mark: george osborne osborne floats the idea of cutting interest rates. the french economy minister says paris should be the new home for euro clearing. and european stocks give up early gains, dragged down by banks commodities rally while the u.s. takes the day off. " live ino "the pulse london. formark baron iton in

francine lacqua. stocks did open a bit lower. it's down a 1/5 of one percent. 4% since friday, the 24th. sterling gaining for the first day in three. down almost 11% since friday the 24th, the day after the referendum. the u.k. 10-year is up by a couple of basis points. today, rising above $21 for the first time in a couple years. investors seeking precious metals as haven asset. let's get the bloomberg first word news. good morning. nejra: stanton and pours estimates a -- standard & inr's estimates a 0.8% hit vote.ke the u.k. brexit

it will see a 1% drag on gdp next year. the bank of england will have to .e. program.q us try his election has resulted in neither party having enough seats to form a government, threatening to undermine the nation's credit rating. moody's has said there are limited implications for australia's top grade. a wider deficit could put downward pressure. election results have yet to be completely finalize. an increasing number of economists predict chinese banks will see the government bailout within two years. standard chartered is among nine of 15 respondents in a survey to say they expect a move. the majority only the cost of recapitalization will exceed half $1 billion. chinese lender's are grappling with a growing mountain of bad debt after years of cheap credit. one of london's biggest law

firms has threatened to take action if the british government tries to initiate the process of leaving the e.u. without consulting prominent. acting on behalf of an anonymous thep of clients, they said triggering of article 50 can only be started with parliament's consent. deadliest attack in the year has killed 100 and 15 people. a truck exploded in a shia neighborhood. has many clothing and jewelry stores, restaurant and cafés filled with the streets with people after they had broken ramadan fast. global news 24 hours a day in more than 120 countries. i'this is bloomberg. mark: george osborne has cutting the corporate tax rate to 15% in an effort to maintain business

investment. the company tax rate is a lowest in the g-20 and was scheduled to fall to 17% by 2020. let's introduce our guest. he says uncertainty will act as a major drag on the u.k. for joining us. standard & poor's saying brexit will produce a drag of 1.2%, 1% in 2018. how bad do think it will be? negatives are slow burn. in terms of hiring intentions, investment expectations, all of these things are going to be worse than they would have been. on the other hand we are getting the equivalent of an injection of adrenaline you get when an emergency. we are going to get rate cuts, and easing in fiscal policy.

you may find it is a bit two-way pull. i think it will be negative, but you're going to get market reaction which is looking at the policy changes. we wouldn't chase the markets right now. we think the markets are enjoying the morphine and the adrenaline. mark: this 15% corporate tax rate, morphine and adrenaline, it could be quite affect -- effective. trevor: we don't know. we heard people say the economy is shocked heard we have not had any data yet. it is so early. we next few months is when get the data. i do think we will get the market swinging around quite a lot. on friday lastk week. they had rallied quite strongly. now, i would not want to change this too hard. mark: the ftse 100 is almost in a bull market. roughly 19% above those levels.

trevor: depends on whether you are measuring and foreign currency or sterling. -- in foreign currency or sterling. weak sterling make the u.k. attractive on a relative basis, on a currency base basis? see positives globally, global growth is ok, we are going to get further stimulus. sterling will take a two way bet on. we are not sure which way it is going to go. the negotiations will happen before article 50 is enacted and it could mean the pound becomes volatile. mark: yeah. so, you are not giving us any levels. going out to 1.20? orvor: over the next three four months, but i do not know where we are going to end up. it may well be that we get to a

situation in six months time that there has been some kind of movement from the european side. we have got french and german elections next year with anti-e.u. parties rising strongly. ofthere is any kind compromise in terms of freedom of movement of labor, for example, that we may find yourselves on another referendum or general election. mark: so, what is your overall view on u.k. stocks? the as part of 8, 9 years, asset fund managers have been underweight u.k. stocks. there has been a sea change in the last month. what is your overall assessment of the u.k. stock market? an overweight equity portfolio. we think the big opportunities right now are buying emerging markets, for example, where workers will be loosened globally and china will not be affected too much. u.k. has a lot of political risk. sitting on the fence on sterling and on stocks. i think they will swing around a lot. the markets have been cheering

