♪ formalroperty panic, u.k. real estate funds frozen in the wake of brexit. in terms of here, these property funds, just one indication that perhaps the others will fall in line. i think it is coming to worry about. anna: payroll pain, the fed is losing confidence to tighten anytime soon, and facing rising uncertainty as tomorrow's job report looms. and milking the health food market, nearing an agreement for about $10 billion. ♪

anna: a very warm welcome to countdown. manus: where is the money flowing this morning? the pound has a bit of a reprieve. we will talk about that in the risk radar. i thought we would go for the shiny stuff, coming back from gold. and there is a real move here, of course in the headlines more funds shutter in the u.k. what you have is the assets, going into gold trading up one quarter of 1%. etf holdings rise by 37% this year. the assets have jumped by 38 million tons, the most since the global crisis. we have entered a new bull run, according to ubs, we are with in a hair. goldman is shifting the

three-month and six-month target. the risk momentum and the fed playing into the equation, all moving the dollar holding back. it is based on fact, not fiction. anna: very much about what the fed is going to say, manus, negative low rates good it seems. punishing the risk radar, what else is on the move. we have a currency market dominating things this morning little bit. quite a few in here, the australian dollar pretty flat, as in p putting them on negative watch. it hasimproving, but decreased since the election. we still don't have the conclusion of that process, the electoral process of the week and of course in australia. the pound getting little reprieve, remember we are lower than that yesterday, the 31 year low now up by half a percent against the u.s. dollar. though a of banks talking about more pain to come, goldman and city and deutsche bank saying that about the pound.

we have begin at the dollar, above 100. increasing for a third day, this conversion trade writ large across the markets. we should say we have oil going higher, and that has been helping the equity section over in asia. actually the equity session in asia not a bad one on the back of some of those energy socks going higher. let's do the bloomberg first word news. here is rosalind chin. the fed is losing confidence in the move to tighten anytime soon. ministers at the fmoc meeting showed officials facing rising uncertainty about the outlook for growth at home and abroad. policymakers want proof that growing at a healthy pace and the underlying momentum of the economy is intact, and inflation will hit the 2% target. sovereign bond yields and record lows are not

worth the risk. the 72-year-old has built the biggest fund at pacific investment management, speaking a bloomberg television. bill: we have high durations, low interest rates, even a small change in terms of yield can produce a significant loss. so the sovereign bonds are not up my alley. u.k. business confidence sank below in the days after the referendum last month. as sentiment slipped from 32 in may, according to data compiled by lloyds banking group, the lowest since 2011 amid the euro area sovereign debt woe. global ratings have lowered the outcome on aa from negative to stable, that is after the outcome of saturday's election, denting the process of writing in the budget deficit. there is a one in three chance they could lower the rating within the next two years, if ary gridlock

continues. nearing an agreement to buy, in a deal that could value the maker of silk brands at $10 million. that is according to someone with knowledge of the matter. 2020, with half of the business kenyan on consumers seeking healthy eating alternative. and donald trump's vice president told choices keep sinking. bob corker has removed his name as a running mate. the move surprised republicans, in a move that could have added spirits and gravitas to the ticket. global news powered by more than 2600 journalists and analysts in more than 120 countries. you can find more on the bloomberg top . thank you.ind chin, let us check in on the market action with haidi lun. she has the details.

manus, we have been neither here nor there for much of the asian session. after yesterday's brutal selloff, not much conviction in either direction. regionally about 4/10 of 1%, which is pretty close to the low about 2/10 of 1% at one point. but we are looking at present volumes across the board as investors are kind of treading weigh out theto global growth conservator japanese down by one half of percent, a little bit of an impasse from the yen that continues to strengthen, a third day of losses for the japanese markets. we're looking at yen pretty close to the 101 level. australia focusing off the announcement, revising the outlook from stable to negative promising gains at about one half a percent, this just went through saying that there could be a one in three chance of a cut to the credit rating, within

the next two years. if these measures to push through budgets or rather deficit reduction measures are pushed through parliament. one way of looking at here in hong kong, the hang seng up by 1/10 of 1%, stocks rebounding in hong kong after the three-week low. we are seeing energy produces really across the board selling off, having said that the reverse in shanghai. giving back most of yesterday's gains there. look at some of the movers, as i say it is really in the energy space where we had a pretty deep selloff yesterday. they are rebounding on the backs of some bargain-hunting. and we are also seeing gold from china all the way to australia continue to gain as gold surges for now, in a seven session. anna? anna: thanks very much, haidi lun and hong kong. getting news, manus. manus: speculating they would buy, all about fresh foods now, delivering the deal.

they are to buy for 12.5 billion dollars. it is all about fresh dairy, health food, wallaby organic, and sales. this all about getting the sales targets up to 5% by 2020. so this is a deal, that adds to the continent, the whole sort of speculation that we had. game looks to be done. at about $20.5 billion. anna: since 2010, just illustrative of the assets for both organic foods and the other parts of the nondairy place manus: at this business operating. manus:just a justification for doing the deal, growing by 5%. this is exactly what they are saying to the markets, the purchase was significantly enhance the 2020 platform. most of this business is in north america. 89% is in north america.

