nbcuniversal's coverage of the rio olympic games. call or go online today to switch to x1. francine: poised to leave. the sun newspaper backs brexit in for new polls put the out campaign ahead. the german 10 year yield goes negative for the first time, the yen rises, investors brace for brexit. imperativens it is for china to deal with its corporate debt. this is bloomberg "surveillance," francine lacqua in london, tom keene in new york.

it seems like brexit is underpinning every investor fear and driving markets lower. it seems the brexit campaign is gaining serious momentum. tom: i guess i look at it like the fed meeting tomorrow. the brexit debate is data dependent. when i am fascinated by, i know we will touch upon it through bremainance, how do the people respond to what you see? francine: i do not think it is data dependent. i think there is emotion and it is a very clear campaign from the brexit people saying if you are historically one that takes the u.k. can win this then you should vote for brexit. this is a very interesting nuanced game plan. let's get straight to the bloomberg first word news with nejra cehic. four new polls indicate

the u.k. is on a path to leave the european union. has the leave faction ahead by as much as seven points. britain's biggest selling newspaper came out in favor of a brexit, saying if britain stays in the eu "britain will be engulfed in a few years by this german dominated federal state." france is bracing for a wave of demonstrations against new labor reforms. the union promises to rally more protesters. the union is the most vocal opponent of the president's plan to make the labor market more flexible. in northern france, a news agency says a police man and his partner were killed i a gunman who claimed allegiance to islamic state. he reportedly was convicted of taking part in a terror cell. authorities are investigating.

orlandoter in the massacre was not on a no-fly list even though he has been investigated twice by the fbi for links to terrorism. fbi director said omar mateen was taken off the watchlist because authorities had no evidence he was a danger. he called authorities and swore allegiance to islamic state. paul ryan will unveil a republican plan to roll back government regulations. he wants to expand energy production on federal land and limit lawsuits against businesses, as part of his agenda he is released to unify republicans before the election. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. cehic.jra tom: within all the news flow, markets are on the move. currencies,ns,

commodities, and the first and second derivatives are interesting. futures further give way. the 10 year yield is 162 2157 in, from 24 hours. oil nevertheless hold some resilience at the 48, 49 level. the vix gets my attention, a balloon from 16 to 22. the vix trades now before the u.s. market opening. the 10 year again to compare and year,st with a german 10 which has moved mightily in the last 60 minutes. negative 0.02. it is not the two-year german, it is the 10 year. hugeine: this is psychological impact.

the first time the german tenure is negative. it is a 10 year. it is not supposed to go in negative territory. if you look at yields, the 30 gilt yield fell as well. sliding stocks and you can see yen, one of 5.75 and the pound 1.4143. tom: it also mentioned mexico in a 19 print. today.mexico weaker maybe it is brexit that maybe it is not. let's look at a snapshot of small business in america and i wonder if it is much different in the u.k. back 15 to 20 years. down we go in the crisis. we come back and get just through 100, and here is the

recent rollover in overall small business mood in america. i would suggest maybe it has a u.k. tinge. francine: i like that chart. i want more plain vanilla to show that yields are falling across the board so i chose the 10 year yield. tenure, ine german year, and in.k. 10 white, the japanese 10 year. global outlook seems to be fueling demand for perceived havens. ofriel stein is the director management services at oxford. thank you for joining us on a day the negative 10 year yield -- the 10 year yield in germany went negative. the move was quite quick but this was in none of the textbooks. gabriel: go back a few years and

negative interest rates were not in the textbooks. it is fascinating to see how our world and the understanding of economics is changing quite rapidly. i think there are two things to look at. tom was mentioning a crucial point that yes, it could be brexit related or specific issues but maybe it is something more long-term. looking at your chart which goes back to 2000, what we can see is a very long downward trend in bond yields. yes, you cane, always find a daily issue. down.l, trends clearly we are in the low inflation world. will be blissfully happy if they get inflation back up to 2%. we are in a low inflation world.

lower ands will be that will therefore not be unusual for them to slip from time to time below zero. this, andbut look at i know that longer trend they are falling but given in february german yields were still at 0.5%. this is quite a sharp move. what i'm trying to figure out, is this a small move that will stay and it will go back up or is this the new normal? what does that mean for central banks? againl: i think we may -- , there has been a clear shift probably months, brought on by realization that u.s. growth was slightly weaker than expected. some concerns misplaced about the eurozone and in particular more concerns about brexit. that yes, the new normal is

yieldly a u.k. bond between one and two. they signify slower activity and lower inflation. that does affect central-bank policy. tom: you have a swedish extraction. the idea of being from stockholm means that you know the courage of the sweetest central-bank in times of other -- swedish central bank in times of other crisis. are the central banks to timid given what we have seen? gabriel: it depends what central banks should do. if you are saying central banks should go all out for creating whatever, then i would say the fed is doing reasonably all right, perhaps a little bit to timid.

the fed and markets in the u.s., it is very unhealthy or the markets are central-bank dependent and the central banks are market dependent and it should not be, but broadly speaking it is headed in the right direction. i think the japanese are far too timid and they should switch to what is loosely termed helicopter money. deutsche bank had challenging days yesterday. what will be the ramifications of this new regime of lower interest rates, greater negative rates on the banks? how will it transmit to the european banking system? gabriel: depends very much on what happens, on how banks treat. so far, banks have been very unwilling to pass on negative depositors,es to particularly small retail depositors, particularly

households. that is because banks realize that real tale funding is quite useful -- retail funding is quite useful, but that erodes their profit margins so you are looking at a time when banks alienate retail depositors or take a hit on their probability -- profitability. ultimately i have a feeling that ranks are going, if negative long,st rates remain banks will pass them to retailers. they will simply have to do it, and we will see what that aims to depositors switch out of cash and into deposit. francine: thank you so much for that. david westin today will sit down with president bill clinton at the clinton foundation's cgi meeting for an exclusive interview at 11:00 in new york.

