i matt miller. alix steel is on assignment. scarlet: u.s. stocks losing more than 1% this afternoon. the s&p 500 at its lowest since march. joe: the question is "what'd you miss?" scarlet: we take a look at market moves across the aftermath -- across the markets. joe: what was the role of the ecb affecting the turmoil in europe. matt: and we look at what brexit means for the u.k. real estate market. we begin with our market minutes. the s&p 500 at its lowest level since march. the now, s&p, and nasdaq all losing 1%. in terms of gainers, the bonds and utilities climbing for a second day. you had telecoms slightly higher, so defensive names with fat and juicy dividends getting

a left. 2% andces down almost that is putting a drag on materials companies. joe: pretty ugly day all around. it had been a little worse earlier in the day with the dow down 300 and the s&p had fallen below 2000. a little bit of a bounceback, but to ugly days since that brexit vote. absolutely destroying banks across the continent and not great for banks in the u.s. either. terminal here and what i want to do is compare the price-to-book ratio. stock is traded for divided by the book value per u.s. between banks in the deutsche bank here at the bottom

-- it's interesting that barclays has got some room to move. deutsche bank trading at almost a quarter of its book value, which is a shockingly low amount. before the financial crisis, you did not used to get below one and price to book. i want to take a look at some happenings in the government bond market. year giltle with a 10 willard -- where the yield has fallen below 1% full top -- below 1%. government bonds come in at not a problem. an extraordinary rally continues there. to pay attention to, let's look at the spanish two-year yield which is back in negative territory.

the conservative or center-right party did well and that gave investors confidence that the populist wave is not necessarily spreading to spain so fast. the periphery is coming back a little bit, and all the turmoil emanates from fx. the yen a beneficiary, even if it doesn't help the japanese economy. dollar yen did not break a hundred, but it is headed in that direction again. citigroup and gci ripping up their old targets, saying dollar yen could reach 95. the big story here is pound dollar. for the pound, it was the biggest two-day loss ever. pretty incredible here. reached aday, it weaker point that any time since friday for joe: this is gold 19%.d in pound terms, up

an extraordinary surge if you are a gold buyer from britain. gold is a lot more expensive than it was two days ago. scarlet: let's take a deep dive into the bloomberg. matt: i'm looking for my deep dive at chart 1813. it is prescient for our european viewers. the red between italian 10 year yield in spanish 10 year yield. spanishy, we had the boat which didn't really go much different than anyone would have taught, today, a total shocker -- italy beat spain to do nothing in the european championship and not them out of the tournament. spain was favored to win the entire thing and with them out of the way, it looks like germany could edge out.

here, you see the yields rat and i wonder -- i don't have any experience with soccer and sovereign debt yields, but do you think that will change the picture at all? if it does, that would probably be an opportunity to arbitrage that scarlet: england is losing to iceland right now to the one. matt: england is losing to iceland. think only one soccer team amount of people lives in iceland. scarlet: the streets of france may be dangerous for any soccer fan. across the developed world, the yield curve is flattening, meaning the difference between short term and long-term rates is flattening. it looks positively steve by comparison to japan. before the crisis, the flattening yield curve used to

signal recession, but not clear that is what it does anymore. this is a disincentive for banks to lend money. with a steeper yield curve, thanks can borrow and lend money out, but it's not really happening the way it is supposed to. flat, flatter and let us. i am looking at two ishares etf's. a both track u.k., but if you can spot the difference between the two of them. isharese line is the u.k. etf. one of those trades in dollars and one of those trades in pounds. in, we can see the one that trades in dollars lewdly got obliterated. some people look up and see the ftse 100 and it doesn't look

like it has fallen that much but that's because it has been priced in pounds which have destroyed. plunged over 15% since the high whereas the one priced in pounds down around 6%. a huge difference depending on what currency you are looking at. scarlet: you can see all these charts and more on twitter. ofning us to discuss all these moves is the cumberland advisors chairman and chief advisor. we have then conditioned to buy the debt. at what point will investors be ready to check that? david: i spent the weekend in may on a fishing trip talking about these kinds of questions and i brought dj present. but watch the, because the hook is chart. is a lower that floats upside down on the waters of the issue doesn't see it. when they get it, they get this book.

