. scarlet: i'm scarlet fu and this is "bloomberg markets." a rally between european stocks deepening and falling to a deep decade low as the shocks of the british vote to leave the european union ripple through the markets. oliver: there will be a joint news conference in berlin that will likely set the tone for europe's response. scarlet: we are halfway through the u.s. trading day. european equities trading ended for the day. get acu catch up and glimpse from julie hyman. julie: they are hovering around the lows as well. we are not seeing any kind of rebound really in today's session when it comes to equities whether it is here in the united states or in the european session. the pound is also continuing its downward march.

the s&p 500 is a bit slow slightly. it was down below 2000. it is down 1.75%. the selling we are seeing is on relatively high volume interestingly enough. this looks at volume by various sectors and what you have is the volume versus the 20 day average. overall volume is about 60% above the 20 day average. not only do you have selling, but you have selling on heavy volume and in particular within financials, the worst-performing group along with industrials. --ume is about 20 the double is about double the 20 day moving average. we have now gone below that level. this is the 200 day moving average and the drop below it as of today. that is a momentum indicators that could mean potentially more declines. in terms of individual movers,

we have been talking about which companies are most exposed to europe. hear some of the -- here are some of the most affected companies. if you look at the sales from europe, it is relatively high percentages. ralph lauren has 21%. if you look at packaging companies, it is all different types of companies. it is not necessarily quadrants you would expect. packaging companies also declining today and part of european exposure. west rock infield error also on decline. oliver: what is going on with the commodity space? julie: it is all over the place. we are seeing oil continue to trend lower. on the other hand, natural gas is going higher as we see warmer weather spread across the u.s.. it could increase the demand for natural gas. gold and copper going in the

same direction. gold has little change, getting a little bit of a bit. sdd. the vix has not changed much today as you would expect it to be up more. it is interesting that copper is catching the bid. the commodity trade is not really consistent with this sort of risk on, risk off scenario. not trading as you might expect. scarlet: interesting to see the gold gains taper off a little bit. oliver: let's check on the bloomberg first word news this afternoon. mark crumpton has more from the newsroom. rulingscouple of big from the u.s. up in court on the last day of its current term. justices struck down a texas law that had threatened to close three forced of the states abortions clinics. it was the high court's first abortion decision in almost a decade. the vote was 5-3. justices back a federal law barring firearm possession from

people convicted of misdemeanor domestic violence. the vote was 6-2. hillary clinton is on the campaign trail in cincinnati and she took the stage with elizabeth warren. the massachusetts democratic senator called mrs. clinton a fighter, who "never back down." they joined hands and waved to a cheering crowd in their first joint appearance. warren offered a harsh critique of donald trump. >> what kind of a man does that? what kind of a man routes for people to lose their jobs, to lose their homes, to risk their life savings? i tell you what kind of a man -- a small, insecure, money grabber , who fights for no one but himself. calledenator warren also mr. trump "a nasty man." in sacramento, california, 10 people were stabbed and beaten when a crowd of white supremacist battled with counter protesters.

made, but have been the white supremacist group was getting ready to demonstrate outside the california state capitol. investigators say the black boxes have arrived in paris. they will attempt to repair them as they were both extensively damaged as the egyptair plane crashed into the mediterranean sea, killing all 66 people on board. ejection investigators were unable to download information from the recorders. 24 hours a day powered by more than 2600 journalists in more than 120 countries, i am mark crumpton. this is bloomberg. back to you. jonathan: good afternoon to you. let's get up to speed at what is happening in the u.k. david cameron has wrapped up his speech before the u.k. parliament. he told lawmakers that british stay.are strong and will

strong for a long time he says. . >> we must not turn our back on europe for the rest of the world. the nature of the relationship we secure with the eu will be determined by the next government. i think everyone has agreed that we all want the strongest possible economic links with our european neighbors as well as with our close friends in north america, the commonwealth, and important partners like india and china. jonathan: francine lacqua is live with the latest. we just heard from david cameron for the first time since he announced his resignation on friday. we have heard from chancellor george osborne. we also heard from boris johnson. i do not see much stability out there, francine. francine: there is not much stability because i thought it was a pretty strong speech. david cameron came out, laying out what he saw as a future, but

there is very little he can tell us. george osborne told us that david cameron repeated it that it will be up to the next prime minister to start with these negotiations. i picked up one or two things from david cameron. first of all, he was in better spirits than on friday or saturday when he was pretty glum at the armed forces party. what i picked up was the fact that he says we will have to go through a difficult adjustment talking about financial markets. they would be challenging negotiations, but he seems to have a plan. there seems to be a task force of civil servants, a creation of this eu unit that can go forward and talk with some of the eu counterparts if they are willing to do so. until yesterday, we thought there was nothing. now he seems to say that i've heard your worries and we have been working on this. i do not know if the markets believe it because the pound has tanked lower. jonathan: equity markets as well. just reflecting on yesterday

come of the last time we spoke we talked about a fragmented labour party. won the prime minister adjust ministerthe prime addressed parliament, he said i thought i was having a bad day, talking about jimmy corbyn, of course. francine: that was actually a pretty funny comment from david cameron. what you are referring to is that he is having a bad day and he welcomes a new labor p.m.. i will keep my phone close in case she also resigns because jeremy corbyn has not had luck the shadow government. we see more resignations in the labour party. jeremy corbyn does not want to go anywhere. callse had at least 18 for jeremy corbyn to quit, but he won't. on the other side, david cameron has more than 80 mps asking him

not to resign and he will resign. the world is upside down a little bit. jonathan: francine lacqua, thank you very much. if you thought we were going to have some sort of unified front for brexit, it does not look like we have that at all in the u.k. politics across europe very fragmented right now. scarlet: keep waiting for that unity to come ahead. oming up, citigroup's cohead of m&a joins us with his take on the potential upside for brexit dealmaking. ♪

jonathan: this is "bloomberg markets" worldwide. i am jonathan ferro. scarlet: we want to bring you to

be bloomberg markets deals report. withom in with analysis big players from behind the deals. we are focusing on how brexit vote is impacting m&a activity. let's bring in jeff mccracken and also peter takgue. he has advised on a takeover bid for humana as time warner's sale to charter. he is now advised on a sale to riverstone. jeff: brexit cannot be good news if you are an m&a banker. what is the impact? what will happen to the big deals out there or deals being considered? peter: obviously uncertainty is the enemy of the andaman a market -- m&a market. the uncertainty with this vote and the surprise with the which it caught the market is very bad for the near-term m&a market. there are transactions which

