guy: welcome to "on the move." we are counting you down to the european open. i am guy johnson and i am alongside caroline hyde in berlin. this is what we are watching. no way back. merkel says this is no time for wishful thinking after the brexit vote. david cameron tells european leaders it is their fault and theyean leaders look like are negotiating great it is hard to gauge what is going on here. they see the bank of england

cutting rates. when will mark carney act? terror in turkey. blamed for state is the attack at istanbul international airport that killed at least 36 people. what islk you through happening in terms of market action right now. .e have seen a rally maybe starting to show signs of having legs here. asia has been up quite nicely. let's talk about what is happening with the european equity markets right now. as you can see, we are around 1.3%. looks like we will see another positive bounce today. yesterday, the footsie up -- ftse up 2.64%. caroline: we are seeing that following over to asia. this is your msci asia-pacific index, showing a significant uptick at the moment. the biggest move that we have seen for asian stocks within the week. we are seeing it at about 1.7%

overall. fascinating moves across the board when it comes to some of the key stocks. brent crude up. speak,o pound flat as we but we have seen the pound generally under pressure today. guy: let's just run you through. the turkish market is in the process of opening right now. let's talk you through some of the numbers we are seeing. falling, led by turkish airlines. the turkish airlines stock is down by 3.2%. you need to take a look at the .wo-day chart we did see a bit of a move yesterday. the market is getting used to these kind of attacks. on this scale, the market is already kind of their in terms of pricing terrorism into the turkish market. let's get you caught up on that

story and everything else you need to do -- to know. coordinated attacks at istanbul international airport have killed at least 36 people. the prime minister says islamic state is likely to be responsible for the killings. the attacks, which injured about 150 people, went off in rapid succession at the airport around 10:00 p.m. local time. turkish airlines says the airport has reopened for flight. european union leaders have told britain there is no turning back after the country voted to leave the bloc. angela merkel said, "this is no time for wishful thinking." her comments came as david cameron used his last eu summit to express disappointment in his failure to win the referendum that he called. >> the tone of the meeting was one of sadness and regret. our partners in the european as weare generally sad, are planning to leave this

organization. that was the tone of the discussions tonight. >> in the run-up to the eu referendum, mark carney wanted -- warned that a vote for brexit would trigger a recession. now it seems it is almost on the way. almost three quarters of the economy will slide into a recession for the first time since 2009. a majority also predicts the bank of england will add more stimulus, including cutting interest rates in the third quarter. day.l news 24 hours a this is bloomberg. thank you very much indeed. the pound has resumed its declined today after rallying yesterday for the first time since the u.k. voted to leave the european union. in brussels, prime minister david cameron is his last eu summit to express regret over the result has european leaders

said there was no turning back from brexit. now there is for new pressure to trigger article 50 so that negotiations can officially begin. david cameron maintains that that remains a job for his successor. >> britain shall seek and europe should see the closest possible relations as britain leaves the -- over trade, who operation cooperation, security. it will not and should not turn its back on your -- on europe. caroline: ryan chilcote is in brussels. you have had a very long day and night. the 27 eu leaders gathering the den -- again today. what is on the agenda? of, -- hug, a.b.

18 building exercise. we can expect a robust discussion on the future of the european union itself. they recognize that what happened in the u.k. could happen in their own countries. there is a real dissatisfaction amongst electorates around the eu with what is going on there. all of the 27 remaining eu leaders want to get reelected. they are politicians. so i think you will see some serious calls for reform. they are not really on the same page when it comes to how that comes about and what the future of the eu should look like. a lot of questions still need to be answered. thank you very much indeed. we are going to leave it there. we will come to ryan very shortly. let's get to our guest, patrick armstrong. -- a group hug possibly today as they try to figure out what happens next. i am not sure they are necessarily on the same page, but that is a different discussion. let's talk about the markets. patrick: sterling has further to

fall. at the endiscussions of september. worst case, we are still at the 11th hour where the u.k. is getting kicked out and there is no trade deal. such a binary thing right now. access to the single market, but only if we can control immigration. on the other side, no access to the single market. guy: so another binary event coming up. this chart here, we are trading at .133 right now. this is the guilt price. -- gilt price. significant decline in yields. walk me through that price. patrick: i think that is pretty fair right now. that is pricing in the bank of england. 50 basis points and the possibility of qe. if you get both of those, you will see yields fall further.