we have then hooked by brexit. it has changed the landscape. it is a sharp hook and once it looks you, you have to play it out for you know where it is going to take you. sometimes the fish throws the hook. sometimes it doesn't turn out the way you expect. most layers in financial markets have been blindsided what do we do now to mark we have the u.k. in disarray, credit trouble, pound is going weaker and they are going into a recession. if you were to run that old today and as a counterfactual, i wonder if the vote would be the same mark the rest of europe has to look around and they do we want to follow that half of the debate. yet italy, france and germany in a meeting talking about whether there should be some emergency

issue to infuse banks with capital. we are going to see substantive changes. the world will not come to an end. scarlet: fitch has just downgraded the united kingdom as well. the credit rating goes to double s&p's aa plus following moved to downgrade the u.k. by two notches. fitch come a following suit, cutting its rating to aa from aa plus. fitch also saying they are downgrading the bank of england. i always forget the banks even have a credit rating. downgradedtch has gdp growth as well. previously, it had seen 1.9% growth. ist: one of your specialties etf's, knowing how to trade them, knowing how they work, when we get a down grade of the

to., are there etf that have throw it out and mark are therefore sales we see in the fund universe? david: i think so and i think you see that liquidation now. you see this volatility spike taking place all over the world and there are also opportunities. what do we know that will now haven a long time mark we longer interest rates and they will be zero in japan, zero in europe. the 10 year yield make it down to 1% here. what does that say for housing in the u.s.? that is not impacted by brexit. we took up our weight in the selloff in sectors like consumer discretionary and housing. you can be opportunistic on one side and at the same time, you have to watch for the hooks. can you think of a good

analogy to the level of uncertainty that people are looking at this crisis with western mark is there a tiny sigh similar level of can usually? atid: you have to look extreme places in history. what did greenspan say? bubbles don't affect long-term economic growth, but they do impact. we had one in 1987. when we unwound rum low interest rates in world war ii, we had a shock. scarlet just had a great chart on the flattening of yield curves. how do you read flattening yield curves now? we need to rewrite a set of rules here. joe: the chairman and chief investment officer at cumberland investment. scarlet: coming up, how the european investment bank played a role in brexit coming to fruition. ♪

mark: i'm mark crumpton. let's get to first word news. u.k. chancellor of the exchequer, george osborne, says contingency plans are in place as market volatility continues following the brexit vote. good news it is very they are reassuring things and it is clear that project fear is over, there's not going to be an emergency budget and pensions are safe in the markets are stable. mark: johnson, a leader of the leave campaign, made his remarks before the pound think before the pound hit is lowest level

since 1985. voters surprised holsters in spain. the caretaker prime minister consolidated his position. his evils party had been expected in parliament. instead, it pick that more, since jesting voters are voting not to jeopardize spain's economy. hillary clinton and elizabeth warned the campaign trail today, talking to some orders in cincinnati, ohio. the massachusetts senator called mrs. clinton a fighter who has never backed down. she offered a harsh critique of donald trump and warned that trump will crush you into the third to get what he wants. a singapore airlines jet caught fire while landing in singapore today. the plane was returning after averting a light to italy after an engine warning messages. all the passengers and crew on

board were evacuated safely. dayal news 24 hours a howard by more than 2600 journalists and analysts in more than 100 20 countries. i'm mark crumpton. back to you. matt: "what'd you miss?" in the wake of thursday passed exit vote, politicians and pundits are trying to figure out what caused the rich public to reject the european union membership. our next guest has identified one culprit -- central banks failed to deliver enough growth to satisfy the public. fellow us is a research from the george mason university and a former economist at the u.s. treasury. about the central bank. before i get to immigration which must have had a massive role in this. really boosted