the adrenaline shot. and that is likely to wear off. there.revor, stay stay with "the pulse." plenty coming up, including could france grab a share of the u.k.'s euro clearing business? we will bring your our exclusive interview with the economy minister. plus, will david cameron be remember for breaking up europe and the u.k.? professor john ryan, we will get his thoughts. and sidesteps in brussel. not the u.k. but germany. we will analyze comments from germany's finance minister. ♪

mark: let's get the bloomberg business flash. nejra: -- seeking to raise a billion dollars in what could be the largest ipo this year, mccourty people familiar with the matter. the firm is set to file the application wiht the hong kong stock exchange. analysts are confident the ipo will be a success. andstment bank cicc brokerage china investment securities -- are in talks on a possible merger. according to people familiar with the matter. cicc has declined to comment, while the has been no response from cis. cicc shares rose on the news.

hiked the price to raise million3 --ring 35 million shares. it cited strong demands and market conditions for the move. national bank of abu dhabi confirmed its merger creating a regional powerhouse with assets worth $175 billion. shareholders will own 52%, but it will operate under the national bank of abu dhabi name. it will allow the lender's to better compete with regional rivals. mark: getting breaking news on the italian lender. it says it's received a letter from the ecb on its nonperforming loans. it will have to present as planned by july 8.

monti pasci says the bank was pl's overreduce its nl three years. it was asked to bring its rates to 20% in 2018. plans asked to present its by october 3. shares down by 8%. italian lender's other worse for offenders the -- worst performers this year. executive politicians are circling the u.k. for spoils after last month's referendum result. one target is the euro clearing business will. they stay in the city of london in an exclusive interview, france's economy minister told us what is on his mind. >> it is a clearing.

we'll have a discussion on a series of issues. have, i think much more players now in paris than in frankfurt. and much more deep marketplace in paris. so, that is something to be debated, negotiated definitely and to be discussed. but i think it does make sense. mark: we spoke to mr. macron. she joins us from paris. will france be able to convince businesse it is the right place to gos? mark, thisf course, is not going to happen overnight. it might take months or even on whoevermay depend george osborne goes ahead with the idea of lowering the u.k. corporate tax. but macron wants to push the

idea that france's attractive, that paris is market-frac friendly despite the bad reputation for doing business in france. an issue regarding this reputation. what i can tell you from the around is that we will have -- reformed labor market because that is a necessity. withd, this reaction, violence is totally unacceptable, condemned by the government and my deep conviction is that at the same time our people are deeply convinced that we have to modernize the country and adapt the country to the course of globalization. so, i don't want to be so

skeptical and so negative. theline: just before him, french finance minister was also speaking and was more cautious than macron. he said we should not divide the spoils. he did not appreciate when david cameron and 2012 rolled out the read cover to france. he said he did not intend to roll out the red carpet in the other direction. mark: you also spoke with the cac 40 chief executives. what with her main concerns about brexit? someine: so, there are concerns, for example they are worried about the slowdown of the construction market, especially in the u.k., but others are also hopeful that brexit could turn france tininta profit. saying paris is now becoming more relevant.