guy: ok. caroline: the -- are you anticipating a recession in the united kingdom? patrick: it is not a certainty, but it is the base case right now. there is a hit to confidence with the consumer. capital investment decisions are going to be deferred. without a real end in sight, i do not understand how these decisions get made. the united states, you have a lot more certainty there and this is going to be an ongoing headwind for all of europe for the next year or two years. guy: all of europe. patrick: this is just as big for europe. the u.k. is a big trading partner. europe cannot afford to lose the u.k. as a buyer of goods. guy: do you think the eurozone is at the right price right now? andick: we are short euro dollar. you want to be long yen because

there will be central bank intervention at some point. u.s. interest rates are on hold nine -- now. it is unlikely to see them hiking. we will have a stronger dollar and weaker global economic backdrop. concerns about the economy going forward. give me a sense of volatility going forward. you said the pound is mispriced at the moment. the fear gauge in the united states and europe, we see them both come down. sinking volatility. is that going to spike higher? patrick: i do not know if it necessarily well. i think people were overestimating his and now we are underestimating the long-term consequences. i do not think it would be incredibly volatile, but we might be ranged with a significant volatility. i do not think we will see the volatility that we saw on monday. i would not want to be sure the

vix because there is still a lot of uncertainty. patrick armstrong joining us. of next, an attack on turkey's airport has killed at least 36 people. we will go live to istanbul.

as you see, we have

optimism on the futures. dax futures up 1.6%. across the board in europe, looking set for the green. let's get to the bloomberg business flash. >> thank you. the brexit may cause carmakers about 2.8 million vehicle sales through 2018. worldwide deliveries may rise to just under 90 million this year. about 200,000 fewer than anticipated before the referendum. that is according to research at ihs. moody's investor services has lowered the outlook on 12 thenesses, predicting brexit will affect their profitability. lowered lloyds banking group to stable from positive. toyota has recalled 2.80 7 million vehicles over a few of the mission control unit. it includes corolla models

and 2015.etween 2006 injuries, of crashes, or deaths. that is your bloomberg business flash. guy: thank you very much indeed. coordinated terror attacks have killed at least 36 people at the stumble international airport. our executive producer of bloomberg tv in turkey joins us from the stumble. talk to us about -- from istanbul. talk to us about what happened. give us updates on what we need to know. >> no one has claimed responsibility, but the turkish prime minister said early indications point to the islamic state. turkey is dealing with terror on two fronts, one with the islamic state and the other with pkk. year, almost 300

people have died in terror attacks in istanbul. , at turkey'sht biggest airport, a terrorist attack took place. it happened right outside the security checks outside of the arrivals hold. caroline: it is always painful to have to read the market reaction in this, but turkish stocks have started trading and it does seem as though the airlines are taking a hit. >> that is right. istanbulle opened -- opened just over 10 minutes ago. it is down slightly. turkish airlines is down more than 3% and other stocks in the travel industry are falling a similar amount. after the explosion last night, its games against

the dollar. currently, it is strengthening against the dollar, like most emerging-market currencies. thank you very much indeed. still with us is patrick armstrong. turkey has its own issues. it is representing a number of issues that the emerging markets face right now in terms of what is happening economically and politically. give us your sense of what you see when you see an event like this. the market is getting used to events like this. put this in the context of your investment portfolio. patrick: i think the geopolitical risk, the market sees right through it. you will see a hit on a lot of companies in turkey. these would be travel companies that are related to turkey. in terms of contagion risk, that does not happen anymore. investors are trained to almost ignore these things from an investment perspective.

emerging markets are going to be hurt by the strong dollar story. as you get weakness in europe and possible intervention from japan, the strong dollar is good news for emerging markets. that is something that will hinder the rally for emerging markets. with a weak u.s. dollar, we start to see that reversing in the second half of this year. caroline: if we were going to look at credit, would you be enticed by some of the yields of companies going on in the emerging-market? at the moment, the search for yield is going to be ongoing. patrick: that is going to be the theme for the second half of 2016. assets are pretty much zero across the board right now. there are some places you are getting very wide and significant yield pickup. that has come with some risk. it is probably reasonably adjusted.

