welcome to "on the move." we are counting down for the european open. i'm guy johnson. this is what we are watching today. delaying trading -- trade weekend by giving what could be a crucial speech. she could be dovish. seven ends with a whimper. fails in his bid to get

everyone to warn about a global crisis. and david crisis -- cameron using the market to confirm he is not a closet brexiter. along friday for u.s. markets. if we take a look at where the pricing is taking us, we are absolutely flat. giving this, what is it? an interview? a fireside chat. he is such a fascinating professor at harvard. questionsk difficult and go places a lot of people may be would not be willing to. he is a libertarian professor at harvard.

looking forward to that. there was a flat trade in equities going on. in japan, you had gains. shinzo abe is talking about putting this off, that is good. you can see the dollar unchanged. interesting to see the south african rand losing even more ground against the dollar. you can now buy 15.5. then you see crude. over $50 a barrel. now coming back from that. the rand and crude are telling you, stay away from risk assets this morning. put your barbecues, as guy says, on hold. the friday before memorial day absolutely dead.

the bond market shuts early. takes his is anyone private jet. it is a little different this year. fed chair janet yellen is set to speak. the half of rate increases. expecting dovish comments. the tail is the -- market is the tail that wags the dog. they are all the expecting a 28% chance rates will increase in june. we are looking at a 51% chance he will increase in july. that is not too far away. i don't know janet yellen has to be particularly dovish.

guy: we have seen this play before. speakers saying, we are getting ready to raise. don'tose trades, they look so good. the muscle memory is kicking in with the market. i get your point about detail wagging the dog. is the market warned? it feels like you've got to people in the room and they are not really talking to each other. some intelligent conversation surrounding this. ouri'm not saying conversation isn't intelligent. european fixedof income at a black rock. what are you expecting? fedt: i think before the was unhappy about how dovish we were pricing. we were literally not pricing any rate cuts for this year. very little after.

with the pricing now, around 50%, they are relatively happy. they think of themselves as wanting to have the option open. i don't ticket will be an active intention to change the market. guy: can she repeat what she said before? her she need to repeat what colleagues have said? does she not change pricing? excludenk she will not a move. if you compare it to previous speeches, you could make the point that it could sound hawkish. groundl find the middle and keeping it open. we will discuss other central banks. in a smart way, it is helping other central banks.

>> the fed has to bank mandates. looking at jobs and inflation. 5% unemployment, close to full employment. , close to the 2% target, shouldn't they be on a path to increase rates? guest: that is a good question. i will say, nobody really disagrees on the labor market site. if you look at various inflation indicators, you have seen a slight change. mightould explain why she sound a little more hawkish than she sounded some weeks ago. if you look at the pricing of oil, you expectations,

can see maybe the probability of two low inflation has been reduced and that will open the door for a summer move. chart, cpi, if you look at the core number, it is above 2%. pce, about 1.6%. oath of them rolling over. are you worried at all about inflation? we hear from shinzo abe we are near 2008 crisis globally. do you buy that? ifhael: i understand somebody is worried on global inflation. look at the european and japanese experience. here, very important with the

destabilization in oil that we get a bounce. i understand they are very alert. i am less nervous about the u.s.. what you said before about the labor market. where core inflation is ticking along. i am less nervous about what you small correction. guy: talk to me about how the market will move in the u.s.. they are nots worried about this. keeping the curve. me the trade on the curve. where are you positioned at the front and in the middle? michael: the front and middle part is still slightly expensive in my thinking. we have a 50% probability for july.

at the end of 2017, veryis not marry much -- much. there is the potential for correction if the data holds up. there will be the continued flow because of the low yields we have in japan and europe. guy: the trade is still on. thank you very much indeed. going to stay with us. up next, we will talk about japan. the prime minister failed to get a warning on risks. there is one prospect they do agree on. exit. talkingident has been about it. we will take you to japan, next. ♪

anchor: you are looking at a live picture of the brandenburg gate as the germans prepare for a concert. abe hasapan, shinzo failed in his bid to have group of seven leaders warn of the risk of a global economic crisis. he used his speech to highlight sluggishness.

