guy: welcome to "on the move." we are caps on you down to the european equity market open. i am guy johnson alongside caroline hyde. she is over in berlin. signs of stability. the selling stocks and the pound of 50 is called higher. is it time to buy or double down on those shorts? david cameron has to brussels to see his european rivals. --l the speedup negotiations will he speed up negotiations? -- over emissions cheating.

can investors put the scandal in the rearview mirror? good morning. we are now a half hour away from the european market open pit what are we looking at? we are seeing quite aggressive selling. in a moment, we are going to see that stuff. i have to put caveats all of this. -- all over this. take everything with a pinch of salt until we get some firm pricing. it does look positive. you got the euro stoxx called up 2%. continental markets, 1.8%. spanish market after a solid .ession, called up fractionally i want to delve into this little bit more to see what is happening in terms of the breakdown of the individual the 250 pricing is really interesting.

what we are there is a little more weakness creeping in. i will get that to work. caroline, what have you got? caroline: 250 is always interesting. exposure to the economy within the united kingdom. i am showing the asian trading, it is flat from a broad benchmark perspective. we're seeing japan, a little bit of weakness. we are seeing a stop to the rut. .5%, just think of the damage done. plummeting 11% over the past two session. it gold, wesessions are not lurching into this particular haven. the tenure japanese bond, i want to show you the fact that it is not all risk on. we are seeing slight flight to safety with japanese yields hitting record lows. and japanese 10 year

bond yields should the probability of rate hikes in the u.s.. a greater probability of a rate cut, 20% in february, guy. let's get over to burke first word news with juliette saly -- with bloomberg first word news with juliette saly. juliette: david cameron is set to face his european leaders of the first time since the shock brexit result. the premise it will endure an upward -- with cohorts later after his efforts to calm britain's investors failed to stop the pound and the countries biggest banks from flunking yesterday. the rating day is here. s&p has stripped the u.k. of aaa ratings lowering its options to aa because of its less predictable policy framework.

>> we do longer think that the u.k.tution strength of the is what we were used to before. the adaptability, and the effectiveness of the policymaking. we think that is no longer a strength. we think the funding risks for u.k. entities have been created which is very important because the u.k. is extremely dependent on capital flows. theette: bill gross has set u.s. recession may be as high as 50% following the brexit decision. the manager also thinks the yields on two-year u.s. treasury bonds may fall. i could drive up the value of the dollar and increase the odds of a recession. he says while britain represents a small part of the global economy, a brexit will slow trade, immigration and growth around the world. as if brexit was not enough,

-- theyis also out of were beaten out of the european championships. fans went wild as the knockout -- iceland is the smallest nation to qualify. england's manager resigned immediately after the loss. global news, 24 hours a day, powered by 2600 journalists in more than 120 countries. you can find more stories on the bloomberg at top . caroline? .aroline: the humiliation i believe iceland has 300,000 people. --is the same size phenomenal things happening in football. let's bring it back to politics. isis talks are being held in europe, not about football but -- crisis talks are being held in europe, not about football but as eu leaders -- given article 50 is yet to be

filed, what can we expect from the two-day summit in terms of the process of the u.k. leaving? views did i your hate to come back to the divorce analogy but it is too useful it i promise our viewers eye and going to stop doing this after a certain period of time. friday morning, after a night of soul-searching, britain woke up and made a phone call to the european union saying two things, we intend to move out and we intend to file for divorce. what is going to happen and what eu said is, ok we have a meeting scheduled for tuesday anyway, let's sit down over dinner and discuss that. that is what is going to happen. that is going to take place in brussels tonight. the eu, dk, all 27 liters leaderws7 -- 247

sitting down to talk about how this will work. the prime ministers says he will not be in charge of the process. it will be the next prime minister. on the eu side, they said fine, as long as you haven't invoked article 50 and officially filed for divorce -- there we go the divorce comparison again. we are not going to have any informal discussions about who gets part of the house and whether you will be allowed back to see the kids. this is an initial airing of the views. everybody wants to get a sense from david cameron how he sees it. what can david cameron will he say at this point, because he doesn't know who is going to be the next prime minister. guy: ryan, thank you very much indeed. that summed it up very neatly. joining us now is geomet cap. -- is michael metcalfe.