♪

tom: good morning, everyone. let's talk foreign-exchange report. thank you, interactive brokers. we are going to do it right now in the 5:00 hour. yen blows through 106, renewed yen strength. sterling. this is not cable under the water of the atlantic ocean, this is euro-sterling and a .79 that has not moved all that much given the sun report. i do want to point out selected emerging markets in 11 nations very weak.

dollar mexico at a 19 print. says thenew forecast global oil market will be almost balanced next year. demand will continue to rise faster than production and the oil surplus in the first half of this year is about 40% smaller than estimated. dannon sayst maker profits will rise this year. they are hoping to make up for difficult target. they say it's our parading margin should widen to 6% -- 6/10 of a percent. detwiler has agreed to buy the new british -- the british million,or $871 representing a premium -- detwiler has been looking for acquisitions to expand its business. that is the bloomberg business

flash. francine: nejra cehic with your update on the top stories you need to find out about. we are just nine days away from the u.k. referendum, for polls showing the leave poll remain. sunbritish newspaper the has backed the brexit. gabriel stein is still with us. why is a brexit campaign getting so much momentum? >> they have chosen one focus which is immigration and it has something that has worked well with the electorate. we have had the remain campaign for weeks making the case for economic risk, for project fear. i think rather than try and meet them pace to pace on the -- it is appealing

fundamentally to something the voters feel they are not being listened on. an interviewhad with justin king on what it takes to be patriotic. difficult to quite say that the only -- you have to vote leave. i think you can vote stay and be all of those things and more besides. francine: what he goes back to is what you are explaining, that it is between the emotional and people will have to decide whether their heart is with leave or not. does the sun have the power to sway voters? svenja: it is the most read newspaper in britain and it does not come to a surprise -- come as a surprise. you have a lot of voters who are still on the fence and i think what the brexit camp has done is they have gone for the emotional

argument and so far this is working. a note of caution, or member we were this time last year. the polls were showing that the conservatives would win the election so we have to remember there is a margin of error, a tendency for voters to stay with the status quo. buts not a done deal yet certainly today it is a bad day for the remain camp. tom: let's bring up euro-sterling. maybe it is a litmus paper for .our world sterling weakness against the euro and the euro challenged as well. what will you watch for today from prime minister cameron, from the chancellor, and from the other elites preaching stay within the eu? planmust change their game . what are they going to change to? svenja: cameron has noticed that

this economic campaign is working and is trying to get .abour to help out we saw gordon brown gallup to the rescue yesterday just what happened in the scottish referendum. he gives very impassioned speeches and many think that swayed the campaign. our vote is very important and there is a feeling they have not engaged. francine: do you believe the polls? the polls rather than the bookers? gabriel: i think britain is going to vote to leave, yes. and partly because of something saying, this is for most voters and emotional issue. i think most economists, even my colleagues who support brexit

will agree there is an economic cost to leaving but the attitude is it is worth it. is thestion is, how big economic cost and how much is it worth it? the remain side, you have had this project fear. it seems to me that the exit side uses what i call project intimidation. anything that says anything negative about the eu, that person is not allowed to speak. the remain side has not been able to make cogent arguments for staying. francine: it is about campaigning. a stark warning from gabriel stein. tom keene will be joining may next week to bring coverage of this momentous day, momentous week, and momentous time. latest insights and perspectives from global leaders

and thinkers as we bring you the referendum decision june 23. ♪

francine: i am francine the clot in london, tom keene in new york -- francine lacqua in london, tom keene in new york. gabriel stein is still with us. when you look at central-bank action, we were promised the virgins and emergence is not coming. the boj probably has -- promised divergence and divergence is not

coming. they should push money not into the banking system which is what they have been doing for the past three years. they should push cash or bank deposits rather, to households and nonfinancial companies until they have as much cash as they want to hold in the form of cash and they should keep giving them more as that is the only way to get activity going, and activity is the only way we can get inflation going. is the boj going to do this? not this week. they make up their bonds purchases from 80 to 100 trillion but it will not have the required effect. they need to do something else and hopefully they will. as thethin currency solution of last resort, where will the dollar b in a year from now? gabriel: the problem with

currency as if everyone is trying to use it as the weapon of last resort, it does not work. the fed does not seem to worry about that and that says the dollar a year from now will be slightly stronger, perhaps not terribly much. weaker. a bit , as much asweaker the bank of japan will be able to arrange. tom: gabriel stein with oxford economics. we go to london next week and before that, a fed meeting. michael and myself with special coverage tomorrow afternoon. ♪ get ready for the rio olympic games

by switching to xfinity x1. show me gymnastics. x1 lets you search by sport, watch nbc's highlights and catch every live event on your tv with nbc sports live extra. i'm getting ready. are you? x1 will change the way you experience nbcuniversal's coverage of the rio olympic games. call or go online today to switch to x1. tom: good morning cute bloomberg "surveillance." on microsoft linked in we are thrilled to bring eugene munster who will

join us later today. just nine days before the u.k. votes on whether andeave the european union, for new polls show the leave campaign is running ahead. the surveys have the leave leading anywhere from one to seven points. another blow, the biggest selling newspaper in the u.k. is backing a brexit. u.k. has won a fight over welfare issues. it wants to restrict access to for migrant workers and the eu court of justice agrees, -- andthat the u.k. french government spokesman said the killing of a police man and his partner was an act of terrorism. they were killed in northern france. , whoe killed the attacker

had claimed allegiance to islamic state and had been convicted of taking part in a terror cell. some advisors are urging benjamin netanyahu to cut a new deal on military aid with president obama. there are tensions between the two leaders but some israeli officials are concerned donald trump is unpredictable and hillary clinton is unreliable. gets $3 billion a year from the u.s. and now wants as much as $5 billion. donald trump has barred the washington post candidates credentials, saying they have no integrity and writes falsely about it. owned by amazon founder jeff bezos. the newspaper rejects his accusations. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. i am nejra cehic. francine: thank you so much.

