brexit begins and a prime minister resigns. markets find a bid after a heroic early morning. sterling plunges. scotland, we have a problem. mr. trump walks the back nine. good morning from our world headquarters in new york. fu and alixcarlet steel. it has been an extraordinary 24 hours as you can see as i stumble through the opening. alix: the market action we have seen was incredible. it was all over twitter when the yen surged below 100. twitter exploded. scarlet: why don't you get us started?

amazing. futures -57, under 3% measured. challenge.a the euro 1.111. elevated,was really 27. sterling, 1.3625. a difficult go of it. 1322. julie: this is my favorite part of the year. this is the pound index. you can see the incredibly tight correlation all through overnight trading into the morning. only do we see a slight divergence.

the white line is the pound index. all such lows, climbing a little bit higher versus the stock getting clobbered. correlationkind of you do not expect to see in your lifetime. scarlet: this is not normal. when you look at how the cash market is doing, it is not that bad in contrast. take a look at the bloomberg. when you break it down into sectors, you have attained main desk you have 10 main groups. companies faring better. the losers are financials, the big banks. we want to show you within the dow the big movers. the dow has 30 members. the only gain is up by half of 1%. stock is down.

alix: now let's check in on bloomberg first word news this afternoon. mark crumpton has more. mark: german chancellor angela andel is calling for a calm measured response to the vote. sentiment in the u.k. is often seen elsewhere in the eu area . see ourselves confronted with the fact that he will have basic doubts about the direction the european unification process has taken. mark: she will meet with the president of the eu and francis hollande. david cameron says a new leader should be installed by october. david cameron: the british people have made a very clear decision to take a different path and as such, i think that country requires fresh leadership to take it in his direction.

i will do everything i can as prime minister to steady the ship over the next months and weeks. i do not think it would be right for me to try to be the captain that steers the country to its next destination. final tally had voters backing leave at 52%-40 8%. -- 40%. 8% . global news 24 hours a day, powered by our 2400 journalists in more than a 150 news bureaus around the world. tom: thank you. we sent francine lacqua westminster. they are not measured and calm. it has been a long day. we have heard from the headline makers. what is the tone of members of parliament? we can't see the members of parliament because

they are still talking about what comes next. it seems to me when he speak to a lot of people on the ground or insiders that both parties, the conservatives and the labour party are trying to figure out their next move. there has been a lot of pushback -- it issels and unfair that the eu is paying the price. overall there is a lot of bafflement and people figuring out, i think you mentioned it at the top, why so many people are does the eu brags it mean for me west mark the people have spoken, but it looks like a mess. tom: you have such a good of europe.ng how are the comments of european officials received by members of parliament? let's remember a lot of members of parliament were

for leave, many were for remain. --depends on the fractions fractions or who you speak to. if you look at the politics, in the labour party, some are trying to overturn their current leader to try and find a more credible situation. others are trying to figure out if boris johnson is really the right option. there are many moving parts and there is not one united voice at all. i have covered this parliament for many years and i have never seen it so divided, ever. not only divided, but divided on both sides. insight on the effect on the economy. ian bremmer joins us on the phone from beijing. do you feel that political leaders understand the depth of

the public's need for change? they should now. they probably won't. this was very much a throw the bones out vote. the polls were very close on this issue and it was never going to be an easy call to say they were going to vote to stay. the heads ofwhile the conservative party, the labour party, pretty much every leader in the world except police said this was a bad idea, the people who voted did not their socialll in contact with the leadership had broken and nobody was taken care testing care of them. the people have spoken loudly. most governments in the developed world work with the working and middle class, i suspect the answer is no. scarlet: what kind of leader is

best positioned to represent the new order, the new paradigm? farage?o or someone who has not come out? farage is not that leader and it is not as if he has an enormous support, the donald trump, boris johnson, they are present extreme protest votes. what is interesting is in germany, people don't want run, but she two is going to win. runne strong is going to against her. he will force the british people to take a monetary hit. wins in the clinton

be ad states, there will trackback to the establishment. one of the reasons you saw this vote is because the u.k. is not were not going to die, they felt like they vote, not show up to polls, ultimately it did not matter much to them. let's recognize the fact that a solid 30% of the electorate did not bother to turn out for this one. we have to hold them accountable. tom: one of the most articulate onngs i heard was lord brown remain. sir james dyson of the vacuum cleaners wrote a lovely piece for the times. to think we can reform brussels is arrogant and delusional.