huge amounts of uncertainty in the markets. phrase, old frayed -- hate uncertainty. sterling down hard. equities off. rockets flying into the bond markets, especially deals. is priced right? what is mispriced? what will he be selling more of? michael: i do not know the answer. one of the important things is markets don't become systemic. one of the wings -- one of the ways you can think about that is markets are prone to draw down. for --ng we are watching they priced almost immediately. the stunning collapse is in line with what people expected in this type of event. the question now is the you get knock on impact's through the banking system who make this a much bigger event. that is the focus now at what

kind of policy response are we going to get? caroline: are you -- how are you embracing yourself -- how are you bracing itself for the unraveling of the u.k. and the eu? are you talking about domino effects? michael: absolutely. i mentioned the banking sector is one source of systemic risk. there is a channel potentially of political desk there are these -- antiestablishment parties pulling well. you can save the trump phenomenon is related to that. it was interesting over the weekend the put them is both did not rise. it wass the first test not an immediate connotation. guy: your worded that it could get systemic but we are not

there yet. i want to talk about the baking sector. how much more would take to push the banking sector to become systemic? we have ecb managing the market in europe. that looks like it is reasonably under control. how much more would it take to get us there? michael: obviously somebody equities are down. somebody banks are down as much 2009. more as an 2008, the banks are much safer now. they have gone through massive amounts of stress tests. banks has issues around the 10% mark. that is much higher than it was around the financial crisis. it is still pretty concerning compared with the group. on a motive basis, it is better than it was.

we know all of this information. that was the other risk around the financial crisis was the concern about if you had the wrist, who was vulnerable? -- had the risk, who was vulnerable echo we note -- vulnerable? we know policymakers can respond aggressively now. the only concern, like we had in february, equity markets become -- that is why policy makers will step in soon. caroline: michael, give me a sense of the reaction we are going to see from standard & poor's? it was the last ratings agency to cut the rating on united kingdom. u.k.e going to stop saying gilt market as a safe haven? question.t is a good the rating agencies have flagged the downgrades were likely in

this event. the one thing we would say that's something that surprised a little bit was when we looked at our measures of international capital flows was that international investment demands for guilds has increased significantly all the way up to the vote. yes, we saw a lot of hedging in the currency but we saw no attempt on the part of international investors to reduce their holdings in guild. i don't think it happens today, but guilds the concern is a little bit, firstly because there is the uncertainty. no one likes. there is also this other factor which is instilling weakness will be through into inflation. inflation has artie accelerated in the u.k. next line -- u.k. guy: can i finesse that? did you get out of this market yet?

michael is going to stay with this. we are going to talk about sterling. up next, the not so great british pound. we are going to take a look at the outlook of a post brexit sterling. it today, we are going to speak a willie walsh, mayor of london. -- willie walsh. mayor of london, preventing.

caroline: welcome back to "on the move." a great day in berlin. we'll see how the rest of the day pans out. dax futures looking integrated 1.8%. notably we've got talks come from the banks of the moment. ubs chief executive is speaking out -- sing capitalization is a little book value at some of the banks. spelling concerns around the banking sector. check out japanese that today hitting record lows on the 40 year. deepe going to be digging with juliette saly. juliette: caroline, thank you. volkswagen's price tag. settle u.s. lawsuits over its emissions tests. the figure is $5 billion more than previously reported and far exceeds any previous settlements

with an automaker. has named -- nestle has named the next ceo. in hans the rains to an outsider for the first time in nearly a century. snyder will join the company --m health care provider start of next year. worlds best performing hedge funds were driven by computers it seems. it links asset management reduces at -- mathematical models says one of its funds saw a 1.5% gain on friday. -- that is your bloomberg business flash. guy. guy: juliette saly.

it has been a stork week for sterling. the british pound has been driven into the ground along with the forecast for the rest of the year. it is up slightly this morning good michael metcalfe is global head of microstrategy's at global markets. he is still with us. fx fm on my bloomberg. i am taking it to one year out. the probabilities get quite interesting. this chart over here, the red is the implied probability of where sterling is. this is the analyst forecast north of 155. the whole thing shifts to the left a bit. there is still -- you look at options and how the market is pricing things. there's an upside probability for sterling from here. i have entered in -- i'm interested in why you think that is? michael: i think the first point is the fx options market is one of the few markets to really

discount the probabilities here. the events of being a big ball event. this chart, there is some speculation that will will ask a happen. will they trigger up? [indiscernible] you can figure out what the market probability of that is. you assume that if her some reason the u.k. do not eventually lead, you seem that sterling is back to 150 against the dollar. it shows what a low probability is period the other side, on the downside, there is 10% probability that we are below 1.20. guy: a fatter tail on the downside. >> we've seen this move already good when the analysts update the forecast in the next month,