i am preferring the defensive equities in the united states that do not have exposure to .urope the telecom companies, the health care companies is where i am more attracted to the yield right now. guy: you are just hiding from europe, aren't you? patrick: last week, we were long europe. guy: how did you position yourself in the run-up? patrick: i was talking about buying right now. i would have been shorting because they would have been a higher interest rate environment and the recovery. investment being delayed in the u.k.. guy: why the you think you were wrong? patrick: interest rates in stocks, i am not worried about getting higher. it is a different market. guy: i am curious as to your mentality. a lot of people within a half-mile of here were positioned wrong.

most people thought it was going to not happen. patrick: we were positioned for the remain. -- wehat, we sign up to saw an uptick in the cyclical recovery. has been wiped out with the exit. i think that is the story. guy: how quickly could you reversed that position? patrick: how quickly can the environment change? guy: in terms of executing and getting things done. patrick: we did a 70% for folio turnover on friday or monday. the exit vote has created recessionary and no interest rate hikes. we were expecting no cyclical votes and to continue hiking this year. caroline: where are you most bearish? is it the banks? moody's cutting the outlook. i was surprised by hsbc being

cut. it seems that international banks have not been hit as hard. patrick: if i were to be involved in banking, hsbc is what i have -- i would look at. we still have some european .anks that are incredibly cheap very low on tangible book value. i would much rather being european banks then u.k. banks. unless you get a cyclical recovery, it is hard to see sustained value. aboutare big worries solvency that are probably isrstated, but i think it negative. guy: a few minutes away from the market open. adidas, we look at probably reacting to nike.

we will talk about that in just a moment. the market open in nine minutes time. ♪

caroline: 7:53 in london. 8:53 here in berlin. the clouds are rolling in. looks prettyes happy. what a hit we have had over the last few weeks. the open a little bit higher.

adidas up about 1%. nike saw a significant selloff to the tune of 7% in late trading. sales missing estimates. concerned that some competitors, such as adidas, snapping at their heels. could adidas the in the green, as many hoped they have managed to steal market share from the competitor? dixons also higher this morning. the company says it is too late to say on brexit. keep an eye on what is happening with itv today. the houseo watching developments. a whole series of upgrades and downgrades. up herede house prices on year. that is pre-brexit. we will talk about that in just a few minutes time. european equities higher again. we rose strongly yesterday. are you surprised we have another leg higher?

patrick: there is followthrough today, which is surprising. it is retracing a big chunk of the selloff. guy: will there be people buying cheap u.k. stocks -- companies? patrick: there may be companies in play. there are talks with deutsche itv.e and unique capital inflows on the other side of that. guy: you think sterling gets weaker from here? some of these stocks will be quite interesting. patrick: weaker sterling makes them cheaper. the company's in the u.k. that i would be looking at our like glaxo and companies that have the foreign revenue. content it isthe producing and the selling around

the world, maybe that is part of the story. coming up, it is the market open . looks like another positive start for the equity market. the market open is now four minutes away. that is coming up very shortly. ♪

guy: good morning, you are watching "on the move." caroline hyde is in berlin. she has her morning brief. caroline: no way back. noela merkel says there is time for wishful thinking after the brexit referendum. david cameron tells european leaders that the leave vote is their fault after they already aren't negotiating. economists tell bloomberg that the u.k. should get ready for a recession. they see the bank of england cutting rates. when will mark carney act? terror in turkey. islamic state is blamed for the

attack that killed at least 36 people. we are live in istanbul. or six secondse away from the equity market open. the could see another leg higher . that is what we are anticipating. we are coming off a little bit into the close yesterday. see, it is moving to the upside quite strongly. it reasonably positive market coming through for european markets. that in context with yesterday, when we rallied up. is fitzy is can -- ftse continuing to push ever up. cac is nowsee, pushing higher as well. we have a positive story. e is up at the get go of trading. here is nejra.

at the industry groups within the stoxx 600, all are gaining at the moment. completely green, as it was in asia. financials look like the best performers at the moment. that is followed closely by energy. lagging behind, though still gaining, consumer staples followed by i.t. this riske are seeing appetite as investors seem to be speculating that the global central banks and policymakers will contain the global fallout from brexit. let's take a look at the u.k. 10 year yield. basis opening up two point. two days ago it fell below 1% for the first time ever. and see someve stocks we are watching.

i wanted to start with a couple of u.k. banks. terday news history -- yes that munis lowered the ratings for barclays and hsbc. lloyd's and principality were put to stable from good. we are looking at barclays and hsbc. second day of gains for the bank after the tumble that brexit.d hsbc followed as well. numbers missed estimates because of concerns that competitors will have traded growth at nike. adidas is one of those competitors. guy: let's run around the gmm a little bit. gold is trading up.

