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. it is the fourth of july.

happy independence day. let's get the first word news. in fact, before do that, let's see if we forgot breaking news for you. ppi numbers coming through from the eurozone. 0.6% increase compared to an estimate of 0.3%, stronger than had been expected and the drop year on year less than anticipated. a stronger inflation picture. now, let's get the bloomberg first word news. nejra: u.k. chancellor of the exchequer george osborne has set a goal of lowering the the corporate tax rate to 15%. he accepts the result of the e.u. referendum and wants to mitigate the economic impact of brexit. u.k. construction unexpectedly contracted at the fastest pace since 2009 in june. thepmi slid to 46 as

impending vote on britain's european union membership stymied residential voting. standard & poor's estimate a 0.8% hit to eurozone gdp in 2017 and 2018 in the wake of the u.k. brexit vote. it also predicts that britain will barely escaped a fully fledged recession as it sees a 1% drag on gdp next year. this will mean the bank of england will have to restart its q.e. program. an increasing number of economist for the chinese banks will receive a government bailout within two years. standard charter and commonwealth bank are among nine of 15 respondents in a survey to say they expect the move. the majority of those asked believe 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.

australia's election has resulted in neither major party having enough seats to form a government. this is threatened to undermine the nation's credit rating. moody's has said there are limited implications for us to's top grade. ch ratings said that a wider deficit could put downward pressure. election results have yet to be finalized. global news powered by 2600 journalists and analysts in 120 countries. this is bloomberg. anna: let's have a look at the data. let show you where some key assets are trading this morning. this is, we will start with energy markets. they half a percent on price of a barrel of brent crude. nigeria getting a handle on the violence and getting parties to stick to a cease-fire in the south of the country. that is having an impact on global equities in asia. a word on silver up by 1.9%.

0.7509.ie dollar an inconclusive result of the election. and dollar-yen. i've got a chart that puts more detail. the brexit vote being marked by that red line. bb, perhaps we will refer to that period as before brexit. we've seen a strong move higher in the price of silver to $21 an ounce. and this is the gold price. precious metals very much the rage. in the wake of that result. more on the precious metals as we go through the program. in the commodities price, more generally. a joint rally in equities and also in the precious metals, safe haven trades. is speaking in central london this morning. live pictures this morning. he's been campaigning for brexit

. he's setting out his party's plan for the coming months following the results of the e.u. referendum. we will bring you any breaking news when it happens. if you are on the turn look, you can go to live go. -- if you are on the terminal. for more on how markets are moving, let's bring in our guest host, the global head of equity trading strategy. he joins us in the studio. good to have you on the program. when i look at the markets today, and it highlight something we've seen before brexit, on some trading days, where we see -- sliding into equities but also safe haven assets like gold. where does this leave us? >> from the best we can tell, a lot of the equities which -- are defensive in nature. so, the safe haven aspect of yen, wee dollar, the are seeing exactly the same on the equities side.

albeit the ftse looks flatter because of the -- move. dollar fell down. the other thing we are seeing as we're seeing buys in yields. we are seeing defensive buying. the one sector that raises a whole bunch of questions are still the banks, especially in your. -- in europe. the banks are down 15% over the last month. that's logical, given some of the headwinds. anna: look at a broad asset allocation, i spoke to one investor who said he had never been more negative on equities. equities versus other stocks, how does it look to? >> at the top, in research allocation, we have downgraded equities. we are much more of a neutral buyer to them. within equity, some things

compared very well, in particular the dividend yield. anything that has to do with free cash flow, buybacks a return on capital to shareholders. bonds are naturally negative. is it the time to try to pick value or growth? probably not. anna: when i look at the u.k. names, the quality u.k. stocks, he's talking about pharmaceutical names, about even tobacco, of the things that look defensive. antonin: it is the defensive aspect in the currency aspect. we seen sizable moves in the last few weeks. then yen. the dollar being stronger versus the fx. so, a combination of trying to identify stocks which are more exposed to outside the u.k. dollar earners does give you a list of these things. the: you have to delve into