this is going to be a massive skew on the last day. caroline: do you feel the rebound should be secure guy: where looking at relative -- should be secure? we are looking at relative strength. if you look at my chart, we are in oversold territory. we are below the 30 figure, only just 29 .7585. do you buy that technical indicator? buy a derivation of the technical indicator which is to think about investor positioning. one of the things we noted before the vote was that institutional investment had built up something of an underweight position. it wasn't that significant. if you look at the position of leavitt funds, what you see there is leavitt funds in aggregate on the currency

futures market was flat on sterling going into the -- one of the ways we read that is that investors both leavitt fund and institutional -- has capacity to sell more sterling. sterling would be able to be sold back to the massive movement. investors still have to act. they hold a lot of u.k. assets in their portfolios did given the ongoing desk portfolios. given the uncertainty, there might be still potentially or sterling sellers did one of the point -- sellers. one of the point i would make -- yes, sterling is cheap. against p2p a point that scares, you can get a 20% undervalued. guy: and to stay there for quite some time. michael, stay with us. thank you for your thoughts good

minutes away from the equity market open. of next, a look at some of the potential movers. it looks to settle with the u.s. with the emissions scandal. ♪

caroline: 7:54 in london. a gray day. is it a great day for volkswagen? shares called higher. it seems a call for the

emissions scandal is growing for vw. thanid to have jumped more $15 billion. $5 billion more than originally estimated. the company is expected to file california, it will be interesting to see whether it europe starts clamoring for compensation. amazing lose expected for some of the builders today, guy? guy: we are expecting european equity markets to open sharply on the upside given the recent volatility, maybe i should not be referring to that as a "sharp" move. through and goou through some of the things i have been looking at this morning. my first -- if i can spell that right. what you will see his goldman

--hs downgrading all of its nice to get these things right on the right day. house builders expected to open higher. ♪

>> good morning. i'm guy johnson. we are here in the city of london. caroline hyde is an the city of berlin. caroline has your morning brief. stability.igns of the selling of stocks and the pound and the ftse is called higher. is it time to buy or double down on shorts and a post-brexit world. the last supper. david cameron has two buses to see his european rivals. willie about to russia to speed up negotiations? volkswagen price tag grows as the carmaker is said to agree on a $15 billion settlement in the u.s. over emissions cheating. canada has put the beat of the scandal in the rearview mirror?

guy: let's talk about where we are with the futures. we are going to will -- we are going to open up 2% on the upside. a very strong open. i want to take you through and show you what is happening now with the market open. as you can see, this is the white line is the ftse. we expected to open to the upside. as you can see, we are climbing. yesterday we sold into the closing. climbed back a little bit. we see what the cac and dax does. we'll get some interesting pricing. house builders, it is going to be interesting to see what the bikes that's what the banks say. -- what the banks say. what the french are buying? volkswagen one of the big stories we have been watching. a decent pop in european equity fund the cash market. let's get the details with nejra cehic.

nejra: when i was standing here 24 hours ago, this was already. look at the difference now good we are seeing green across the industry groups on the stoxx 600. -- difference now. we are seeing green across the industry groups on the stoxx 600. energy among some of the best performers with the oil price rising today. the worst performers, they are still up 1% on the defensive. health care and utilities showing where we are seeing some risk appetite coming into these equity markets. let's take a look at how the gilt market is opening. yesterday we saw the 10 year yield dropped below 1% for the first time ever. that yield coming down 15 basis points. we are looking at it right now. it doesn't seem to be moving quite yet. much unchanged is what we are looking at. keep an eye on that 10 year yield.

let's take a look at some individual stocks we have been watching it i am starting with the u.k. banks, starting with barclays. this stock has lost more than half its value in the last 12 months. the shares fell more than 17% for the second straight day. barclays and ubs halted yesterday as it hit post crisis lows. we are waiting for that to open up. it is not all about brexit. where keep an eye on the slate. -- on nestle. the company named a successor to the ceo. it hands the reins of the world's biggest food company to an outsider the first time in nearly a century. nestle up 2.3% off the back of that. volkswagen opening higher. this is even after the price attack to settle lawsuits in the than $15jumped to more