we suffered from the deflationary pressure because of the chronic and insufficient demand. it, we have the deceleration of the emerging economies which is bringing in a major sluggishness. anchor: it does, however, mention a brexit. issued dire predictions korea the other leaders were not so convinced. you've von: they were not buying it. you see what a difference two years makes. you may remember when it was first introduced, he delivered such a message of optimism.

now, he is painting a grim picture of the global economy being the world is going to into the downward spiral like what we saw in the lehman crisis. he talked about the slowdown in demand. concerns about emerging economies, as you mentioned. he called it the biggest risk, the shadow cast on these emerging markets. the global economy was the biggest theme. they also talked about ethics policy. saying disorderly moves had no good impacts toward the economy and nations should refrain from currency manipulation. we will see how that goes. in terms of the sales tax, that is a question. he said he was going to make before the summer

election. whetherk to me about the brexit was the biggest concern. they talked about trump as well. von: trump was one thing. it had rattled some of the nations. brexit seem to be a development. brexit wasn't even on the list when it came to risk to the economy. in the official document, we are seeing language like posing a serious risk to the economy. this would actually reverse the trend when it came to greater global trade as well as investment. not to mention the jobs created behind it. we heard david cameron talking about this. he wanted another body to

support their main camp. pressed fortalks his case staying in the block. a deal worth $7 billion. saying the agreement underlines the importance of the u.k.. the pm having a pretty good week. he also got the victory when it came to dealing with the steel supply, oversupply in china. the g7 said they are going to tackle this issue. governmentfueled by subsidies and support. guy: thank you very much. yvonne man joining us. the president of the united states has just landed in hiroshima. we will bring you the pictures later on we hope. let's talk about what is happening with the japanese economy.

e is lookingbé\ at canceling the sales tax. this is the japanese curve, it continues to be a weird curve. are we expecting fiscal policy to change? the sales tax to move? michael: you said this morning, cpi, the tokyo cpi slightly disappointing. if you look at the underlying data, i think you don't have to give up on abenomics yet. he will definitely deliver again. it is very likely before summer, we get the announcement the hike will be postponed.

curve, itk at the implies a low probability of success in the reflation effort. we think the long and is too pessimistic on the fundamental scenarios. talk about the japanese curve, you always have to make the markets, one of the most official sectors. you have to take it with a pinch of salt. anchor: i wonder what you think about the spending climate. obviously, here in germany, we are still in austerity mode. cameron trying to keep that country to no budget deficit. e wantsother hand, abb to spend his way out of a dire

situation. do you think we have strayed inm the austerity readiness the g7? my take of the theement is pretty much initial positions are unchanged as you described them. germany and the u.k. pushing for discipline. some countries and especially japan pushing for more spending. policy shouldat be more balanced, sustainability, everyone will go home and point to the things he is thinking. yes, morese will say, spending. that we've got the german elections, i would not be surprised if we got moderate concessions. tax cuts or infrastructure spending.

to me, that is in the ballpark of 1% of gdp. guy: what is fascinating is the ability to sell long dated paper. countries that were stressed by the credit story. are you comfortable with this? buying 50 year paper from some of these countries? michael: it is an interesting development. it shows the hunger for yield and the economic profiles in both countries. guy: but you are discriminating? are not buying them on a buy and hold.

it is interesting. i think some of the non-german are steep. that is what makes it -- guy: which are too steep? france, what we call;. semi-core. compared to germany, steeper. italian or spanish, you almost have to double. germany, which does not necessarily make sense from a credit perspective. you could argue a 10 year bond is long enough. shouldn't buy the 10 year and feel relaxed. guy: joining us from black rock. next, minutes away from the market open.