$2.9 billion in terms of revenue last year. europe contributed about 14% of the overall revenue for them. culturally that is a whole other issue. it is all about the bottom line, 5% sales growth by 2020. anna: in terms of the property story in the u.k., formal funds are frozen as investors seek to dump real estate holdings in the wake of the u.k.'s brexit though. manus: anderson, global investors, canada life have all suspended trading in at least 5.7 billion pounds of assets. aberdeen cut the management portfolio by 70%, and a redemption. nejra is standing by. bill gross says this is nothing to worry about. this is a question of contagion, and in terms of impact, what is the fee? nejra: who am i to disagree with bill gross? what he says is this is from an innocent of bear stearns subprime funds for the lehman

debacle. moreso said if there are to follow after what has happened so far with the u.k. property funds, this could be summoned to worry about. and indeed we started with one at the beginning of the week, standard life. now a total of seven u.k. property funds have frozen withdrawals.in terms of numbers , it takes a total number of real estate assets frozen by money managers since monday to 15 billion pounds. to give be some context, about 24.5 billion pounds is allocated to real estate funds, talking about more than half that. so the impression is where do we go from here? well you can property funds analysts basically warned that 20%on values could fall by in the three years following the u.k. leading the eu. and of course we saw all of this happening actually since brexit. and then morgan stanley has also put out a note to say u.k. property funds could come under

further stress. now to put this note out before canadathe latest, life and aberdeen. but what it said was that the funds are designed a circuit breakers, but the sentiment generator can still drive a negative feedback loop, similar to that seen during the last financial crisis. this i final point, and found really interesting, the question of whether the u.k. property fund scenario could send a warning to the junk on world. because junk bonds may actually pose a greater liquidity risk than those invested in u.k. commercial real estate. anna: nejra, thank you much. to discussh us now more detail, managing director , goodief economist, lena morning. i do like setting as a question at 6:00 a.m. it would be summoned around comparing and contrasting in terms of the property sector now. versus 2720 you see parallels?

is there worry for you? elan: the property is the epicenter of leverage, and the fact that we have a slide to quality is a slightly liquidity and away from highly leveraged assets, it is little surprise that it is the pound and the u.k. housing sector at the epicenter of this divestment crisis. i think that the fact we have seen poverty funds closing in such a short space after the referendum shows the extent of the political risk in the financial stock were underpriced and financial valuations. but also shows to this point the pound's weakness is really a testament to the fact the rest of the world is investing in the world, rather than inflationary. the capitalizing inflationary signal, and that is the worst thing because it means the fact that we have record low gilt yields, looking at manus looking at the chart. discoverys is anna's

in the bloomberg terminal. what we have is the heat map. anna: i called the heat mpa. manus: credit where it is due. and if you look at the gilt wave, looking at these graphs, what you see is his period right out here, this 30 year bond market. down we went in terms of the yield collapsing, the contraction. around the 23rd of june, around that period of time for the referendum. money is continuing to go, gilt returning 14% in 2016. the spread between 30 year on the far end of this heat map, and the closed paper is delegated. given that we are such an indebted nation, with the currently high deficit is under pressure -- lena: it is a flight to liquidity, from the very funds that are seeing outflows from foreign investors. the fact that gilt yields haves the.n, this is reflected

u.k. market that it is a sign of markets collapsing a sign of low yields not working for growth. at the moment, rather than a sign of inflation at this point. they could be worse of course. we could be seeing u.k. bank yieldsfalling and gilt rising, a default scenario. manus: which would be a default scenario? lena: bank stocks falling. manus: they already are. yieldshe fact that gilt falling, it shows the financial systemic risks that has risen, the results of income markets pricing down the neutral rates in the u.s. economy. but also the fact this is happening globally, bond yields are at record lows cannot is the u.k. story but a global systemic story. the u.k. being one of the biggest centers in the world. the second one of course is a signal of the fact that the bank of england has expressed a

willingness to do whatever it takes to contain the contagion from brexit. therefore, the bulk of the default will happen through a cheaper pound, rather than hire gilt premium. and it is the shock absorber, i think. anna: describing that is necessary, mark carney of the bank of england. have we seen any expression of risk in the pound so far, and the real estate market, looking for other places where he might see this express, other dominoes to fall, are there other assets classes you look at that might be the worrying next step? lena: exactly. the highly interconnected financial system that we have, what we have seen in the last week is that the financial contagion from brexit is not over yet. and the third one is that it is not contained to the u.k. and so the domino effects here are vulnerable credits elsewhere. and there is one in particular that should pay more attention,

