francine: super mario needs help. mario says he will do his part to the ecb stopped buying corporate bonds. googler easing continues as the brink of korea surprising -- bank of korea surprises. and labor is missing from the referendum campaign is almost half of the party voters do not know the site the party takes.

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. let's 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 short-term 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. let's 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: let's take a look from 42,000 feet of what we're facing right now. thank you to this idea. this is usually the five-year review of where inflation will be. this is not that. this is the expectation or price of a ten-year vision of inflation.

here's 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 early-season rises up, some analysts have lowers that. means they will start downgrading their forecast. it is slightly edging out higher. let's 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 long-term 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 you're 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. i've 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 it's covered by an rate policy. i do not anticipate that they are leading to a bubble in bonds. i think they're 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. on's 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 economy's 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. china's 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 europe's 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 central-bank 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 we're seeing banks react to negative interest rates. the rex central-bank 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 central-bank 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 don't 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 double-blind 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 working-class 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 longer-term view, everyone is excepting the short-term kyle's. -- accepting the short-term 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 don't 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 don't 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 america's 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 pro-choicers 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 philadelphia's 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. let's 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 >> we're 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 hero-year-old .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 don't do it, the paper they do. and then there are people who worry about deflation, and i'm 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

devils's advocate, you would say brought,at the 2008 and we do make sure there's 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 we're in a catch-22 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 what she ju. rightave to do the labor reforms to give young people a chance to find a job again. they have to transform the private sector. tom: how will the banking

system, the financial system reacts to further negative interest rates? i think the pocketsls them in some fear the effects of the negative interest rates. i am not sure how big the impact inflation and how big the impact is on profitability of banks. i am not sure about that. there's certainly a lot of talk in small banks. they are afraid of the negative interest rates because they squeezed their business model. you think european politicians are taking seriously enough the risk of brexit happening? i think it is quite dangerous

because if it happens it is going to be relatively quickly to the prepared for that. shery: thank you so much. francine: coming up on bloomberg tv we will hear from bob iger who is in shanghai for the opening of something quite vague. that is at 6:00 a.m. in new york. that exclusive interviews coming up next. ♪

tom: extra data checks for the morning. in london, with a record low 10 year yield this morning. that is breathtaking in the united kingdom. let's get to the bloomberg business flash. ramy: a return to hands-on trading according to a person familiar with the source.

says they will be concerned about the outlook for the global economy. they directed a series of bearish investments. predicted tos are drop for the first time since 2012. that is according to a report from the royal institution of chartered surveyors. possible reasons including uncertainty over the brexit vote, and a new tax. behinde is standing maria sharapova for using a performance-enhancing drug. that could have threatened her endorsement deal, but the sheep did not intentionally break those rules, so she will keep swoosh.the ago michael mckee years had h a car he called

revision. the markets think that the fed is a hole through december, but what if they are wrong? through december, but what if they are wrong? yesterday, the government consumereported spending on the services side that significantly raises personal consumption. they are revising up their gdp forecast for the first quarter to 1.2% to 1.4%. that is more than double what the national lumber was. we will see real change in psychology of what the fed might do. go back to your wheelhouse, the survey yesterday was jaw-dropping. >> we have a record number of job openings in the country in april.

but what happened to hiring? it fell off. we don't know why. some anecdotal evidence that workers to find the fill those jobs, in which case we should see hiring start to pick up as more people come into the labor force. but the other possibility is uncertainty is holding back people. duke survey chief financial officers around the country. they delayed hiring 61%. they blame it on upcoming elections and washington dysfunctions. they are willing to see what happens. say 110% isld our angst over washington dysfunctions. francine: it is either uncertainty of politics or the weather. how much can you take it at face value?