ceo also told me if people have to choose between paris, amsterdam and frankly, and the end they might choose paris for the quality of life. mark: i'm not going to say anything about that. let's see if trevor is heading to paris. is paris the new london? trevor: i think the quality of life is pretty good here, actually. mark: what about the eurozone economy? what will be the knock on effects? 8% from estimates a 0. brexit. europeanhe hit to the stock market was larger than the hit to the u.k. stock market in local currency terms. is because people immediately saw that not only is there an economic impact of the slowing up a trade relations between the u.k. and the euro

area, but there is also some questions being asked about the sustainability of the euro project because of the political situation in countries like france and italy, where there was survey were a large proportion of people were feeling negative in their views towards the e.u. i think you have got that nervousness about the european project again. what's differences time is that the ecb is buying everything that moves. i think as a result, peripheral bond yield spreads are remaining quite tight and the banks are bearing the brunt of the nervousness. mark: thanks since friday are down 70%. year to date 30% -- banks since friday are down 17%. notor: the ecb is intervening in the bankshares. and that is the release valve. the japanese are not out

there buying individual bankshares. they are buying etf's. we are to see a lot of unconventional policy. a fairly deflationary world backdrop with the china slowdown. now we've got this hit in europe as well. although, i think one of the interesting aspects of this is that the fed in america is on hold. no interest rate rises. i said early run, the chinese economy is probably not going to be impacted too much. mark: we will come to emerging markets but europe versus u.s. when it comes to valuations, attractiveness on stocks? what is your view? more interested in the u.s. if i am buying dips. bear in mind, donald trump is in the -- it's going to be a summer of risk. we have these rallies and we have corrections and i think it is going to be a sideways summer. mark: spain, some say that brexit helped mr. rajoy.

in australia, you had populism causing an out certain outcome to their election. trevor: politics is extremely hard to understand at times. the polls and the brexit vote were off the mark, although within the margin of error. the sort of times you have to keep focus on the medium-term. it's the world economy is creating jobs and unemployment rates are falling. policy is loosening. that combination has been what is been driving stock markets up that la seven years. swe have a positive medium-term view but negotiating the political risk over the summer is going to be difficult. in london. investing in and o uncertain world. this is bloomberg. on a bright and sunny monday, july 4. ♪

mark: markets close in the u.s. all attention on friday. we get the jobs data after the may number caeme in well below estimates. fed rate estimates have been buried by the brexit vote. markets do not expect a single hike till 2018. 2018. we are at a 34% probability in september 2017. you can see probability of a hike, very low. trevor: the big debate when the year started is will the fed hike rates another three or four

times? mark: it is now zero times. trevor: what is interesting is that it does change the dynamic for all of those parts of the world that were bracing themselves for a fed rate hike. mark: emerging markets are a buy? trevor: i would buy them during panic moments over the summer. because of the political situation we will get periods of financial stress. they sell off heavily into those financial stress moments. because if you get further worries about europe in the short term the dollar will be strengthened because the european currencies will be going down. europe's big economy, china is not immune to concerns about your. the things that will make markets dips could cause a pull back in commodity prices paid you will buy, because the outcome will be loose policy for longer. and therefore, less risk of

telestrate. -- dollar strength. mark: what stands out? trevor: personally i would buy the broad indices. of different emerging markets from a trader commodity export point of view. not singling out a particular region. i think a lot of areas which were worrying how they were goin g to source finance when u.s. interest rates went up, will get a lot of relief from this. mark: what is your number one fear right now? trevor: two things. one is we go straight from worrying about brexit to worry about donald trump. there are concerns about his policymaking on the cuff. and markets will get worried by the because markets do not like uncertainty. another concern would be that market pressure forces a bad u.k. and in the

europe. i like that there is this long gap for article 50 is an active chance,thit gives one a is their compromise/ se. m doa you think it is in everyone's best interest to meet in the middler? the fact that having a foot in both camps in the world has been very good for the u.k., i think it is in the u.k.'s interest and, therefore, in europe's interest. it would need to be a purple reformed european union. what i mean? anything that would allow the british public to say, actually, i think now i would vote in favor of staying. it's possible. my concern is that market pressure will say you cannot wait six months for article 50. he politicians t in europe in a room, sometimes

you get a good outcome. sometimes bad outcomes because they are quick outcomes. mark: stay with us. willext guest says cameron be remembered as a leader who facilitated us wintering of europe. splintering of europe. ♪

mark: welcome to "the pulse" live in london. big getting some surprise of a number. 46. the of expectation was is a slowdown to 50.7. that's a big slow down and construction pmi. and according to bloomberg, that is the slowest pace since 2009. this is pre-brexit.