china. anna: so this is the china lake? lena: what we are worried about here is that sterling is declining, and at this point there is no evidence yet that the drop is fully hatched. in other word will be have is the run on aaa rated reserve currency is unprecedented. manus: a run on the currency, $1.20, various people saying $1.15, is it over yet in your timeframe, very briefly? lena: this could lead to a broad-based dollar strength that could lead to a weaker yuan, they've all the managed carefully so far. but what you want against the europe or the yen, if the dollar strength continues, we could see an impact on global commodities. we haven't seen it yet, but that doesn't mean we are not going to see it because the pound declines. anna: the manager for

communications showing the better than previous, but we will see how far that goes. manus: we a lot more global issues to get through, lena joins us. we have to get to the fed. we will talk about payroll paying. in. that is up, next. ♪

anna: welcome back to countdown. 1:20 in the afternoon in hong kong where the hang seng is up, moving higher with the energy stocks helping the agent asian sector. london it is 6:20 in the morning. here is rosalind chin. buying the foods in a deal worth about $12.5 billion, representing a premium of 24% on the 30 day average closing price. targeting sales growth of more

than 5% by 2020, with half of the business kenyan on consumer seeking healthy eating alternatives. fundsore u.k. property have closed doors, as investors seek to dump real estate holdings in the aftermath of the brexit vote. global investors, columbia threadneedle, and canada live have suspended trading. aberdeen fund managers cut the property portfolio by 70%, briefly holding redemptions, so investors can get their money back with time to reconsider. samsung has reported the biggest profit in more than two years, bolster my demand for its galaxy s7 smartphones, cost controls, and sluggish iphone sales. the largest maker made $6.9 billion in the latest quarter, beating estimates. the results underscore how the company is defined the slowdown

in the smartphone market. and that is your bloomberg business flash. anna and manus? manus: thank you very much. the federal reserve is losing confidence to tighten rates anytime soon. the minutes from the fmoc meeting last month held a week before the britain referendum showed that officials taking rising uncertainty about the outlook for growth at home and abroad. mike mckee has more. mike: if you're looking for guidance for future fed moves, you will not find it in these minutes. instead, you are seeing a committee groping to figure out what the prospects were for the u.s. economy. keep in mind the timing. this was after the dismal jobs report in may, but had the brexit vote. brexit get surprisingly little mentioned in the minutes, but it could be a risk and a flinch to development. but no details on what the risk might be or what the policy response might be appropriate.

however, most of the discussion was devoted to figuring out what the may jobs report met. remember 38,000 jobs were created. many participants the minutes note fell the number was likely distorted by the verizon strike and statistical noise.the labor market might be slowing , but in general the labor market was stronger than the data showed. some suggested the lower rated games could be suggesting a general slowdown ahead, while others a few blame the weak hiring on the inability to find employees.bottom line, almost all judge the surprisingly weak may report increase the uncertainty for the outlook of the labor market. it is a terrible cliche, suggesting the outcome remains to be seen, but that does seem minutes fore fed the june meeting. michael mckee, bloomberg washington. anna: managing director at g plus economics, lena, did you

get any a direction from the minute? might suggest that we did not get any clues. lena: the business for the markets right now, the biggest risk is from the jobs report, and the reason for that is that of brexit wearket have seen the markets waiting. panic over three things, the brexit is not fully priced income of the fact that the financial contagion is not priced in, global confidence is not prices. the median sales of the brexit fallout, and on the other hand the markets have been rising in the media implications of lower for longer against interest rates. and this is against the instability of the bank of england ecb easing this year. that stimulus, that near-term stabilizing effect in terms of lower bond volatility and liquidity the result, the key

anchor holding markets away from a panic right now. manus: holding markets, the contagion is not done. you specifically look at this chart, this is the s&p 500 and invertible syncopation with the u.s. dollar. why does that matter? is your best case scenario that there is a window for the fed to do more rate hikes. that was the headline yesterday. will the fed do more heights? and why are you obsessed by this correlation? has: globalization happened directly challenging the stronger dollar. the fact that we have seen the s&p 500 close higher yesterday, as result of the european markets holding a better this morning, directly related to the fact that the euro-dollar is higher. in other words, the weaker dollar and stronger equities, more expensive, risk-averse, meeting a stronger support for global trade, the very least minimizing deflationary risk. anna: you talk about how the

biggest risk this week has been the strong payroll number, because you like, or the markets like the nonthreatening environment from central banks. not looking for them to threaten. where does that leave us with other banks, the boj for example? we will get more that story for the month of july. the fact the boj is struggling with inflation is a great indication this is a global phenomenon, rather than a japan-specific phenomenon. more specific for the boj is that the management by china has been relatively expensive, of the yen. what does that mean? devaluationshina have happened against the yen, some 18%. only anst the euro, couple of points against the dollar. that means that japan is basically carrying the ball of china's deleveraging tray. and that is unsustainable. anna: thank you very much.