britain should focus more on the rest of the world trade we have nothing to fear by leaving. can the united kingdom recapture --sense of ian: europe does not look good today and in five or 10 years, probably worse, and that would be true i even if the brits stay in. those are not the people who are governing. those are the people who voted to remain. the people who wanted leave want protectionism, they want immigrants out and not want the best and the brightest coming in , they want the u.k. to be homogeneous. it is going to's. tos -- it is going

experience recession and will not get as many immigrants. it is not a britain that is going to become anything great. what are the implications for the broader eu when it does not have a liberal market friendly u.k.? have not have -- it is not -- lessit is relevant today. if you are going to read negotiate a treaty with the u.k., and an enormous distraction over the next few years, i can think of a lot of countries that will use that as an opportunity to get more goodies for themselves. you're going to have to relitigate the entire eu treaty. pieces of all the integration that were making the eu stronger, financial harmonization and regulation,

digital strategy, those things are going to stop. tradeansatlantic partnership the u.s. has been promoting, those things are going to get much weaker. downside forng but the eu itself. scarlet: you are joining us from beijing. what is the response in china? what does that mean for china that will be renegotiating a treaty with the u.k.? it or not, the chinese do not like this and they do not like this because the chinese are not fundamentally a military power. they are in economic power beard for them to be successful, they need strong economic partners that want to buy a lot of their stuff. fact that the europeans are becoming weaker and the transatlantic alliance is weaker, he gives them more potential to divide or did they like it when the southeast

asians are weak because the chinese are dominant militarily there. they can have security control in their backyard. they want stronger trading partners. the russians want a week eu, they want a better energy environment to do deals. they don't want a strong eu. the chinese actually think more strategically. from china's perspective, this is bad. the reason he goes to germany, berlin, that is where the power is. decided it is a second-tier power. xi jinping is going to spend a lo lot less time there. tom: thank you.

let's run through the u.s. stock market. i don't do as well as scarlet fu or alix steel. they said to do it. down 3%. nasdaq, same kind of mood. the vixx. ♪

alix: you are watching "bloomberg markets." we are joined by tom keene in london. we are looking at a selloff across the board. it is read across your screen. the dow down by 500 points. take a look at my screen. immense correlation, immense slide down in the pound, it is the white line. having a little bit of divergence as we are off the lows of the session with the s&p. scarlet: the u.s. stock market is getting hit, not as hard as we saw in the futures. joining us is katie nixon . has comethe referendum and gone, talk about what this means for u.s. companies and u.s. economy, once the shock wears off? kate: i think the answer is, we

don't know. we are very much in uncharted territory right now. the biggest rest in part to u.s. companies will probably be through the currency channel. we saw a meaningful strengthening of the dollar. to see it coming back again will call earnings estimates into question for 2016. alix: about 3% of sales actually go to the u.k.. but it is the offshoot, the lack of demand overall. what is the impact on earnings this year? can you revise it yet? kate: it is very difficult. it is 17% to the eu. we see it reverberating across the eu. it will be difficult to guess at this stage what impact will be

to earnings, but we can tell you it will not be positive. the politicale battle over the next couple of years, does your single-digit world to become ever more single-digit? kate: i think this is the new normal. we are expecting less returns. we are seeing the low returns being accompanied by a wider band of uncertainty around them. the range of outcomes is broader right now. you see that reflected in prices today as investors are trying to find a level in the market where they can get compensated for the additional risk around this lower than normal rate scarlet: what opportunities might this present? tos it create an opening build a position or add to a position that already exists? tradeit is very hard to around these markets. those who have tried have gotten burned. it is hard to gauge if this is a

huge buying opportunity without answering the question of how this impacts, politically, micro, macro, or investment sentiment. we are staying the course, but we would not add to positions. scarlet: it might be months until we learned, or more. kate: we have to get our sleeves analyze how this will impact. alix: is there a lot of money in cash? investedhave a fully portfolio. the overweight are in the less the market, where we see a lot more clarity around the fundamentals and we have a lot more confidence in the fundamentals right now. scarlet: what are your client saying to you this morning? what have they been asking you wes? alix: when did they start calling you? kate: first thing in the

morning. it is natural to be concerned, there is a great deal of uncertainty, a lot of unknowns that are known and a lot of unknown unknowns. they are cautiously staying the course, trying to work our way through this uncertain period and come out on the other side with what it means to fundamentals. tom: help me with what i used to believe is normal. if you look at the dow industrial average in this bull market most of us missed, the drop-down is the red circle, fairly pulled back. the correction, it is for 2800, now, we have500 not done this for a while, have we? katie: we do not think this will turn into a bear market.

ultimately, we do not think it will push the u.s. or global economy into a recession. that would be a necessary ingredient for a bear market. we consider silver linings. this will keep the federal reserve on hold much longer than they want to, much longer than investors and his spaces, which will ultimately provide some sort of support for risk asset markets. scarlet: jay nixon nixon, thank you so much for joining us. we want to get another quick check of u.s. stocks before we head to break. down by 500ow points. is 10%. ha alix: goals, $51, 1318. this is "bloomberg markets."