how much is it just people being uneasy, and others looking at the election and saying this freaks me out? >> this is a common occurrence in surveying business leaders about my they are not doing so well. we were worried about obama care for years. but it does show that there are things going on in the political sphere. with all these job openings out there you have to figure that they are looking behind that. if you're leaning the writing way -- wrong way on the fed from you could be in trouble. francine: go back to our world. to be not angst among ceos and cfos, but nothing to feel good about which is why they are not hiring, which growth is quite lackluster, and this is all middle and southern europe. mr. bevan: but there is another bit absolutely that has been

driving a path into the decision .aking apple has done this successfully for years. but what it has done is go around the world and worked out where once to buy cheap and efficiently. tom: what is the ramifications of the 10 year yield crashes down. we get to steve majors 1.50%, what is happening at that? >> it raises concerns about when the economy is going. the yield curve is starting to flatten a lot. does it tell you anything

given where the fed is at this point? >> is going to watch penguins take the stanley cup tonight? [laughter] tom: that was an inside hockey question. it is not game seven, but the penguins. >> we will talk about it today. and acrossto-coast all of canada and syria. ,e will continue with james thank you for being with us. mr. davies will join us about the challenges of europe, economics, and brexit. this is bloomberg surveillance. good morning. ♪

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♪ get america's fastest internet. only from xfinity. >> this morning, tensions moved

to record low. korea stuns with a rate cut. in the danish krona tests the experience with negative interest rates. it is the most difficult week for european banks in this hour . new fascism.he good morning, everyone. this is "bloomberg surveillance ." we are live from our andquarters in new york london. it is june 9. francine, remarkable markets. what is the import of the new low yield? francine: we do have to look that brexit and the referendum on june 23, but there is something larger going on. we are snapping the five-day winning streak and so, all of that fairy gold dust the u.s. jobs number lost friday will slowly disappear. tom: real me once is this

morning and we will get you original data this morning. right now, with our bloomberg first world news. reporter: israel has cracked on as palestinians follow the first attack in five months. two palestinians opened fire in a tel aviv shopping market, israelis.rael those who want to stay in the european union warn the brexit could cost jobs. several tell bloomberg that some companies have already frozen hiring, while others are using short-term contracts. in france, there is no sign of protests over labor reforms ending soon. they are vowing to disrupt the political championships, which to begin this week. now, walk outs are even

disrupting trash collection. and disney has signed a deal with a chinese partner to produce films in what could soon be the largest movie market int he world. biobn iger told bloomberg that they are preparing for the first theme park in mainland china. he was asked if he would consider staying. he is set to retired in two years. >> i know i am going to enjoy the next two yeras. i have said it a number of times, it is the opportunity of a lifetime to run this company in this age. i am thrilled with that and by 2018, i will have had this job for 13 years and that is enough. whatever the board says. i have said all there is to say. says the disney board has plenty of time to find his successor. we will hear more from disney ceo biob iger later in the

program. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. tom: thank you so much. less go to the equity bonds and currency commodities. first of all, futures are negative. but again, dow 18,000. obviously, there is close watching with major curve flattening. we are not near a recession, but we are getting there. the euro is not the story. there is a lot of tangential stuff. the next screen, please. dow closing above 18,000. the yen, i am watching. the german 10 year has just broken down again. we are not through the lows of 0.04ast 18 hours, but

gets my attention. francine: one of my main stories today is of course, u.k. yields. they are declining to record lows. you can see that on the stoxx 600. there is a little bit of pressure with investors trying to assess the outlook of the global economy. just seven days ago we understood janet yellen would have to take more time to raise the interest rate because of a weak jobs number. because we had the news from the central bank, more easing. and we had a little bit of news regarding the australian central bank. actually, new zealand's currency after the central bank refrain from cutting costs. for the next 30 minutes, we have mr. howard davies, the rbs chairman. we need to talk negative rates. we need to talk about the brexit. we need to talk about this u.k. 10 year yield at a record low.