depths of u.k. policy to try and work out where all these conversations go between the u.k. and the e.u. very difficult to make a conclusion, but i suppose if you're trying to come up with an equity strategy, you have to have some idea, or do we wait till we have more clarity? antonin: we are trying to do two things at once. picked fornies were exposure to the u.k. the second aspect is to think in terms of scenarios, what sectors are likely to be double gains.t volatility is going to stay with us. because of these reasons, we think it is too early to see a clear roadmap of the next six months. being long protection for us does remain interesting. anna: you've got a number of

sectors trying to wrestle with what this means on a regulatory level, the airlines, and the house bill, and u.k. construction pmi numbers at 46. it feels like we are in the eye of the storm. antonin: pretty much. on a daily basis, we have many questions we can't answer just yet. one of the reasons why it has been calm her in the last 10 days is clients enter the vote -- rather underway to the asset class and very well hedged. a lot of volatility on the books. that's also explaining why we are bouncing so much. anna: i want to bring the viewer's attention to the comments about nigel farage. he says he's resided. he says i've done my bit. speaking in westminster this morning, u.k. independence party

-- set up very much to try and from the e.u.k. he is resigning. he will be continue to speak. ukip is in a sound financial position and he concludes his remarks in westminster. we'll see what the future holds for nigel faraga. coming up later in the hour, volatility.s sees this is bloomberg. ♪

anna: welcome back.

i'm anna edwards. nigel farage, you can see, has resigned from ukip. this morning, say i have done might bit. he's continue to take questions. we will continue to monitor what he has to say, about his future. lets the to the bloomberg business flash. nejra: postal savings bank of china is seeking to raise $8 billion in what could be the world's largest ipo this year. have filed aaid to listing application with the hong kong stock exchange last week. analysts are confident the ipo the be a success, noting actual listing is not likely to take place until september. cicc and brokerage china's investment securities are in talks on a possible merger. has declined to comment on the story, while there has been

no response yet from cis. cicc shares in hong kong rose. line has hiked the price of its initial public offering to raise $1.1 billion. it is offering 35 million shares in its debut and as much as 3200 yen each in what could be the largest tech ipo this year. the operator of japan's most popular messaging service citing market conditions for the move. national bank of abu dhabi has confirmed its merger with first gulf bank, creating a regional powerhouse with assets worth $175 billion. hold 52%eholders will but it will operate under the national bank of abu dhabi name. that is the bloomberg business flash. anna: a few more details coming through from nigel farage. be changing his mind as

she did change his mind in the past. he will go on leading his group and the parliament. he didn't get the warmest of occam's last time he appear to the european parliament. he will go on supporting ukip. ahead.t days lie let's stick with the u.k. politics. george osborne has set a goal of lowering the corporation tax rate to 15%. he told "the financial times," he was a mitigate the fallout from brexit. other countries are looking to capitalize. the french economy minister told bloomberg he wants to take euro clearing from the u.k. >> the clearing will -- we'll have a series of discussions on a series of issues. in terms of organization. but i think we have, i think much more players now in paris

than in front for. -- in franfurt. and much more deep marketplace in paris. that is something to be negotiated definitely and to be discussed with the different institutions in charge, but i think it does make sense. anna: we'll see where the conversations go. for more, let's bring in jamie murray. jamie, let's talk about what the chancellor is signaling. they intend to get down corporation taxes, but e.r.a. had a plan to get it down to 17%. this is a little bit further -- but he already had a plan. jamie: it is one of his hobbies pretty corporation tax rate was 28% when he arrived in government. he does this every opportunity he gets. now, this changes a nudge down. 2 percentage points off the