manus: that may well provoke the g7 into action. lena stays with us. we have a lot more to get through. we're going to talk about banking woes, . ♪

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♪ anna: welcome back, everybody. 6:30 in london, is in the bloomberg first word news. there is rosalind chin. asalind: buying the foods in deal worth about $12.5 billion, representing a premium of 24% on the 30 day average closing price. darkeningd company is sales growth of more than 5% by 2020, with half of the business looking at healthy eating alternatives. the federal reserve is using confidence in its move to tighten anytime soon. meeting laste fmoc month held before the brexit

referendum, show rising uncertainty about the outgrowth at home and abroad. policymakers want proof. the underlying momentum of the economy is intact, and that inflation will eventually hit their 2% target. more u.k. properties have frozen withdrawals, as investors seek to dump real estate holdings in the aftermath of britain's brexit vote. henderson, colombian threadneedle, and canada life have suspended assets. aberdeen cut the value of the property portfolio by 70%, and holding redemptions so that investors who want their money back halftime to reconsider. confidence sank to a 4.5 year low in the wake of the referendum. compiled byn may, data from lloyds banking group. that is the lowest since december 2011, amid the euro

area's sovereign debt woe. lowering the outlook of australia's aaa credit rating from negative to stable, after the outcome of saturday's election dented the outcome of reining in the deficit. there is a one in three chance that there could rate in two years if the parliamentary budgets continue. and getting a nation tour of africa, seeking to increase the economic influence in a region where china has taken the lead. in mozambique today, modi heads to kenya. power by 2600 journalists and analysts in more than 120 countries, you can find more on the bloomberg at top . anna and manus manus: roslyn, thank you very much. asian stocks are trading higher as they weigh investment growth,

and the timing of a potential rate hike from the united states of america. nejra has the very latest. nejra: if we look at the msci asian-pacific index, troubling to call this again because we losses as0 of 1%, much as 2/10 of 1%, so little fluctuation in the markets. the overall theme is some risk aversion. we're continuing to see the brexit fallout, four more property funds freezing withdrawals. celestica look at the same havens. yen rising against the dollar for third day, we are at 100 .89 on dollar-yen. all this is about money moving into the safe haven, but it is also about dollar weakness following the fed minutes. and effect one thing to do are saying is that the treasury yields are actually the biggest driver of this dollar yen trade. and we know the 10 year has hit record lows this week. and we are looking at another state haven, gold.

the prices of two-year high, above $1000 and outs. but also gold holdings and also topped 2000 tons for the first time since july 2013. 30%,olden's have risen gold has likely entered the early stages of the next bull run. and finally i want to just look at the aussie dollar. this bit earlier. it has since recovered a bit, much unchanged on aussie dollar now. this is after the outlook was cut on the aaa credit rating from negative to stable, also given a one in three chance of a downgrade within two years. anna: thank you very much. talks between the european commission to recapitalize italian banks are stuck on with the creditors should face the taxpayer funds, according to people familiar with the discussion. manus: for more we are joined by philippe, senior credit at

hermes. let's get right to it. this is a standup as we understand it, between the european commission and what the italians want to do. recapitalizeeally their banks without breaking the rules? philippe: good morning. i would just say that there will are talks that will allegedly come to a standoff at the moment, but we wish to sustain some latitude to recapitalize the banks, without treating a burden on the shareholders. and i think italy is right in attempting to fix the problem. using this latitude there, i think that is probably collateral damage for the likes of some groups, quite huge at this moment in time. bank,you mentioned that clearly where a lot of concern lies filippo.

what do you think we will see recapitalize? how much money is needed to be put into the sector? japan, if yoully, want to do capitalize and solve the problem once in order, and we really talking about between 20 and 40 billion euros, that is the amount that has flowed in the previous week. in my opinion, that would solve the big issue, which is the finance between the accounting value, and probably what the market is ready to guy this stuff up. and this is all related to sort of kicking the can down the road, then probably looking at something in the region of 10 billion euros. which i think probably be a combination of different measures, increasing or creating a new fund, recapitalizing some state funds, and the banks for

example, there are more banks. manus: everybody is trying to understand the scale of the problem and the numbers. you have sent us some through. there are 210 of the worst performing. and the reality is they're valued at $.35 in the euro. but they expect the fund or the bailout mission, whatever that is, to take it off the banks at a higher price. that is contentious. if the real value is down to $.25. philippe it is very contentious. but you have to think that the entire nonperforming market is not very liquid. and the transactions so far have been very few and far between. so i think it is probably the real value line somewhere theeen the 30-35 cents and