we are joined by douglas norton. straight to with the imf told me a little bit earlier on. they are looking at the chinese economy and the deputy managing director stan lifton was talking about china's near-term economic outlook. he is concerned about the medium-term. >> we are concerned with the present rapidly rising credit in the economy that too much may go to companies that really not have the basis for repayment, and the debt problem that presently we think is manageable could become unmanageable. are managing it but how likely is it that they will get it right? we need to see progress in reining in credit growth and hard and budget assets. douglas: particularly because china has a peaking 8 --

beginning workforce and the fastest rising age. tothey have the ability finance the current credit environment? we think they do. the banks have cash balances the size of the entire fed allen's sheet. we had -- fed balance sheet. huge governmental summit coming in august and it brought forward the next financial conference to this summer. concerned as everyone else and we think there are indications that moves will be made in a short time. francine: what do fed hikes mean for the chinese economy? i think the issue with the yuan at the moment, a lot of people are putting too much weight in terms of policy. i think it has been driven ever

more so by flows and the chinese government has the ability to normalize those flows if they want. the interesting different from last year when we saw huge outflows from the government, they have not chosen to sterilize those outflows on this occasion. tom: i am glad you bring that up. or idea of sterilized unsterilized actions by the oddest of macro economic policy. debate, hereexit is the reality of a long-term strength.enan be douglas martin, what i would say is i combine this with massive yen strength and currencies like the mexican peso weakening as well. d.c. and unraveling after we have heard the comments from the imf? douglas: absolutely.

particularly when we are looking doj, we have seen a huge yen appreciation over the past three months or so. the interesting thing about the is no one islity position for it because no one is putting any risk on it at the moment. what i think is fascinating is where the rmb sits at the moment. chinese 10 year bond even though it is ill liquid is twice that of the u.s. treasury. when we look at potential demand of chinese assets, chinese yields are looking pretty good at the moment in a global context. sterilize.ntioned it is too early in the morning to go into the discussion of what this means. what i would suggest is a debate over whether domestic policy adapts and adjusts for capital flows, is a debate that is

different in china than any other nation. do you agree with that? douglas: absolutely. stableifferent from a cyclical economy. we think that it is a secular change and the cash balances they have built up have been in ticket of of the way historically they have run their economy. the unwinding of cash balances will help them make that transition from an export economy to a more domestic driven economy. if you think about whether and -- whether the cash balances are enough to net off inevitable pressure. of all, as the main assumption that they will transition to a consumption led economy in 15 years? what happens in between? douglas: i think they have a huge potential for it, more than

the market gives them credit for . we have precedents for this type of growth historically and most recently, the precedents for this was in korea in 1980. they had msci inclusion and the financial form was very similar to china. they did not have the release of capital controls and they had off-balance sheet financially -- financial career. the first u.s. dollar net influence into korea only happened five years post that event and i do think he have precedents for this type of emergence of a better capital environment. francine: what does the rest of the world need to do to help china? is a very think that difficult question. they are trying to get themselves through their own financial outlook. i think it is interesting that

china is introducing the asian investment bank, which give the roots for the program but is getting financed by other central banks. what is fascinating is that that is in the world's interest. the marginal projects that china , china is still the fastest growing, largest economy in the world. tom: douglas morton, thank you so much. with northern trust. out of northern trust headquarters in chicago. let me do a data check. nuts. oilhinks i am week. we are looking at the german 10 .ear, -.024% bloomberg "surveillance." ♪

tom: good morning, everyone. francine lacqua in london, tom keene in new york. we will be together next week in london with michael mckee. really a historic occasion. in the 6:00 hour we will have more on brexit. , scarletting tomorrow fu leading our coverage, and to description proper on this meeting is george goncalves. when did we get live meeting and desperate -- and dead meeting? there are a lot of issues causing it to take a pause.

how the fed postures what is going to happen down the road assuming we get through -- tom: what we listen for in the press conference? we are going to have alan blinder on. what do you listen for in the press conference? george: a number of about faces. a few weeks ago they were sounding very optimistic and now the market has pretty much priced them out of the summer. they need to really clarify what are the metrics they are looking at, what kind of hurdles they are looking for. .hat is going to matter more if there bogeys have been lowered and they feel like they could actually still raise rates have to come clean on what those levels are. francine: you seem to suggest there are bigger issues at play. they had some pretty terrible u.s. jobs figures. how do we deal with that? it intowe have to put

perspective that we have had a cumulative improvement in labor markets but we are at the point where the question is, are we at the mid cycle of this recovery or at the end? i think they are going to have to sound optimistic but still think that growth is above potential. if it is not above potential, why hike in the first place? we have had improvement in jobs, low inflation. at this moment there is really no need. wantine: you could say you to keep some 12 in the 12 box and you can raise if something happens. some tools in teh toolbox. george: at the end of the day it is about financial conditions which have been tightening for the last 18 months and now they are beholden to the markets. euro-yen, stronger yen,

dollar-yen one of 5.79. 105.79.u explain -- would you explain how an institution can hold full credit and paper? how do they do that? george: in comparison to what you are getting around the world that looks pretty juicy. you have to think about where we are compared to the rest of the world in terms of yields and that has been a prevailing force. tom: has this spilled over into the corporate space? george: it has been part of every fixed income sector throughout. tom: the nine-year microsoft these is trading 10 basis points above the full faith and credit u.s. 10 year. credit.: full faith and

when you look at the german 10 year bund yield, -0.03. how do you find value in boones? -- bunds? george: there is a collateral made. i think jim morrison was looking into the future and thinking about global bond markets and thinking about raking through to the other side. it was never ever thought that this could happen. something, wef have to do a trip to paris to pay a moment of silence to jim morrison. when you are closing the doors -- quoting the doors, that is a great and spiritual thing. francine: what surprises you the most, the move to the fact that we have this move into negative territory and no one has flinched? george: it has been an anti-climatic move.