billion. that is $5 billion more than previously reported. guy: thank you very much indeed. michael mccarthy -- metcalfe is still with us. michael, what is the equity market going to take its cues from? back.nks are bouncing day, theit to a five numbers look completely different. .ome of it is currency give us a sense of where equities are going to position themselves? how are they going to follow the news? are they going to be active? proactive? michael: fundamentals the not change in the last week. i think the thing that could have contagion from financial markets there were quickly is

the banking sector. the sector is key that we get some stabilization. the question is whether that stabilization needs more promises from policymakers are not. maybe we get the bounce because it is a little bit oversold. it is important that we get reassuring words from the bank of england, reassuring words from draghi. guy: when is the policy response coming? what is the scale you are looking for? michael: some of the market , theyhave been backed cannot repeat that trick because of that was a one-time shift to a new policy. japan.ce is we focused on japan before brexit. the yen and nikkei have accentuated the need for the japanese policymakers to do something more and to take that policy response to the next step.

caroline: michael, talking from japan, shifting our gaze to the united kingdom, only one single stock is down on the ftse 100. it is a gold stock. look what is leading the charge. house builders trading higher. because lscbout m&a has been i doubt this has been i've up. are you into spitting that deal will get done? anticipatingre you that deal will get done? michael: -- actual evidence of the uncertainty on the up real economy. we have been using the m&a tracker on bloomberg. at the massive capital that is the phone into the u.k. a curious thing so far, it's a

that much evidence is year that m&a flow -- u.k. company has been the target of the inquirer. it hasn't fallen off that much. was stille lcd ongoing throughout this even though brexit was a possibility. -- even though brexit was a possibility. we will focus on the pace of m&a flows coming into the u.k. evidence that exit has changed real economy dynamics. guy: can we come back and talk about the policy response and what is happening in japan? draghi is going to be speaking and 55 minutes. what does he need to say? michael: draghi is the master of communicating with the markets their intention to do whatever it takes. it is that kind of like which. i suspect he will very forcefully say the ecb is there to support the banking system

and there to backstop any potential dangers. shields. is japanese 40 year, very aggressively over the past few days it the curve has been flattening for some time. this is the european curve starts to look like that? does the german curve start to look like that because of what is happening with brexit? draghi is going to be worried about brexit, but in some ways it is a piece in a wider puzzle. michael: there were many risks that the markets faced this year. brexit was one of them and it has realized. a euro this changes that -- that a low growth, low yield environment -- so far, not having much success. that is why we are seeing -- you see the impact of the curve. japan a vacation story -- the

nification story is everywhere. weoline: a phenomenal moves have seen in the probability of a rate hike versus a rate cut. there is 0% of a rate hike all the way out until november. cut beingrate affected in to a tune of 22%. willie get a rate cut from the united states -- will we get a rate cut from the united states? michael: it is incredible how in u.s. inings particular. the reason i highlight the u.s. is the fundamentals in the u.s. are actually a little bit stronger. if you think about where the fed is originally forecasting rates this year. i can september 2014, the duck blocks had the rates at 3% this

year. you look at the economic outcome -- the economic situation is not that different. the thing that is different is the global environment and financial conditions. response expected fed that's not really the real economy. look at the us-led market. generally the labor market is pretty tight. we're beginning to see signs of inflation. also remember, it wasn't that long ago, yes, fed officials have talked a lot about brexit. the officials have said clearly that they thought the interest rate market was underpriced for the chance of rate hikes. if brexit changes that a little bit, but unless you get a lot of systemic risk, it is a real puzzle to imagine the fed could cut rates. guy: michael, stay with us. michael metcalfe from state street.

draghi speaks and 50 minutes time -- speaks in 50 minutes time. draghi is going to leave early as well. that speech is coming up very shortly. it could be extreme the important. the road ahead for a vw. we are going to break down its growth emissions bill next. later, we are going to hear from willie walsh. the mayor of london joining bloomberg throughout the day. ♪

guy: welcome back. it is a: 12 in london. that's it is 8:12 in london. if you're up early in new york, what you are seeing is a bounce in european equities. that looks in a normal world, that is a good, solid equity markets start. the problem is we have come a long way and a very short time. as a result of which, maybe we should not be reading too much into this. there was always going to come a week in time when the markets would recover a little bit. we will wait and see what is happening here. the ftse trading it 168.6. the equity markets are seeing a bit this morning. on a day the golden sex downgrades them does goldman

sachs downgrades them. here is bloomberg first word news with juliette saly. david cameron is set to face his fellow european union leaders for the first time the shock exit results. u.k. prime minister will enjoy an awkward dinner later after his efforts to calm the u.k. public failed to stop the pound and the country's biggest banks from slumping. the ratings agencies that had their say on the referendum thesion, s&p has a strip u.k. of its aaa rating, lowering it to not just to aa. aadropping its rating to from aa plus. >> we do longer think the institutional strength of the u.k. is what we have been used to be for.