♪ scarlet: this is "bloomberg markets." alix: we're joined by tom keene in london. we have two charts that show the volatility in the market. this is the stoxx 600 and the swing. wung the widest swing this year. if you take it out to five years , the widest swing since 2011. ,f we maximize it, this index we have gone past anything we have seen 2008-2009. the white line is a measure of volatility. the blue line is u.s. stocks.

we definitely wind up having some kind of move. volatility is picking up. we are nowhere near the volatility we saw in 2008, nowhere near 2002. tom: this is the key insight of the day for me from a lot of smart people. this is not 2008 and not something before that in 1998 there it the standard deviation move is nowhere what we have seen in certain crises. i do not know how to make this charts. when we come back, this is "bloomberg markets." and chart camp, with alix steel and scarlet fu. you guy's be good. i'll see you later

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we have seen this morning. just an extraordinary morning, no question. the highlight -- our headquarters in london still by the resignation of the prime minister. that was an extraordinary moment. in with keene, budding alix steel and scarlet fu. he is on top of first word news, mark crumpton. mark c.: donald trump is tying thursday's brexit vote to his campaign for president. mr. trump spoke to visit -- to voters in ireland. you see it with europe, all over europe, you can have more than just what happened last night, you will have, like many other cases, where they want to take their

borders back, the monetary back, a lot of other things. mark c.: he thinks that exit will be a goodit thing, but will take time. scotland's prime minister says that brexit needs a second referendum on scottish independence is likely. more than 50% of scots voted to remain with the european union. >> in other words, to secure a continuing place in the eu and a single market. mark c.: in 2014, scottish voters voted to remain in the u.k.. be writing as will new set of rules. christine lagarde discussed the need for a smooth transition.

>> the british people have spoken and the decision is to be respected. it will be time before the there of the future of united kingdom and the european union will be known. in the meantime, it is important that there be clarity on the negotiation process and that it be carried out as smoothly as possible. mark c.: before the referendum, the imf forecasted that would draw from the eu could force the u.k. into a recession in 2017. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. i am mark crumpton. this is bloomberg. back to you. alix: thank you so much. one of their casualty of the day is the yield thread. , he a look at the curve keeps on flattening. the question, can the curve

invert? can invert when you have a two-year yield. it is truly unbelievable. all of that weighing on the fed. scarlet: the fed is going to be dovish. here is a function that we like .o use as a bloomberg you can choose your country. i'm choosing the united states. let's start with the actives. highlighting the intensity in the move in the yield. .he red shows the intensity

here is the curve on the bottom left-hand side. on the bottom right-hand side, you see the tightening of the curve. what i will highlight is the quiddity. how liquid the trojan market is, or not so liquid. normalcy returned basically later on. alix: that was the question -- how is the pound faring. scarlet: joining us is geopolitical strategist with the zehon politics. he joins us on the phone from austin, texas. how painful will the european union make it to leave to

discourage other countries from following it? >> they will make it as painful as possible. there are a number of countries good fit.lready not a hungry is barely a democracy. france has national ties that is very unhappy with the way it has evolved. sweden only joined because everyone else was in. the factor screening people out of this will only accelerate. the european financial crisis has been going on since 2006. they have had multiple of attorneys -- opportunities to come up with a new plan. alix: do you find that more power in some shifting to the more protectionist southern region of the eu? so much the southern region, but, france. we will see a shift towards what

you saw about the merkel attitude of what the chinese have. scarlet: do you believe the eu or europe in general needs to roll back economic integration or should they roll forward with economic integration. of course, we do not have political unity. it throws into question, what has been accomplished? roadmap.is no singular i don't want to criticize them on that point. there are number of other things you can criticize them for. if you're going to have a , you do those at the same time. some countries will have huge advantages over others. these are the places that can compete. you look at southern europe, and they don't have the good

infrastructure or the financial capital, but they are in the same currency union. if you live in spain, you buy a german car or a greek car costse the financing exactly the same. what the europeans need to do is come up with a plan for the eurozone. is it cannot do that, there's not a european union. isx: in one word, how vladimir putin feeling right now? >> punchy. alix: good to talk to you. scarlet: the global business report is up next. first, we want to bring in eric to get a sense of the etf's that .re most active today >> first of all, we have the

hindsight of what happened that day. know --as market makers smoothly, as it has. a shout out to etf's. etf site 87 billion of that. volume ishalf of the etf's. spy alone is putting up some insane numbers. it is trading more than the top 40 most traded stocks combined. it is not probably going to break the record. the record was set at 98 billion in one day. the fact that spy will get there at one point is a sign that there is a lot of concern. alix: where is the money flowing into? >> it is up 4.5%. it is having a good year.