it was only inevitable that this was going to happen. we are a couple weeks before the u.k. referendum and there is a preference to hold high quality assets. it was bound to happen. the question is how long we stay here. baby, light my fire, are we going to end up with instabilities? george: the fire is inflation. tom: do you see it there? george: no. here of idea instability is out there, that is the fire over the horizon. we are killing it. george: we are definitely going into the lyrics for sure. i think with negative rates there is concerns about how banks will make money in the future.

there is concern in the financial system about how we reach the limits of central-bank policy. the efficacy has been questioned throughout this first year of negative rates. it is not natural. every bank wants to grow and not shrink their rates of growth, and i think we will look back and realize this is an anomaly and not the norm. until we get inflation and proper growth, we will be kind of stuck. francine: tom, do you have any way you can trump george? tom: i want you to put the sign up because here comes the sun -- the sun up because here comes the sun. a very important brexit endorsement. there is the sun, and another one from the telegraph that gets global wall street's attention. how about the fed decides?

we will do that tomorrow, scarlet fu leading the coverage. michael mckee and i will join with the former vice chairman of , reallyalan blinder looking forward to that fed moment tomorrow. ♪

francine: nine days until the vote, the referendum on june 23. i am francine lacqua in london, tom keene in new york, but he will be joining me for full coverage. 26ra: microsoft is betting billion dollars it can put itself at the center of people's business lives. that is how much they are paying for linked in. tech investor yuri milner calls it a good move for linked in, speaking to erik schatzker. >> linked and being part of a large company, might even take bigger risks as opposed to being a public company, which needs to report quarterly. canink the linked in team

realize that now is the time to really take bigger risks. nejra: microsoft has $100 billion in cash but is borrowing to buy linked in, a move that will save on taxes. shares of sony rose in tokyo after they announced a release date for their virtual reality handset. it goes on sale in the u.s. in october and they unveiled exclusive games for their playstation console. inflation in the u.k. on expected but he 3/10 of 1% last month. the cost of transportation rose but that was offset by cheaper food and clothing. that is the bloomberg business flash. tom: there is a lot of going on and i want to make clear, some of the market action is not about brexit or bremain.

of the evans pritchard telegraph, they have been very sympathetic to brexit. he came out with a blistering op-ed saying he will personally support leaving brussels. we are deciding whether to be with quadscommission i executive powers that operates more like the priesthood of the 13th century papacy than a modern civil service. too much has happened that cannot be forgiven. i am fascinated by that comment and your reaction. francine: it is something you hear more and more which may explain why the brexit campaigners have done a so far very successful campaign, and over the last 10 days the polls are shifting. leave, they to the say they are willing to eat grass within the next five years as long as they get their sovereignty back.

we mentioned the sun and we have to go back to his son. i am not sure whether this has real power to sway voters but i did hear from rob hutton saying the sun would only do this if they thought that rex it had a real chance. they would really not the backing a losing campaign. back in 1992 it did manage to sway voters. tom: let me bring this up, and i say this with great knowledge of your traveling around the continent -- why haven't we seen a response in the last few days from people on the european continent? i was asked that question at least three times yesterday. francine: we do have responses, they just get buried. people are responding but it is not getting picked up. if you look from a purely emotional point of view, it is very persuasive to have someone

tell you the u.k. is the best country on the earth and we will be better together and alone. tom: george goncalves with us from numerous. unraveling for central bankers. talked with chair yellen earlier. mario draghi has no power within a negative german yield. as his power diminished? george: the hope and the faith that they have is the there will be an increase in demand and credit lending. one can argue that the lending programs should be more effective than just having rates lord. that -- floored. that is what they tried all along and it has not changed the dynamic. i think they are getting more and more powerless. most dangerouse

word and what we do. george: hope is not a strategy. tom: our strategy is to keep george goncalves with us. we reset what we are doing. bob nardelli will be joining us. andrew sorkin with a blistering note in the new york times on linked in's compensation. talk about getting a wonderful guest, gene munster will join us from piper jaffray. this is going to be a very strong our. bloomberg "surveillance." ♪

tom: a landmark morning amid an eight year great distortion.

germany, to the 10 year. great britain chooses and the polls tilt brexit. sterling weakens. the sunsets for prime minister cameron. nardelli on, robert mergers, acquisitions, boardwalk, and part place. this is "bloomberg surveillance tuesday,rom new york, june 14. i'm tom keene. with me, francine lacqua. brexit, as we go to london next week, is front and center today. francine: the countdown begins. get, "why do we care about brexit?" tom: i was guilty of that. francine: you were wrong. when you look at risk aversion, it is prevailing on the markets. let's save ourselves and

get to the first word news. here is nejra cehic. nejra: thanks, tom. four new polls indicate the u.k. is on a path to leave the european union. the surveys have the leave faction ahead of remain. came out in favor of a brexit. the u.k. staysif in the eu, it will be dominated engulfedritain will be in a few short years by this relentlessly expanding german dominated federal state." the union is the most vocal opponent of president francois a liver's plan to make market more flexible. in northern france, a news agency says a policeman and his partner were killed by a gunman who claimed allegiance to islamic state. he reportedly was convicted of

taking part in a terror cell. french police killed the attacker, but a couple's three-year-old child was saved. authorities are investigating. the shooter in the orlando magic are was not on a no-fly list even though he had been investigated twice by the fbi for links to terrorism. james comey says omar mateen was taken off a watchlist because agents have no evidence he was a danger. he called 911 during sunday's murder spree and swore allegiance to islamic state. around the world, the jewels were held in memory of those killed in the orlando mass shooting. one of the largest was held in orlando itself, where thousands gathered to mourn the 49 killed in a gay nightclub. president obama will travel there on thursday. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world, i and nejra cehic. tom? tom: we could do a two-hour data check this morning. we will not.