disregard the predictability, stability and effectiveness of policymaking. that is no longer a strength. we think the funding risks for the u.k. isities -- externally dependent on capital flows. juliette: bill gross has said the odds of a u.s. recession may be as high as 50% following the brexit decision. the fund manager also thinks the yields on 10 year u.s. treasury that could drive up the value of the dollar and increase the odds of a recession . he says while britain represents a small part of the global economy, a brexit will slow trade, immigration and growth around the world. if brexit wasn't shocking enough, england's -- is also out of your. they were surprisingly beaten in a european chairmanship against i -- championship against iceland.

people, iceland is the smallest nation to qualify for a national tournament. global news, 24 hours a day, powered by 2600 journalists in more than 120 countries. you can find more stories on the bloomberg at top . caroline? caroline: thank you very much indeed. we try and get over the embarrassment -- we are going to return to u.k. politics briefly. -- saying he stands by his decision to hold the referendum. .e are in a prolonged of economic justice. he says it is crucial to provide fiscal stability. talk of the government stepping in and help to support the government -- help the economy. we don't have anyone to help the

government while david cameron is leading. news.talk about corporate the cost of the emissions scandal is growing for volkswagen. camp is saidaid -- to have settled on more than $15 billion. the company is said to settle the -- in san francisco. give us a sense chris of how significant five ilion dollars actually is. that's $5 billion actually is. the $15 billion figure, 50% more than what we were expecting earlier. that is a huge settlement in the u.s.. it is a big hit. that gets volkswagen up to its limit in terms of the money it set aside so far.

works to a 13n billion euros. that gives them a buffer of 3 billion euros to cover the rest of the world. -- thepe they have potential if the risk here is once european consumers see the kind of settlement they got, the consumers got in the u.s., they are going to want some of that as well. me -- let me let bring you into this conversation. chris makes an interesting point. regulators are not going to allow that to happen good from an investment point of view, getting this done is as important as the numbers -- it gets management the ability to say we focus on the business if we deal with ticking costs out and the other things they need

to do. michael: trying to get up desk get rid of uncertainty -- get rid of uncertainty is what they have been trying to do. you don't know which way the regulators are going to go. much -- they had a similar issue on a much bigger scale with exit. -- with brexit. caroline: where worried about europe boosting in the amount. morningstar has this entire scandal costing $55 billion. isn't that a phenomenal amount? is that something we can see happening to vw? >> that would be a high amount. what the other guests have said is that the european regulators have taken a softer stance toward volkswagen than they have in the u.s. the u.s. has been turning the screws on volkswagen. in europe, they have been pretty soft. they basically have to update the software in certain cases,

at a new pipe to regulate airflow. that is basically what they have gotten away with. in the u.s., the reason they are being hit with such numbers is because the regulators want these cars off the road. saidu regulators have these cars are ok, they are fine. you can fix them. in the u.s., they said there is no agreement to fix the cars. that is why it is so much more onerous in the u.s.. that is why they have to come up with a big number to entice owners to get cars off the road. they want to give them back to volkswagen. that is the difference between the two jurisdictions. will wrap up the conversation. michael, i want to wrap things up with you. draghi speaks shortly. we're waiting to your what policy responses from the u.k. gives a sense of what you think the policy responses going to

look like. michael: in the u.k., we'll get rate cuts. the market is price for rate cuts. they will because is at first, because all we've got our forecasts what the economic impact is going to be, but we have not seen any real data yet. they are going to be cautious at first. it will be a small rate cut. from the ecb, because they threw everything at us at march, it is going to be words. just a reinforcement of whatever it takes. it will open up the possibility. guy: michael, it has been great seeing you this morning. michael metcalfe joining us. we are going to go to central portugal where mario draghi is due to take a speech. we think that is going to happen around 9:00 this morning. the policy response continues to be critical on how the market moves from here. this is one of those big

features you cannot ignore. we'll have a live on bloomberg television. ♪

guy: welcome back. george osborne is making some comments relating to the referendum. he stands by his decision to hold the referendum. it is critical to provide fiscal stability. candidate can

become a new tory leader. my role depends on the new leader. caroline. caroline: fascinating stuff. been alwaysne has someone who wanted himself in the running. we'll see how he performs. let's get back to central bank policy. elliott gotkine joins us where draghi is due to speak. what do we expect him to say while he remains in portugal? elliott: caroline, the tranquility just outside of lisbon is the stark contrast to the turmoil going on around the world. mario draghi cannot ignore what is going on. policies, there's been speculation that the ecb will cut interest rates. in the past, he has said this is the brexit votes that the european central bank will continue to work to try and boost inflation in the eurozone.