$.40. and a fund that is able to buy these nonperforming loans for a value which is more close to the value which the banks or the assets, that is probably the right way. that it satisfies with a lower internal rate of return on these assets, then they can justify a price which is closer to the $.40 on the euro. anna: take us to the process from here then, who shall be talking to whom? seeming to suggest it was not clear who exactly would be required to suspend the european rule, if that was the intention. where is the power to fix this right now? filippo: it will probably be an end decision for the european commission. because there is this article in

32, which doese lay out the condition for some exceptions from the state, and the possibility of circumstances, that than to be at stake. and in this case, and in the day, the final word to be from the president of the european commission. manus: you know what? i would love to believe you the last word is with the european commission. can you envision any situation where renzi will allow mom, pop, grandma, grandpa to take a hit and bailout the italian banks? that is the rub, the italian market is structurally so different to anything else in europe. you are quite right. i think it is the political somengness to impose

departures of the banks, usually zero. manus: there you go. short and sweet answered we like you. you can come back. hermes,redit analyst at thank you. anna: lena is still with us, chief economist. weigh in on the italian conversation, we talked yesterday, saying italy may spur a pan-european banking crisis. is this well contained? lena: it does have strong echoes to the eurozone banking crisis, back in 2011. i think the important thing here is that this is the first banking crisis of negative interest rates and qe in europe. and what it does show is that the lessons have yet to be learned in europe, that you cannot fight systemic risk with cyclical talks. and you cannot fight a capitalization crisis was central bank liquidity alone.

now, the question here really is how long can they be allowed to just fester? clearing a long love. because the longer it lasts, the longer the risk that comes systemic and contagious. the moment it becomes brexit would think be to preempt this, but as we saw with your before, sometimes political decisions can lag behind. manus: this is the market reality. this is the stoxx 600 bank index. this is your yellow dot, 2001. i would argue that italy is in a stronger position, apropos of the irish and the greeks. here we are. contagion is already happening in terms of bank stock valuation. where does that look and feel to you? when will i say right, italy is contagion?

or is already happening? lena: the dna is very different in the systemic sense. there is no risk because the quantitative easing, the a limited amount of funds. manus: and there is liquidity awash. lena: the risk of the contagious domino effect is very low. what is available this time around, any bank decision that happens at the expense of italian bankers without any government european commission limitation, will have a deflationary impact, a contractionary impact. it will be a huge political crisis, a confidence shock. they could have an impact elsewhere. spain, portugal. risk of ae, lies the broader systemic crisis. will we cannot allow is for this

crisis to just allow central-bank liquidity alone. it has to happen from the italian government, it has to happen with european commission beard about clarity on this, i think there is investor flight. anna: interesting that the things that are making this better than previous bouts of concern about the banking sector, one of them is what the ecb is doing. but at the same time, the reaction you described, stocks getting too ahead, may be it off the radar for europe a little bit. we've seen in europe many times now crises, what is required to produce reforms. lena: absolutely. some markets will be inclined to look at the italian bond yield, say there is no crisis here. the fact that we have the bank index where it is now, back in 2011, i was sure this was an economic bomb wedding to happen.

and liquidity is buying time. manus: she is on a roll today. economic bomb's, global contagion. that is going out on twitter. anna: thank you very much, lena. chief economist at eplus economics. the company reporting the biggest operating loss in more than two years, as successors of the galaxy s7. we're joined by tech reporter ray stevenson. anna: samsung's sales still flat though. why the positive investor mood? >> well, it was mainly because the company was able to keep costs under control. operating profit came in 8.1 trillion, compared to analysts of 7.4. that was on the back to some instead of lower marketing costs, because a lot of carriers

picked up or sugar the burden of marketing. you know the galaxy s7 line of phones, samsung not have to devote as much marketing to the effort. therefore, helped boost the bottom line. even though sales were up only marginally during the latest quarter. manus: what are they doing right that gets them to keep selling galaxy phones, even though we have the smartphone industry overall said to decelerate. certainly the signs of a deceleration? reed: one interesting thing that samsung at this time around was they tied the debut of their new flagship phone just right. they get a little bit earlier, precisely during the period when iphone sales were starting to dip. and so i think that managed to capture a lot of consumers, who were looking for something new and shining, advanced. and samsung delivered it to them, and just the right way.