corporation tax. he has sort of indicated that it might be brought forward as well. so, really, it is a gesture, but is it going to change the outlook? not very much. anna: to try to encourage businesses to stay. how much is this going to cost? he is already said he is not going to stick to the target for 2020. there is a lot in flux. we might not get clarity until the autumn. jamie: the measure that was 18%,nced in 2015 to cut that will of cost 2.5 billion pounds. if you add that and the extra cut, it might be 6 billion pounds a year. so, it's not immature but it is not massive, either. anna: what you expecting to see from the u.k. economy, what hit to growth do you expect? i talked about the dire construction data, some of which

came after the brexit vote. antonin: economists have been calling for 3% to reduction -- and a 1.5% reduction for your. in terms of the numbers we saw on the screen, we are less pessimistic. but the news analysis morning by george osborne is quite likely to happen in the coming months, i.e., a lot of rumors, expectations, speculation, but not a lot of hard facts we can base your investment. anna: we will hear from the central bank tomorrow around financial stability? jamie: that is one reason why we do not expect the u.k. to plunge into deep recession is that the bank -- has provided that backstop, has ensured it's functioning normally. lift they won't capital bugger. --

buffer. anna: we talk about the future of italian banks. that is next. this is bloomberg. ♪

anna: welcome back to bloomberg "surveillance." i'm anna edwards in london. independence day in the united states.

some italian banks are falling. a finance minister for bloomberg in london. on the italian banking sector, they seem to be getting to a head. we are seeing some real weakness, some italian bank stocks, some of them down more than 8%. >> that's right. what you're seeing is renewed concerns about the financial strength of the banks. we saw the shares tumbling dramatically after brexit. more so than some u.k. banks. the tension was renewed after a merchant the european central bank asked them to review it's bad debt. what that's doing is highlighted concern that if it needs to do this, and made into raise capital. and who gives the capital for it? after last week, we heard the italian prime minister speaking,

trying to find someone within the european law to allow governments to provide some of that capital. anna: there is also to talk about whether there will be some request, some spent rules, conversations will no doubt continue behind the scenes. by marco but who talked about how still we are learning the lessons of the italian crisis. europe still has not put enough capital into its banking sector. that is basically the problem. antonin: big picture, the u.s. government and regulators shoved a lot of money downth their throats in 2008. the european -- has been about keeping them alive but not enough to move on to the next stage. what's been worrying in the last few weeks is that italian banks in particular, we knew that to raise money, there are few of us in europe, not just the italians, but they have been waiting and waiting.

off event is not helping. -- it is the deflationary shock. we are seeing 10-year and 30 y ear bonds in negative territory and all of that will not help banks.fitability of the if you added gdp slowed down, it is a bleak picture. anna: a tough time to recapitalize. chesa: you have got monte pashe -- tapping private investors at this time is very difficult. hence, the government is trying to find a way in which you can to existing rules to tend special circumstances that the banks find themselves in. anna: does there, time when they look really cheap, or no? but the banking sector in general. antonin: you cannot call them

cheap, but you can call them volatile. yes, they are cheap, but you know exactly what the npl's ar e. some of them do trade on a good dividend yield. yes, they are sheep on the yield basis. but you've got to become -- 0-ch eap on a yield basis. "the puls anna: thank you very much. theng up on "surveillance," search for a conservative leader in britain is underway. will be the future of u.k. politics in a post-brexit environment? this is bloomberg. ♪

a tom: francine lacqua and keene are off today. independence day in the u.s. no bond or equity trading in the

united states. ministerench economy has told bloomberg paris is a contender for the european .usiness post brexit other cities have been gearing up for a battle for transactions done in london. for a lot of financial institutions, the brexit will be a big question. it will depend on the axis, the organization of the brexit. our role is not to play on this uncertainty. what weesponsible and have to do is respect the vote and organize the brexit. at the same time, it is true, it could be -- for our financial

place. we have a lot of financial institutions and we can welcome who wouldnstitutions like to join the eu. u.k. constructed contraction -- u.k. construction contracted. the purchasing managers index slid to 46 from 51.2 a month earlier. it adds evidence the referendum was hindering the economy before the shock vote to leave. analyzes a hit to gdp in the wake of the u.k. brags it vote. they also predict britain will barely escape a recession as it sees a 1% drawing on gdp and 1.2% the year after. the bank of england will have to restart its qe program.