"on the welcome back to op move." it is 9:00 almost in berlin. watch today.cks to

philips lighting starts trading. we had an interview with the ceo, at 8:00 london time. ,he company raised money pricing shares new the middle of the range. 20 euros a share. company at 3 billion euros. selling off a 25% stake. what really, i i this morning was a line out of bhp. talking about the real spark for copper demand which will be renewable energy. i guess the electrification story, everything else is going to happen surrounding the renewable story. it is going to be fascinating. the european equity market story about to lift off. we have a live shot of the amsterdam stock exchange as we

wait for the philips lighting ipo. markets not going to do very much. this as we await news from janet yellen. ♪

guy: good morning. welcome. you're watching "on the move." i am alongside matt miller. he is in berlin. matt has your morning brief. matt: put your barbecue on hold. yellen delays traders long weekends i giving a crucial speech this afternoon. jeff good luck takes she will be dovish. market pricing agrees. the g-7 ends with a whimper. japan's prime minister fails in his bid to have the group one about global crisis. one mention has been the brexit. david cameron using the g-7 to commit to the eu. we will discuss the latest

holing, politics and market action at 8:30 london time. guy: let me take to amsterdam where we are awaiting the opening bell of ipo philips lighting. there is a large hammer. there we go. [applause] up: european markets opening . a delayed hit of the gong. it is friday the 27th. let's show you what is happening with these markets. let's put some numbers. where up .1% -- we are up -- we are down .1%. matt, we are waiting for the one thing, and that is janet yellen. let's get details on what is happening behind this big topline market numbers. nejra: this is the stoxx 600 and how the industry groups are trading within it and looking at

the imap on the bloomberg. we are seeing more red here than green. asia, it was a pretty broad-based rally. health-care stocks and material are only in the green. how care up 4%. it is energy stocks -- health care up .4%. it is energy stocks and financials. we are seeing lower oil prices back down below $50. i want to get to individual stocks. take a look at the u.k. 10 year yield. we're looking pretty flat at the moment. 1.40% on the 10 year. there we go down one basis points on the u.k. 10 year yield. let's take a look at some of the top stocks that we are watching. i am starting with philips. the ticker for the lighting is

this that has spun off in an ipo today is light. i am taking a look at the original philips, raised 750 million euros is what we heard yesterday and that ipo. lighting starts trading at 21 euros. a little bit higher than the ipo price. stocks stocks -- philips appears to be gaining. moving on to axa. the sale of its business will generate a loss of 400 million euros. it agreed to sell its u.k. investment tensions to phoenix group. the transaction expected to complete in the second half of this year. up slightly on that news. roche looking at here, moving up higher at 4%. this is after the news after a group member of the roche

saying it showed superior progressive just superior progression. -- superior progression. some good news on the drug, pushing that stock up. matt? matt: thanks very much. i want to bring back in michael krautzberger. michael, i want to draw your attention to a chart i have here. you volume. it is equity volume in gray over the last year. here we see the last friday before memorial day weekend. i want to illustrate for everyone here in europe and around the world, how light volume is on this friday. typically, traders, especially the big deal kind of traders, the ones who are doing well and can leave on a friday before a three-day weekend.

the bond market is going to be slower because they close early. we have had some traders in new york, michael says it is dangerous for janet to speak today because liquidity is going to be so light. you think we are going to see big moves if she makes an interesting statement? michael: you have that potential. people making the same comment saying how can they possibly do a rate hike in september. if we start making that argument when she is about to give an enormous speech, i think we would be overdoing it. if she delivers a big surprise, yes she can move the market. as i said before, i don't expect her to rock the boat. market pricing is appropriate. looking too much, even for -- on those intraday volatility would be overdoing it. heard someve

forecasts that are surprisingly low for year-end treasuries. mark grant yesterday forecast 1.25% for year-end. where you see treasuries trading in the near to midterm? six-day forecast, probably not the most -- thing for the manager. priceduly is a privately . i think the probability of the rate hikes slightly after underpriced. i would not be as optimistic, but i think i would express my bearishness more in maturities. the long end can be well supported by your. -- by europe. guy: the markets priced on inflation right now. the u.s. picked up a little bit