stevenson, bloomberg tech reporter joining us there on smartphones. manus: up next, what next for britain? is there any other conversation we're having today? right here, europe following the brexit. we will speak to the ambassador to the eu, on bloomberg. ♪

manus: you are looking at a shot of new york, futures indicating at 29.3 on the s&p 500. apparently unchanged. 6:49 in london. 1:49 having a late cocktail in new york. let us to the bloomberg business flash. here is rosalind chin. buy and: denanon is to company, including debt, that

represents a premium of 24% on the 30 day average closing price. paris-based company is touting sales growth of more than 5% by 2020, with half of the business looking at consumers seeking healthy eating alternatives. properties are closing doors, seeking to dump in the wake of brexit. columbia threadneedle, and canada life has suspended trading in at least 5.7 billion pounds of asset. aberdeen fund managers cut the portfolio by 47%, and investors who asked for the money back have time to be reconsidered. mortgage bond traders are leaving deutsche bank's new york office as the lender withdraws from the biggest cause of the market. that is according to people with knowledge of the matter. toldsay christopher has deutsche that they will start later.

snapchat is about to cause ng users, allowi to hold onto messages directly in a move to find users tied to the app. it has about 150 million daily users, valued at $18 billion at his later funding and may. and that is your bloomberg business flash. anna and manus? manus: thank you very much. u.k. business confidence sank to a 4.5 year low in the days after the eu referendum. sentiments led to six from 32 in may, according to lloyds banking group. that is a lowest amid the euro area's sovereign debt woe. anna: our next guest has been at the center for 35 years, stephen is a former u.k. investor to the eu and is currently chief advisor on europe at portland's

communication. great to have you on the program. we are caught in the midst of a leadership vote, the conservative party try to find a new leader for the party and the country. your experience in europe, what does that tell you about what we need from a new u.k. leader, to get the best deal for the u.k.? speaking from that side of things? >> the key thing in most of these relationships is trust. that our partners will want somebody they can have confidence in, confidence they're competent, but confidence that when they say something they can carry it through. so spirits helps. and you know, looking at the runners and risers, they do have a track record for being secretary. but at the end of the day, they're all our partners, all politicians. they do with whoever comes up on top of the pack. manus: what is the most important thing for whoever goes

to the eu to negotiate on the half of the u.k., that they want to be a part of the single market, what is the single most important message that needs to be conveyed between now and perhaps, and i use the word perhaps because it will get to the article 50 vote when we good on the brexit road, because we're not there yet. stephen: they're not be clear messages because they have not produced two candidates, going on until september. and parliament is in recess until october. probably the new prime minister when you take time and go around europe. they're not going to negotiate with those collectively, but they're not going to refuse to talk to the prime minister. they need by bilateral relationship with us. time is her, she did take to do that. and actually see what she then thinks the market will bear, as it were. it is very difficult because we had two years to negotiate our

exit, that is at the same thing as negotiating a new relationship anna: explain that. we could have a. where we automatically have to rule, before we can then negotiate another trade? stephen: that is the most difficult part. an ideal world, you can have two negotiations going on in parallel. what you put in his place? if you are lucky we can at least start those two processes, rather than just one. but what happens if it is not complete? if you don't have a new trade deal after two years? only if every other one of the 27 countries agree, can it be extended. you have 27 countries who all have a lot, potential to blackmail us, special deals in order to continue the discussion. the last thing you want at that point is to have done a deal just on trading goods, not in services and financial services. and in those circumstances, if

you could not get an extension under reasonable terms, and the only alternative was trade goods only, that it would be better to just face the inevitable. terms, and the negotiate. but none of these things are cost-free, far from it. you have new tariffs, worldwide under wto rule. it is expense. not a single process. you probably jump. manus: the whole leave campaign was predicated on immigration. and was predicated on controlling immigration. and if you go in under what is the norway option, you have no control over the free movement of people, under that style with which already exist. stephen: the norway view, though attractive, is going to be longer-term.

there are two possibilities. one one of course, and this is a long shot, starting to revise the freedom of movement, that we can't rely on that. break, we, over the ourselves might change our mind. we can rely on that either. most likely thing is that we find ourselves over quite a long period of time, and maybe having gone out under wto negotiating some kind of free-trade deal on the canada model or something similar. anna: just briefly, the most important visit the new prime minister will have to make is to germany perhaps. we have this trade flow graphic in terms of trade. stephen: germany, paris and berlin are the obvious places, but of course we are also in a situation where next year is an election year. we have france and germany. it made a vehicle after those events that we see clearwater.

anna: stephen wall, former ambassador and advisor. manus: running for the bulls in pamplona, spain, the only place is on "countdown." ♪

?c+sv guy: property panic as real

estate funds freeze in the aftermath of the brexit vote. the moves are worrying. >> in terms of these property funds, it is one indication. there could perhaps, the others to follow. markets,he health food danone is ready to purchase whitewave. the fed is losing confidence in its need to tighten any time soon. officials rates rising uncertainty as tomorrow's job report looms.