have already been agreed and announced and in the public domain -- we expect those to move forward. the transactions which have not yet perhaps seen the light of day or are being negotiated -- those are the ones that i expect are being negotiated under a different set of assumptions. we may see some follow-up. fallout. jeff: will those deals just diet or will they be delayed and try to come up with a different price or some different strategy to get them over the goal line? peter: i think you might see a little bit of both. just anecdotally, i can tell you two things that we were working on over the weekend that died over the weekend. jeff: because of brexit?? peter: because of this vote. there iscdotal basis, evidence that certain transactions will just never see the light of day based on this. i think more generally, you may see deals renegotiated and you may see transactions start being mooted, which weren't being thought of before, and that is

associated with the currency depreciation of the pound. scarlet: what kind of historical precedent is there for this political development disrupting m&a? is this an earthquake or a minor tremor? peter: that's a good question. i'm not sure there is a particular good political analog. i would say that if you took the 9/11 event or the lehman as beingbankruptcy watershed event, this is nowhere near that in terms of its impact on the market. if you look at the vic's volatility, we are well inside of those extremes. oliver: we talk about the opportunity that has opened up for potential buyers to take advantage of that shift in the currency. is there any concern on behalf of the potential buying companies that they do not want to come off as predatory? do that keep them at a at all or do they want to get it done? worriedcquirers are not about appearances of being predatory. they need to convince the shelling shareholders -- selling

shareholders of that. that is more difficult. crossing a trade and finding agreement between buyer and seller can be difficult to do. jeff: how long do you have to wait? you would not go to the target this week, but does it take weeks or months before you feel comfortable approaching a u.k. target and say we would like to do a deal? what is the appropriate time? peter: it is going to be situation specific. we would argue that m&a transactions often will just gestate for long periods. the reaction in the very near term in days or weeks of selling shareholders is going to be one of wait and see. i want to understand what the circumstances are. therefore, an approach might fall on stone your ground relative to a month or two out. oliver: as someone who has been on the ground with deals

happening, is there any concern on behalf of the shareholders of potential companies that are getting bought out that they do not want to accept a deal now because it is sort of admission that this is a price that looks ok for us? is excepting a price in a situation like this a signal that they are cheaper than they want to look? peter: you have really hit on the heart of the issue that in uncertainty and with a great deal of change, selling shareholders do not know whether or not they are getting a good deal. the reason that we crave stability in my market, whatever the market conditions might be, the stability of the trend line is extremely helpful for us because it allows buyer and seller to come to a common agreement as to what the future looks like. scarlet: with the pound toppling so much in value, what are the upsides of brexit? does it make it cheaper for companies to go and buy u.k. companies? peter: absolutely. i think we may see transactions

get considered today. i was on the phone with a client this morning talking about a potential u.k. target that prior to the devaluation of the pound was probably farther off in their thinking. they want to one that analysis backup. scarlet: did any of their clients position for brexit? now that it has happened, are they ready to pull the trigger? of.r: not that i know wha jeff: it feels like everyone missed. everyone assumed it was not going to happen and we all got it wrong. peter: that's right. i think there was a degree of complacency perhaps in the market. our own political analyst for calling it a 30% or 40% chance of an exit, of aleve vote. commenting that the market was pressing in

something less. mccracken and peter tague, you guys are both going to stay with us. we will come back with a little bit more still ahead on "bloomberg markets." m&a values are on the rise as well as premiums. we will look at why that is a get more from the deals area after the break. ♪

scarlet: you are watching "bloomberg markets." i am scarlet fu. oliver: i'm oliver renick and jonathan ferro is an ru in london. there is one curious note with the belly of deals and associated premiums. multiples are unchanged today and they remain above historical averages. i want to bring back in jeff mccracken. we have also got peter tague with us. i want to jump into the bluebird terminal and quantify this topic that you have brought up, which

is the topic of premiums. if you look on this chart, we are looking at the volume per deals with in the blue. but warns line shows the premiums. you can see the year today is quite a bit steeper than 2015. what is going on behind that? stock prices are pretty much flat over the past year. are we seeing a take-up in terms of what companies are paying? peter: part of it is the demand that buyers are under to do transactions. there is a need by acquirers to continue to drive bottom-line and topline growth. the number of organic archer opportunities to do so are limited. in that backdrop, sellers are demanding more to relinquish control. jeff: cannot explain or does that impact how the shares of investors are reacting on the buyer side? it seems like every deal that the buyer share with g would gop

in the last three quarters, it has been going down again. does that explain it all with this increasing valuation? peter: it is certainly part of the expedition. as prices rise and buyers are forced to stretch farther, and you saw the multiples chart up a second ago. the multiples are well above trendline. with that backdrop, it is relatively normal to expect that we might see a reversion to the mean of buyer share price reaction. we look at a 20 year or 30 year timetable and typically the buyer share price on announcement will decline while the targets rise because of the transfer of the premium. scarlet: are there certain industries where you can expect a higher premium than others right now? peter: there are certainly industries like health care, for instance, that demand high premium. scarlet: why that? peter: because of the prospects and seller shareholders will

also have a view of the blue sky potential company longer-term that is perhaps more aggressive in a lower growth industrial environment. technology will occasionally demand some pretty racy premiums. that is a function more of the growth prospects of the company then it is necessarily a unique feature of a particular geography or particular type of transaction. jeff: has there been any the structureshang of the deal? peter: we have seen a rise in the all stock transactions. in thecentage of stock mix and all stock deals have been on the rise. that has been because valuations for equities have been on the rise. as companies look at share prices and say that these compare very favorably to my precedent, it

starts to look like that currency is a lower-cost currency relative to cash. cash is still very, very cheap. interest rates remain at historic low's. we have seen a dramatic tightening in. terms of capital markets. there is some market trends behind this, but also just the fact that equity multiple today are trending on the high side. oliver: i'm glad you brought up the willingness to do deals because we look at the potential outcomes for brexit and the fed is now pretty much off the table . and just rates are not going anywhere. -- and just rates are not going anywhere. to that be a catalyst for deals to happen? peter: the conservative approach is probably good for the market broadly in terms of a continued lose money policy. and availability of credit and capital is at the heart of our business. scarlet: we've not talked about