what is being distorted in the markets right now? >> well, i am never very comfortable to use the word distortion in relation to the markets. they must be telling us something. i think what they are telling us, after the u.s. jobs numbers, but also the worsening prospect surrounding the brexit. saying, the economy in the world in general, and itticularly within europe, looks like the prospect is softening. therefore, people are saying, we are low for longer and maybe low forever. people are looking at the interest rate prospects and saying, that seems to have changed again and the prospects of the first rise has been receiving as we approach it. i think that is what the market is telling us. francine: bond yields, would you say they are being distorted by

all of the central-bank action? >> well, it is very difficult to know what an original state of grace in the market is, prancing. is, francine. the central bank has been intervening for a number of years. i think there might be some distortions to come in europe where the ecb have announced rather selective buying of corporate bonds. maybe there is going to be some distortion within the categories of bonds they are prepared to buy and perhaps, once with a slightly lower credit rating might be better value. but i think we are just in a position where the financial markets remain on life-support, amazingly, eight years after the crisis. tom: you are not at oxford with john hicks. in 1939, he established the

architecture of how we think within closed systems. openld suggest in our more system, the way we view the tensions of negative rates is through the foreign exchange market. bring up the danish krona, if you would right now. i find it extraordinarily that we are up to two standard deviations of euro danish krona. going to see this experiment through the form exchange market with odd currency paired dynamics. >> obviously, the swiss franc is the most obvious currency. the danish krona as well. they seem to have become safe havens at times. therefore, the inflows that are typical for them to manage because the currency market and the currencies are not thick enough.

i think there might just be some idiosyncratic things going on in relation to these peripheral currencies. tom: nicely said, professor. i would suggest the word idiosyncratic to our audience, all three of our audiences. the dea that the way we are living now is not normal. can use plain to me that a bond rate.lt is a normal how should our audience adapted to that? >> i think the way you have to think about this is we are in no way recovered on the financial crisis of 2008. if you look at what has gone on over a longer period, you can see that the trend growth rate of the economy has fallen. so, the slope of the line is more shallow. also, we have lost on the ims

calculations. 12% of output as a result of the fall in gdp after the crisis, which we are not recovering because the slope of the trend line is more shallow than it was. the consequence of that is, investment is significantly lower than it used to be. on the imf calculations, 20% down from what it was before the crisis at a similar growth rate. as the capital stock is not been replenished in the same way. therefore investment demand is lower and therefore, interest rates are low. that is the only way you can see the situation. you can then if you like, use a loaded word like "normal" and say we are going to normalize at some point. and most people would say, i hope we will end up with real interest rates. but i think we are still in a recovery period that is taking a hell of a long time. francine: rb actually going to

see helicopter money and a lot further -- are we actually going to see helicopter money and a lot further of negative territory? >> i don't doubt that helicopter money has won very many converts. partly because it is difficult to know how to put a framework around it. is one democratic control of helicopter money, that central banks don't like the sound of that because they would like to be in control of financial conditions. i think most of the central banks believe they still have other tools of corporate bond buying or whatever, which can be adequate. and so, personally i am not looking for helicopter money in the short to medium term. francine: sir howard, thank you. we will be talking about the banking sector next.

we will be asking, how does he force politicians to do more reforms in europe. ♪

francine: welcome back to "bloomberg surveillance." tom is in new york. tom, we're looking at guilt, yield. but first, let's get to the bloomberg business flash. reporter: first, a surprise move from the south korea central-bank. to cut the benchmark interest rate to a record low. they have a possible slowdown in global trade. they also say the government will restructure companies with a lot of debt. theis cutting costs in

u.s. it is also reducing the number of financial advisors that are recruits from its competitors. last year, they scooped up dozens of advisors when credit suisse got out of management. you are also looking at banks, tom. tom: but by consensus, the greatest tension is in europe. perfectrd davies is a person to speak to about banking with his work at the london school of economics and now, as rbs chairman. first of all, sir howard, congratulations on moving rbs to a constructive operating income. bring up our single best chart for the day. europeanhe s&p stocks banking index. sir howard, why has it rolled over once again? i don't want to mention any names because rbs is clearly the leader among 600 banks, but why

are european banks rolling over once again? >> i think three things are in here. things are heavily geared -- banks are heavily geared towards economic growth. prospect for interest rates is low for longer and banks find maintaining that interest margin difficult in a low interest rate environment and a negative interest rate environment, which we have in the eurozone, close to impossible. i think the third factor is that the market is looking for banks. if you look at the relativity between banks, we think that the big, global heavily diversified banks are very difficult to manage.