income inequality. greatlyple profited from what the central banks have done, some people not so much. that: there has been development as well, but if you go back to 2008, 2011, particularly related to exit, the central bank raised interest rates in 2008 and raise them then to rice in 2011 for euro zone economy was not completely healed. imagine an alternative world where the ecb did not raise rates twice and started qe sooner. the continent would have had a heart risk or growth rate and that would have maybe challenges of immigration, eu regulation, sovereignty issues much more bearable. just like when a person is sick of a cold or minor cut becomes a more serious concern. having a really sick economy for the past seven years exacerbated the extent of these issues.

argumentmake a good that the ecb tightened inappropriately, but the u.k. is not on the eurozone. asset purchases for a long time. how does that ask lane the brexit vote? why should the actions of the ecb and premature hiking have any of the act on the u.k.? david: it's a big trading partner and it sets the tone for europe. had europe been doing much better, the critics could not have looked to the european union and pointed vendors and said policymakers have failed us. it speaks to a bigger policy failure and that is inflation targeting. that's a good thing and provides a speed limit. the ecb, bank of england and the head, they are constrained by inflation targeting.

what we should have seen as a catch up time of growth and in patient targeting prevented that from happening. it served us well coming out of the 80's but going forward, we need to look at something different. seven years of sluggish rose on the continent does tend to change one's mood and make minor irritations much more in tolerable. joe: in terms of the global fallout, you have in this vote represents a significant tightening of financial conditions and it will even if the u.s. and that policy. explain why this is a tightening of financial conditions and what kind of hit the economy it will have. david: one big effect it created was a rush to safety. average dollar go up 2% or 3% and tuesday and it has already been valued excessively since that time.

it has grown 20% and the reason that is important is there's a large art of the world economy whose currency is tied to dollar. tiehly 40% of countries their currency to the dollar. that kind of puts a choke on them. growth inbeen huge the parallel dollar system, about $10 trillion of loans and sureties that had arisen outside the u.s. firms issuing these borrows and taking them side the u.s. that makes the debt more unbearable. matt: if i look at financial conditions on the bloomberg -- it's a great function you can tailor to see any number of different things. i'm looking at u.s. financial conditions and this is the zero line. above the zero line

this year just come down above the brexit vote. take a look at the drop down on the upper left-hand corner and switch it to the euro area. they haven't been above zero --ce 20 seen and even then only for a brief moment. get should the ecb do to financial conditions backup or can they not do anything to get financial conditions back up? even helicopter money is not going to help. david: i think the ecb's and tie and europe plus hands are tied. eurozone was a flawed currency from the get-go. if i could go back to the dollar briefly, if the dollar does go up, i think we will see even bigger concerns arise out of

china. if you look at what happened in china late last august, massive capital out close tied to the rise of the dollar. the rising dollar was the camel -- the straw that the camel's back in my view. if this dollar continues to go up, we will see other problems there. definitely see your problems going forward. countries like china, saudi arabia that are pegged to the dollar, they may face stress from the surging dollar. matt: it's always a currency story. thank you. appreciate your time tonight. up, like trying to build a superstate without and i entity has led to the mess that is the eu. ♪

matt: i matt miller. "what'd you miss?" of bloomberg you posses is what you miss. -- trying toote build the state without the nation has led to the mess that is the current eu. elite missed this because they are the exception, the one group that has a transnational identity for her point is people like me or joe, scarlet, politicians, bankers especially are more citizens of the world and the field he kind of patriotic full the masses who voted in this brexit vote for we can't understand that and when those people feel like they need to defend their country that's being overrun by the other, in the case of immigration, whether it really is or not they are

going to make a choice like this for scarlet: you can also see the ranks it vote as men tight meant against leaders. the world's first global elite has come to an end. he says britain's hubs of financial and ideological flows are all located with in a if the mile race -- radius. the proximity and inbreeding among clinical, financial and media elite created double and one people were completely taken voter is --ou have voters in england and wales deciding they were going to take back their country. a piece by boris johnson that was published yesterday, saying the pound remains higher than it was in 2013 and 2014. she writes johnson did not clarify against which currency