private equity coming in. jeff: it feels like there have been a lot of deals blocked. we have seen these deals get blocked by the regulators. this may be something that would be advantageous if your private equity. maybe you are slightly below a strategic bid, but you can say thatthere is zero risk this deal will be blocked by the doj or federal trade commission. that could be something that private equity could parlay into a boom. scarlet: to that end, do you have companies that are looking to sell themselves to another private equity? peter: public companies do not have the luxury of picking the buyers. they unfortunately need to cell to the person or party that is prepared to deliver the highest value. and jeffeen talking, is absolutely right, there may be a trend in terms of the regulatory environment to support increased financial sponsor activities. scarlet: thank you so much, jeff mccracken. citigroupr tague,

cohead of global m&a. jonathan: let's get everyone up to speed with global markets. softer in the united states and the session. s&p 500 down by 1.64%. here in london, the ftse closed down by 2.55%. the banks got hammered with a two-day drop of 21% over the last two days. the biggest two-day drop on record. i will whip through the other asset classes. the pound is much softer, down by 3.6%. the biggest to drag drop on two drop on cable and 1.46 on the u.s. 10 year. ♪ you guy's be good. i'll see you later

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brexit after shot. i am jonathan ferro. iron scarlet fu. this is bloomberg markets. let's get to the headlines. mark crumpton has more from the new york newsroom. mark c.: david cameron is rejecting calls on a do over europeaneaving the union. he is setting up an office to deal with the brexit exit. that the economy is in for some turmoil. pm cameron: we know this will be far from plain sailing, however, we should take confidence from the fact that britain is ready to confront what the future holds for us from a position of strength. mark c.: he says he will leave office in october once his successor is chosen. the supreme court has decided to make a harder to prosecute officials accused of bribery.

governor mcdonnell was accused in 2014 from receiving loans from a wealthy businessman. in west virginia, two men were presumed dead when floodwaters that swept their camp away have been found alive. that lowers the death total to 23. meanwhile, heavy rain is expected to continue today. turkey and israel have ended six years of diplomatic exchange met. as benjamin then yahoo! confirmed, ties have been restored. the reconciliation deal opens the way for israel to sell billions in natural gas to the turks. 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. good afternoon to you. angela is meeting with other key eu leaders today to talk about the shock of the brexit outcome. berlin, hoping from to learn the latest but the news compass behind you. what are you expecting to hear? caroline: we will have to hear ofm of them, some sort consensus. on the one side, angela merkel has been building the narrative of calm and measured analysis and potentially giving the united kingdom more time to potentially go back from exiting the eu. she said that she at sympathy kingdom in terms of

needing more time. some officials even saying that they could be given until the end of the year that they pull the trigger and fire for article 52 b enacted and formerly exit -- formerly exit the eu. on the other side, it is france, staunchly wanting to see quick and the eu. u.k. they want to dampen down any desires coming from their right-wing parties to see referendums in france, perhaps in the dutch countries and, indeed, in spain as well. i know your flag came sailing past me, as did francis. we are likely to hear from them as they talk about consensus, in terms of timing, pushing for eu unity ahead of the talks in brussels. jonathan: we can see live pictures behind you in berlin. talk about when this news

conference begins, it seems to me that there is a big division between the leaders themselves and within their own government, within their own coalition. talk to me about the division of germany right now. the division of germany right now. carolyn: you are exactly right. we have german but that throughout all of this, next year is an election year. we are starring to see the the coalitioneen parties, particularly between the social democrat party. you have the likes of the foreign minister talking about a quick exit. we've had the likes of the president of the european commission. he has been one of the representatives thehe talks abor talkedhile angela merkel of caution. some of them speaking of germann the eu. harshly saying that if she in any way i classes to the demands for a slow process, she will be

rebuked. it is interesting, the dividing lines you are seeing. she is having to negotiate with the social democrats. they seem to be wanting to take a harder line, to separate themselves ahead of those elections next year. jonathan: i'm just getting some breaking news from frankfurt this time. they have canceled the annual portugal, and in the central bankers around the world as well. mario draghi this way can attend the eu council. these comments coming from an e-mail statement. that chair guillen is not going there either. it just gives you a sense of how nervous some leaders are around what is happening and how they want to be at home to drive the shift from there. sense in europe of

the urgency, not just the politics, but for the economics as well? >carolyn: you are absolutely right. they're looking at what is happening in the markets. i talked with one of the head chief of staff for angela merkel. i spoke with him earlier today. he was talking that the need for calm within the markets. they want to show there is an element of consensus, particularly between the outer layers of the eu. there is a bit of this course the link of the twos'deed speed europe. there is a concern that we might start to see appealing off of two to europe -- to europes dividing.

it builds more anger about the youth and immigration. the dividing lines become that much sharper. perhaps that is why mark carney is staying at home. he has talked to how great of a job he has done. it seems that mario draghi also talking about needing to be there to support the economy, while, at the moment, a political crisis rages in the u.k. and fear that this may spread to the other members of the eu. jonathan: thank you very much for joining us from berlin. we will bring you that news conference when it comes. scarlet? scarlet: of course, we are looking at the british pound continue to lose value compared with all the other currencies for a straight day. julie hyman is looking at the

movers and again is out there. julie: here is the theme that unites them. 100% of revenue from the united states. we are releasing a version of anything that is exposed to europe or internationally. that is where the money is going in the u.s. today. kroger, the u.s. food companies and tyson foods, all of them get the revenue here, and also they seem to be trading higher today. also, the storage real estate investment trust, the companies that have little storage areas for you. all of them are trading higher and have the revenue in the united states. utilities, which have the added defensive,being typically, they hold up well even in economic downturn. not all utilities in the utilities index have all of the revenue in the u.s., but these four do.

tend to behich defensive, are doing well. these last two groups -- utilities and telecom -- are the best performing groups so far this year. this looks at these two groups year to date comparison to 10 year yield. they have benefited not just from concerns about the economy, but ideas that they tend to move inversely to healed. the 10 year yield, which as we know has punched over the past few days to the lowest level going back to 2012. we see utilities and telco continue to climb. we will see if the uncertainty continues, if these groups will continue to benefit from that. good stuff. thank you so much. as we continue to monitor the markets, you can see volume is still higher than anticipated. oliver: it is.