we hit the high points right now. futures -- the tape was a little bit better in the last 40 minutes, from -17 negative five -- from negative seven to negative five. there is brexit, eu, e.m. carnage. on to the next screen. popping, 18the vix to 22. the german 10-year making a 1.4145.nd sterling, francine: this is what i am most interested in, the german bond 10 year climbing. to bloomberg quickly. on the u.s. economy, this goes to the idea that it is not just exit -- just brexit remain mania. trending the crisis, we come back. we just get above, and then we

have recently rolled over. you really wonder what that says not only about the u.s. but also the united kingdom, the small business economy. francine: i did put a line -- there it is. pink.n see the u.k. is in the white is japanese. the german 10-year -- negative. i do not know if it is a blip or if it is negative. it is a 10-year paper. tom: george goncalves joins a spirit he has agreed to stay over for this section. this morning, we did not know about microsoft, linkedin. robert nardelli joins us. he has provided infinite wisdom , linkedin, economics, and finance. there be honest, i think is a lot on this reporting.

i wonder about the salvation of microsoft saving linkedin. i will do that later in the hour. bring up the chart on the long-term 10-year. george goncalves lives this. a guy like me says a great distortion, the yellow is the year, andsible 10 then you adjust for inflation. these are totally unusual times, aren't they. george: living in the market is telling you they do not think growth will pick up in the future. the fed has been wrestling for the last number of quarters with, what is the neutral rate, the equilibrium rate? these models skew them for the last five years and finally are starting to realize that the dollar plays a big role in the u.s. market economy. all that is lowering our growth potential. tom: bob nardelli, you have lived the risk-free rate. do you have a clue what the risk-free rate is right now? when you do a discount back on a seven-or 10-year model?

can you play the game? bob: as i talk to all my colleagues, the number one concern is the uncertainty in the marketplace today, whether it is currency, global trade. tom: the money question is, do guys like you -- does jamie dimon keep moving forward and ignore george goncalves' world, or are you linked into brexit? bob: i think you have to be. today's ceo has to be able to pivot. you talk about growth. megadeals being proposed. we see the administration stifling $400 billion of potential mergers and acquisitions, or corporations are doing great on the bottom line but trying to merge to get growth, more synergy and better productivity and better channels to market. rates: why would you want as low as they are is not to encourage more activity? your point is well taken. but at the same time, the concern is a large concentrated

pool of assets, forcing people into fixed income. to make this work, you have to get growth on the other side to stave off all this debt as well. bob: i say -- i see a lot of people moving to munis. tom: first time on the show, let's bring in francine lacqua, waiting patiently in london. francine, interrupt these rude gentlemen. francine: bob nardelli, when you are pointing to risks out there and the fact that there is so much uncertainty, does this prescription come from central banks? do central banks need to show more courage in not lowering or doing more qe to show the morets and the ceo's powerful growth? bob: i think that is right. 's big concern is

that she does not want to raise rates to have to back up. when you look at the jobs market in the u.s., with a paltry 38,000 jobs, you look at the outcome, the economic outcome george has been talking about, the ceo's today are very concerned, playing it close to the vest and being conservative because none of them want to get caught upside down might we saw in 2008, 2009. francine: what will it take for the ceo's to be less concerned? do we have to wait for some kind of catalyst or ugly event to make sure that we wipe the table and start a new -- and start anew? we have to get rid of some of the policies and the regulations that they put in place. we ought to talk again about repatriation of bonds. i have some ideas on how that might work during this campaign period. we had to be more supportive of growing the gdp as opposed to an anemic .5 in the first quarter. you have to have a gdp to create

jobs, and we are upside down in that area. tom: i do not want you to get upset with tokyo this morning. where is the tip point on japanese yen as a global proxy for instability? to look atkets love round numbers like 100 and draw a line in the sand. with each respective country, what it is trying to achieve is grow its way out, and japan has thrown everything at it. there was a bank of japan meeting this week. the question is, they are at odds with each other. we have talked about policy diversions for so many quarters now. -- if yen cannot we can the yen cannot weaken and the economy is turning around -- tom: thank you, george goncalves. .576ative jaw-dropping

this morning inasmuch as the new negative yield on the german-10 year. we go to make -- we go to brexit. fed decides, scarlet fu elite in our coverage with vice-chairman binder. and richard clarida as well. look for that tomorrow at 1:00 p.m. ♪

francine: welcome back. this is "bloomberg surveillance ." let's get straight to the bloomberg business flash with nejra cehic nejra: china's

-- in a presentation to investors, alibaba said residue -- revenue will rise 48% in the 2017 fiscal year. shares of alibaba have fallen more than 2% in the last three weeks. the fcc is looking for data for its single day promotion. a new forecast says the global oil market will be almost balanced next year. it is predicted the demand will rise faster than production. it is -- it says the oil surplus in the first half of this year's 40% smaller than estimated a month ago. billion inas $100 cash, so why is it borrowing money to buy linkedin for $26 billion? it results in lower taxes. most of microsoft's cash is parked offshore and it would have to pay a 35% tax rate to bring it back. if anything most of the purchase with that, microsoft could avoid those tax payments.

that is the bloomberg business flash. tom: we are going to dive into the microsoft/linkedin story. gene munster of piper jaffray will join us for an extended bout here on linkedin, and some sorkin off the wonderful article. right now, given the great distortion, what does banking and business do? robert nardelli has a lot of critics that go back to carrying water at general electric and home depot and a bunch of others. bob nardelli has been someone who has been in the trenches and understands the dynamics between economics, finance, and investment. this great distortion -- how do business people work within it? as i said -- bob: the biggest concern in the

the fluctuation we were talking about earlier, you put together a three-year plan, it is very hard to stay on a three-year plan when the dynamics are changing. you have to have contingency plans. you have to be quick of foot and pivot. tom: home depot, to the moon, great performance, etc. argue,melt, many would was the ceo of the year last year. when you look at how big corporate titles are at that thing and adjusting, what is your message to them? at what jeffok did. he had to exit the ge capital business, which had been a real cash cow for the company. but if you look at the dynamics in the market, some of the new regulations, i think he made the right decision at the right time to get out. home depot is continuing to grow. her same source tales -- their same-store sales, the stock has performed extremely well.