you can see gold rallying. also trading to the upside as well. ruble is gaining some traction. patrick, you would be selling this rally, yes? patrick: selling into the rally, yes. it will have a lot of opportunities over the next couple of months. it will nothing really change over the next couple of months, just perceptions of things. some policy members may or may not be happening. guy: you talk about that. there will be ups and downs. as the market directional at the moment? talk about volatility, walk me thorough how you think about this market? patrick: so much is lack of uncertain the right now. the decisions and turn on capital employees for companies are going to go down in europe.

rally, it will not pay off in the long term. in the short-term, momentum may win out. money is coming back in to find cheap stock prices. i think the recessionary forces will drive equity markets going forward. guy: caroline: i want to draw your attention to our viewers that thomas cook is currently the worst performer on the stoxx 600. i have that on my screen. it is down by 3.7%. the reason is concerns over travel. the is especially after tragic events in istanbul. do you think cash will remain on the sidelines, to a certain extent, among ongoing political instability? we see ripple effects are at the eu, as it remains?

cash willventually, find a home. these will be resulted months. people eventually forget the prices that were in at the moment. will find a they home for that in the united states more than europe right now. of the versus european. if you're looking for safe havens, the treasury is still yielding 1.4%, while in europe you're getting no return. guy: talk about what is happening -- why not buy european stocks that have global topline? patrick: make sense, definitely. especially in the u.k. with sterling being very weak. if you are a mobile company, you are lumped in with europe. you are benefiting from a global economy. it is --global exports make sense. companies that have foreign revenues, definitely.

guy: are setting of a barbell performance here? seeking ahat you are little bit of safety. i am wondering if -- patrick: we have not completely moved into safety. we just balanced our portfolio. we moved into some safety, high-yielding stocks. haveare global and multinational revenues. aree companies, there weaker environments in europe. patrick, talking about european companies with international presence -- you heard from vodafone today saying it might move its headquarters. a lack ofpecting passport into happen within the u.k.?

patrick: it will be something that is talked about. defers investment decisions. it great uncertainty. these are the kinds of things that create a recession. people talk about what they might have to do. those deferred decisions from other people, and some consumer decisions. it isafone does this, uncertain. if you have a job of the vodafone, you'll probably not spend so much. this is the real knock on the economy of the u.k. guy: people think about vodafone is being headquartered down a new very. -- newberry. it is not. it is headquartered in heathrow. leaving headquarters would be really easy. it is a handful of executives and support staff. that is it. that is the kind of story. people are getting excited about thousands of jobs being lost. it is not leaving. it is potentially moving the

suite three different jurisdiction. patrick: it is -- no one knows the real consequences. the hard data coming out on consumer confidence, things like that, are much more important than soundbites about relocation of a headquarters. that is where the real meaningful information is going to come from. much,hank you very patrick will stay with us. later, we bring you an interview with u.k. foreign secretary. that is on midday on bloomberg. up next, 2018 on the calendar. the is when futures price next u.s. fed hike. we talk about what the current he does, next. ♪

guy: 8:11 in london. let's check the stock markets. the rally continues. why? we will talk about that in the upcoming hour. the ftse is trading up. some of the house builders are rising quite sharply. we will continue to monitor the situation. it remains very fluid. let's gige up to speed with juliette. juliette: coordinated attacks

that is dental's and -- is anbul's international airport. the islamic state is said to be possibly responsible -- most likely responsible for the killings. turkish airlines says the airport has now reopened. european union leaders told britain there is no turning back after the country voted to leave the block. angela merkel said this is no time for wishful thinking. her comments came as you give prime minister david cameron used his last eu summit to express disappointment at his failure to win the referendum. david cameron: the tone of the meeting was one of sadness and regret. our partners in the european union are genuinely sad that we are planning to leave this organization. that was for a much the tone of the discussions at dinner, tonight.

e: in the run-up the referendum, bank of england governor mark carney warned that a vote for brexit would trigger a recession. now, it seems it is almost on the way. about three quarters to a survey after voting to leave the eu said the economy will slip into a recession for the first time since 2009. the majority predicted the bank of england will add more stimulus, including cutting interest rates in the third quarter. global news 24 hours a day powered by more than 2400 journalists in 120 countries. caroline: thank you very much. we have some interesting facts for you. 1.5%tse coming up points. it has its head above water on a year-to-date basis. we are actually back in positive territory.