when we might get from him now that the challenge of getting inflation back to where it ought to be in the eurozone has become even tougher, he might be calling upon a government to do more. he has expressed frustrations about placated reforms. bazookaven brandish his , perhaps do a little reprise of his famous do whatever it takes to preserve the euro speech. such is the situation right now. guy: elliott, great stuff. elliott gotkine joining us from portugal. it looks sunny, doesn't it? policy response is absolutely pivotal. we are going to wait and hear exactly what mark carney is going to do. mario draghi a pivotal piece in this puzzle. carney, yeley, and draghi moment -- yellen carney are not going to be there. draghi is.

it is going to be truncated appearance at his own forum. live draghi coming out from portugal at 9:00 a.m. london time. ♪

guy: welcome back. you are watching "on the move." we are 30 minutes into the trading day. these abounds with european equities. -- decent bounds with the european equities. the banks aren't that strong this morning relative to the other sectors. let's talk about politics because we are trying to figure out what politics is in the u.k. at the moment. david cameron, facing eu leaders for the first time since the vote. the political story at westminster though, absolute fascinating. we have been tracking every move

during the last few days. caroline: george osborne, speaking on the radio here in today. earlu.k. early on he was on the wrong side of the results in the referendum. but on the radio this morning, he was talking about what his role is going to be. he is currently the chancellor and it will depend on who the new leader is. theresa may, will she be given the nod? jeremy hunt has been talking today as well and he has been talking about a second referendum, but not exactly in the way that sounds. guy: don't get too excited yet, folks. caroline: this does not mean another chance to answer europe, yes or no.

it is whether you like the agreement with brussels or not. guy: it was going to reject that, though? anna: i'm not sure what the ballot paper would look like in that situation. and then of course, there is the labour party as well. guy: we are running out of time a little bit. so, we will come back to the labour party later. given his constituency, fairly annoyed about what this outcome looks like. he is more in line with these leadership at the moment. anna: we will probe him a little bit more on that, and ask him about jeremy corbyn. guy: what time are you talking to him? anna: 10:00, u.k. time. guy: thank you very much.

anna: let's bring the political discussion to berlin now. heads tos as cameron brussels to meet with the eu divided who remain on how exactly to show the u.k. the door. with us now is a representative in germany. give us a sense on how germany is thinking at the moment. it seems to me that the germany is looking to give space to the united kingdom, while france and italy are talking about a quick exit and a quick invoking of article 50. >> it is only natural that after an event that happened must make that there are several opinions around. we have to find a common approach and that is why we have this summit of european leaders. but the chancellor agreed to with the french and italian leaders was that there should

not be a cliffhanger. we don't want to wait too long and that is understandable because we all have an interest. this is not the way to look into the future. we need to have a decision on how to go forward. yielded andum has result, not the one we wanted or the one we had hoped for, but it is a clear result and now we have to carry on and find the way forward. anna: is two months too long? they are not talking about replacing the leader until september in the united kingdom. >> that is now up to the u.k. we will see when they will trigger this article 50 procedure. but of course, there is a certain expectation that this should happen sooner than later. the four presidents of the eu institutions that it should happen as soon as possible, which is also caused an ost been effective.

but merely politically, we need to have a union that is capable to act. we have issues on the table like migration and security and we cannot be in limbo. anna: is limbo until september too long? richard: that is not for me to say. that will be decided today. hope we will come to terms rather sooner than later. anna: where he is that we could see a domino effect with the rest of the eu. what about cohesion within the 27 countries? merkel was talking about the need for cohesion. is there going to be a two speed europe, a two integration stance? richard: at the moment, there are different models. we need a fruitful discussion, regarding how to carry the european process forward.