but inflation is fairly subdued. people think inflation is going to come back but when is it going to come back? michael: the pricing has corrected somehow. i think we are still priced a bit relative where core inflation is running. i think that is the same for example if you move to europe on a different level. willnk the coming period be very interesting. now the stabilization and oil, will see a turnaround. i think it will be very interesting. the applications on core inflation because we would say it is not meant to impact core inflation that much. guy: at one point -- this is a little bit high, but at some point where it would have to

have this discussion. at one point -- at what point does the fed go we have to let it run hot? that is going to impact our capital in the fixed income trade. at what point does the market start having that come station? -- having that conversation? michael: we are not there yet. maybe we have to let inflation run a bit higher to make up for the flow rates. the market would seriously buy into that, they would have to price five-year. five-year is quite a bit higher in many markets. i think at the moment they are more focused on it. that is one of the reasons why inflation rates have inflated risk return. i don't think they would allow it to overshoot. the actual threat potentially do it, i think recover could help

us -- ask -- recover could help inflation expectation. matt: let me give your destiny get your take on inflation expectation. it is a global world and some of that is going to bleed over. we are having trouble -- the ecb is having trouble getting inflation up here. is there any chance we see a pickup in inflation forecasts for the eu? ask for theyou inflation forecast specifically, it is a move people expect that the inflation forecast the ecb will publish will go up. that is more driven by the turnaround in oil prices and futures. i think there would be a bounce. there would not be a bounce to make us all relax especially with core inflation in europe still below 1%.

there is a long way to go before we can relax on that. on the other side, the ecb has just announced a major -- at least they are working on it. guy: what is more important, what yellen does? or what draghi does? for up to five years, it is really all about draghi. development, it becomes more important. the long and is really 50-50. what is yelling doing -- yelling doing and the ecb. guy: do you think the ecb's maneuver is going to shrink? the politics in germany are increasingly important to ecb thinking. they are independent. they are going to make their independence very clear that they are aware of who their

largest stakeholder is, i suspect. i expect the bundesbank is going to be interesting in that light. michael: good point. what do we think the ecb will do? we think there is a good chance that the next six months, we have a bit of a paul's because pause.it of a -- the credit to the private sector is improving. a natural case for waiting and do a little bit less. it might very well fit in nicely with the german election cycle without ecb doing something different as of the german election cycle. but because data is stabilizing. the only change will probably expect is the closer we come to end, which is indicated as much 2017 and will push that

out more. matt: guys question is fascinating. we had last week in the u.s., robert kaplan saying the fed does not care about the political situation and could raise rates into election-year if they feel that is a proper move. is the ecb more political? especially considering the possibility of a brexit here. the ecb seems have more than just the fed simple dual economic mandate. it seems to be a political organization. michael: i think what you -- a larges just number of different countries and central bank governors makes it much more political. on the other side, if you say at the end of the day, the ecb only does things which are popular in the biggest countries, i would argue draghi has shown that he would push for the same think desk for the things he thinks

are right -- for the things he thinks are right. i would be convinced that he would continue to do so. guy: we have some big political events coming up, the brexit, a vote coming up from ramsey. we have all kind of political stories that could upset and improving story in europe. draghi is driving a really difficult job. how does he navigate all of this? are talking about policy and st. -- policy andying saying draghi has done a lot. the next move is fascinating. michael: he wanted to make sure to get his policy input in. [indiscernible] policy stimulus eriod of brexit vote,

spanish election. in that sense, i think, draghi try to do the best. he can't manage those political risks directly. investor, one of the considerations we have to take into account in structuring our portfolio. guy: thank you for spending so much of your time with us. michael krautzberger from blackrock. those -- philips market -- philips lighting make its market debut. that conversation next. ♪

guy: welcome back. you are watching "on the move." let's take a look at some of the trading action we have yellen speaking later. -- lisicki look at some of the trading action. we have yellen speaking later. the market is softer. some of the financials are down. agriculture is down softer and france. i should take a look -- there is a fairly big move there. the debt function -- we have credit agricole. a little bit softer. let's find out what is happening around the world. here is first world news -- first word news with haslinda amen.