it has traded $2.5 billion. that is a ton. , although, are going the px has traded at 19%. a shout out to this random etf in europe. leverage play. there are only about $2 million -- whoever is having is having a really good day to day. any flows for that one. scarlet: what about the big losers? about 11%-12%.wn here is the thing. the currency is a big part of if you own a

european etf. this could kick currency hedging back in. we will see if this is enough to .ick back and the trade the vanguard european etf, down about 11%. here is the thing. this has the most volume. it is interesting. the vanguard is usually known as not having a lot but the fact that it is the most traded etf is an interesting development. scarlet: all right. the etf read for us. thank you very much. alix: some breaking news. not everyone is having a really bad day. hedge fund manager is looking at his flagship fund, up 15%.

scarlet: this was because of short positions that had been in place since last year, all according to people familiar with the matter. they will be much closer to prices priced in to equities. alix: a short position in equities, long in dollar and gold. this is bloomberg markets.

>> it will send a shockwave through the european union, by think ultimately that will be a good thing. ♪ good morning, everyone.

bloomberg markets. alix steel.nd we are in london. francine lacqua was just beneath tower.zabeth we welcome all of you on a most interesting political and historic day. we have a wonderful guest. you and i need backdrop. we can get that from andrew robbins, always writing controversy with a different perspective on his br britain. what is her next book going to be about? history a single volume biography of winston churchill. tom: rick jenkins has done this book. how will you be different and how do you fold today into the history of winston churchill? any archives visit

at all. he did it all from published sources. i will be going to a lot of archives and battlefields, and actually, i write differently. spoken with prime minister? i know you are good acquaintance of him. >> not since his recognition -- resignation. leaveed him to leave the campaign. he threw back his head and laughed. tom: what did he mess up? when you go to the archives 5-10 years from now, how will we look back on this prime minister? >> having had the referendum at all -- i was very happy having it -- he probably underestimated resentmentn anger and that people had. during the actual referendum, he talked about how there may be .ar in europe

people asked, why on earth are you having a referendum? tom: you preach the idea of a britain that looks out across the world war than it did. a good 15 years ago date wrote about the spirit of this nation. what you need to do to meet the prescription that they deserve? >> people accuse it of being little england. they are the exact opposite. they are looking out to the historical truths about britain which is we trade with the cold world -- whole world and need trade deals that we haven't been able to get because of our membership in this organization with 28 members. queueou talked about the -- i cannot get it right.

prime minister johnson, he has to get away from the elite q ueue. how does he do that? >> he went to oxford. tom: a good start. >> in that sense, he is very much part of the elite. he is descended from turkish immigrants. he certainly does not look elitist -- has wrestled appearance -- his wrestled appearance does not apply that. tom: what is the prescription? the to do list this morning for british big business? they got crushed. >> they did. tax cuts and deregulation. tom: tax cuts for the elite people? won?eople who remain,though they will they are still the biggest businesses in the u.k..

tom: i look forward to the churchill book. some historical perspective there. i love doing that to give us a little deeper view of this most unitedc day for the kingdom. trading in new york, let's look at the equity markets. i demand we do oil. they are deteriorating, and you see that across a typically worse performance for the nasdaq composite. stay with us. bloomberg markets. ♪

alix: it is cold first is the pound. the blue line is the cold and the white line is the pound index. at the what happened start of getting hints that the leave vote was going to happen. $1400 an ounce is a possibility. joining us now is mike whitner, head of oil research. i know you are in oil guy, but you have put out notes on what this means for commodities. what does it mean for gold? >> what it means for gold, you already hit the nail on the head. we are already experiencing risk aversion. it is unclear how long that will last. what it means for cold and commodities in general is a flight to safety. cold is the ultimate safe haven. we expect to see a further move

upward. your chart of the day is gold as well? tom: i don't have enough right now -- it up right now, but what i would suggest is that gold is outside the monetary dynamics right now. does it have a life of its own that will go to record highs? think we are tied about record highs. we're talking about further upside. scarlet: we will certainly keep an eye on that. let's go to oil. .ou have wti down clearly oil is being taken down. what about the fundamentals? does it alter the fundamentals in any way? of the is the question day. there are two fundamental impacts that could possibly happen.

one is currency impact, which could dampen growth in emerging markets. that is the reason for the stronger dollar. the other is the impact on economic growth itself. obviously that scenario could play out. see, in total, of 0.3% hit on gdp. it is not that big. in the abstract, i would compare two things. one is maybe we lose one or even two of global oil demand growth. is other thing to even mind last year we had global oversupply of 1.7 million barrels a day. this year, for the second half, we are balanced. that is the story.