we are seeing a little bit of pairing, as julie pointed out, as we get ready for this press conference here. obviously this is being closely watched. jonathan: what i want to see from this conference is somewhat of a united front. what is clear is they are not on the same page as what they would like from the united kingdom. what we can do is listen into german counselor angela merkel. here we arerkel: meeting, just a few days after a very painful and regrettable decision, the decision of the citizens of great britain to leave the united kingdom -- the european union. ofdo respect this decision course, but it will have to be thought through in its consequences.

carry athat we responsibility at this time as do all citizens of the european union and the institutions to lead the 27 member states on a joint path, which on the one negotiate we have to a u.k. exit with the united kingdom, and we also agree that article 50 of the european treaties makes a very clear statement. a member state that wants to leave the european union needs to make such a request to the european council, and before that has happened, no other steps can be taken. the europeanen council will formulate theseines about how negotiations will happen, and we no informal will be

talks about a negative for the united kingdom before such a request has been received. that was german chancellor angela merkel speaking with friends will hold on and the a tiny minister. some headlines -- merkel saying the ballthree believe is in britain's court. we can listen into a bit more of the news conference. we are ar merkel: large community, and the thatean council will see we come to a joint agreement as to how to proceed, and we will

not strengthen the centrifugal forces within the european union. our colleagues will make a suggestion that of course we will give a new impetus in the work of the european union and certain areas that we will formulate tangible measures over the coming months regarding international security. you know we fight against terrorism. we need to protect our external borders to refugee questions and with african countries. with turkey, we need to redirect the strategies. the second important topic is economic growth and competitiveness. above all, we need to have sufficient number of jobs, which we do not have at the moment in

the european union. we have to see as to what we can change. we must think of young people. the youth in our country can .xpect for young things to work we can think about how we can have such a message for young people. will discuss this in the coming time. in september, we will meet to anduss specific measures leading to the 60th anniversary of the treaty of rome next year in march. until to make

specific tangible measures. the details, of course, we will discuss with our colleagues. thank you very much for giving me the opportunity to discuss this today. jonathan: we seem to be having some technical difficulties with the translation of french president france will hold on. to bring you the comments from angela merkel at this joint news , angela merkel says these discussions to start at the eu summit tomorrow and we need to help to fight youth unemployment in day eu. she says, we will propose a new

impulse for the eu and the eu remains one of the struct economies in the world. take a listen on the comments francoisident front to hold hollande. de: we got thean results. therefore, they decided to exit. we deeply regret this choice, it even if it was shared by 52%. it means that nevertheless 48% wanted to remain, and especially, a great deal of young people. weak regret it because, after all, the united kingdom is a friend, an ally, and historically, in europe. but, we must respect this decision. it is our responsibility, in relation to the people that expressed themselves. the debate was particularly long

. we must prove right now -- must talk about our sadness because we are sad. we must also talk about our responsibility. after all, it is our responsibility. our responsibility is to not , in time, not to lose time order to deal properly with this departure of the united kingdom, and not to lose time in order to look at this new imposed that we have to give to the european union. nothing is worse than uncertainty. uncertainty generates political behaviors which are often irrational. and, uncertainty also gives rise to financial behaviors that can also be irrational. in fact, the united kingdom is already living through this and experience atl

the political level but also the financial level. there must be no effect on european europe is solid, strong, and a project that has to carry on, even if certain changes should be made in certain parity should be reaffirmed. not to lose time, as angela has said, is to ensure that the notification by the british is made as soon as possible that there are not any pre-negotiations before the trigger. once it would have been expressed and transmitted to the european institution, to have a negotiation phase with an article 50, that is better for the whole of europe.

it should take place as soon as possible. of course, we understand the political situation as well in the united kingdom and, once again, we want to be able to be respectful, what, we also should be respected by the united kingdom with regard to who we words, theer european union. and, under all circumstances, we keep -- will keep strong relations with the united kingdom. as far as france is concerned, we have agreements and political and economic relations that will stay. we mustn't lose time either in order to give new strength to concrete parties. we are not tying about re-creating europe. europe will not the re-created. it is constantly evolving. it does not need to be rebuilt. it must carry on being built. by cops trading on the parties and by rapidly introducing concrete measures.

angela has mentioned the four parties. , we haveh matteo talked about security, protection borders, fighting terrorism, capacity to be able to defend ourselves together. that is a really important aspect with regards to protection that the europeans are expecting from europe. employment,arty, especially with respect to the digital area, energy. we have a great deal to do, and we should do a lot better than we have done. there is another priority, very close to the previous one, which is used. we have to take concrete measures in the coming months to make sure that use is more confident in europe, especially with regard to exchanges,

mobility, training, and employment. , welly, within the eurozone are well aware that there companies that are not in the eurozone, but there is a fiscal thatolitical socialization is going on. better,europe be function better, work with more ?larity for the people chuckl that will be part of the decisions in the coming weeks. in september, if the european council keeps that timetable, we would then have some work that will be carried out. what is really essential is clarity, rapidity, and unity. if we are clear and speedy, i have no doubt that we will be united.

jonathan: you are watching a live news conference happening in berlin right now with angela merkel, francois hologic and matteo renzi. france will hold on saying that delaying a u.k. exit process risks market uncertainty. i think you get a sense of that today. this is unlikely to be triggered 50,some time -- article they are talking all. let's listen in as much a over and the makes his comments. renzi: it is a , arespecial moment, as if citizens, not only the english have lost,o voted

but as if our citizens just beautifulealized the european feeling. thee were periods in which european ideals seem to be a distant ideal it is as if we suddenly woke up and something was missing. wasf a very precious object removed. in fact, we have to think about this at the double level on the one hand as it was just reminded, common sense, whichsibility, lucidity, should take place. the family, which has to keep together. on the other hand, there is a strong belief that we have to be able to give hard and legs to

the european project. that is where i think it is interesting, this past being put forward. it takes into consideration that the european union has decided it is no longer possible to lose time, as was said. we have to respect the rules and decision of the sovereign state. at the same time, we have to keep in our hearts a strategy for the following month that is nevertheless a strategy that will bring us to the heart of europe. my attitude is it is absolute aboute have to be careful security, growth, young people, and i believe, it is very important that europeans demonstrate they are not only the major place of peace, but where peace has rained for 60 years. our economies have grown, ideals