so, if you look between banks at the price to book ratio, you see that simpler banks with strong positions are highly valued and highly diverse, very international banks with positions in lots of different markets are undervalued. tom: let's call that a canadian model we are aspiring to. rationalizingst their brokerage in the united states. how are we going to combine european banks? how do they clear their market ?o your simpler structure >> well, different banks are approaching this in different ways. rbs is coming out of a lot of countries and we are focusing on the markets where we are competitive. you can see other examples of that in a number of different parts of europe at varying speeds. some markets in europe still

have problems with capital. there is still capital weakness. italy is an obvious case, which makes it more difficult to restructure of course, if you don't have enough capital to take the losses coming out of particular businesses and markets. but i think it is pretty clear that the overall trend is toward simple vocation and retreating to markets -- is toward simplification and retreating to markets where you have a sustainable margin. francine: how does a field being at the head of -- how does it feel being at the head of rbs? >> there was an expectation a year ago that rbs might be back into a position of paying dividends in 2017. clearly, the expectation has somewhat receded. that is partly become of some particular issues to do with past failings of the bank.

we have not yet settled on our u.s. subprime. those settlements keep dribbling out, goldman being the most recent. those things hangover the stock to some degree. when people look through that, they see a bank that is in a strong market position in its chosen market. the core business remains pretty robust. but naturally, investors would like to see some of these past problems result. tom: are you any closer to finding a buyer? is it more difficult because of the concerns surrounding brexit? >> it is an enormously complicated project. it is an i.t. problem of massive size with a couple of million customers and 220 products. issue. it is an i.t.

i guess the listeners will galze laze over.ll ga tom: we don't want to do that, sir howard. we did that three minutes into the hour when we glazed over talking about negative interest rates with of the danish krona. you have been doing this for years and i guess they go back to the synthesis of your work at the london school of economics. a lot of our audience is looking at populism and they are looking at the politics of the moment. francine mentioned the brexit and it leads to instability. you see instability now within our financial system or can it withstand the political test? >> looking at the financial system overall, i would say in the u.k. and the u.s., the banking system is much more robust than it was before the crisis. we learned one hell of a lesson then about banks operating with

thin slivers of capital and very large balance sheets. most banks are operating with three times as much core capital as they had been. i would say, you have to it knowledge that the banking system is significantly more robust. even though we do have signs of compressed liquidity in some areas. nonetheless, i think the banking system is ok. where i think people are more concerned, and quite rightly, is that credit growth has continued. it has gone more on in the non- bank sector. ago,e u.s., 15 years they were balance sheets with 15% of gdp. they are now 10% of gdp. they have now contracted sharply. i think where we have to look now is, are there instabilities building up in the shadows, the

shadow banking sector? tom: let's come back with sir howard davies. from new york, "bloomberg surveillance." goodmorning. ♪

i'm francine lacqua in london. we still have the rbs chairman, sir howard davies. we talked about how the yields were falling to a record low. of course, the brexit vote is approaching. the campaign is really ramping up. what kind of questions do your

clients ask of you and what do you tell them? sir howard: well, they ask what the vote is going to be and we tell them that we don't know. [laughter] let's get that out of the way. but i have been over the country in the last three or four weeks meeting our business customers around the country about what their attitude is. and what you hear is not a great catastrophe, but the people are saying they are putting investments on hold. i think that is particularly true of foreign investment into u.k. property. a couple of people said specifically that they had a deal they thought was going to complete. they said, maybe we will look at that on june 25. i think we are seeing also a slowing down of the pipeline of loan demand. not necessarily the pipeline emptying, but not coming through very quickly, as people are pausing. francine: are you brave enough

whether to say whether you think the brexit will happen or not? sir howard: it is impossible. betting odds would say the probability is on remaining, but i have never been a betting man. i am just not going to give a forecast. francine: sir howard, it was great to have you on the program. sir howard, the rbs chairman. everything to know we know about the election coming up on june 23, if you are a bloomberg user, check out our website. up next, we speak with bob iger. we spoke to him at the opening of the new shanghai disney. ♪ okay, ready?

whoa! [ explosion ] nothing should get in the way of the things you love.