he was measuring and as the pound we further, his assertion left many scratching their heads. the pound is higher against the ukrainian and only if you are talking about jamaican dollars, it not higher against u.s. that -- the u.s. dollar and is by no means a stable currency at the moment. is still higher against the euro. although it has come down substantially, it is better than it was in 2013. coming up, who's on the for real estate imposed brexit london? we will look at who has had that risk. ♪

mark: i'm mark crumpton. let's get to first word news. a unanimous supreme court has turned over any conviction of bob mcdonnell. it's a ruling that makes it harder to prosecute elect officials accused of bribery. he was found guilty and 2014 of accepting more than $165,000 and give an loans from a wealthy businessman in exchange for promoting a dietary seven clement. -- dietary supplement. rejected to an obama cause, turning away an appeal from several home care in a sea -- industry group,

saying the labor department overstepped its authority when it approved the rules in 2013. donald trump race $3 million online after sending e-mail last week asking for calm -- asking for campaign contributions and promising to chip in his own money. that's as much as he raised in the entire month of may. it shows that he might have enough to fill the coffers bernie sanders style with will giving a few dollars. hillary clinton has released a new tv ad blasting mr. trump in his response to the brexit vote. the at this every one is tested by world events with trump things of how his golf horse will be affected. it shows the likely publican nominee at his golf course in scotland and he said more people would now visit his resort. according to the "new york

times" the central intelligence shipy and saudi arabia weapons into jordan where they were stolen and told to arms merchants. some weapons were used to kill to americans in jordan last year. global news 24 hours a day howard more than 2600 journalists and analysts in more than 120 countries. i'm mark crumpton. back to you. matt: i want to give you a quick recap of today's market action. they drops across the board in equities. the s&p 500 well to a level we haven't seen in months. the dow fell 260 points, at one point it was down well over 300. big drops there, it drops in europe. with the ftse falling, the continental index falling closer

to three. i want to point out one quick and you cangot here see the big losers, side from the jet, which is the biggest loser of the mall, big housing developers. we will continue to talk about for and replace falling 17% the second trading day in a row. a rough day for financials. thingstraordinary happening in markets over the last couple days. the u.k. 10 year falling below 1%. a pretty widespread risk off sentiment everywhere. scarlet: nike seems to be losing the race against the s&p 500, falling 17% year to date.

let's explore why. nike's annual forecast missed annual estimates, raising concerns that the growth of biggest sporting goods maker is slowing. analysts projected 10% growth. one of nike+ biggest challenges is under armour. all of that is widening. companies need to contend with the liquidation of sports authorities because that gives you are locations to sell their products. under armour has already cut their forecast because of their demise. the strong dollar is another challenge for nike. the dollar eroded their sales growth last year to around 8% compared to 14% when you exclude foreign exchange. gross margins are back at 10 years high -- 10 year highs but

they are not expected to pick up in the near term because of the discounting in the u.s. asia is the right spot with future orders growing and greater china than any other market with orders jumping about 35%. nike is achieving that kind of growth despite its size. we want to put that into perspective. they bring in more annual revenue than all the other companies here combined. earnings after the closing bell on tuesday. matt: developers are coming to terms with written's decision to leave the eu, a decision that down ase ftse index much as 26.4% on fears businesses would move staff out f the u.k. the index is on track to close at its lowest level since december 2013. for more on who is most exposed,

our guest joins us on the phone from london. one of the first things i heard on friday morning was there's a development in the city that was about one third of the way done and investors were going to pull out because there's no reason to put more office space in the city of london if it leaves the eu. is that the kind of sentiment you are hearing? guest: certainly a huge amount of concern. lots of rumors flying around about which projects might he put on hold until we figure out what is happening. the backdrop is in six months , there's a decent amount of supply coming through. a lot of that is. certainly anyone who hasn't started the project is going to be thinking twice.