have grown, but the same time, we have to value what unites us. that is what constitutes the greatness of germany, france, italy, and all the other countries, the social europe. not onlyof museums europe of prestigious things. going from the fact that many things need to be done, but there many more things that we can do together. we must not minimize this idea. butust not lose a minute, we must know that europe is strong and solid and it must be even more solid. for me, the most obvious expression is an expression that comes from a greek word, which cairos, which means an

opportune moment. i believe what has happened over the past week demonstrates that in fact it is an opportune moment because it is, on the one hand, we are sad, after the senate and francois said it, we are sad for the bush citizens, but the same time, it is an opportune moment to turn over a page, and we can do it together because they're more things that unite us spend divide us. lose sight. italy will play its role. >> you have just seen a live news conference with the three heads of state from italy, france, and germany. francois hollande and of course, matteo renzi and

german chancellor angela merkel. i think we can listen in again. >> finally, what happens if the english hesitate? i think article 50 is quite clear in that the request to initiate things has to come from .he uk of course, we will discuss this with our colleague, david cameron. the time has shortened today compared to what we heard on friday, in terms of selecting a new leader of the tory party. i think this is being discussed in the u.k., and of course, taken together with the question of initiating article 50, the question is what are the relations that the u.k. once with the eu?

we have to think about what is .n our interest i cannot really comment at the moment on the duration. said.only repeat what i we want as little uncertainties as possible, and we have to just wait and see. yes, we are completely in agreement as far as that is concerned. we have to work fast. fast means that the british government -- and we will see who will represent -- will have to notify as soon as possible. notify us of its decision as soon as possible. exit.er words, we obviously note that there is a timetable that was established for the election of the chair of

the conservative party. now it is up to the british people to let us know of this decision as soon as possible. then, how much time will it take -- once again, the timetable is invented by the treaty to ensure that the discussions work well. we will try to ensure that we can start preparing. of course, we cannot commit ourselves to anything before the trigger has been set off. . would like to add one thing as far as i am concerned, it is important that the european public opinion be aware that one democracy. fun of too often we are represented as being an elite that does not really played the democratic game.

at the moment, there is a referendum, and each of us can think about what it is like to have the referendum. when the british people express themselves, what is crucial if the need to be respected. because then they have the idea that whatever the decision of the citizen's nothing will change. i share what angela and francois also said and i would also like to say that one doesn't make fun of democracy. jonathan: you've been watching the live news conference with the three heads of state of italy, france, and germany. let's get through a few headlines. earlier angela merkel said we agreed to know informal talks

before brexit has filed. deadline of set a the u.k. exit notification. the article 50 is clear that the u.k. needs to file that. a sense of desperation at the same time. a very emotional plea. francois hollande saying we can't do anything until u.k. files for exit. caroline hyde is still with us in berlin outside where the conference is happening right now. a sense of helplessness coming out of this and a sense of urgency as well. and how they can desperately try to put forward a united front with clearly underneath it all there is rather little as to the timing. they are saying the ball is in the uk's park right now. they are really trying to show a about their

priorities through the eu. unemployment, investing in technology, growing their economy. but clearly there is no agreement as much as they kept saying there was about when this will happen. angela merkel refusing to commit to any sort of timeline. you hear from hollande this desperation and sense of urgency, we can do nothing until the u.k. triggers article 50. this underlines everything we have been hearing that they can only agree that it's up to the u.k. to trigger article 50. merkel wants to go slower. two want to other go as quickly as possible. francois hollande

saying the eu 27 should aim to present a clear plan by september. that's when the conservative party leadership contest will resolve the self. until then the u.k. will not have a new prime minister. existing prime minister will not be triggering article 50 himself. so it's at least until september and the apps -- perhaps beyond. merkel said, we agreed to know informal talks before brexit is filed. that means two months of uncertainty unless someone changes their position on the negotiations with you to happen -- that need to happen. >> exactly. they are trying to push the u.k. to act more quickly. trying to put a very positive note on the challenges they face and they are healing they need to engage with in particular. in the united kingdom it was the youth who wanted to remain in you -- the eu.he

really it's fascinating. they are clearly trying to present a focus that they are going to achieve things despite the two months they will have to sit on their hands and wait for the united kingdom to actually exit. -- officially exit. they are speaking to the disengaged youth in their countries saying, we hear you, we are better together than falling apart. jonathan: caroline hyde in berlin. scarlet, the two words that dominate the market is uncertainty reigns. you can see it across all the asset classes. scarlet: the euro is still holding at session highs versus the pound.

julie hyman has been tracking movements in u.s. equities. certaintystill have a in the stock market -- uncertainty in the stock market. stocks off the session lows but still close to them. the s&p bounceback above 2000 and 10 held that -- and has held charthis is a pretty ugly between friday and today. .he worst two-day selloff the largest groups, tech and financial are helping lisa declines. many of these companies getting a lot of their sales 20% or more . all trading lower today. thanks stocks being swept up in concerns over contagion.

and of course the effects of lower bond yields. jpmorgan, citigroup and wells fargo all trading lower. bank of america looking not very positive 12.5%. it's even worse if you look at the u.k. and european banks. , their todayes chart looks even worse than that. a decline of 36%. it looks like this is all about brexit still. julie: you also have to look at the week backdrop. there were already concerns about global growth. i wanted to look at the pound as well. this is rates. we can look at rates first. you have the 10 year yields of

japan and germany which have gone negative. you have the u.k. and the u.s.. still about 10 basis points away from record lows. we have been seeing the pound continue to decline today. we are watching a tumble to its lowest in at least 30 years. scarlet: thank you, julie hyman. oliver: mark crumpton has more from the newsroom. mark: contingency plans are in the economy asup market volatility continues in the aftermath of the brexit vote. the remarks drew praise from boris johnson. johnson made his remarks before friday's sank below

post both low, hitting its lowest level since 1985. hillary clinton has released a new television ad blasting donald trump for his response to the brexit vote. his response says every president is tested by world events. it shows the nominee at his golf course in scotland. he says the drop in the pound -- means more people will visit the resort. an e-mail lastnt week asking for campaign contributions and promising to chip in his own money. haul shows he might have the digital magic it takes to harvest money bernie sanders style. pope francis says the church and gays anns owe

women, thewell as poor, and children who have been exploited. i'm mark crumpton. this is bloomberg. back to you. stocksn: a rough day for and a rough day for sterling as well. let me tell you the story of the markets globally. 500 down by 1.7 percent clinging onto that 2000 level. by 2.5% at the close and an ugly second day of losses for bank stocks. europe -- here in europe. if you want a positive, peripheral spreads really coming in today.