by thisit is dwarfed big move to a balanced market. that is the key for oil. tom: we have the privilege of having alex salmon with us. i do not have the time to talk about him -- give us an update on how badly scotland needs the north sea oil. >> north sea oil is specific to the u.k. sector. it is a mature province. ofy are in dire need investment and have been hit by this just like everyone else. i do not think there is a whole lot that will turn the trend around, to be honest. you take a look at my

bloomberg here, you can see the damage that has been done in the last few weeks. much more weakness is there? what is the downside target? bucks ofare a few more downside, possibly another two dollars-five dollars. it really depends on whether this takes on a life of its own. fundamentals, we are fairly neutral for the next quarter. me, the bigger story, unless this takes a bigger hit to the man, the bigger story is rebalance. alix: great to see you, as always. scarlet: we have some breaking

news. shares of morgan stanley calling 10% today. if you look at the same function -- sim function on the bloomberg, this is the biggest decline since 2011. the egg is one day decline since september 2011. tom: this really bears watching in the last hour and a half. headlines from dark tools. this is something we will be talking about very much through the summer. scarlet fu and alix steel, they own the show. stay with us. bloomberg markets. ♪

>> live in london in bloomberg world had quarters. i'm scarlet fu. >> i'm alix steel. morgan stanley is down 10% on

the day and the steep it lost since september of 2011. it is the lowest level since a few days ago. nonetheless, the steepness of the decline you really have to key in here. scarlet: banks across the board getting crushed. if you look at the bank index, 24 members, all 24 members are lower. first republic has no exposure to overseas markets. it is not headquartered anywhere outside the u.s. and doesn't have branches outside the u.s. is what i meant. stanley downmorgan 10%, kbw bank index off by 6.4%. alix: tom keene is joining us from london as we have around the world market show for you. we are looking at s&p's now the low of the session. tom: it is very nuanced and we should take time looking at currencies and commodities. bring it up, if you would.

the markets are speaking. well., jump in with me as 148-149 level. we come back a little bit but scarlet, what i would notice is the curve flattening that happened earlier this morning. scarlet: and you wonder to what extent? to what extent would it have gone even more? earlier on bloomberg television, i don't want to be doom and gloom, but it's one of the things i am watching. tonya, roll over. .lex is upset with me looking a little more currencies, gold. it that is the new currency.

alix, sterling, obviously we want to watch that. but i also get a lot of value from euro sterling and the other ross pairs. -- cross-pairs. alix: in terms of what is moving here in markets, we touched on it, but it is financials. if you look at the financials index, they are getting completely hammered. that is the illustration of gap down right there. tom: look at the headlines under ms equity cn. them bloomberg headline service where you have the chief in decade of officer saying, and i quote "the firm's meeting client needs." scarlet, i have to ask if it's that temple, why didn't the headline come out? and to that point, as

you have here in the markets, you see a russian to save the. where the money is actually going is to names you might expect. it td, gold meyer index. poultry a is sort of the dividend loving stock up 2%. on the downside, away from the big banks, we see in best oh, charles schwab, e*trade. mom-and-pop will go trade on e*trade. those stocks being down. there are a lot of questions out there. ithe dollar getting a huge bid against emerging-market currencie. all of those rallying against the dollar. not as much as some of the other emerging-market currencies. what i found interesting is a 1.5% loss is relatively tame

because it's the best-performing major currency this year up 18% on its own political narrative. outside of the market, let's check on first word news this afternoon. mark crumpton has more. leaders senate 27 other member states will continue despite written's decision to leave the block. they will hold an emergency session on tuesday ahead of the summit of eu leaders in brussels. was a big political miscalculation for u.k. prime minister david cameron who spearheaded the remain campaign and lost. he announced his resignation saying the country needs fresh leadership. not acameron: this is decision i have taken lightly but i believe it is in the national interest that new leadership is required. precise no need for a

timetable today, but we should aim to have a new prime minister in place by the start of the conservative party conference in october. delivering stability will be important and i will continue with my cabinet for the next three months. mark: speaking outside of number 10 downing street. a possible successor, former london mayor morris johnson was one of the leaders of the campaign and spoke about the upcoming exit talks. >> it is vital to stress there is no need for haste and as the prime minister has just said, nothing will change over the short term except that work will have to begin on how to extricate this country from the supranational system. as the prime minister has rightly said, there is no need

to invoke article 15. they say the u.k. will continue to be a great european power. day.we have had a spirited onan go 18 different ways the future politics. the one person we have talked less about today is the labour party. it is not going to stand in front of 10 downing street and resign. where is he going to stand if he has to resign? >> we don't know what the inside politics of labor are at this moment but insiders have told us there may be some kind of leadership contest.