london, traditional tenants are banks, who we are expecting to move overseas. canary wharf has a heavy concentration of investment bankers. are we seeing any discrimination on the part of commercial real estate august companies and those that are pure residential outside of london? guest: i thing it's fair to say both sides of the market have been fairly badly hammered. there have been some really spectacular falls with one house builder that does not have particular exposure to london, their shares down as much as 76%. they have recovered a little bit at the market has been punishing

the house builders will that's a reflection about general sentiment. the housing markets are very expectve, so i think and nation that we will see a reduction in transactions certainly in the second half of the year. , anyoneommercial side with a big exposure to london offices, that is a laggard in a haver but developers who built big shopping malls and warehouses are still seeing pretty significant falls in their prices. scarlet: we have some breaking news -- volkswagen is said to face a $15 billion tab in a u.s. sentiment -- u.s. settlement. morewould be $5 billion than was previously reported.

i that's incompetence nations are expected to cost them $10 billion. in addition, there would be remediation and finds that would add another $4.7 billion. talking $15 billion and the payout is set to rise as payments to owners are tallied up. just fromnumber now the u.s. government. importantly, to retail customers, they could get $10,000 apiece for their cars. 85% to owners for trade-in of their vehicles under the settlement. it's really important to volkswagen to this right, not only for the u.s. to penalize them, but volkswagen has to get this payment right to keep this customer base. they haven't got a huge customer base in the u.s. even subaru outsells flagon and

has for a couple of years. they have a number of other brands like an audi and porsche that are big in a u.s. bentley and lamborghini on the luxury side. owners will get as much as $10,000 apiece. golf for $25,000 and all of a sudden i realized it was harmful to the lives of evil around me, i would probably want all of my money back. and of course you have german prosecutors who have opened an investigation into the former ceo, so this saga is far from over and the negative headlines continue to plague of all flagon. a ceo who when audi lost the lemans 24 hour race took apart the clutch by himself to figure out what was wrong. , so how he didr not question the engineers about

passing emissions test is beyond -- that's the problem with volkswagen. the bank of england governor, it's his turn to choose whether to leave or remain at the central bank. we will hear from two former policymakers who will hash out the future of written's monetary policy for you. ♪

scarlet: time for the bloomberg business lash, a look at the biggest business stories in the news. two more solar city board members say they will not vote on tesla's $3 billion offer. that brings the number of directors not involved in the decision to five out of eight, including elon musk, who is the

biggest shareholder of both companies. will makeay the ties it difficult for the board to be impartial. the new york stock exchange will allow floor brokers sees her soul mobile phones on the trading floor. that follows a communication break down on friday, a hectic day after u.k. voted to leave the european union. purdue is planning to give its s more time to pack and play in the sunshine. the world's biggest poultry producer is overhauling its animal welfare practices. changes include more exposure to natural light and more places to rome. that is the bloomberg is this flash. matt: "what'd you miss?" two former bank of england members sound off on what the u.k. central bank should do post-brexit. danny branch flour and his old

rival shared their open using views about the doe's options this morning. -- boe's options this morning. will be think it crucial, like after 9/11, to sit down and decide what is the right action. worry hand, you might inflation is going to rage because of the fall in the exchange rate. second, you worry about this huge negative shock coming in a you might raise rates and on the other hand you might cut them. something, does it matter? these are serious days and the mpc should be having meeting so people like andrew and i can get in the room and say what would forright action be in mark example, if they think they want to do some quantitative easing, they have to start the process. it takes a while. the mpc should be meeting, thinking, learning, looking at

forecast in the light of event and trying to calm the world. guest: what i'm trying to understand is what the monetary policy discussion would look at -- would look like. the sterling has adjusted significantly. will that do some of the hard work for the bank of england? i'm not sure monetary policy can do much at the moment because it is so low. you have to be careful about creating, adding to the sense of emergency. i have lost track of when the mpc is due to meet because they have changed the schedule. i thought that was a bad idea. i think in terms of a quick change in interest rates, i don't inc. it would be very effective because you can't take