so, construction unexpectedly contracting at the fastest pace 2009.2000 and, a -- since it stymieing residential building. as to evidence of the referendum was entering the economy before the shock outcome to leave. something for the bank of england to ponder. now let's get the latest bloomberg first word. nejra: standard & poor's estimates a 0.8% hit to eurozone gdp in the wake of the brexit vote. it also predicts that britain will barely escape a fully flesh recession and sees a 1% drag on gdp next year. it assumes this will mean the bank of england will have to restart the q.e. program. australia's election has resulted in neither major party

having enough seats to form a government. this is the running to undermine the nation's credit rating. moody's has said there are limited implications for australia's top grade while fitch set a wider deficit could put downward pressure. saturday's election results have yet to be completely finalized. an increasing number of economists predict chinese banks were a government bailout within two years. standard charter's and commonwealth bank are among nine of 15 banks to say expect a move. the majority of those asked believe the cost of recapitalization will exceed half $1 billion. grapplingnder are with a growing mountain of bad debt after years of cheap credit. bank debt's database attack -- baghdad's deadliest attack in two years has killed 115 people. in a mostly shia neighborhood. the area has many clothing and jewelry stores, restaurant and

cafés. the blast came to the streets filled with people after they had broken the ramadan fast. globalist 24 hours a day powered by 2600 journalists and analysts in 120 countries. this is bloomberg. francine: put your other hat on. you are watching markets now. nejra: i wanted to start by show you the stocks ixx 600. unchanged now after this benchmark had its biggest rally since february. but let's have a look at how the individual stocks are performing because some of the best performance today are precious metals, miners. only assume is because of the rally that we are seeing in silver and gold. silver topped $21 for the first time in two years. it's outpaced gold this year. some see it continuing to outperform until the turmoil from brexit subsides. we're seeing gold up for a

fourth day. assets in gold etf's at their highest since 2014. some of the worst performers are italian banks. down some 7%. we're seeing banco populare, well. san paulo down as it received a letter from the ecb on nonperforming loans. it was asked reduce these over three years. was asked to bring the npl ratio to 20% in 2018. it has to percent this ratio -- to present this plan by october 3. we are keeping a close eye on italian banks. also, keeping a close eye on the ftse 100. this is your today. this is where we had the plunge after brexit.

it has not only recovered but gone back above the level it was pre-brexit. guess what? your today from a february low, up 19%. meeting the ftse 100 is close to entering a bull market. keeping a close eye on that to see if it pushes through that by the close. finally, keeping a close eye on dollar-yen. brexit has spurred the biggest upward shift in yen forecasts is 2008. -- since 2008. 1.10 is where jpmorgan has it at the turn of the year which is the most bullish quarter. it has gone beyond that. barclays calling 87. mark: thanks very much. does the government need to consult parliament before beginning the process of leaving the e.u.? that is a contention of a group of clients represented by one of

london's banks. one of many uncertainties facing the u.k. as it seeks to unpeg more than 40 years of e.u. membership. let's talk about brexit and political risk. john ryan is here, a visiting fellow. hello, john. do you think parliament does need to vote brexit before article 50 is triggered, and will there be uproar if there is no vote? >> i think there has to be a vote. we are a parliamentary democracy. we're going to going to the territory now of different law forms coming out with different proposals. anyway, over this period, this is one issue -- there are different views -- but this is one issue put out there. we'r going toe see law firms very involved in the untangling of regulation. on this, we have to have a vote. mark: what happens if the prominent votes to remain or not to trigger article 50? at anthen we would be