but we should not be afraid of the future. a good advisor. i think we should have self-confidence. the eu is still a role model and a beacon of stability if you compare it with the rest of the world. and we want to carry on with this. the question of how we develop, we have to decide by the 27th. but i don't think we should be afraid of our future. europe is strong enough to get through this. he be afraid of his future? richard: certainly not. and with him as president, we are confident. anna: does the eu blame itself for what happens? richard: many have had to blame themselves for what happened over the last years. without saying that the decisions made by brussels are decisions made by politicians

from all over europe. i think many people will now have to ask themselves whether over the last years they did europe if they have put in the right light. now we have a situation and bust look into the future, not into the past. we must look into the future, not into the past. anna: some soul-searching. later today, we will be talking about the business side of brexit. the former bank of england governor will be speaking to bloomberg. that is next, amid the fallout from the brexit vote. the flip 100 has remained -- the ftse 100 has remained surprisingly resilient and we .ind out why ♪

>> we have questions for our british friends. theall of us in europe, in european union, and indeed for the world at large, let's decide. i'm trying to find a word that describes our feelings. i was just chatting about this a moment ago. i think probably, the best word would be sadness. >> i think a terrible mistake was made.

they presumed that if they have the referendum, the issue would be closed very quickly. and the political problems they had as a consequence of the narrative, they thought they would be pushed aside. they were mistaken. any people are going to lose their jobs. it is a terrible outcome in all respects. >> it is not absolutely clear that you would have to do something today. that might look like panic. maybe you should be thinking about the cut in rate. maybe you should be thinking about a purchase of corporate bonds. that takes a while. guy: the central bank response that we are seeing -- remember, draghi speaks very shortly in portugal. that is coming up in a little more than 19 minutes time. i want to show you what is happening around the world. the gmo function is fantastic on this. they gives us an idea of the

scale of the moves that you can see. with closed markets excluded, the ftse 100 is up by 2%. the dax is up by 1.26%. obviously, this was really showing the scale of the moves and the coloration was really sensational. japanese 10 year continues to be very well bid, the four basis point move there is fascinating. switzerland is moving in the opposite direction. we are also seeing a little bit of selling at the backend oof the japanese curve. offer thiso an morning, trading down by .7%. that gives you a walk around with what is happening with the markets. as i said, the gmo function, it

is great. let's get everybody caught up with what you need to know with the bloomberg business flash. tagette: volkswagen's price over the rigging of emissions tests has jumped to $15 billion. the figure is $5 billion more than previously recorded and far exceeds any previous order. closere would bring vw to the $17.85 billion it has set aside to cover the cost of the scandal. nestle has named its next ceo. moved these move has biggest food company to an outsider. schneider will join the company on september 1 and start as ceo at the start of next year. performing hedge funds

were driven by computer assets, it seems. one of the funds saw a 5.1% gain on friday. trillions where wiped from global equity values after the brexit boat left britain in global and political paralysis. that is your bloomberg business flash. caroline? caroline: that is amazing, that $4 trillion figure. eu leaders are this morning, holding crisis talks to mitigate the follow from the brexit vote. the pound is up, but slumped sessionse two after the decision. the vice president said the outlook remains positive. >> there is certain turbulence, which i think was unavoidable. whetherquestion is

there will be a substantial change in economic growth ratios for the eu. i would say, i would not rush to this conclusion here. just stick with the 1.7%. at this stage, of course we are. we will have to see for a couple of weeks, if not months. we will see when we will get past this stage of turbulence. >> i'm going to ask you some broader questions relating to the brexit. do you see any opportunity for the u.k. to remain in the european union? >> it is a decision of the member states. the procedure is triggered by the u.k. filing a notification an article 50. it is for the u.k. to decide when and if they are triggering this. >> so, if the u.k. does not trigger article 50, then the

u.k. could remain in the european union? >> well, it is really for the u.k. to decide. we respect the outcome of the referendum, but formal steps have to be taken by the british government. >> what do you take of all the pressure on juncker to resign? >> this is a result of the british referendum. this is also a question for the british government. >> do you think david cameron could have done more to avoid these results? >> we really regret this result. but weect this result, will not go into some kind of a blame game. this is for british politicians themselves to make conclusions. >> that is an interview from the european commission, following

britain's unexpected vote to leave the eu. ftse 100, that has been relatively resilient, falling less than half as much as the broader 250. we have been analyzing the trend of. i understand the idea that you becausern more bullish they are largely globally exposed in terms of their revenue streams, as a result of which, you would have thought the devaluations look better. doesn't it kind of depends whether or not you are a u.k. investor or a global investor, though? >> yes, exactly, guy. it is all about the pound being at a 30 year low. jpmorgan and socgen have said, buy. it been moreit has