haslinda: the end of summit to munich a saying later economies have strengthened their resilience to avoid falling into another crisis. the group feels monetary policy alone is not enough to spark growth. japanese prime minister abe failed in his bid -- of a global economic crisis and that after he presented commits to the g7 indicating there was a danger of the world careening -- on the scale of 2008 immense shock. jeffrey good luck says he expects a dubs speech from janet yellen later today. chief executive of double wind capital says the fed will restrain from raising interest rates in june. showss contracts investments see an 18% -- 80% probability of an increase

month. china says it has room to increase borrowing. beijing says overall risks are under control and can add leverage gradually with a debt, gdp ratio low. local government that is more than double that figure and more than 100 -- in more than 100 cities has debt that is bigger than the local economy. germany has edged out china as the world's largest supplier of federal credit. that as the asian nation authority spends -- supports a weakening yuan. japan's consumer prices dropped for a second month. consumer prices excluding fresh food fell 0.6%. the price growth will intensify pressure on the bank of japan to consider further monetary stimulus after governor kuroda

disappointed the markets by taking no action in april. donald trump is reported to have picked up enough delegates to clinch the public and nomination. and number of unbound delegates have confirmed they will support .rump, putting him over the top meanwhile, world leaders have potential donald trump victory. -- >> they are paying very close attention to this election. i think it is fair to say they are surprised by the balkan nominee. -- the republican nominee. they are not sure how seriously to take some of his pronouncements. they are rattled by him.

>> many of the countries in our world have been absolutely abusing us and taking advantage of us. if they are rattled, we have great relationships, if they are rattled in a friend a way, that is a good thing. haslinda: 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 . matt: thank you very much for that. philips lighting shares jumped into trading debut after the parent company raised 57 million euros for its public offering, a 25% stake. we're joined by the ceo. eric, let me ask you how the pricing process went? the market very volatile at the beginning of the year. did that affect you?

eric: thank you for having me. no, we have done a fantastic job so far. we are extremely excited to see the interest of investors, both on the recess side and the institutional side confirming we have a strong investment case. backed up by the cash flow generation. looking forward with the new shareholders to continue to expand our global leadership, driving lighting and committing writing and services. -- and committing lighting services. matt: guy, go ahead. go. matt, matt: a story on the bloomberg about the partnership with vodafone to install new streetlights. you can save government a lot of money with new technology.

where do you see the growth coming from? is a government? is it institutions? what is the best growth case for philips lighting? eric: we say that we are delivering lights, because as you say, we can put energy efficient streetlights that has not been connected back to a system when we saw that monitor those streetlights in real-time and test real-time. we are making the street -- real-time. we're making the streets safer and more secure. the growth is coming from many different sectors. as we are not such a cyclical company. guy: good morning, guy johnson speaking from london. you talked about their cash flow -- talked about your cash flow. why am i buying philips

lightning -- philips lighting? is because it you're going to give me a nice dividend? . chris philips lighting is a company that has a very strong leadership in the lighting philips -- eric oh lighting is a company that has a very strong leadership in the lighting industry. we have a very strong brand. we have a fantastic -- to innovate. we are connected to customers who trust us. from theh is coming competitive advantages. guy: i should think of you as a growth stock, right? eric: when you look at the company, we would be seeing technically as an income or value stock. our plan has been declining because we have a [indiscernible]

which is still conventional. there are many parts of the company that are still growing. -- we turn into a growth profile. guy: just another quick question. your relationship with the parent company philips, we have seen other leading companies being spun out and that relationship being very difficult. what is your relationship going to be like? how much management latitude are you going to have? how much interference you expect? how is that going to work? eric: we have an exceptional relationship. relationship.t we have a great relationship between france and myself. it is a fantastic advantage to have a majority shareholder when we are creating a company that knows us. who knows our business.

philips, theout remaining stake that royal philips holds? how can investors be sure they are going to keep it? are they looking to get completely out of the business as they focus in more on health care? eric: ultimately this is the decision of royal philips. they have the willingness in the medium-term to focus more on the health care business. guy: when you look at the lighting business, where do you see fitting into this? it is interesting to see valuations being priced in? -- being priced in. eric: at this point in time, the lighting industry is undergoing fantastic revolution.