♪ get america's fastest internet. only from xfinity. francine and i are watching 10 year yields. in the u.s., 1.68% is a wild

statistic. now, to our bloomberg first world news. reporter: tensions are rising between china and japan over the east china sea. talks took place today after a chinese warship came close to area covered by japan. the deadline to vote in the u.k. referendum has been extended by two days. voters now have until midnight tonight to register. the registration website crashed on tuesday night. a referendum will be held on june 23. the u.s. house will vote on a bill today that could great a financial control board to manage a restructuring of the u.s. territory's $70 billion debt. that must be passed before july 1, when puerto rico must make a $2 billion payment to bondholders. san francisco is preparing for a different kind of earthquake, a

fiscal one. to make sureng that san francisco can withstand a shock. the current tech boom has turned the city into one of the hottest in the u.s., but city leaders are haunted by the dot com bubble. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. francine? francine: disney has signed a deal with a chinese partner to willce films in what soon be the largest movie market in the world. iger, tells us that the terms of the joint venture will be settled shortly. iger spoke at the opening of the first theme park in mainland china. iger: we are very far along in this process, including developing ideas for film and identifying talent already to make those films. reporter: can you give us a bit more clarity on the timeline?

iger: shortly. reporter: within the year? iger: we won't have a movie released within a year, but within a year we will have production. francine: our tom mackenzie their speaking to bob iger. let's bring in paul. what kind of market can we expect in china. i know it will be the biggest in the world, but when disney tells us ty will make disney-branded films in china, will only be for the chinese markets? >> i think it will originally be in china. they are trying to create some coproduction facilities in china, so they can great content in china that is outside of the quota of a foreign films allowed into china every year. as you suggested, china is going to be the number one global box office market likely next year, surpassing north america. a lot of the studios, including

disney, are trying the only to get their big-budget hollywood producer films in china, but they are trying to coproduce there. that way, they can hopefully export to other markets around the world, particularly in asia. but globally as well. francine: let's listen to more of the interview. bob iger was asked to consider if you put consider staying on. he is set to retired in two year s. iger: it is an ongoing process. they know and i know i intend to leave in 2018. we are all confident that the right person will be identified to run this great company and take it into the future in all sorts of exciting ways. that decision will be eight iman a timely basis. reporter: do they have a hr team looking?

iger: i can only tell you that the board is hard at work. reporter: are they looking internally or externally, or both? iger: they are looking expansively. they are looking for in wide, would be my guess. -- they are looking far and wide, would be my guess. reporter: if the board were to turn around and say, please stick with us for another two years? iger: i know i am going to enjoy the next two years. i have said it a number of times, it is the opportunity of a lifetime to get to run this company in this age. i am thrilled with that and by 2018, i love had this job for 13 years and that is enough. whatever the board says. i have said all that there is to say. francine: this interview is great. i think iger was expecting more of a promotional interview. that is certainly not what he got. i know a lot can happen in

two years. but would they be better looking outside for a replacement, or inside? >> this was a textbook plan on how to manage the succession for disney. it was really the feather in the cap for bob iger. at the last moment it all fell apart in the company is now struggling to figure how to replace bob iger. i think they will have to look not only internally, but externally as well. francine: bob iger also had seen a huge opportunity in china. also asked him where else he sees market opportunities? iger: we his same in -- what we have seen in europe is cause for concern and there is not much cause to be overly optimistic. although, our businesses there are doing reasonably well. although paris is having a tough time, the park in paris. generally speaking, our business

across europe is ok. i would not suggest that we have great optimism, though, in at least the near-term. in asia, though there has been a slowdown, we still see growth and opportunity for our company. we talked about the movie business in china, that even in other parts of asia, we have had discussions about indonesia as a growth opportunity. we think there are a number of growth opportunities i asian, including india. the united states is actually quite solid. i don't know that i would call it an exuberant economy, it is healthy enough for our business to thrive in the near term and i believe, for years to come. tom: 14% per year for the last 10 years is a wonderful stock performance. when you look at this, thery