even more constitutional crisis and we are the moment. i think we would have a very difficult time explaining that to people who had voted in the referendum. because there is a lot of wide e yes about whether we will have exit. i think a lot of people on the outside who won the referendum are rather concerned about the slow-motion process that is going on. they feel may be this is going europeans in the union. and they feel like we need to jump and get this over with. many have said we need to get on with it. is there a case to be made for that? john: it is difficult because we have got a situation that the conservative party are going to decide which person is going to be the leader, then the prime minister of the country. we have got an official opposition that is in a very

chaotic situation, to say the least. so, you know, whether everyone an election but lots of people say a lot of different things while they are campaigning but political reality might come close to the person that takes over the conservative part of sooner rather than later. mark: it could throw up other imponderables. some say it is unlikely but let's say the labour party won. invoke article 50. they're all sorts of permutations here. partyunless the labour sorts itself out, they could split. that is the worry, the parliamentary party is out of sync with what the trade unions and memberships are saying. we would need to see about on john corbin. show what the state of play is

in the membership. we can only guess that maybe corbyn could still win. but it is going towards a split. mark: an early 1980 split? john: that was the problem in the sense that after the unilateral disarmament and opposition to the european union, people like shirley williams, and roy jenkins felt that the time had come to have a more centerleft party. they felt the labour party was veering too much the left and the parliamentary party feels that way at the moment. although everyone is trying very hard to try and push jeremy corbyn out. mark: he says he will run if there is another ballot. john: he possibly could win. square oneback to but then people will have to make a decision. if that does happen, whether the labour party is the vehicle that

some of them need to stay with or whether they need to start up, a new party. -- paddydo ashdown has mentioned that there is a need for a new political force in british politics. at sterling.eek this is the pound against the dollar. there you go. 10%aday a 1/10 of 1% lower, below its levels of the close of june the 23. the d before the friday that we found out thatay brexit had materialize. the german finance a responsells tofor to post-brexit. ♪

postal savings bank of china is seeking to raise $8 billion in what could be the world's largest ipo this year. the firm is said to have five a listing application with a hong kong stock exchange. analysts are confident the ipo will be a success. cicc and progress china investment securities

28 billion of $ assets are in talks on a merger. cicc has declined to comment. cicc shares in hong kong rose on the news. line has hiked the price of its to raise $1.1 billion. it is offering 35 million shares in what could be the largest tech ipo of this year. the operator of japan's was popular messaging service cited market conditions for the move. mark: thank you. german finance minister wolfgang schaeuble suggested government should sidestep the european commission if necessary to progress cooperation between e.u. countries. for more, our government editor is standing by. how does this fit into the post-brexit debate?

tony: well, this is kind of an opening gambit by the german government. sets down a few markers. that the european commission, which is headed by john claude younger, is sometimes an obstacle in the german view to getting things done quickly. does that mean, as has been reported in some quarters, that germany is gunnifng for mr. juncker? wolfgang schaeuble said that is not the issue. we need to get practical things done. so europeans, skeptical europeans, see the european union doing things for them with the practical effect. mark: what is angela strategy going forward -- angela merkel's strategy going forward? tony: there has been a lot of

pressure from some governments, the french notably, to get moving quickly on brexit now the vote is not something that merkel has a spouse. she wants clarity. but she has also said that the things that need to be done now are tackling youth unemployment, getting competitiveness going in the european union, and just taking steps that have, that show people that the e.u. is actually doing things for them and not the enemy, if you like. how is that going to be done? more to the policies? that's something that is still bit up int's still a the air, really. mark: thanks for joining us. our germany government editor in berlin. let's get back to professor john ryan. could germany become isolated

with brexit? yes, i have spoken in germany and said brexit will bring a counter intuitive. germany will become quite isolated, and at the same time, more will be expected of germany and the same hand. you can see now alliances, already before the brexit vote in terms of the czech republic, select year, poland, hungary -- migrationia, over the issue. you can see the mediterranean parties of voting for radical left parties. the german government, whether he has a strategy or not, i'm not really sure it has formulated a strategy, what your correspondent was very general pronouncements. i mean, if germany was really serious they would have done something on the greek crisis sooner than later rather than keep -- kick the can down the road. also, they would've actually