welcome to "countdown." i'm manus cranny. anna: and i'm anna edwards. we are getting breaking through's from europe. give industrial production coming through. -- we have industrial production coming through. the expectation was an increase of 0.1%. the year on year number is weaker than what was expected. bear in mind, this is data for the month of may. this data though, underlying the fragility of the situation even before the brexit vote. an unexpected decline in the month of may, a sign that the political uncertainty and dampening production is having an effect. globalf fragility in the economy now might have to be

exacerbated, of course. coulditish vote in june further weaken the german economy. wolfgang schaeuble was very dismissive of the effects of the u.k. vote on the german economy yesterday. we are getting weaker numbers than expected out of germany. manus: consumer spending and consumer confidence will be the rub of what happens. 8.9%.are down the estimate was a decline of a 5%. so, dramatically worse than what was expected. on the food side, down 9%. the total u.k. sales, down 4.3%. sales, that is taking everything together, those rose by 2.1%. too early tot is quantify the implications. we have that lloyds survey this

morning, confidence is being eroded. of course, a lower pound. what are the implications in terms fo importing goods? impactinghe terms of the deflationary story? so, overtones also came out with their numbers. as far as bovus is concerned, they say it is too early for them to assess the impact of the referendum on the u.k. market. the u.k. housing market fundamentals remain strong. of legal half completions, up by 15%. will they be able to sustain that given that these commercial property funds are gaining? will that have an impact on the retail sector?

will they build on more land plots? ab foods is not just do foods. they also do clothing. they say their four year outlook improved. they see it benefit on the eu referendum results. that is on the fx side of the business, not speaking of the business as a whole. this is ceraeal, breads, etc. they see a translation benefit. this goes to the heart of some of the stories we have been talking about, the beneficiaries of a weaker pound. that could be important to them, in terms of translating that back into a weaker pound. analysts said 60% of the profits come from there.

as everybody goes to find cheaper close, primark could do ok. manus: let's check on the futures because we have a bounce coming through on the equity side. by the way, i should say the analysts t are upgrading their estimates on the ftse 100. we have our next guest. let's talk about the risk eight radar. s&p has lowered its outlook on the aussi dollar. it was alittle higher. the dollar-yen, when will it .00, and where are we in terms of intervention? anna: the aware of what is have -- be aware of what is happening in the equity markets. we have asian equity markets actually doing ok as a result of some people getting into more

energy related markets. we can see the nymex price higher there. a quick check on the bond markets perhaps. we all sound like broken records, talking about these record lows on various bond yields. this is the 10 year german wound markets perhaps. -.18. let's get to the bloomberg first world news. danone is toah, is buy whitewave. of itsve half business from consumers seeking healthy alternatives. the federal reserve is losing confidence. minutes from the fomc's meeting

last month held the week before the referendum. officials are facing rising uncertainty. policymakers want proof that job creations has resumed at a regular pace and that inflation will hit the 2% target. southern bond yields that record lows are not worth the risk. gross spoke to bloomberg television. >> we have high durations now at low interest rates. even a small change in terms of yield can produce a significant loss. the sovereign bond yields are not up my alley. rosalind: u.k. business confidence saying to a foreign a half year low last month. -- sank to a four and a half year low asthma. this is the lowest since

december 2011. ratings has lowered the outlook on australia's aaa credit rating to negative from stable. this is after the outcome from the elections on saturday. s&p says there is a one in three chance they could lower the rating in the next two years. this is as good look on the gridlock on the budget continues. global news 24 hours a day, powered by 2600 journalists in more than 120 news bureaus around the world. you can find more stories on the bloomberg at top . anna? manus? manus: thank you. let's check in on the markets. haidi is standing by. we are picking up a nice updraft on the futures. haidi: a little bit of a bounce, manus, that we see here in the asian section.

but yes, as i said, a lack of conviction. you can see that from the very thin volumes. investors are just waiting and seeing what global central banks will come up with. we also have rumors perhaps, of more action from the pboc in particular. that has been driving some of the gains in hong kong. bouncing off that three-week low we hit yesterday, we are up about .9%. regionally, we can say a lot of gains in the energy sector. this, after oil recovered. the nikkei 225 just close to five minutes or so ago, down .5%. they are extending losses a little bit into the close. we do have a stronger yen again today. sydney stocks are interestingly up by .8%, despite the s&p announcement downgrading the

outlook from stable to negative and warning we could get a cut thein two years if government fails to push through these deficit reduction measures. we have pretty strong gains coming in from these emerging markets. up nicelys sitting here. we have been looking at dollar-yen, of course. it is pretty stable, but strengthening. it is not quite breaking through there. dollar, the aussi had a very strong reaction to the s&p outlook. anna? anna: thank you very much. four more u.k. property funds have a frozen withdrawals. this is in the wake of the brexit vote. they have suspended trading in