we have to understand that we are moving from conventional technology to led. then we are moving to connective lighting. about valuations sorts off those short-term types of indicators, companies to take the market share. get to the right level of valuation. matt: eric, thank you so much for joining us. the ceo of philips lighting telling us 25% stake on the amsterdam stock exchange. guide? -- guy? guy: what kind of company is a leading company these days. next, we will be digging into the brexit debate. every friday, we are going to wrap up the news that you might've missed. the market trades that are being watched very carefully. we are going to do it every friday in the run-up to the

referendum. we are going to start after this break. ♪

guy: 8:30 in london and welcome to our brexit debate. the last half hour every friday, we are going to wrap up the news you may have missed. the market trades we are watching. let's catch up on what we need to know. let's get you never change with the big brexit stories we have been watching. nejra: the u.k. treasury wants that britain faces a year-long recession if it leads the european union under its severe short show nouriel -- #area of the house prices would fall 10% from current levels. it warns that pensioners could

be left hundred billion pounds worse off. -- could be left 300 billion pounds worse off. mark carney -- was asked about as he appeared before the u.k. treasury committee. in the spirit of goodwill, i'm going to ask you dismiss something. that is we know that goldman [indiscernible] can i give you the opportunity to refute any suggestions that goldman sachs put any pressure on you? i will take the opportunity -- yes, i refuted categorically and am stunned. >> thank you. atlantic, across the

the president says he doesn't see the eu referendum influence he said even if the u.k. decides to leave, the next day nothing happens and the country will enter into negotiations bounds to go very slowly. s&p global ratings once that a brexit when not just weaken the pound, it would ever dies its status as a reserve currency used in trade. sterling legs in central bank holdings. central bank says it may be thrown the pound and threaten the nation's top aaa credit rating. g7 leaders warned a vote by britain to leave the european union would pose a serious threat to global growth. the remarks were contained in a final communique following their summit in japan. those with this week's big brexit stories. .att: thank you

here are the big interviews. here are some of the voices we had way in on the debate. >> there are lots of things i despise about the european union, delete table in brussels. ,he way the market works including the u.k. governments the end, help us reform brussels did we need to move toward a single market and away from political integration. it is important we have a strong u.k. voice at the table. >> my guess is they both stay. should they not, there is a two-year transition. it will have some impact on banking businesses. meaningful.at i am more concerned for the markets. frankly, for the state of the anopean union which has been extraordinary success over 70 years. tinkering with that model at this point does not seem to make a lot of sense.

>> i have great confidence in the british public. i think we are very common sense people. on june 23, many of them will vote on instinct what is best long-term for the country. i think anyone who looks at it cannot but see we are going to be better off as an independent country. >> the remain campaign has had some success in recent days in putting a series of stories in front of voters. the government has decided to use the mechanics of government to do this. i think that is applications for stability and a referendum. >> i would be devastated if we voted to pull out of europe. whene sense prevails and push comes to shove, people will realize it will be enormously damaging to both europe and great britain if britain were to

walk away. guy: richard branson talking about his views as all of the other guests at the moment. it is the number one topic that everyone is discussing despite -- apart from what janet yellen does. the market has been watching the story carefully. we have seen some of the polls move this week. let's show you a couple of charts. they are interesting in what they tell us about where the market is. this is the british pound versus the u.s. dollar. the pound has been climbing over the last few sessions. this, as the polling start to move toward the remain camp. the sterling has recovered. i want to show you this chart. this is absolutely fascinating. this is the pound versus the u.s. dollar. this is the one-month risk reversal. what this is showing you is an expectation that the pound will weaken, i.e. it is in the

ascendancy at the moment. maybe that is real money saying while we are seeing the headline rate moving on the upside on sterling, we still need to hedge moneysitions. maybe real accounts are being forced to do this. really interesting crosscurrents existing within the market for the british pound. let's talk about some of the polling and some of the things that have moved the markets around. joining me now, matt saying. he is the -- matt singh. the -- good morning to you. this week has been fascinating. what we have seen is the market pricing in an increasing probability that the u.k. remains. we're getting very close to that. you get this fabulous page here.