that is above where we began the year. even after the tumultuous this we're seeing in recent days of trading after the brexit, we are more valuable on the ftse 100 than at the start of the year. that is pretty fascinating. we turn our attention to the united states. apparently, forget next year, the fed is done hiking until 2018 if the futures are to be believed. he volatility in the market tends the brexit vote seemed to have derailed efforts to normalize monetary policy. let's now bring in patrick armstrong. fascinating facts, and indeed the area of the terminal we can use. wirp, we have been assessed with it. it shows you with the probabilities are of a rate hike. it seems now that was more likelihood of a rate cut being factored in.

the you believe this? patrick: i don't expect the fed to be hiking right now. part of their job has been done with the stronger dollar. they're been talking since march about how the u.s. fits into the global environment. the headwinds are coming from a slowdown in china, and europe. it will be difficult for them to raise rates if you already have a strengthening dollar. i wouldn't expect them to raise rates. i wouldn't put it at a 0% chance. because things to change. -- do change. it is unlikely at this point. what the me through fed -- what this does to the longer cycle. be -- are weg to one and done? think about the interest rate cycle, where terminal rates are, is all of that out of the window?

patrick: it is been eight years set interest rates went toward zero. doesn't see that there is an end in sight for us to we were at such economic lows before the leave decision, that created some headwinds. you don't see anyone with exit .elocity right now that won't spur inflation for stub inflation is nonexistent anywhere right now. it is difficult to see and end 20% interest rate. -- to a zero percent interest rate. caroline: can you tell us what happened with u.s. 10 year yields? are recalibrating where they see yields going for the u.s. 10 year. they actually see it rising, , lookinggh we see 1.4% rather attractive right now. are you anticipating we see that continue to rise?

patrick: there will be a lot of flows into them. 12 months out you might see yields rise. over the next six months you will see a steady stream of capital looking for a safe haven. the yield differential between the united states and europe, i think the spread is so wide that i wouldn't expect to see higher yields in the next six months. over the next 12 months, if you see a recovery, that may start to move higher. come back to this conversation related to what is happening with the fed. ftse isa that the positive for the year. patrick: in sterling terms. guy: that is the important factor. this puts them all into dollars. think then 8, 9, i 9%. is down by the cac is down by 8%.

it is really important where you are as an investor. definitely. that will be the attraction of the u.s. dollar going forward. you will get immediate returns and dollars. if you think in euro, or sterling, or yen, you'll those returns. that is very important. it is more so now than ever. guy: patrick armstrong will stay with us. up next, we will go into the top sector picks in the united states. what should you be buying? ♪

guy: welcome back, you are watching "on the move." bloomberg's yvonne man about what yields to do. >> we are in very strong position. we have in the final stages of closing our deal to sell the global generics business. the theat is closed, proceeds will be spent about $10 million on a stock repurchase program. repayment, on debt that will leave us with cash flow of about $20 billion to invest for growth. guy: let's bring in patrick armstrong.

you like u.s. pharma. andou like global pharma u.s. pharma? attracted tore telecoms because of the u.s. exposure. we talked about multinationals in europe getting a benefit from a weak currency. multinationals in the u.s. would get a headwind from the strong currency. we also like the biotech. guy: do you want to get more specialized? ubs has a high net worth individual fund. this is becoming more interesting. patrick: it is. there will be so many breakthroughs. over the long-term, they will grow at a faster rate. trading -- they are trading at a market multiple right now. patrick, what about

the political risk in the united states? you have it clear and present in europe. what about trump versus clinton? on theas much pressure back of what might happen. patrick: i think the biotech companies may be held hostage to around notve allowing price gouging for these companies. however get in power, the lobby will be strong. they will not kill off the biotech sector. that is a growth area for the united states. that is a area where they want to foster growth. in the near term you make it better at keeping prices down. in the long-term, that is a risk you can almost ignore. it will not happen. the trump factor is a risk, as well. as result of the brexit vote, people weren't expecting it. whether that points to just a satisfaction -- and dissatisfaction. caroline: what about global