decided to move forward with further integration of the euro zone. they had the opportunity. for that to happen, they need a financial transfer system, which is something germany is refusing to do. so, i'm wondering really if this again is just a lot of pronouncements without any real content. merkel herself is under severe pressure within the german political sea. alternative for george led -- her party are doing well. people's parties are at 50% of the vote. this is amazing. 10-20 years ago there were 70% for now, now they are down to 50%. she is becoming isolated and to a certain extent i think the germans realize that britain exited the european union, they would be left in a minority over market liberalization and things like that. so, again, you don't really see

anything coming out of berlin at the moment that is a concrete plan. mark: what about the concrete plan and the u.k.? where is the plan to educate ourselves? john: there is no plan. we mention this when we were talking about this before the brexit vote. that, you know, the remaining campaign had an open goal. where is the plan, what will you do, is there a plan b? if we get a brexit vote, what do we do now? don't seemee - - we to have much of a plan. we talked earlier about the legal challenge. some law firms have already before the brexit vote have looked at this issue and what you should do, they've be looking at it and some one out of four businesses have a plan.

plan.'t see a strong what we are in is an election cycle and hopefully, someone is doing something somewhere. i'm worried we're going to have a new department -- looking at the brexit department. where has the contingency planning been done in the civil service? where are the political parties? people are making general pronouncements. boris johnson wrote an article, mentioned five points that don't mean anything. so, the politicians need to get a grip on this and actually move this/know where we are. -- so we know where we are. mark: thanks for joining us. up next, the uae merges its largest bank as the gcc grapples with $50 crude. this is bloomberg. stay with us. ♪

mark: a quick check on markets. the stoxx 600 was up earlier. rose 3.2% last week. sterling lord against the dollar for the third day. the 10.7% since friday 24th. 9% lower today. abu dhabi combining its two

largest banks to better compete with regional rivals. national bank of abu dhabi is merging with first gulf bank in a deal that would create a lender with $175 billion in assets. us through this deal, then. >> well, mark, it has been a landmark week. abu dhabi has been cutting spending to try to plug the budget deficit. last week we have seen some merger activity on the front of uae's biggesthe investment funds merging. further traction with this deal, the largest in recent years. first gulf bank and the national bank of abu dhabi creating a financial services behemoth to the tune of $175 billion. let me put that in context. you are looking at a bank with combined market capitalization, an estimated $29.1 billion.

bigger than deutsche bank, bigger than credit suiesesse. it would also create the largest lender in the middle east. qnb.ing qatar's back to the savings theme, this would help cut $136 million in savings annually. but, of course, there will be a $163 million one-time integration charge. mark: what are the implications of such a deal? >> well, several fronts, really. let me run you through the mechanics of the deal very briefly. you are looking at a shareholder retaining 50 2%. for furtherthe tone mergers. that is what analysts have been telling us that michelle you how these two companies -- let me tell you how these two companies

have been performing. nbad and first gulf bank. wil exchangen -- nbad exchange five shares for eachl gulf share. a month to date performance, gain of 29% for nbad. the ceo's of both companies will be stepping aside. the many director of first gulf ceo.takes over as the estimated time for completion, the first quarter of 2017. of course, everything, as always, subject to regulatory approval. mark: thanks. in dubai. here is the week ahead. u.s. stock and bond markets close for independent state. tomorrow, bank of england governor mark already holds a new conference to present the financial stability report. on wednesday, we have got the

fed's june meeting minutes. on thursday, president obama meets with the head of the european council. we round out the week with the all-important nonfarm payroll. "surveillance" is next. ♪

taxing times as the u.k. prepares to leave the e.u. george osborne looks to slash the corporate tax rate in 15%. the french economy minister says paris should be the new home for euro clearing. silver surges. gold rises as investors pile in to safe havens. this is bloomberg "surveillance ." francine and tom are off.