have the same kind of painting with a steamroller going on in greece. i would like to focus on resolving the greece issue even

though the actions of greece inside of the eurozone and the single currency and of course causing shadows and ripples about whether the currency. i think with regard to in the course of coming weeks discuss the greek problem that needs to be socialized of the european stage which is fundamentally has been done through the funding the ecb has put in place. jonathan: a final question. from your experience, managing a bright -- a bank and ciphers, if the ceo called you up, what kind of experience would you give right now? john hourican: it is essential to get an urgent and implementable place -- plan in place all pincus see you are not just talking abut doing. a straightforward plan. -- plan in place that is implementable so they can see you are talking and not doing. jonathan: john hourican ceo of

the bank of cyprus. thank you for joining us. the conversation on agrees. guy johnson is standing by with a guest. over to you. guy: thank you very much. let's talk about the walk of the greek economy and how it is handling the situation. representing you are a think tank. a small to medium-sized company. the bulk of the greek economy it is hard if you are a small company to deal area how hard are they finding that? guest: the bulk is facing a bit of trouble. giving the confidence, they cannot produce or import. and they cannot sell because there is no demand and the banks are closed.

guy: we were talking before to another company that has produced olive oil. the all of us are still growing but -- the olives are still growing that they cannot find tins for them. hari makryniotis: you need to import. they cannot exports. guy: it has been bad? hari makryniotis: it has been bad for the past nine months. it is frozen. it has gotten much worse over the past few days. guy: was there any preparation they could make, maybe money offshore? hari makryniotis: if you are a bit company, you can do many things. if you are in a small or medium-sized company, it is more volatile. guy: the business points we heard, is it louder?

a debate we had a the u.k. talking about whether or not business should be part of the debate especially with the scottish referendum. is it now the time business should? hari makryniotis: it is time to step up. i am not sure. it is toward the previous establishment as well. fortunately [indiscernible] guy: is a have already gone. hari makryniotis: many have left of the country. we need to keep the minority of businesses. guy: who will step up and say we need to stick with it? who will stick up and say we need to maintain membership from the eu? hari makryniotis: it has to be from the progressives. people have lost confidence. the political parties. individuals, small businesses,

they all need to come together and have a loud voice. guy: even if we got through the immediate threat the policy framework at the moment does not look particularly conducive particularly as you say and a small to medium-sized sectors. it is still a very oppressive situation. hari makryniotis: it is. we need stability. we need stability and have some type of stability over the next few months. and then deal with other things after that. guy: do you think companies look at long-term, how will companies operate? do you think companies' formations will slow down dramatically? would you think twice? longer-term? hari makryniotis: it is already decreased a by 40%. the thing is so very important

in tourism, great human capital to work with. let the companies operate. [indiscernible] guy: does it matter if it is the euro? hari makryniotis: it does. the government would promote other forms. the government would promote for us. take a breath and implement reforms. i do not think the current establishment would have the signals. i think things will get much worse. guy: you talk about the number of people who have left. how many people are you talking to that are younger and bring norse? -- entrepreneurs? you talked about the aggressive exit, will it continue or accelerate? hari makryniotis: it

has stabilized. we see it rise again. most choose to move abroad. i think the next step is to [indiscernible] things are not a better within the last few months. guy: great speaking with you. hari makryniotis joining us. difficult situation. the bulk of economy out of the state sector is small and medium-sized companies. they are finding life like incredibly difficult if not impossible. jonathan: guy johnson, great work. thomas jordan, smb president speaking. greece is a difficult situation for the eu. swiss wants weakness. euro weakness. yen strengthened. at problem for the swiss

national bank as much for their european central bank. we will keep her right here on greece. dashing forecast. imposing capital controls. live on the ground. as i look at the equity markets, the dax is off by 3%. the ftse is off by 2%. and a weaker euro. we are back in two. ♪

jonathan: good morning and welcome back to "on the move." i want to check on currencies. a weaker euro. when you look at your role just a month -- when you look at euro , a move of 0.1%. a stronger swiss franc it is not that much stronger this morning. and snb jordan spieth is saying they intervened in the -- and snb jordan is speaking say they intervened and the swiss overnight. what you have seen it when we bring up a chart of euro-swiss is a turnaround in that pair. a stronger swiss was the story earlier and now weaker swiss