chinese banksdict will receive a bailout within two years. 15 banks are among nine and responders who expect the move. the cost every capitalization will exceed half $1 billion. chinese lenders are grappling with bad debt after years of cheap credit. australia's election has resulted in either party having aough seats to form government. there are limited implications for australia's top grade. a wider deficit could put downward pressure. news 24 hours a day, powered by more than 2600 and analysts in more than 150 countries.

farage is stepping down as leader of the u.k. independence party. aim being in politics was to get britain out of the european union. that is what we voted for in the referendum. that is why i feel i have done my bit. than wenot achieve more managed to get in that referendum. it is right that i should stand aside as leader. i will continue to support the party, the new leader. i will watch the renegotiation and perhaps a hawk comment in the european parliament from time to time. nigel farage says he will see out his term as an mep.

for more on the political outlet, we are joined by our guests. welcome to the program. good to have you here. farages about nigel resigning. whether he is on going to play some kind of formal role. >> the question is what is happening within the tory parliamentary party. the tory members, they are going to determine the leader of the country. is going to role,ue to play a

continue to apply pressure on the negotiations. in the near term, this is a tory question. anna: how do we square the circle that involves the eu -- they keep saying if you want access to the single market, you need to take freedom of movement. contenders say freedom of movement is off the agenda. how do you square that? is left the door open to a compromise with europe. the smart money in london is the renegotiation of free movement of labor and they can piggyback on reforms europeans will advance. when we do join the norway-type toeement theresa may want do, we are joining something very different than we left. the second is u.k. negotiators are going to try to broaden the scope of the conversation because they understand how difficult it will be to reconcile single market access

with the commitments they have made on immigration. the conversation, you divide the membership. the french and germans don't agree on anything. states, that allows the u.k. to make more progress on this trade-off by making the conversation bigger than these simple issues. do the 27 get closer together or does it come together more slowly? perhaps it is a different answer if you are in the euro or not in the euro. >> you see how they answered post-brexit. -- they have been more accommodating trying to find an agreement. beyond that, two difficulties

,re mean -- renegotiating trade given the u.k. has the bandwidth to renegotiate everything. french elections and german elections will add to the complications. within a few months, we should have a roadmap of what it will look like, but it will take years to be crystallized. have to worry about who is already in power, but those who may come into power. article 50, when will that be triggered? you have to push hard to get them to pin down. february. or if there is a significant delay, you will see huge pressure.

delay, the bigger the head to capital investment. there will be economic pressure. we don't want to begin the negotiation in the middle of the french or german election cycle. serious engagement from the europeans. the smart money would suggest january or february. officials in the foreign office need time to work up a range of options that will be presented to the government in september. anna: thank you for those thoughts. up, the top 21 dollars for the first time in two years. brent is trading near $50 a barrel. ♪

anna: welcome back. francine lacqua and tom keene are off. silver, tops $21 for the first time in two years. more, our correspondent is here. to you first. good to have you on the program. or much is this about silver how much is about gold? we have had a big rally. silver, since brags it -- since attractshen gold investors, you have a big movement in silver.

it is cheaper. ool sister ofe f gold. the correlation. silver is taking off. who is getting excited about precious metals? i talked to investors loading up here it that or retail investors? it is a big investment to have been buying. some hedge funds seek exposure to gold. retail investors are driving the rally in silver. one retailer sells online. his website crashed last week because of the huge demand.

gold is the big money that is .riving anna: when you look at how this , how that filters through, it acts as a bit of an offset. ftse is about 60% dollar earners and 60% dollar yield. the surprise for us was the pound was going to be a mitigating factor. if you look at the ftse year to date, it is up. by the energy sectors.