at the moment, the probability of a brexit, according to your .athematics, is 19% matt: there's an awful lot of theusion because of the numbers just because of the numbers the different polls are getting. -- because of the numbers the different polls are getting. the telephone polls are showing the charge on the brexit page. the s&p polling model which adjusts to the various factors. you can see there's been a shift toward remain in the last week or so. perhaps not as much, just looking at the polls. should not have been as much of a surprise as it was. clearly it did surprise some people. miller: a vote to remain in

turnout. surely people who want to exit the eu are more likely to get out there and voice that opinion. people want to remain and continue with the status quo, what is the impetus to go to the polls and vote. matt: the turnout is a interesting issue. democratics. the in terms of the motivation, people are telling opinion pollsters that the people that want to leave are really determined to vote. people want to stay, less so. i think that we are in the period ahead of the referendum, there's going to be no other government business. i don't know what the news media is going to talk about. it is going to be referendum, wall-to-wall.

in terms of the turnout, yes, it will be interesting to watch. it is a relative turnout. guy: this is going to sound like a crude question, but why is the market paying so much attention to polling? else isdon't know what there to go on. guy: that is a simple answer. matt: obviously, there are betting on prediction markets. financial markets, for example. in terms of the polls, there is a lot of skepticism. last year and skepticism about the current numbers given that they also are different. in terms of measuring public opinion, -- guy: did we learn something that happened from scotland? heavily extrapolated that in? -- have we extrapolated that in? matt: there was a full inquiry into it on the industry.

the samples were not representative. pollsters were talking to people that looked representative, but in other important ways they did not reflect the u.k. electorate. they have done work to address that. mr. miller: used to trade currencies. are the markets a better victor then pollsters that's a better predictor -- a better predictor then pollsters? matt: -- that was the case back then. isng markets as a predictor an interesting concept. the problem is when something is purely driven by supply and demand, you cannot see what is behind that and what is driving the expectation. my preference is always use models. it is always interesting to watch addiction models -- to watch prediction models.

guy: i've got a lot of people disappointed with the level of medical discourse, but nevertheless we are in the short game. as a result, do you think the polling is reasonably stable? matt: if it is going to move, this is the time that happens. in referendums, often campaigns -- in a referendum, they've got a new decision to make. it is something that cuts across party lines. this is the time where things could happen. the most intensive part of the campaign, there are a number this time. guy: matt, you're going to come back and see us. we are fascinated by what you are doing on the tamron all -- on the terminal. germany's plan in case of a

brexit. we are going live to berlin next. ♪

>> i have never been a closet brexiteer. i have been passionate about getting the right result. it is in britain's national interest.

matt: that was david cameron speaking at the g7 summit in japan earlier, insisting he has always held the view that britain should be within the european union. g7 leaders warned of the global risks of the u.k. voting to leave if the u.k. were to vote to leave, also german chancellor says the u.k. referendum was not a part of the subject discussed at the summit she has been downplaying that. other leaders -- at the summit. she has been downplaying that. next -- ders -- david bloom is with us in london. let me thank both of you for spending time with us. alan, i will turn to you first and ask why is angela merkel not being more vocal in her support. she has wolfgang schaeuble out there saying this would be the end of the world if britain leaves. she has not gotten behind it. >> she has been clear from the outset that she would be against any brexit. teer.s no closet brexi

it is been a strategy that's elected to her financial -- to do the talking on the german side. he did a tour if you weeks back of the u.k. when he gave three speeches, barely clearly saying this would be a bad thing for -- very clearly saying this would be a bad thing for europe. she is staying somewhat aloof. guy: let's bring david bloom into the conversation and we saw the action in sterling. it has been to and fro with the polling. very little of the story being priced into the euro. why? david: you don't know. it may or may not cable. cable.or may not in we are comparing one thing to something that is unexpected.