are 18% down from their market peak. white as a guy as prestigious as rich green, have a sell on bob iger. >> i think the issue really here is the cable network's nest. tom: that did not get mentioned here. >> when we talk about the cable network business for disney, you are talking about espn. cord cutting is not befriend for disney. tom: it is a great chart. we have all been down the matterhorn at disneyland. disneyland is the real disney themepark. not disney world in orlando. i know they are distracted by suggestion over the succession. what is the to do list financially for disney? >> they have to invest in their core businesses, which is the

cable network business and the themepark. tom: themepark are more important than "frozen" let it go, let it go, let it go? surprise foras a disney and it is the gift that keeps on giving. tom: what kind of guy can replace bob iger? >> the guy who can take this company into the digital world. you can't just rely on the big-budgets. if there is one job that is better than facebook, it would be disney. tom: there you go, pulse when he nn succession -- paul sweeney o succession. we need a data check here. we are looking at the financial markets, particularly foreign exchange and bonds. yields are in euro.

"bloomberg surveillance," stay with us. ♪

francine: ask the market check today. i'm francine lacqua in london. tom, first let's get to the bloomberg business flash. reporter: investor george soros has returned to hands on trading. he has become more involved with trading at his own family office . is there any concern for the outlook of the global economy? he recently conducted a series of big bearish investments. nike is a standing by maria sharapova. she has been suspended for two years for using performance-enhancing drugs. they found she did not

intentionally break the rules. a is an unusual form of golden parachute. this one gets triggered if another executive gets fired. the operating officer could leave with $63 million. that is if the controlling shareholders fires his boss. the ceo does not offer dooley the job. he is considering changes to viacom's leadership. that is the bloomberg business flash. tom? tom: we had a good thoughtful discussion with rick from credit suisse, but with market events this morning we have to decidedly rip up the script. what was it like going to tasmania for school? >> as it was for me, i don't know anything else. tom: it is a first-class institution. >> yes, it is a great school. tasmania is very small, but there is a long line of

economists trying to get in. tom: this morning, we are looking at the danish krono and the surprise of south korea. are we unraveling right now? when you look at your fixed income space off the desk at credit suisse, are we unraveling? >> i don't think so. it is more just disappointment with the global economy and sluggish growth. i think the u.s. is fine. cyclicalhe flick recovery is still happening there, but there are still very big headwinds in the rest of the world. i think the export model for emerging markets in general is broken. this means you can't get good growth. to put it another way, if you look at things in little terms, we have been growing below trend. tom: sir howard davies talked about this. >> we have fallen off the trend line as much as we do during a recession. tom: you don't see instability

coming? instabilityrol and within your world. >> that is right, but there are very big shocks out there as well. i think we do have to get through the brexit. it is generally, a coin toss. there is no doubt in the short-term bridge and leaving the eu would be a big shock. if the u.k. were to leave, german 10 year yields would go negative. i think the stock market would come down. there are a lot of things that could go wrong. i also think that while a lot of the economic world is again talking about a pickup in the second part of the year, it looks to me as if the chinese stimulus has washed its way through the market again. manley turned up in housing and infrastructure. mainly turned up in the housing and infrastructure areas. francine: just going back to the

brexit a little bit and these u.k. bond yields falling to a record low, is this just the new name of the game? how much does this have to do with worldwide things, and how much is this a brexit play? >> i think there is a structure element and a brexit element. the really extraordinary thing that is going on is the negative interest rate policies. we have the bank of japan, the ecb, and a bunch of other central banks. we have never seen that before. what that is doing is driving an aggressive search for yield. in the very near term with people getting concerned about brexit and people again beginning to question the veracity of the recovery in the u.s. given the payroll data, we are seeing this again. what you are now seeing are some technical levels being breached. now that the u.s. 10 year yield

has gone below 1.70, the likelihood is we get another surge in those markets. again, the game changes. francine: will germany go negative? it seems like it has been accelerating this push into lower and possibly come into negative over the last couple weeks. if it falls into negative very rapidly, what does this tell us about risk-taking? >> will germany go negative, the honest answer is, who knows. if you look at the volatility markets around bond markets particularly in the u.s., the extra ordinary thing is they are not present much when it comes to the brexit. given that the polls are basicallya a dead heat, it is a coin toss. the likelihood is, as we get closer, credit markets and bought markets do start pricing at least the risk o that something coud happen here.