spreads between germany, france and spain and italy really coming in over today's session. look at sterling. on biggest two-day drop record. our special coverage from the brexit fallout continues next. ♪

oliver: this is bloomberg markets. i'm oliver renick. scarlet: i'm scarlet fu. jonathan: on jonathan ferro. oliver: barclays chief u.s. economist is here with us now.

says the potential implications of the brexit vote are not limited to europe. he slashed growth forecasts across regions. tell us what areas around the world particularly negatively affected. >> i think everywhere. we took global growth down by almost a percentage point in the second half of this year. that would be foremost concentrated in the u.k. ad in the eu we have shallow recession in q1. took a percentage point out of growth for next year. also a downgrade in japan and china in the u.s. uncertainty related in the u.s. but also less trade and less activity and the appreciation of the yen. no one was really spared. scarlet: uncertainty is a drag but in what way?

on companies, on consumers? the shops to uncertainty which we would class of why this is one of those -- thisified this -- classify as one of those. labor markets are already showing signs of soft -- softness. at first we think it's a business shock t. that could become a consumer shock if neighbor market -- labor markets weaken further. the dollar index has appreciated by three percentage points. some real strengthening of the u.s. dollar. i wonder what the fed can really do given what's happening globally at the moment. >> right now not a lot. if you look at financial you have thedices,

dollar strength that makes them worse. we have also had declining interest rates. all of this is generally offset. financial stress has picked up. that's where you see uncertainty. at least at the moment probably not a lot of that can do to combat dollar strength. we are not even february levels -- we are not even back to february levels. jonathan: what are the biggest spillover effects from that stronger dollar the barclays research team are most concerned about right now? would it be china you guys are spending more time thinking about? eurosterms of how does a intricate issue become global, that is accident the -- exactly the channel. it hurts manufacturing. oil is declining.

hitting all the sectors in the u.s. economy that have already been week. you saw when volatility spiked it was because the dollar was putting too much pressure on china. a lot of dollar strength was likely rekindle those and that is the transmission channel we are focused on. we know the dollar impact was largely what encouraged equity markets last year. paying said they're not attention to what china's devaluation prospect look like. what is on the fed's mind? >> that type of story is one where china is importing monetary tightening at a time they want to you are taking that tightening on board. anything that rekindles fears of a hard landing means financial volatility gets propagated.

maybe the fed does not take of you on where the right dollar should be but it does not like excessive volatility. whether that comes from bank stocks out of europe or devaluation possibilities out of china. scarlet: janet yellen was supposed to go to europe to attend the ecb forum this week. that is no longer happening. why do you think that is? >> my guess would be that if you put all three of those members of the panel at the same time markets would be looking for some sort of coordinated response. to lower ratesg and do further balance sheet expansion? the fed is not there yet. have extensive liquidity facilities available and those announcements were made public last week. they were not at a point where they wanted to do anything coordinated, maybe it's best to back away from that session

altogether. scarlet: nothing to add right now. michael gave them from barclays pen fromel ga barclays, thank you for being here. ♪

jonathan: this is bloomberg markets coverage on brexit. i'm jonathan ferro. scarlet: i'm scarlet fu. oliver: i'm oliver renick. the uk's decision to leave the european union has thrown global markets into turmoil. alan says things will get worse before they get better. to tom keene and michael mckee earlier, he said the impact that spread to the

u.s. >> the fundamental issue is the fact that productivity growth has ground to a halt. we're running out of people. everyone is very pleased at the fact that the employment rate is rising. statistics tell us that we need more and more people to produce less and less. that is not a prescription for a viable political system. and so what we have at this stage is stagnation. i don't think that there's anything out there which suggests that there's a recession but i don't know that. what i do know is that the money has always been a critical indicator of inflation going at at time remarkably steady 6% or 7%,

almost a straight line. it is tilted up in the last several months. it has added a percentage point or two. should the thing that we be worrying about now which we have actually given no thought to whatsoever is that this type of economic environment ends with inflation. historically money has always ended up that way. i'm going to get a lot of letters when you say that. what's he talking about, there is inflation, futures indicators show no inflation. how do you defend that? >> to be more blunt, are you an inflationist? >> all i'm saying is i don't know when it's coming. look at human history. there are times and times again when we thought there was no

inflation and everything was just going fine. wait.cally say, this is not the way this thing ordinarily comes out. i don't know. i cannot say. are soggy.rices been that aave terrific impasse and had a terrific impact on global inflation. surprised if the next unexpected move would be on the inflation side. you don't have inflation now. tom: how do you respond to paul krugman's essay the other day that there is a glory to simple models? 1939 and he is a chart. -- has a chart.

i'm going to lump greenspan with krugman. if i take paul krugman and alan y, wespan's primal cr want simple models. is the solution to think simply or is there a value to the complexity of globalization and institutions? which way should return? >> if you want to have a simple model that you can get that actually captures the complexity of the forces that are in play. simple models can be slimmed down. that's easy to do but it may not work. e: the fed's models don't do well at incorporating financial markets. >> that's right. frbus looks exceptionally well

-- works exceptionally well for the nonfinancial area. i had many inputs myself. my sideline was economi etrics. the financial model was awful. it captured nothing. it didn't grasp what the issue is. i tried to reproduce what i would do in sapping the territory to .0 which is the latest version -- mapping the territory 2.0 which is the latest version. what we don't measure correctly are bubbles and their implication. financial models have to capture the bubble effect. bubbles are essentially part of the fact that human nature is not wholly rational.

you can see it in the data very clearly. scarlet: that was former fed chairman alan greenspan earlier on bloomberg. jonathan: seemingly no one has a real handle on what's going on in the global economy right now. this is how it's playing out in markets. uncertainty reigns and stocks go south. the close of the ftse, dramatic. the biggest two-day drop since august of last year. barclays down by 17 percentage points. cable.d two-day drop for down by over 3% in today's session so far. ♪

london andive from new york city, i'm jonathan ferro.