tom: i cannot emphasize within brexit, the renminbi, and all that, certain stock charts have moved from the lower left to the upper right. there is a lot of good being created out there. francine: there is, but i wonder if that good is from shareholder buybacks or dividends. we do see value creation for share prices. are you alarmed by the fact that there is more shareholder activism, saying i want money back, that puts in jeopardy the future growth of certain companies? bob: there is no question, if you look at today, there are activists and active investors. some of the activists, to your point, exactly are focused on short-term. they are forcing the use of cash to buy stock back to be able to drive the earnings to pop the stock. as opposed to steady, progressive, producible income level, r&d, new products,

customer satisfaction, and driving it in the right direction. there are some patient activist investors focused on trying to drive fundamentals in companies. so you have a mixed bag in the marketplace. francine: where does that leave us five years from now you go if big companies are not investing in our future and cheap money at some point will come to an end, what kind of growth companies and what kind of world will we see five years from now? bob: we have to be careful on some of the companies forced to do stock i backs, dividend increase, to keep the stock where it needs to be, and we need -- we may need to see them hollowed out four or five years from now in a deficit area or not as competitive in the marketplace. tom: here is the chart that matters. this is the u.s., what is called the h 15 chart, back to eisenhower. the bout of disinflation and outright deflation in the early

1950's. up we go at the peak there are you and others look like geniuses rocketing down that redline. now you get to the zero, and it is than what? ,ith a new lower terminal value are we going to see compensation change for executives as they financially engineer forward? bob: i think you will. we have seen a shift from my earlier days that performance is tied to total shareholder return, tied to legitimate growth. a lot of times they are backing out, earnings growth achieved from stock buyback. there is a lot more regularity. tom: did you buy the cleveland browns at one point? i did not, but i probably should have. tom: bob nardelli of financial

engineering. francine? francine: we will talk more about the browns, there's -- about the browns, the bears -- tom: very good. the browns, the bears, and the cubs, francine. francine: we will sit down with president bill clinton of the clinton foundation for the meeting in georgia for an exclusive interview. that is 11:00 a.m. in new york, 4:00 p.m. in london. ♪

tom: the hate mail comes in. it is time for a "surveillance"

correction. the browns and the bears are football. the cubs are baseball. i was jesting there, and i was widely criticized through e-mail. francine: that is what confused me, not brexit at all. sun" endorsing brexit. let's get to bob nardelli. all, "the sun" is the most read newspaper in the u.k. can it actually sway voters? rob: that is an interesting question. 20 years ago the answer would have been, everyone thought yes. it was still the biggest selling paper then. a circulation of 3 million. these days it is in decline. all newspapers are in decline. do they still matter? i don't know.

the significance of this is tends toat "the sun" pick winners, so they are picking a winner and saying there will be a brexit. they have not been on the losing years in aut 40 british vote. that does not mean they will not be this time. they might be stuck because this is what their owner, rupert murdoch, strongly thanks. even if they thought it was different, they would have to come down. this is a significant moment. gaining: why is brexit momentum? is there anything they remain count can do to reverse course? rob: somebody put it to me yesterday saying this argument is about jobs versus foreigners. theory,of political jobs ought to beat foreigners.

it up to be a compelling argument. argument, there are two bank many immigrants coming in -- there are too any immigrants coming in -- tom: we showed this in the last hour. we are deciding whether to be guided by a commission with quasi-executive powers that operates more like the priesthood of the 13th century papacy than a modern civil service. too much has happened that cannot be forgiven. what will you look from brussels and the elite in europe to assist prime minister cameron? rob: i do not know that they can do very much. it is not just like john paul yunker can fly over here and say, you know what, -- it is not just that jean-claude junker can

-- if thisre and say is a rebellion against the elite, which is what you want this to be, then what have the elites got? at that point you are sort of stuck. you have tried your experts, your warnings. do you bag? -- do you beg? hutton,: thank you, rob with some smart analysis. here on "bloomberg surveillance," all of next week, we will bring you live brexit coverage from london. we will have the latest highlights inside that perspective. ♪ ?c+sv

francine: tom keene is in new york. i am in london. we have to do extra data checks today because -- this is

probably our biggest story of the day per german 10-year yield below zero. the u.k. seems to be moving closer to brexit, and that is having an impact across the board. the yen is considered a haven at 105.91. let's get straight to the "bloomberg first word news" with nejra cehic. nejra: it is nine days before the u.k. vote to leave the european union, and four new polls show the leave campaign is running ahead of remain. the surveys have the lead -- they leave -- the biggest selling newspaper in the u.k., "the sun," is backing a brexit. the u.k. has won a fight in the eu's top calls over welfare benefits. the u.k. wants to restrict access to benefits for migrant workers. the eu court of justice agrees, ruling the u.k. can require the recipients of some child welfare

benefits must have a right to resign -- must have a right to reside in the country. a french government spokesman sets the killing of a police man and his partner was an act of terrorism. the two were killed in northern france. police killed the attacker. according to a french news agency, the killer had claimed allegiance to islamic state and had been convicted of taking part in a terror cell. u.s. helicopter gunships have been used in combat against islamic state forces. it is a first time that happened since president obama approved their use in april. iraqi forces are trying to retake fallujah and mosul. some advisors are urging israel's prime minister, benjamin netanyahu, to cut a deep -- to cut a deal for military aid with president. some israeli officials are concerned donald trump is unpredictable and hillary clinton is unreliable. israel gets more than $3 billion a year from the u.s. and now

wants as much as $5 billion a year. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus i am nejraworld, cehic. tom? with geneg up here munster, we will talk about the financials of linkedin and microsoft. sometimes you get lucky. scheduled to join us was jennifer morgan with sap. bob nardelli is with us as well. then you rip up the script, which we are going to do with you right now. forget about financials. everybody is going in the cloud. what the goodlate gentleman at microsoft is trying to do here. the cloud is a way for companies to get innovation faster, cheaply, and focus on as they backtant off infrastructure stuff.