integration in general? aw much do you feel there is seismic shift going on in terms of country's willingness in terms of trade. are you more forward about the expansion plan to globally, in that respect? patrick: it has definitely taken a hit. it mayre warning trends be an ongoing theme. he saw it with the vote to leave. you saw it with extreme parties and isolationist policies. that has been an engine of growth. it is been a big engine of growth. if we remove that from the recession willal be the consequence. guy: how would you handicap the global recession? depending on what you said it too. for a country could be two quarters of negative growth. anything below 2.5% is a

recession. those are something you can't rule out. shouldn't be the best case scenario. there are enough things happening that it on think we fall into a global recession. it is something you always have to have in the back of your mind , especially with these protectionist policies. that is taking a big hit on global growth. something is up in terms of what you said that it. you are now, you feel a lot more defensive. patrick: it is just the interest rate environment. that is what changes entirely. companies that were defensive will be hurt by a higher interest rate. we will not get that now. i was wary of the stocks in the past. now i am very much attracted to the dividend. guy: you are looking for anything with it bond like property? patrick: yes. guy: you don't worry about the valuations?

patrick: it is pretty expensive. you can justify that with a 4% yield. i would be buying into anything with a yield. if you can buy yields that are market multiple and have non-cyclical properties, you see significant growth. caroline: a quick last question. should i go long on berlin real estate right now? definitely, that is one of our biggest positions. that is a beneficiary of the low interest rate policy. 3.5%,ty yields are around the business model makes a lot of sense. president of properties at a significant deal. guy: great to see this morning, thank you for sharing so many of your thoughts over the last few days. patrick armstrong, up next, we talked about what is happening in berlin. have been builders

battled over the last couple of days. what is next in a post brexit housing market? we ask the experts. they're fresh calls out today. we have nationwide of the program as well. ♪

guy: welcome back, you are watching "on the move." the rally is continuing. that surprised our last guest. we will see how sustainable this is. i am curious as to why the market is doing what it is doing. we will kick that around throughout the day. it is interesting. i draw your, attention to the right-hand side of the wei screen. this is year to date and year to date currency adjusted. i have the adjustment into u.s. dollars. the ftse 100 is now year to date

up, not much. nevertheless, it is positive. once you currency adjusted we're down by 9%. bear innwws -- need to ftse 100 depends on who you are. if your base currency is sterling, it is up. if the base currency is anything else, and i will flip this over. i will show you what this looks like in euros. let me see if i can do that. -11% in euros. beware, as ever. you need to be careful with the numbers out there. make sure you are comparing apples to apples. let's talk about some of the factors. u.k. emerging in the

that has been happening ever since the u.k. voted to leave the european union. the housing and construction and materials sector has been absolutely huge. that was outdone only by the 350 real estate investment trust index. those were i watering, does it -- eye watering, to say the least. down by 33 or 34%. persimmon is down by 34%. barratt down by 32%. watering numbers. is there any reason to be optimistic? charlie is with us, joining us in studio. in the west of england we're joined by the chief economist at the nationwide building society which has data out telling us about where the market is. robert, i will start with you first. you produce data. we see the numbers.

can you give us an idea of how significantly different the world looks this week than it did last week? how do you think the data might change? robert: to be honest, over the last -- house prices have been in a really narrow range. that is a growth between 3% or 6%. the fundamentals of the market are pretty solid if you looked at labor market. that is key. things were looking very robust. now, the uncertainty has significantly increased as a result of the vote. it was always going to be difficult to figure at how strong underlying demand was. we have a lot of volatility in the transactions data at the moment. was a record levels of activity in march. we had lots of activity pulled

into march. to the summer months we were always going to see a big fall back in transaction activity. it will be hard to figure out how much of that was because of the stamp, and how much is due to the increased uncertain the we see. the next couple of months will be hard to figure out the underlying case. robert, will it be -- from your economic viewpoint -- london that is hardest hit? in many ways, london is even harder to figure out what is going to happen. you look at the london market, the landlords pay much more important role in london than in other parts of the u.k. the outlook from those sources particularly uncertain. looking at landlords, the changes to taxes and standards -- that will have an effect on the years ahead. that is a difficult time for responders -- investors to

respond to. it is not clear where the balance will live between the increased economic uncertain to being generated by the vote, or the fact that given how fast , the propertyn prices will look much more attractive. be very hard in london to figure out what happens next step not least because of many metrics it is already pretty stretched in london. we look for house prices and earnings, and record levels of stress. it will be really hard to figure out what is affecting the u.k. overall. london will be particularly difficult. it is interesting to see what happened in the months ahead. guy: robert, what would a 50 basis point cut due to the market? -- do to the market? robert: it is difficult to say. it may provide additional support for demand.