tom: james sweeney wrote a brilliant paper 14 months ago that inflation worries were overweighted. can you agree with that? >> it is interesting. if you look at the bond market, it is telling you something is going on. but if you look at the inflation data, there is very little evidence. tom: then why are tips priced where they are priced? >> again, i think there are a bunch of things people are worried about. markets giveequity us quite a different story. tom: when the fixed income guys start talking about equities, we throw them off the set. we look into new with this on bloomberg radio. also on bloomberg radio this morning, david malpass. a perfect time to speak to mr. malpass. he owns the word "fast."

we will talk to him about fast-changing markets. "bloomberg surveillance," ♪

tom: the yen, down 1.05. but it is it stronger. two oddities, the euro and krono are now two strong standard deviations. the kiwi is also strong this morning. we will get to that in a moment. prancing? francine: coming up shortly is "bloomberg ." three.hit two of the foreuropean commissioner economic affairs. he is in brussels right now at the economic forum. we will be talking to him in the aftermath of draghi's comments. we do have pablo goldberg from blackrock. he will be talking about emerging market debt. also, as you said, we will talk

about negative interest rates, about the banks, and what has gone wrong with hedge funds. tom: next week, folks francine lacqua and i will be remote from a coal mine. we will be talking to any number of canaries in a: min and one mine and one of them is this chart. this is the trade weighted yuan. the joys of 1997 and 1998. the joys of 2008 and a very quiet rollover here. and of course, the outcome of that was a stunning cut today by the buoyant economy. it used to be a point economy, nt economy of korea. were you surprised by this rate cut? >> not really surprised. korea is a good gauge of the global economy.

the global economy is not firing on all cylinders. coming to new york, everything seems to be doing well. but outside of this country, export numbers are not doing well. tom: korea is a barely breathing air. who do you blame? >> it is all about exports and it is not just china. u.s. is of capex in the restraining exports. tom: are we going to have an ad yx currency war? the way you solve this, by definition, is currency depreciation. tothe koreans can cut rates zero. it is very difficult to move currency through these small economies. francine: that is exactly the point. you are talking about smaller economies. what about china? there seems to be a packed, which was probably by a stroke

fed does not the move so the dollar does not rally, so they do not have to the value china's currency. >> there is probably no big game plan at the moment. china is going month by month and the prime goal is stability because the big risk for china is precipitous outflows. that would undermine the system and not generate credit. scheme of things, it is about currency. but in the time being, stability is the number one thing. the big strategy is out. we are technical right now in china. francine: are you buying this stabilization story? how much does this have to do with intervention by the government? we worried in the past about chinese stability. >> it is all about the government stepping up

and saying, we are going to intervene to keep the currency stable. because the are not worried about competitiveness of the moment. we are worried about domestic liquidity and credit growth. capital flows out too quickly and they have a problem. so, stability over everything else. tom: where is the breaking point with dollar-yen. you and i know that when we look at bloomberg, you have all of this stuff in your head. everybody migrates back to dollar-yen. may be they look at euro-yen. where is your tipping point for abenomics. where is the break point? >> it is 100. that is the key market here. the problem is, where do you go if you get to 98. tom: you have a unilateral

intervention, and they do not work, do they? >> exactly. they have no tools left to move the currency. tom: very quickly, can janet yellen raise rates? >> now. tom: thank you. it is very timely to have him here. i am looking forward to the next few hours with michael mckee. " continues.ichael mckee i am really looking forward to this tomorrow. from london, from new york, this is "bloomberg surveillance." ♪

?c+sv stock supporting all time highs. interest is well above the historic average. why is this so much more the face of all of these gains?

stephanie: negative rate of squeezing bank progress. super aggressive super mario. the ecb began buying pork -- corporate debt. but what happens if he holds countries -- companies that need restructuring? ♪ david: welcome to "bloomberg ." towardscks going another hive. amanda: we're watching a day after initiating corporate on buying programs. mario draghi makes a case for structural reform at the economic form in brussels. david: we had there in just a moment.