with microsoft and linkedin, you have one of the biggest social networks, and microsoft's cloud. that is about clouds and networks now. tom: amazon is doing everything is. mr. bezos when i say to you the cloud is the future, how do you respond, other than 85 companies are going to spend a good jillion -- a gajillion dollars for three or four winners? can you make money at the cloud? jennifer co. absolutely. you have a revenue stream coming in every year. francine: if you have been lagging in the cloud space, you could have got in -- who could have gotten in but did not? jennifer: a lot of companies are focused on the cloud in mary -- in maybe a certain area of the business. we are focused on the enterprise. in the enterprise, at the ceo level, at the board level, you

are seeing focus on digital. digital innovation. you cannot move fast unless you have an environment and applications allow you to pivot and move quickly. we are seeing it everywhere. mort on the boards asking for? what is the ceo asking for to be able to do -- you are on the -- what are the boards asking for? tot is the ceo asking for make decisions more expeditiously than i was growing up in home depot, for example? jennifer: things are moving fast in the digital economy. executives, ceo's are getting pressure from the boards. -- are seeing this cheap this chief digital officer. -- a used to be a cheap chief officer focused on digital. create a digital line of

business. that is the focus of that executive. francine: jennifer, how difficult is it to stay ahead of the curve? sap announced together with apple that you are developing use of businesses on iphones and ipads? the cycle of innovation is quicker than it was in the last 45 years. jennifer: exactly, and it will never move as slowly again. with microsoft and linkedin, you are looking at the power of the network coming together with the cloud, and the partner ecosystem. the more you can bring the synergies together, we have a big partnership. "synergy," it is nothing more to me than cost-cutting. the capital deployed to the cloud -- what is going to be the return on capital? is this going to be a profitable business, or is it just that this is where the technology is going, and as a counterfactual we have to do it because we have

to do it? jennifer: there are synergies just around cost-saving as you mentioned, but think about what the companies can provide. if you are talking about an auto parts company, companies are becoming software and technology companies themselves. they are looking to digitize the business, to create new products and services, which leads to revenue growth. francine: how do you look at those trends? we are seeing the digital board room, where you are providing a service to a massive retailer that now can make decisions instantaneously on proliferation,w what products to promote and not to promote. jennifer: you want to see your business not where it was yesterday but where it is going to be. having a digital board worm -- having a digital boardroom, you can see what is going to in your people, your talent, what is going on in manufacturing. tom: francine, jump in here

please. francine: how do you choose your board? it is something we talk a lot about in the u.k. with a younger audience, do you need younger board members? do you need people that are almost born on the ipad? how do you make sure this person tells you what happened and what will happen in the next five years? jennifer: talent looks very different in technology. it used to be you needed a certain number of years of experience to be an expert or to provide value. now you are seeing that technology is in the last few years changing dramatically. nobody has 10 years of experience in something. one final question -- are you going to buy twitter by thursday? jennifer: not that i know of. jennifer morgan, i want to get her in trouble with mr. mcdermott this morning.

coming up, we will talk with gene munster about much more of the realities for linkedin, the financials of linkedin, including stock-based compensation. how exciting is that? futures improving. 1.58%.ld, that is a wow statistic. good morning. ♪

francine: tom keene is in new york. i am francine lacqua in london. tom keene and michael mckee will be joining me next week to cover brexit. the german 10-year yield below 0% for the first time ever. i want to show you the other things we are watching. the asset checks, stocks fell. here is nejra cehic. nejra: inflation in the u.k.

unexpectedly stayed at .3% last month. the cost of transportation rose things to higher fuel prices, but that was offset by cheaper food and clothing. shares of sony rose in tokyo after the company announced a release date for its virtual reality headset, which goes on sale in the u.s. next october. sony unveiled exclusive gains for its playstation 4 console, including batman and spiderman titles. microsoft is betting $26 billion it can put itself at the center of people's business lives. that is how much the world's largest software company is paying for linkedin, the professional social network. a tech investor calls it a great move and spoke with erik schatzker. >> linkedin being a part of a large company might even take opposed to being a public company, which needs to

report quarterly. i think that the linkedin team can be realistic that now is the time to take bigger risk. nejra: microsoft has $100 billion in cash that it is borrowing to buy linkedin, in a move to save on taxes. tom, you have more on this deal? tom: we are thrilled to bring you gene munster of piper jaffray. i have heard more hot air on linkedin and microsoft in the last 24 hours than on record. the land of touchy-feely, the touchy-feely meter is off the chart. i love your work. how bad did jeff weiner need this deal? linkedin cratered. how bad was this bailout? bad: he did not needed that because he had a good business

ultimately, so he found a way out here it i think it was a good outcome. it was a good near-term outcome, but he did not really needed. tom: i agree. bring up the chart on linkedin, where it was, and then it cratered recently. and then of course, a nice bounce back. gene munster, why did mr. nigella do this deal, and what does he need to do in the next six months? gene: he did it because it gets the power that microsoft brings in terms of customers. given ultimately that the valuation with a dip like that was a big opportunity for microsoft, they were capitalizing on some unwarranted investor fears, so credit microsoft for doing that. calculated have not it myself, but microsoft paying $220 each for monthly users,

that compares to $40 for facebook users. is that too high? gene: the linkedin customer base is much or -- in than whatsapp linkedin's case, you have a incredibly-- an loyal base. you can make money from them not only on the core recruiter product, but there are new products that microsoft is interested in, like navigator, which goes after sales force. i think that you have to look at what the revenue opportunity is and how much earnings potential they can have when you look at the per-value user. makinge: is this deal twitter a takeover target making this more likely? very i think they are