but how labor market conditions unwind is key. even if economic conditions do soften, that will likely support prices and the u.k.. there are so few properties on the market. if you look at the number of close to theis lowest levels going back 30 years. construction has been holding well below natural increases in the population for a long time. even if demand does soften, there will be underlying support that this agenda has properties on the market of a moment. the let's talk about primary markets. as you say, building remains depressed. charlie campbell is sitting next to me. charlie, we have seen some of the house builders. forecasts outnew this morning. what have you changed, and why?

thinke: there is a lot to about in terms of what the world looks like after the referendum. is a demand and shock affect. effectively, we are seeing gdp expect to slow in 2017. years like back at 2012 and 1995, those were years in the u.k. where we had gdp shocks for various reasons. in those years we had real house price declined of around 5%. i am thinking that is a reasonable case scenario. that minus five is about 3% nominal. an 18% of earnings downgrade. to put that into context, shares are down about 34% since the referendum. it does seem as if a lot of bad news is already been processed in. caroline: what should we be

worrying most about on the food chain? is it the builders? is it the companies helping to sell? where should we be most worried about all of this? re, before the referendum it was reasonably received wisdom that we were looking at companies with high with londones, and exposure is the one that might be the most exposed in a slowdown. with the benefit of hindsight we might be changing those views. london properties have certainly fallen a long way in u.s. dollars. that much march active to overseas buyers. also, if there are big changes ahead to the u.k. economy, will not be quite confident that london is more flexible and with a starting position to adjust those changes. london also has a bigger shortage of housing than others.

perhaps london might be more resilient dummy all first thought. guy: can i ask a question about inflation? potentially, we're about to see significant wage pressure in the sector. we already seen quite a lot of it. non-u.k., euut labor from the labor pool in the u.k., how is that affect the ability of these housebuilder's just to -- from a process point of view -- deliver anything? and the longer term, that is right to worry about. in the short-term we have seen a buildup of labor cost pressures. those may not go away. that is probably building a bit less in 2017. labor for thee up residential centers. i think labor cost 80 got away in the initial term post of the quebec later on if there really is something for immigrant labor. that much reduces the long-term

demand for housing. robert, i want to bring you back in here. bring us a sense of when you factor in rate cuts going forward to the united kingdom. we'll market share to coming out later today. we have your own nationwide number showing slightly better-than-expected junes. what are you anticipating? what is the effect in terms of policy? how does that demand for mortgages going forward? i think it definitely is probably too early to say at this stage what the likely policy responsibility is. i think it probably does increase the probability that it will shift to it even bias. inflation is likely to increase because of the sharp decline in sterling. policymakers among likely to look through that as they did in the financial crisis. i think it is likely to the, willll, a shock that they

be most concerned about. in terms of borrowing costs, what is key is how financial conditions develop. how long interest rate moves. hopefully, those things will settle. that will continue to provide support going forward. i think the labor market is going to be clearly key in determining sentiment. that is something left to watch very closely. we don't have anything to go on at this stage. a lot swings on how employment intentions change. that is the rate story. what about the residential stuff put in place already? seehere room now for us to that loosen? there has been a tightening bias. you think that will now cut

bait? arehe reasons the fpc getting concerned about -- those are more valid now. i wouldn't expect them to loosen. clearly, they can put something on market for us to making it more difficult to buy or let that might mean it becomes something of an occupation. guy: thank you for taking the time to join us on the program. later today, we bring you an interview with the u.k. foreign secretary. that is coming up in u.k. time. new here on bloomberg television. up next, the final stages of closing. we get the details with its ceo. ♪

caroline: 25 minutes into your trading day. let's check in on travel companies. we very sad news from the late 19 are attack. that happen in istanbul. that is pushing down on some key travel companies. a german company based here, we're seeing that on the lower side. e worst performers down around 4%. international consolidated airlines also off by two