these have raised some questions. the bigger question going forward, with the renminbi going toker, as we get closer seven, does it become unstable? we are not there just yet. not surprising to see money going into safe haven. we saw australia was not expected to produce something as inconclusive as it did. the political instability is not going anywhere quickly. of the year,e end the question will be who is the prime minister. kind of deal they are going to look to achieve. next year, you have french

elections, german elections. .here will be prevailing for the withdrawal negotiations, a two your process. trade negotiations will run parallel. are there headwinds for some of these? javier: we are going to hit some headwinds soon. the demand for gold comes from investors and consumers. euro demand will suffer where there is sensitivity to the price of gold. in a low margin sector in the there are going to be things we are not going to be buying.

that is going to be one. the other one will be industry demand. silver is used in a lot of industrial processes. we see the industry reacting. we are reaching the demand limits. from there, the price increase is going to be slower. oil coping with the brexit blues? javier: we are going to see investment.t you have the uncertainty about what is going to happen with .reaks it -- with brexit investors are not going to put

in too much money. supplies will decline. prices recovering. the potential is not here in the united kingdom, but nigeria. production is hovering around a 30 year low. the supply loss is what is driving this market. anna: thank you for your analysis. stay with us on surveillance. the commodities conversation continues tomorrow on surveillance. is at 6:00 a.m. in new york. this is bloomberg. ♪

anna: welcome back. francine lacqua and tom keene are off today. it is independent a in the united states.

let's get the bloomberg business flash. nejra: postal savings bank of china is seeking to raise a billion dollars in the world's largest ipo. that is according to people familiar with this matter. the actual listing is not likely to take place until september. chinesed a brokerage investment securities with around $20 billion of assets are in talks with aim -- in talks of a merger. to speak onlined the matter. -- has hiked the price of its ipo to raise $1.1 billion. it is offering what could be the

largest tech ipo of the year. national bank of abu dhabi has confirmed its merger with first gulf bank, creating a powerhouse with assets worth $175 billion. shareholders will own 52% of the entity. the merger will allow the lender to compete with rivals such as qatar national bank. anna: thank you. a big week for central banks. mark carney will present his financial stability assessments. as australia's leadership hangs in the balance, we will get the decisions as well. and it eurasia group are still with us. about what lies

ahead. let's start at the end of the week. that is the big item on the agenda. >> we will see what comes out. the question is, what happens to lift off? is it delayed until december? the bigger questions will be around the banks in general. we talk about european banks earlier. liftoff is important for european banks. beyond that, you get the results of the japanese elections. a live meeting for the end of july. further negative rates is not good for the financials. anna: it is not just the european banks suffering. there are downward forces that themselves -- could exert themselves.

only an 11% chance we get a rate hike from the u.s. federal reserve by the end of this year. middle of what could be a tense political situation. what do you see? whenseems to be a year things people thought would not happen are happening. the focus is going to be on the tory party succession. it looks as though she is going to take it. we will not know until the ninth of september. that is going to be the defining question. in that context, the fed is going to be more risk averse regarding their great. anna: do you have reservations about predicting where the said

goes? -- where the fed goes. ? feels like fading liftoff. given the amount of tailwinds we again, for to faded now, it sounds like a reasonable assumption nothing will happen. the worse have come from a tactical view on friday. you are starting to reprice the currencies,r, lower that may add headwind. from markill hear carney tomorrow, presenting his financials ability assessment. we have heard a lot from him since the brexit vote. the question for carney

is is he safe, depending on who wins the leadership. gove, carney is safe. -- has been more hawkish. , that has beeno negative for the markets. anna: thank you for spending the last half-hour with us. that will do it for surveillance. of bloomberge best from the past week. we will bring you live trading throughout the trading day. ♪

♪ nejra: these are our top stories. one of the most high profile brexitheir exit -- pro has resigned. nigel farage says he has done his bit and wants his life back. construction contracted since 2009 as the impending brexit though held back --. economists in a survey predicted a reading of 50.7. has set chancellor