different companies, and i think anything this deal does is it sets a new tone in terms of what is an acceptable size m&a. that is probably the real takeaway. tom: i think you are dead on, gene munster, with the idea of a new tone being set with the shock of that headline yesterday. the reality is a lot of stock compensation needs to be reset at a better point so that everybody can keep the gravy train going and -- can keep the gravy train going in silicon valley. what other companies are in a linkedin position, whereas you and mark mahaney say they have reset and sell to the biggest sucker they can find? gene: i have to stick to my coverage universe, so i cannot think of a man -- i cannot think of a name that is an obvious takeout. but you will see more m&a from apple. tim cook has been talking about them doing bigger deals. companies terms of

that you will probably see more from, it is probably apple. tom: gene munster's talking greek, isn't he? in your world, is silicon valley using a different playbook than what you guys play by? bob: gene is making a good point. full disclosure, i am a user, and linkedin is a much more professional platform them twitter, for example. i am a monthly contributor and a shareholder. so i was pleased to see the recovery. but i think this is a good move for microsoft. you will see more in play. yahoo! is already out there. people are understanding the importance of social media as a way to get access to a large consumer base. tom: gene munster, what does apple do with all their cash? apple says they are not going to use cash, they are going to use debt. how does tim cook adapt to what we have seen in the last 24 hours? gene: probably the price of certain assets are going to inch up. there are two areas apple will

go after. one is this whole mix of , and the reality second thing is what is going on in automotive. those are two big pockets. everything going on around the iphone tends to be organic. all the news we saw yesterday is really organic. and the last final pieces, obviously they are doing more private investing that we have seen more recently. those are probably the three bigger buckets. nardelli, when you look at valuation, is everything overpriced? 's tech overpriced -- is tech overpriced? bob: it is a very good asset that will give them significant assess -- significant access to a broad install base. from my personal experience, we are seeing multiples at very high levels. double-digit multiples is kind of the norm here in the concern

out there is can you really get a return at the 10, 11, 12 multiple level. ibm -- how do they respond to this? it used to be microsoft, ibm, microsoft, ibm. ibm almost seems left out of the discourse. i knowhe little that about them is that they have shifted more towards their services business. what it comes down to for these mega companies, they need to find big areas of growth in the future. companies that just kind of focus on their existing lower growth are not going to go very far. that is why you see coming like facebook go after the whole augmented reality and google go after self-driving cars. they do not see these big pockets that they are going after. my recommendation to ibm would be to do what these other smart companies are doing. tom: gene munster, thank you so much, with piper jaffray. he will join michael mckee and i

on radio. tomorrow, scarlet fu. she is motivated. i think it is a live meeting meeting or just because scarlet fu will be in attendance. our special coverage of the fed. the fed decides, 1:00 p.m. tomorrow. ♪

tom: you need to know the tape is better than it was two hours ago. francine lacqua and london. i am tom keene in new york. yen stronger, dollar stronger, euro weaker through 105.87. that would be a big deal, except it was really much stronger two hours ago. under 119 gets my attention. watch that. i would counsel. francine? francine: coming up shortly is "bloomberg ." alix steel, you are looking at yields. what else? alix: you are looking at yields, not only in the u.s. and the u.k., but also european

peripheral yields have been spiking in portugal, spain, italy, greece. the risk-off trade continues, and the risk aversion is putting upward pressure on those yields as well. also, commodities are in the midst of the selloff. it is going to be a big market three-hour show today. we are going to be talking with don hill -- with tom hill, senior managing director at blackstone's alternative asset management. the question there is, when we have all this turmoil and if we have a recession or stagnation down the road, what tools are left in the central bank's box? tom: thank you so much, alix steel. robert nardelli is with us. it is time to step back and talk about this great distortion and what it means for corporate officers. danaher is one of the best run companies in america, delivering

12% per year on a linear function. i want to know why there are not s outdan or her -- danaher there. why can you not develop cash allocation, capital allocation, even within this great distortion. bob: a good friend of mine, george sherman, started that transition for danaher. it was a disciplined, methodical business approach put into the acquisitions out there in various industries to get diversity done. tom: you were on the board of coca-cola a few years ago. is your experience that you can generate discipline in this milieu, or are there so many corporations out there that we are all too busy being busy? bob: the operative word there is to have a discipline, to really understand what you are trying -- tom: a written plan.

bob: a written plan and then stick to it. doingnnot be forced into a deal because everybody else is, and you do not overpay, do the diligence, and have a core business that is expandable. francine: when you look at the great distortion, all of this cheap money, funding, and how easy it is to fund m&a, are you not worried that these megamergers are just based on nothing? if you do not have core values and you do it because you can because of synergies, then this does not look like it will be a good outcome. there are two great points there. the cost of money is encouraging companies to do things they otherwise may have not done. but if you look at the dow-dupont thing with andrew and g- if you look at the a business, the size, the r&d synergies you will get out of that are going to be very, very important. the boardquickly --

had to tell them to do this, right? bob: andrew is a good friend. the opportunity presented itself with the transition at dupont, and i think it green came in and had a good relationship with andrew, and they saw a way to get there. tom: it is truly a historic day. francine, the german 10-year, amazing. yield,e: and the 30-year also below 2%, also significant, also historic. tom: francine lacqua and tom keene again. we will be in london next week. billloomberg ," clinton, david westin speaking with the president. look for that later this morning. this is "bloomberg surveillance." ♪

jonathan: a boost for brexit, gilts rally. subzero, germany's 10 year bond yield drops into negative

territory for the first time ever. reserve: the federal off its today policy meeting and economist predict no change. and very warm welcome to our viewers world wide, this is "bloomberg " alongside alix steel appeared -- alix steel. get you through the asset classes, risk off. the ftse off by over one fourth of a percentage point. the fx market, a similar story. yen strength, sterling weakness.