the euro-dollar, there may be something there. it is quite clear from house -- from how sterling has moved, they have not been priced in. some people have argued that if the u.k. were to choose a leave, euro-dollar could move a long way because nothing is priced in. we don't really know. it is very hard to disseminate. it is impossible to tell. that is the honest answer. i got to be honest on your show, ok? [laughter] matt: david, one of the things it reminds me of is the preparation for y2k. we will all completely freaking out in 1999 that the computers with some help not reset properly on new year's eve and the world would come to a standstill. you think this is more serious guy: -- more serious? david: it has to be, given what

you just said. y2k made no difference whatsoever and became quite a storm. this is quite different. known --eld terms is a and rumsfeld terms, it is a known unknown. the result is largely unknown. i disagree with that. this is a very big event. we could be having a fed meeting two weeks before. this is a big thing. it makes our markets a lot more fragile than they were in 1999. matt: for sure. in 2000,w year's eve y2k was thought of as a possible massive problem as well. we got over that with no problems. what are the problems your hearing european leaders, alan, describe as possible were written to leave the eu? allen: in the geopolitical context, we've got france on

fire. we got refugees drowning in the mediterranean. -- it is live or die for his political fate. we have a political trump presidency. according to our own index, a 17% chance of brexit. that is a significant chance. ? what we hearing from senior german officials is that they are considering the prospect of some kind of grand france ingether with the event of a brexit. what struck me is these are not concrete, these plans. concerned.re for the netherlands, there is an election there. scandinavia, with whole and trying to unscrew some of its better terms with the separatist

challenge. scotland, the story overnight saying there could be a referendum again for scottish independence. held --erendum was there are all of these -- matt: the contagion is the big concern. >> the spanish election is three days after the brexit vote. guy: alan, thank you very much indeed. david bloom is good to stay with us. we will talk about what is happening -- is going to stay with us. we will talk about what is happening in the markets next. we're going to look at the impact of the eu referendum on the pound. david bloom has a few things to say. we had that conversation next. ♪

guy: welcome black -- welcome back. david bloom is still with us. let's talk about what is happening with the cable rates sterling has been moving up. -- cable rates. sterling has been moving up. as you can see, we have been making decent gains. this is a one-month chart. cable back on the front foot. i want to say this chart here. riskis the one-month

reversal. this is measuring the skew between -- what is interesting is that you are paying a lot more for downside protection then you are for upside protection for the cable rate. david bloom, why is this logical? david: if we were decide -- if we were to decide to remain, sterling would go up but the gains would be limited. if we were to decide to leave, all of that uncertainty comes to fruition. this puts the chances of a bigger move greater. i need some protection, i prepared to pay, but more toward the massive uncertainty that may occur on one side compared to the other. that may be wrong but that is how the market is. the u.k. has a big fiscal deficit. sterling does not trade on structural issues and trades on cyclical ones. -- issues, it's rates on

cyclical ones. it trades on cyclical ones. it is not a linear relationship markdowns is asymmetrical. guy: who is buying this kind of protection? david: look, we're talking about real money. we're talking about the corporate sector that don't want to come with the reporter. if you are a responsible treasure, you're going to say what have you done to protect us from such an eventuality. they would go out and try to look for some kind of protection. that is what you do when you're responsible. guy: that is what markets are pricing in. david: that is what markets are

facilitating. what are the other currency there's that you're watching besides cable and pound euro? euro-dollarusly, after the event may move a long way. it is difficult to say, because what actually happens? what does the u.k. cause politically through europe. the other we think is your swiss. that may sound nutty. but what we are arguing is if the u.k. decides to remain, the euro swiss does not move it if we decide to leave, does the swiss franc the come a safe haven currency in europe because you have introduced new turmoil into the hold -- introduce new turmoil into the whole structure? it goes and strengthens the gain

. there is nothing the s&p can do about it. you.david, great to see thank you very much indeed. ♪

francine: the fed chair speaks at howard university. traders agree the dollar hold study. japan'scommuniqué drops warning about a lehman style threat to the economy but puts brexit on the list. prime minister shinzo abe says he will decide on the sales tax hike before the summer's election. so, welcome to "the pulse," live here in london.