important that the foot thtse 10 is not reflective of the u.k. economy. if you are based outside of the u.k., it is all about hedging. hedging that pound slump, and then you can benefit from a market that is really not a u.k. market that will help you benefit from any revenue translation effect from the lower pound. anna: i mean, quite phenomenal in terms of the moves we have seen. which companies can you highlight, which will benefit from a weaker pound? in which are most -- and which are most exposed? >> we have huge companies in the ftse 100 and they are trading at record highs. they actually rose every day since the referendum. even rolls-royce came out today saying they are going to have a 400 million pound translation benefit, if the pound stays at

this level. and that is just this year. so, some big names that export worldwide. they just happened to be listed in london. guy: sophia, the market is in bid this morning. bouncese of whether that is a sustainable? >> guy, it might be too soon to tell. some people are clearly buying. we have seen some inflows into u.k. equities. i have spoken to some investors who say, this is the time to buy. but i think the sentiment is still that it is too soon to tell. you never know when we could get another shot from the u.k. government, or maybe policymakers will disappoint in their support and markets could take another leg down. it is all about waiting, being cautious, and playing defensive. guy: it certainly is.

it is interesting to see, the ftse 100, up by 2%, but the 250 is up by 2.8%. thank you very much indeed. up next, as the brexit vote sinks in for all sectors, we will delve into the details regarding the pharma sector. ♪

anna: the sun is starting to

shine in berlin. you are looking at the brandenburg gate. rwe is your best performer on utilities. vw is also pushing highs, despite the fact that they will likely the $15 billion in charges coming from the united states. in a few minutes time, a german politician will address the european parliament at the start of a debate on the u.k.'s exit from the eu. 30 minutes later, angela merkel will deliver a speech on the same subject. and at 1:00 p.m. u.k. time, a meeting of eu leaders will begin in brussels. one hour later, the european commission will also discuss brexit. guy? guy: now as markets react to the brexit, investors are taking stock of their portfolios. oneof performer since --

out performer since the boavote is the pharmaceutical sector. in many ways, the pharma sector great attributes. two things you probably really want right now. >> exactly, guy. the fundamentals of the industry have not changed overnight. they have not changed with the vote at all. guy: people still get sick and still in whatever it is these companies are producing. >> as you highlighted, they are global companies. for example, gsk gets most of its sales in the u.s., but it reports in pounds. so, it will get a benefit from the weak pound. anna: indeed, the likes of rolls-royce today, syin they saying they could see a 400 million pound uptick.

what companies could benefit most from this weekend fx? >> so, gsk, because as i have said, they report in pounds and much of the revenue comes from the u.s. but also, astrazeneca, they have a high cost base in the u.k. with the week found, they will get a benefit from that as well. guy: what will happen from the regulatory side of this? from a company side, how will this work? and the regulator has an issue they have to deal with as well. >> the european medicines agency is based in london. they are the regulator for the european union. we don't know what is going to happen with them. and for the sector, they would like it resolved as quickly as possible. the u.k. does have a regulator and they could set up a system that would pretty closely replicate what they get with the ema. but the question is, what kind of relationship will the u.k.

have with the eu. guy: we have been talking about banks shifting and going somewhere else. would it make sense for the pharma sector to be looking internationally? >> i don't know, i think for the most part because they are global. it is fine to be based in the u.k. i think the question will boil down to brain capital, in some ways. with people want to come and work in the u.k. from other parts of the world if the u.k. is perceived as hostile to outsiders? guy: an interesting question and we will watch this story carefully. this makes you wonder about the whole ethos story as well. do we need to move on? that story will come around. stay with bloomberg television, full coverage of draghi's speech in portugal a few minutes

away. a little bit later, we will be speaking with willie walsh. today is a busy day on bloomberg television. stay tuned. draghi, up next. ♪

francine: sterling holds its decline. the pound steadies as european stocks rebound post-brexit. draghi takes the stage. the ecb president is a speech in portugal. we bring you those remarks live. eu leaders meet in brussels. cameron crosses the channel for his first encounter with his old allies to will we see standoff or conciliation? -- old allies. will we see standoff or conciliation? ♪ francine: welcome to "the pulse." live from bloomberg's european headquarters.