what happens? overthrown as simple as this? his political future will be. enough to keept the u.k.. help us with what prime minister cameron was talking about in a conservative or tory october meeting. this is not like the cleveland convention with mr. trump. speechent through the together and it was emotional and to the point. he said he will resign but not immediately because he doesn't want to shock the country but he

wants some sort of transition. the party conference like they do every year, the next couple of days or weeks to have names put forward. boris johnson won the vote and was the one pushing the most for this country. but he's not necessarily the deputy crown prince. it is not clear if people are getting him parliament on west minster even though they would rally behind prime minister boris johnson. >> when we look at the vote and how it wrote down, this is a fragmented united kingdom because the english voted to leave.

scotland, wales, they wanted to stay. >> you have the young most theted to stay, especially well-educated young, overwhelmingly. the old devoted to go, and geographic league, it split with london and scotland voting to stay and at wales and northern the towns, the countryside, all of those bits voted to go. a lot of those are old labor areas. the inability to persuade people that it was really committed, one of the big reasons why it went. kind of leader? boris johnson is many things. if you are choosing a lawyer to represent your case, it's not

necessarily the right person. a sense that he is the right person to negotiate. they quite like killing leaders that very seldom vote to be the assassin. he wasn't allowed in. see borishem now johnson who is previously the fun-loving easy-going one is one of the more divisive people. most high-profile tory woman michael wast but the justice secretary. is people saying that they don't want to be prime minister but then they decide they do.

>> they're ready to flood the system with cash if they needed. will we end up cutting rates if the fallen sterling leads to a >> theckup and patient? canadians are done the right things getting through at the right moment. it was the reverse of what happened. when he somebody to come out and say here is a quarter of a trillion pounds to stop anything terrible happening. suddenly questions like rate come back in and it gets difficult. by $.15.is down >> congratulations on your interview with the president. i know you'll be doing a bloomberg businessweek interview with president trump.

i know he came off the helicopter today norse of where you grew up. explain how he was greeted by the scots. what did they think of this display? >> they went along more for the pageantry than anyone else. donald went there and told them how wonderful it was to get out. this.are common themes in in a think hillary should worry about this. what happens is we kept on every x in the world that it would be very dangerous for them to do this. there is a strong sense that we want to show them. it could argue trump is a similar version of that.

erratics he have to be a new prime minister does he have to adapt and adjust? >> it is a complicated political and eight. you have the party to the right of them, the united kingdom independence party. it kind of disappeared. if the only purpose was to get them out of the european union, it gone. i think that by any means or any measure, his performance was not exemplary, and he was left of the party. it, you'rele of going to have to have one person prime minister going into that

told and they've got to talk uncle a merkel and get a deal. tom: editor-in-chief of bloomberg. scarlet: this is a fear gauge and shows you how much people are willing to pay for protection. it is the highest level mid february. it compares with the average of an elevated dip. it this is bloomberg market. ♪

alix: you are watching this very special edition of bloomberg markets. if you want to look at where the , look at the peripheral bond yields of areas in europe like portugal, spain, italy, greece. the yields are moving higher on greek debt. see that risk off trading can continue. it is under 2%. that is were you wind up seeing stress in the markets. scarlet: i want to bring in the deputy chief investment officer. global fixed income fund.

move away from risky assets. week? >>e damage next one of the things we have been discussing is a would cause that to continue. there are two main things. and by that, we mean the systematic financial channel. evidence, we don't see of that type of movement to that particular channel. second question is around growth. event or aig enough big enough shock to really alter the regional or global growth estimates. there are a couple of things that make that difficult to answer. the reaction far shins are different.

it is more limited now given where we are starting from. in the political risk around this is that much more uncertain this time around. we'll get a lot of litmus test, including one this weekend. alix: if you look at the potential actions, doesn't have the perverse effect of investor switching for the search for yield versus the search for safety? >> i heard tom say this is been a nuanced market mover. italian yields and spanish yields are higher. but to a much lesser degree. future, the immediate it's not time to be a hero.

given the moves we have seen so far, we haven't seen a move wider yet. in many parts of the corporate credit market, they are back to where they were a week or so ago. it's not that things are dislocated that you have to go do that reach for yield. scarlet: you mentioned opportunities and you will be looking for them but what asset lastly you bet on those opportunities? >> it will depend a lot on what happens over the coming days and weeks. question for us is not necessarily will the fed be december, but or , theu look at what christ

real question around u.s. fixed income is could the fed be hiking more than one the next couple of years. one of the areas we see attraction is some of the global wills were central banks be forced into the cycle because they're not being billed out by the fed. i think you'll find value in parts of the credit work it. i don't think it's obvious enough to go full scale. alix: thank you for joining us in boston. tom: special programming this week, and we're thrilled to

bring you the perspective on bloomberg. we begin at 4:00 a.m. eastern time. on london.al show we will do that from london and then on sunday, we have a full day of coverage across television and radio. ♪

>> a stunned london. tom keene in london.