them down much a low .5% and it might add to the feeling of panic. the outlook and their statements are going to be very important. >> goldman sachs came out said what about a buyout like the ecb program? what do you think of that? andrew and i were both on the committee. it was not a very large amount. has permission to do that. that you havelear to do something today. maybe you should think about a cut in rates or a purchase of corporate bonds. that takes a while. the?would the impact

youree with andrew, but shouldn't jump in. that might add to the sense of panic. how you do it and which ones would take a while to work out. underwood what circumstances would buying corporate bonds make sense? upst: risk premiums went significantly and the objective of corporate bond purchases was to try to neutralize that. the one thing they should have on their radar is what's happening to risk premiums, including corporate on risk premiums. when we did our analysis before the referendum and looked at the con >> shock to the economy colors premiums were quite important generator of that transmission to that shock.

wait and see how financial markets and bond yields have come down. upess the risk goes dramatically, there may be no need to go -- to do anything on that run. former bank ofwo england policymakers on bloomberg this morning. up, where should you be parking your money outside of europe and the yen mark we will discuss alternative sources of safe havens, next.

joe: "what'd you miss?" take advantage of the ongoing market panic from] brexit.

of america merrill lynch says now is the time to add to asian and emerging market equities. for more on why it might the immune to the global markets, betty liu joins us. weeks.'t seen you in six i'm happy you are joining me on tv today. betty: i get to see you over the transom, so i'm looking forward to your return. bank of america coming out with its report and it's interesting because there is that sentiment on friday when the markets were people were e-mailing saying that there would be some opportunity here in the downturn. it looks like it may just be in asia. we did see stocks in asia devastated by brexit that things were more calm overnight even

know it is still pretty rocky. this report is that asia has very minor exposure relative to other regions. share revenue for companies is it comes toen looking at other companies other parts of the world where they do do business with europe. logic, thatw that have one issue with this report where you have to look at this in a larger context. withat what is going on japan and a stronger yen. you might say exports are quite small but the overall impact could be big regardless. people looking for

dollar yen to hit $1.99. when you look at it on the bloomberg, it is a sea of red. this is as of yesterday's trade. most asian markets managed to bounce back after a pretty brutal selloff. bank of america and merrill lynch saying asia is a safe haven. asia, it's among the least impacted because of its low exposure to trade. betty: look at china and the fact that that market is quite insulated. that market has hardly moved. betty: they have robust the mistake markets. there is sufficient demand.

you one thing i have heard say is that with u.k. out of the eu, they would be free to establish free trade agreements with former commonwealth countries like india. in a could perhaps be toleration of trade between u.k. and india. said: as boris johnson stop looking at all the negatives. there is upside here. and he would say that, of course, but there is some truth to that. they have and if it rum trade relations with the european block. they may be able to benefit from a direct bilateral trade relationship. this bank of america report, trying to give a silver lining to what seems devastating for much of the world here. markets wise. joe: betty liu, thank you for

joining us. tune in at 7 a.m. for bloomberg daybreak asia. scarlet: coming up, what you need to know to gear up for tomorrow's trading day. that's next. ♪

scarlet: i'm scarlet fu. "what'd you miss?" the ecb forum in central portugal begins tomorrow officially. joe: also don't miss this -- tomorrow at 9:00 on a case schiller economist are looking 0.58% increase in housing month over month. matt: and we are getting gdp figures out from the u.s.

economists are looking for 1%. that's all. thank you for watching. ♪

john: i'm john heinlein. emily: and i mark halperin. with respect to twitter, john heilemann says don't read the comments. mark: on the show tonight, a workweek that started with a political bang. you have your brexit aftermath, pair of supreme court decisions, but you've also got two democratic party superstars sharing a cincinnati state and drawing attention to laura --