franc as we rebound. down by 0.1%. the story playing out across individual pairs. a weaker euro pre-individual stories when you look at euro/ swiss. i want to head back out for the latest in athens. elliott gotkine is there. talk to me about the feeling on the ground. we saw the cue at the atm's. is it continuing? elliott: a lot of the banks have their atms inside so people cannot get to them. prime minster alexis tsipras called on the greek people for their composure and patience. you look around, the beating hearts athens of an looks patient and composed to me. around here, a guy selling -- every day of the week. the one big difference in you

will see here is the bank which has its shutters down. people cannot actually got inside to the atm to get 60 euros out. even if it had cast. the bigger problem in some other provinces people going to the airport specifically to get cash out. putting in a card after card to get as much money as they possibly could. it is going to be a paradise. look over here. you have the world's media, a few. satellite trucks. everybody here to get a sense of what the greeks are going through. not all want to speak on camera. i got a quick word at the pharmacy over there. very terrible what is happening. greeks and do not know how it will play out. day one of h rose. the banks will be shut at least a week. we'll have to see.

-- day one of capital controls. jonathan: more satellites. thank you. we will be back with morgan stanley's head of asset. a grexit would put a monetary easing in question. my question to you, the last two years, controls in 2 eurozone countries. do we have to start asking that something is wrong? is that the case? guest: the currency union is a weak one. in response to german unification and leaving a plan originally that was after political unification of the euro and we have brought it forward and have not made significant progress of unification. we do not how cisco autonomy or

fiscal finance minister. that makes a very big difference. a currency union is solve optimal. -- suboptimal. you have to deal with the expenses of suboptimal. what it happened in the case of cyprus, they lost capital control but part of the program. that is very different to the current situation. you have cap of the trolls that are -- capital controls that are failure. in its quantity, a very different way of looking at things. far more severe. jonathan: on the fx market we were talking about discriminating on the euro pairs. euro weakness seems to be the obvious trade. the other side, the other central bank looking at what they are going to do. do you think the swiss national bank will do more? hans-guenter redeker: i think they will say much more.

on the other end, what to you have in your toolbox left? very strong reserves relative to gdp. some people will say it is unsustainable and runs a risk. what can you do? can you cut rates? already record low deposits in switzerland and many are asking the question and maybe saying they are restricted in that. another point, how to trade. how to trade? you would trade against the swiss national bank of because it does not make sense. a couple of weeks ago, mr. kuroda making an interesting statement. he was basically saying limited yen's strength. not the swiss franc. jonathan: please stay with us. hans-guenter redeker. after the break, will wrap up

the trading day. we'll give you a breakdown of what you need to watch. we are back in two. ♪

jonathan: good morning and welcome back to "on the move." tomorrow, greece's bail out expires. the payment to the imf is a do. unlikely it will get paid. not all about greece. jobs thursday.

stateside the fourth of july holiday. payrolls on thursday. we will be back with morgan stanley's head of strategist, hans-guenter redeker. payrolls thursday. the fed, what is their position? hans-guenter redeker: uncertainty in europe or deal with potentially high zynga rates lower. higher u.s. dollar. -- or hiking rates lower. they have an eye on your -- on euro. it means slower. built into the forecast. the fed will act in december for the first time pre-not in september. we think the forecast looks solid in respect of what is happening in the markets right now. a higher u.s. dollar on the risk appetite offered. why should it off in a rush? --

teh fed rush? jonathan: why should the fed rush. "the pulse" is up next with francine lacqua. that is it for me. have a good rest of your day. ♪

francine: greece in crisis. the stock exchange closed as capital controls are imposed. as greek banks teeter on the brink of a we will hear from angela merkel and jean-claude juncker. manus: the markets react. the euro falls and volatility surges. that as the risk of grexit moves further. francine: china enters the bear market as themanus rate cut fails to stop the rock. regulators are said to consider suspending ipo's.