right now, in berlin, caroline was with us 24 hours ago and she travels not only from a stunned london but to a stunned berlin and. i was shocked by the body language. what did you note in the chancellor's comments? >> amid the searing heat, she's trying to keep a level head. she's definitely trying to contain this desire to hurt the united kingdom and make an example, to stop the domino effect. she's trying to say, we need to remain calm and measured. of being germany in the u k economic ties together. pragmatic, trying to stop any rush to the exit.

and the calls for the referendums. >> 35 degrees in berlin. that is 95 degrees. we have to understand that she is on centigrade. very hot in berlin. it thank you. it is bloomberg markets. by thee on the move, led lowest in over three decades. ♪

>> i believe, ultimately, it will be a good thing.

scarlet: you are watching bloomberg. alix: this is your business report. prime minister david cameron resigns. a volkswagen executive is arrested as the emissions scandal spreads. the automaker also manipulated noise level test for more than two dozen models. scarlet: deutsche bank laying the groundwork for major cuts. we begin in london where david cameron announced he will step down in october saying the country needs fresh leadership. >> it will need to begin under a and i thinknister

it is right that they start the legal process of leaving the eu. mark carney is not taking any chances. pumpovernor is going to billions of dollars into the financial system to a beast and running of market. nothing will change right away, they said. >> no change in the way our goods or things are sold. it will take time to establish new relationships. some volatility can be expected. the we are well prepared for this.

ask he says his tenure could be in trouble. he is now in a very difficult position. the group accused him of pushing to remain. >> they have been manipulating scandals. the confirmed the executive has been arrested but won't they need else. and there is a global blood of steal that will only get bigger. rise or percent and a number of countries have filed trade complaints.

>> the most far-reaching measure yet to pay taxes. the goal is to get billions from guns to drugs to gambling. >> ending the push to extend it drilling rights. drilling, they halted immediately. the lease expired between 2017 and 2020. the bank reached an agreement in the labor council. most of the cuts came in the private and commercial business. that is a global business report. tom: james dimon sent a note out

to his employees and commended on their efforts in the past 24 hours. pricing was consistent, and feedback from clients was very good. volumes were a record overnight. some how in the next 24 hours. idea of morgan stanley in the news and all of the major banks, it was a little bit of worry here. i do mean jpmorgan, but this is something worth watching.

alix: and perhaps these last two , it was not looking so great. so staying on that currency theme, tom, one of my favorite charts of the day is a simple one. this is just a one day overnight intraday chart of the dollar yen. it is simple but i wanted to highlight us is the 100 level right here and we saw it move off the lows the session and under flatlining. the reason i feel like that is important is the five-point move over two days, it might see intervention. we're waiting for what the doj might do. in terms of looking for intervention from the bank of japan or ministry of finance,

this is one that you and i worked on. three standard deviations and this is dollar yen over the longer term. there we go. with this latest leg down for standardr, this is a deviation move. it gives it a safe haven type aspect. is pouringat money in its that money is not boring out and it's the sort of natural upper pressure. >> they've had it for so long, right? tom: i would go with that. come on, scarlet. here is my chart that i stole from you. check. gets a royalty

presumes dollar strength. scarlet really only shows, we are standard deviations into it. they know about weaker and stronger currencies. me with why i don't see a stronger dollar? why do i not see a stronger dollar given the gyrations of the market? >> rates are too high in the u.s.. it is used as funding current. when times are good, people borrow in those currencies. and now in risk is off, they have to reduce the leverage. it provides an upward pressure on those current sees. it has to be balanced with deleveraging.

scarlet: i want to bring up some of the magic that we use. all you need to know is that red is dangerous and that is pound sterling with a continued that 20 weaker pound sterling. are you able to trade today? are you able to invest long-term when we see this kind of emotion in the market? >> trading has been decent. it there were bigger moves when the market closed but overnight, the banks were providing liquidity and they had invested heavily in recent years. other banks were not providing electronic offerings but the spreads were brighter than usual. in the short-term, one can trade. difficult is that people

have such extreme positions that you don't know what kind of unwinding will take place. it will be profitable in the near term. visit shinning that investors had, you noted many had taken up protection. they sought out different kinds of proxies. >> they had protection for the brexit scenario. take anything sterling related that was asked into. please the swiss franc or the yen and see how it has behaved. and you guys talk about intervention.

there's no way you can be successful with the volume is no high. it happens when liquidity is very low and volume is low. they are on the sidelines as the market comes down. served by just smooth talking the markets. take a look at the bloomberg here. the offshore is that white line. and the blue line is the onshore. you can see that difference has been widening. in the past, when we see mr. virgins pick up, we tend to see a selloff. are we looking at something along these lines?