oliver: i'm oliver renick. scarlet: i'm scarlet fu. this is bloomberg markets. let's head over to mark crumpton. a couple of big rulings today from the u.s. supreme court as the justices end their current term. one had to do with abortion and a regulation concerning texas abortion clinics. joins me from the supreme court with the latest. let's begin with that texas case. in favorces ruling 5-3 of the abortion clinics. >> what was at issue were regulations that said abortion clinics have to be essentially surgical centers and have a lot of staffing requirements. the second requirement had to do with the doctors and the law said they had to have admitting privileges at a local hospital. the supreme court regulation said both of those regulations

don't do anything to promote the health of women and are not worth the burden they put on texas women and the closures of the centers they have caused. will that that law -- law try to be refined? will texas still put up some roadblocks? >> they may try to, but this law is struck down. it is gone. abortion advocates are talking optimistically about how they might be able to use this decision to strike down similar laws in other states. texas put forth the argument during this case that the law was put in place to protect women's health. >> right. and the supreme court didn't buy it. it looked at the evidence and said there's just not any evidence that abortion clinics were unsafe and needed this regulation. they balance that against the burden they saw on women. the law had closed 20 abortion clinics across texas so far.

if it had gone fully into effect another 10 would have closed. the supreme court said that as an undue burden on the right to abortion access. mark: the high court also unanimously overturned the bribery conviction of virginia governor bob mcdonnell. he was accused of accepting more than $165,000 in gifts and loans from a wealthy businessman in exchange for favors. this is something that goes beyond just bob mcdonnell. what are the repercussions for other elected officials who faced similar charges? >> we are going to see. for bob big victory mcdonnell although there is still a possibility he could be retried. the court said you cannot prosecute somebody even if they accepted a lot of gifts just because they arranged some meetings or attended an event. you have to show more than that. how that applies to the other

cases it remains to be seen. ,n the case of sheldon silver his case has been on hold waiting for this decision. prosecutors say they don't think it will have an effect. i expect his conviction to be upheld. mark: what does this ruling mean for mrs. mcdonnell? she faced similar charges. >> it may help her as well. we will have to see at a lower court level. you, greg. i'm mark crumpton. back to you. scarlet: we are keeping our i on the british pound. investors have had a couple of days to digest the brexit vote. the pound is at its biggest two-day loss ever versus the dollar.

when you look at the dollar yen trade that's an interesting one. the yen strengthening. strength could be in the cards. you have a just be and citigroup saying that dollar yen could reach 95 fairly soon. oliver: that becomes a problem for equity markets. thing that is interesting today is we have seen utilities do pretty well. we are actually seeing some interesting developments in the low volatility space. we have been talking about these lowball funds. were questions about whether the lowball funds were going to do eir job. the terminal is doing that right now. the s&p is down 1.6%. the lowball funds are down less than a percent. aparently those higher not wreck the

value proposition of the lowball funds. scarlet: you are also keeping an eye on the political headlines. jonathan: i don't think you can really draw a distinction between what's happening with the politics and what's happening with the markets. there is a lack of leadership and what you want to see is some stability. there were questions over the future of mark carney. anis johnson came out with opinion in the telegraph. look at this. the most sensible people can see that mark carney has done a superb job and now that the referendum is over he will be able to continue. continueze the word his work without being in the political firing line. you will remember that he was in the political firing line and believe campaign had a lot of criticism for the bank of england and governor carney in particular for some of his concerns over the potential of a brexit. hey would have rather do stayed out of the debate.

he did not stay out and he was in the political firing line. so the very idea that boris johnson has come out and said that governor carney can continue with the good work, i think that's a little bit of stability we did not have yesterday. that's a great point as you see world leaders toeing the line between acknowledging the brexit and trying to keep things under control. we'll go to abigail doolittle with the latest from the nasdaq. abigail: another rough day for the nasdaq. down more than 2% on top of friday's slide for the worst two-day drop since last august. technology is the worst sector drag. microsoft and amazon are down. not far behind its health care. especially biotech. friday's 5% top of slide. the worst today slump since last september.

are defending the biotech shares. we see that shares are down. this is true of all of the big names. they are down. the biotech bear market is really pretty bad at this point with the biotech index down about 39% rum last summer's peak. take a look at a two-year chart of the nasdaq in blue and the biotech index in yellow. we see a divergence that may raise the question with the 16% weighting in the nasdaq to health care whether or not the biotech bear market tells a bearish story ahead for the nasdaq. this would be particularly true if the february lows in the biotech bear market are

breached. back to you. scarlet: great stuff. get back to the bigger picture, much of the talk around theit has entered on economic implications but the referendum could also affect security in europe. madeleine albright weighed in with tom keene and michael mckee. >> mr. pruden is very pleased with what happened -- mr. putin is very pleased with what happened with brexit. one of his agenda items has been to cause disruption within the european union to make sure that it splits apart. i think the important part is how nato will continue to function together and also what signals there are for the eu general. there's a school of thought that says nato will have trouble with security arrangements in europe because the europeans may not be getting along. another that says because they

are not getting along and they don't know what's going to happen, they will rely more on nato and this could reinvigorate that organization. >> i think nato continues to be the stabilizer in many ways in the alliance that has helped together the land -- the longest. they will be looking to see how security arrangements can be strengthened. a lot of the issues are going to do with what nato is going to do in central and eastern europe. i'm sure they have to consider the entire security picture. mike: when president obama went to the united kingdom and he said, if you vote to leave you will move to the back of the line. after the boat he said, but we still have our special relationship. where does the united kingdom fall if it moves outside of the scotland or scotland and northern ireland vote to secede?

that theis no question leadership of the united states did not think it was great for brexit to take place. people have said that. what is of great concern is our continued relationship with the united kingdom. that has been a key one for decades and decades and i do think that we will have to keep watching. they are now calling it little britain if in fact scotland and northern ireland leave. are going to do is keep a very watchful eyes but remember the special relationship and also the importance of the european union and our transatlantic ties that we have. tom: you traveled from the czech republic and the war. andended up in notting hill various other parts of england.

we heard today that margaret thatcher made modern britain. do you agree that margaret thatcher shifted the britain you knew as a child and that we need a new margaret thatcher now? >> when i was there was during world war ii and churchill. jonathan: breaking news in the city of london. the u.k. has lost its last aaa credit rating that was held by standard & poor's. aa.as been cut from aaa to the outlook negative. this is critical. it has been noted before last week. head of sovereign rating. in europe giving a strong signal that this would happen but it has happened. the united kingdom has lost its final aaa credit rating from standard & poor's. cut from aaa to aa. and with negative outlook.