percentage points. turkish travel agencies have a 35% drop on the back of these attacks. real ramifications from the tragedy coming out of istanbul. let's move on to the pharmaceuticals area. closing withges of arrivals. that is according to the company's ceo. they spoke to bloomberg about the tie up. it ish respect to brexit, too early to talk about the impact of the industry. we arespect to allergan, headquartered in dublin. only 1% of our total sales is in the united kingdom. outside of currency, we see the immediate impact is minimal. we see a things like regulatory approvals and

others go. that is a few years away. known as a deal guy. you also college of a man of operations as well. how does brexit influence how you move facilities in the u.k.? would you potentially move out of the region? i don't think so. we have our international headquarters. we have a fantastic team. we are committed to both marlo, .k., and our people there. there are no plans to change anything in the way we operate. hopefully, we can remain committed to our operation for the long-term. >> talk a little bit about m&a here. it has recently been dominated the headlines. this deal that failed because of a new rule brought on by the treasury. you said you were blindsided by

what happened. as soon are deal ready as the sale is complete. you have a lighter balance sheet right now. you have more cash. how will you spend it? brent: yes, we were disappointed by the u.s. treasury's involvement with the pfizer deal. a veryn itself is in strong position. we're in the final stages of closing the deal to sell our generics position. when that is closed, the proceeds will be spent about $10 billion on a stock repurchase program. on debt repayment, that leaves us with cash flow of about $20 billion to invest for growth. we will look at buying intellectual property, r&d assets. i think we are lookg --

looking at more smaller scale deals. guy: let's leave the pharmaceutical sector to one side right now. it floats away from the continent without any plans. enough,at were not three major questions remain. who will lead the conservative party? will jeremy corbyn retire as the labor secretary? will a scottish referendum happen? it is not boring. [laughter] guy: let's talk about the conservative party. >> we know a few of the names will be running. is education secretary discussing iran. -- a run. we have some graphics to show you. in government all

that long. he was backed and this name forward in a newspaper article this morning. he was from the remain side. that is interesting. beaer i -- bear in mind, they are all brexitiers now. ons is, if someone will run a working-class ticket, it could be this guy. out nobody can quite work what is going to happen to jeremy corbyn. it looks like there will be a contest. anna: it depended how deeply you want to delve into the labour party rule book. it is complicated. he lost a confidence vote. geteeds 15% to back cam to on the list for the next round of voting. be differingo

opinions. supporters will say it is different if you are already the leader. there seems to be some different of opinion. that is where we are on the conservatives and on labor. i will speak to philip hammond a little bit later this morning. we will talk about all of this going on in u.k. politics. and relationship to global for the u.k. going forward. guy: it is fascinating to think about that the s&p now believes it is the main party of opposition. it has a more condensed base of mp's that back it. politics in flux here in the united kingdom. we have an interview coming up a little bit later. looking forward to what mr. hammond has to say about what is happening within his party, his government, and his country. up next, the people may have voted. the stoxx story is fascinating.

we bring you more details about what is happening. we will talk u.k. on the come back. ♪

guy: the u.k. voted to leave. look liketocks remain. no reason why the u.k. stocks should be excluded. a non-event?

>> what index compilers have been telling me is that eu membership is not a criteria that they use to select securities for their indexes. the other criteria they use such as liquidity or market cap. not one ofip is them. it does remain in europe. as such, the securities remain eligible for the most widely tracked indexes such as msci and trhe stoxx 600. -- the stoxx 600. caroline: are they putting brexit to one side entirely? aleksandra: in terms of right now, yes. there are no terms to change anything. the msci did tell me the look the impact. there in process of stress testing the impact of various levels of populism. a little bit concerned.

they couldn't tell me more than that because the report is due in july. they're looking at the rise of this popular sentiment in europe and the u.s. and how that impacts investors. guy: thank you very much, indeed. not all doom and gloom. with what is happening with the index compiling story. thing certainly are changing. let's talk about what is happening in the markets. you'll hear a lot today but the fact that the ftse is back to flat for the year. what we are seeing, i want to show you this right hand side of it isoomberg terminal, this. what you will see here is a locked this is the fact that the ftse is back to flat. put it in euros, and gives you a constant currency. then you can see that it is still down by 11%.

stay with bloomberg television. the pulse is coming up next. philip hammond will join us a little bit later on. ♪

francine: steady on stimulus hopes. the relief rally in europe continues. the french president says london will suffer from brexit. merkel says there is no backing out. david cameron turns home. the islamic state is blamed for the attack at the international airport they killed 40 people. ♪ francine: "the pulse." welcome to