>> keep in mind that all of this is happening in an environment where risk assets are expensive. stocks are due for a correction. yes, there will be ripple effect. they are not going to leave tomorrow and it might take months. excuse foring for an volatility to come back. overexposed to risk assets and have not been diversifying as much as they should. effect see the ripple that mean china and elsewhere. alix: thank you. markets.s bloomberg

scarlet fu, alix steel, myself. i'm in london, they are in new york. of them the snapshot doing better than the major banks. us. with ♪

scarlet: this is bloomberg markets. alix: we joined by tom keene in london. time to break down the coolest chart if you deep dive into the

bloomberg terminal. michael mckee will be really mad at me. redline is the u.k., the blue line is the eu. is asia x japan. tighter financial conditions, nowhere where we were in 2011 and not near where we were in if you want to see what happening, you have to look at these conditions. >> if you look at the fed next rate hike, it will not be

inclined for financial conditions. >> some of the safer havens. this is the chart. either one would work. what you see is the safe havens. people pile money and tv actual security itself. by and theyanding made that crystal clear. of a trillioner pounds, about 345 billion u.s. dollars. course being of into the market. by julyof a rate cut for the u.k.. >> reader of research, if you have seen anybody actually publish the outcome of a rate

cut, i haven't seen that. >> i don't think i have seen a cut call yet for the u.s.. a few in the u.k. about further easing and absolutely pushing that next hike out there, how can you not? scarlet: they pushed out to june 2017. alix: let's take a look at the probability of the work function. and you're looking at 9.3% odds. and then you go out to november. this was it zero before it came out. and then you bring it back today. scarlet: we will be paying

attention to all of this in the weeks to come. with lord speaking roberts. scarlet: and bloomberg market next, donald trump says they are taking their country back. what does it mean for bernie anders is well? ♪

alix: this is bloomberg markets. tom: and in london, we had the most interesting conversation people from the united kingdom. he went to europe as well. one of the most interesting

ourle we spoke to to get ears started. >> it is the worst possible scenario. i believe is much worse for the u.k. in the european union. he's gotdenly realizes a scaremongering message. the whole context of the campaign is entirely wrong. we should only call a referendum if you want to change something, make some fundamental move. you don't do it to call -- to change little of nothing at all. >> been saying this and warning this for many years that the european union is in a state of disintegration and we're getting to the point where you're in

that stage. >> it becomes a learning point that if you ignore economic reality, there is a cost. it is clear to everybody that you cannot play games with europe without running serious risks. >> people try to look forward to this historic day and they are looking to italy. speaking of elections, let's switch gears to presidential politics. donald trump speaking out on a trip to promote a scottish golf course. he said it extends beyond the shores of the u.k..

trump: people want to take their country back and you see it with europe. happened just what last night, you'll have many other cases or they want to take their borders back and they want to take their monetary back. >> what are the similarities between trump and the program exit politics. he made thatg speech in scotland that overwhelmingly voted to remain in the eu today. look, the coalition we saw vote is similar to the demographics donald trump is targeting. less educated, people that believe in a sense of nationalism and nativism that was the roaring across large parts of europe. is the coalition he will

want to stitch together, the similarities between the regions. location that people feel. of the similar types of demographics he is explicitly targeting. pittsburgh, dayton, ohio, and that is what he is looking to fit together. and we are keeping an eye on the democratic side, bernie sanders came out with what sounded like an endorsement of hillary clinton but wasn't. >> he said it would you vote for -- would you vote for her if she was the nominee and he's had that he would. that populism that drives that kind of agenda.

it is actually a mirror image of the far right populism, driven by people that believe that they are not getting what they want. u.s. and in the u.k.. we will see this tremendous surge of populism unfold. it is a true rejection of the establishment and the elite. it is a wake-up call across washington and it is a wake-up call, too late for london. >> does it scare or impact you as voters at all? asked easilymp has endorsed the briggs it moved the home if we do see values, their pensions are severely affected as we expect and this is what hillary clinton can use to damage him.

you supported the u.k. withdrawal and look at what a disaster that has called -- caused. alix: and right now, president obama getting ready to speak it the summit in california. he is speaking at the summit. we will be monitoring this speech or headlines. a key for joining us and thank you to tom keene in london for staying up late on this special coverage of bloomberg markets. president obama: as some of you know, john is stepping down. ♪

, one thing that will not change as the special relationship that exists between our two nations. at will end her -- endure. in a few weeks, we will be

meeting in warsaw for the nato summit. ourshared values, including commitments to democracy and pluralism and opportunity for all people in a globalized world , that will continue to unite all of us. that is the work that brings us here today. the world has shrunk. it is interconnected. all of you represent that interconnection. many of you are catalyzing at an accelerating it. it promises to bring , but itinary benefits also has challenges and will also evoke concern and fears. part of why this global entrepreneurship summit has been , something my heart i been so committed to is because i believe all of you represent all the upside of an interconnected world.