i think what's really interesting is that the rating agencies have come out and said credit negative. if you look at the bond market and the performance of u.k. , while the credit rating coanies say it is credit negative, the bond market and investors are saying something else if you look at the price action. scarlet: it's a little bit counterintuitive that they are saying the u.k. is less credit worthy than before the vote yet investors continue to pile into the safest government debt. not much of a current reaction. the british pound already along the bottom. the biggest two-day loss ever. it is still down. the low of the day was 13121. that has been the most reflexive asset throughout this entire thing for the past couple of days.

pretty interesting to consider that you see the demand for a safe haven that keeps pushing yield down across the world is just incredible. bit of aa little dichotomy today where it can't phase investors rushing into bonds. and you have yields in japan and germany at record lows as well. jonathan: it is across nations. the aaa credit rating is almost a badge of honor for some of these governments. the fact that it has been lost is going to be a loss of faith. the united kingdom cut from aaa outlook which is negative. standard & poor's saying it doesn't see the uk's institutional assessment as a strength. the cut that a lot of people expected has been confirmed. the market is saying, still credit positive. whatever it means for growth,

the consensus is going to be damaging in the near term. in the markets pound had the biggest two-day drop on record in today's session. a 31 year low. we have been discussing yields grinding lower globally. 1.45% is your yield on the u.s. 10 year. york withn and new special coverage on brexit, this is bloomberg tv. to our viewers worldwide, good day. ♪

, thisan: live from london is bloomberg markets. i'm jonathan ferro. scarlet: i'm scarlet fu. oliver: i'm oliver renick. jonathan: breaking news.

the united kingdom cut to aa from aaa by standard & poor's. s&p the last credit rating company to have united kingdom at aaa. the s&p head of sovereign credit ratings in europe came on bloomberg tv on friday saying the brexit vote would lead to a downgrade. so this is confirmation. what's fascinating is the same conversation we usually have. the government, it's kind of a badge of our. for the market, i'm not sure what it means anymore. gilt yields went down to all-time lows and they continue to grind down. scarlet: like when the u.s. lost its aaa credit rating from s&p. treasury yields were pushed down further and further as everyone moved into the safety of government debt. we are keeping a close eye on

cable. the low of the session was 1.3121. we want to bring in joe weisenthal to discuss this story. brexit vote, moody's came out and made comments on the uk's credit rating. moody's had already rated the u.k. lower than what s&p had it at and reduce the outlook to negative. >> these sovereign credit ratings are completely irrelevant to the market. when the u.s. got downgraded it didn't matter. japan has been downgraded a bunch of times, it doesn't matter. the u.k. gets downgraded and people are worried about the capital flows -- it doesn't matter. we see were the anxiety takes place. it's on the currency channel. the u.k. prince its own money. it's not a credit risk.

they can't run out of it. people are already worried about sterling. it's not going to take place on the credit side. agencies don't like the trajectory of governance in economics and what this means that in terms of actual credit risk, the market doesn't bite at all for good reason. jonathan: do you see what's happening from the credit rating companies is actually we should move away from looking at it as system and grading see it as a measure of the economy? do you think as a market participant we actually have to just look at the work done by credit rating companies and less focus on the rating and more focused on the research? >> i am much more interested in the research itself. what did they think about the trajectory for growth? all of that sounds totally

legitimate and interesting and stuff that board want to know about. lots of people are saying it i this point, but the credit don't tellmselves you much unless you can come up with some plausible scenario in which the u.k. can no longer create the currency it needs to pay off its debt. the rating itself is not probably what's important for sovereign credit. cites the voteo for remain possibility in scotland and northern ireland creates wider constitutional issues. is that coming back into focus? >> i don't think there is any question that there is massive economic shock and uncertainty now in the u.k.. the market's reaction is the market's reaction. it's massive. everyone has come up with some very clear ways this is going to hurt the u.k. economy while so many questions are out there.

obviously the market is not concerned about the credit of the sovereign. if you look at corporate credits. anxiety right about that. just not on the sovereign. we are about to see another euro exit. it's going to be spain because italyre yo losing to 2-0. we are going to continue the conversation next on the brexit fallout here on bloomberg markets. ♪

scarlet: you're watching bloomberg markets. i'm scarlet fu. oliver: i'm oliver renick. jonathan: i'm jonathan ferro in london. scarlet: let's rehash -- go ahead.

you've got the headlines in the u.k. jonathan: the united kingdom cut to aa from aaa by s&p. the head of sovereign ratings at standard & poor's came on bloomberg tv here in london and said a brexit would lead to a downgrade. we've got confirmation of that. the u.k. cut to aa from aaa. uncertaintys the for the economy ahead. i would focus more on that than the credit rating itself. for the market, it's still a good credit rating. good pointat is a especially if you look at yields of government bonds. andheading to record lows continuing to bump along those lows not really changing despite what the credit rating companies say. anti wo bring in a chart i thought was interesting. the expected path of increases

in europe has really shifted. this is for anybody who has a bloomberg terminal. matt for passing this along. the orange line is before the brexit vote. the green line is the path as of today. the curve has flattened. far theotable is how move into positive rates got pushed back. all the way into september of 2020. according to the market, the ecb will not raise rates above zero for another four years. thise paying attention to zero line because that's where the ecb presumably would get out of negative interest rates. good point. is a segues such a perfect from what you are talking about. completely eliminated.

this is a huge overhang for the market now. now it's out of the ballpark. looking at to be whether it's going to affect investors moving into riskier assets. rates are not going anywhere. scarlet: jonathan ferro, thank you for joining us in london giving us the latest headlines and market coverage. we have a lot more coming up. later today we will be speaking with former u.s. treasury department economist david been the ecb the role that has played in the crisis and in brexit. this is special coverage of the fallout from brexit on bloomberg television. ♪

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>> it is 7:00 in london, 2:00 in new york, and 2:00 in hong kong. >> live from new york and

london, this is "bloomberg markets." >> let's continue our special coverage of the briggs -- brexit vote. matt: i am matt miller live from london and we have breaking news at this hour. the u.k. 's debt rating has just been cut from aaa to aa. >> that's by standard and poor's, and it's very interesting. some comments saying perhaps gilts would rally if something like this were to happen. david: here's what we are following at this hour. markets falling after the shocking vote. we look at potential buying opportunities after the dust settles. vonnie: the s&p has cut the u.k. bond rating from aaa to aa after