at least 5.7 billion po unds of assets. manus: joining us now is neil callahan, it was been joining this story for us, and stephen englander. bill gross says this is something to worry about. to 38 hours 24 into this story. is this a fair judgment call? >> i think the level of panic is clearly spreading. the 17% reduction just shows , and ais has spread spread quickly. we know have -- we now have more than half of the real estate funds in the u.k. frozen. we will see if there are enough cash buffers to avoid freezing

as well. anna: if we are looking for something to try and draw a line under this panic we can see in this particular part of the property market, can we turn to any real data on the value of commercial real estate right now in london? and is like it was any comfort, or does it make things worse? >> we are in for a long wait. nobody is going to want to sell a be moment, unless they are forced to. at the moment, people are just guessing. anna: 17%, for example. that is a guess? >> that is a 2% fair value adjustment. people are trying to take a stab in the dark at the moment. manus: i have got sterling there. whether we go lower, whether story.n altebolster this how concerned are you about this story from a contagion point

of view? >> i am not by concerned. property is liquid. there are many people selling. you will not be able to cash a very quickly. this does not leave the funds with many options. i would be concerned with sterling, whether there is any indication that it is foreign investors or local investors that are trying to leave. denominated assets and 45% of the money is foreign. people are trying to reduce their exposure at the moment. when looking at contagion, we have to look at gdp. >> we are still in the stage where the market is reacting to a brexit vote. even now, many people are not accepting of this. in my case, we are getting former questions -- i am getting former questions about how much further it must go.

investmenton direct into the u.k., u.k. investment, i think it is negative right now a. and 1.30, that is pretty high. manus: the global contagion from the brexit is not priced in. the pound is not fully priced in, in terms of brexit contagion. what is your near-term forecast on the pound? >> you know, let me put it bluntly. i think sterling has become an emerging market currency, in the sense that there is a structural deficit that must be funded. investors still want to take money out, rather than put money into the u.k. the question is, what gets you the capital flow to fund the deficit you need. the answer is, sterling has to drop like a rock. and we are not close. anna: this is not dropping like

a rock yet. is this something that is on your radar? >> everything is possible. and a traveled for two half weeks an just having come to the u.k., the rest of the world is not as concerned about brexit. most people are concerned about banks. right now, the brexit and probably correctly, is viewed as a u.k. and european problem, unless it kicks off something else, like panic in european banks, for some sort of financial crisis. we discussed brexit in asia, but it was not the entire conversation. manus: it is interesting, have we become so engrossed in our situation that we have become myopic? take us to the rest of the

ramifications in terms of the global deflation. what does this do to policy response? sized. is a middle country. the impact will be significant in the u.k. for a couple of years. the impact on negative will be negative, but much less so. and globally, the arithmetic works out for it to be some what negative. the bank of england is already signaling eases. we have expectations that the ecb and the boj are going to ease. manus: are we going to get to 0%? 20 we get there? there?- do we get >> it could be one hour from now. [laughter] >> even zero is not the bank of

england's problem. anna: does he have a place where he wants the pound to get to? >> not one that he would admit, . very neil, thank you much. and stephen will stay with us on the program. we have some breaking news. take: rabbobank will an additional 500 million euros charge for the provision of swaps to small and medium-sized enterprises. as they get a little bit more detail on that, digit shows you the litigation -- it just shows you the litigation is nowhere near done. " next,n "countdown,

more on the central bank minutes. that is next. this is bloomberg. ♪

manus: 7:20 in london. the ftse trains up this morning and the futures is up this morning .8%. what a beautiful morning. the fx market? that is the question. anna: the federal reserve is confidence.ng officials are facing rising uncertainty about the outlook for growth at home and abroad. policymakers want proof that job creations have resumed at a healthy pace, that the underlying momentum of the economy is intact, and that inflation will hit the 2% target. manus: the pound is trading like

an emerging market currency. looking at the fed, when you look at the fed, what they need to try and balance is whether the jobs number from last month was an anomaly. could they, would they, should they, given the global issues at the moment raise rates again? >> i probably would have voted to raise rates a year ago, but this is a very different fomc. they are much more aggressive and are trying to stimulate the economy. economist think they will not raise until december and even that is in question at this stage. anna: because you see the data stronger than they do, or you are not prepared to run the economy run as hot as they are? >> the economy has undergone a

lot of shock. i think the reality is that money is so easy. there is a lot more momentum in the economy. monetary policy, i don't think it is as important as they think it is right now. manus: this is the dollar. what we are trying to work out, is if they are going to let it run hot, where are we in terms of what is going to drive the next move in the dollar? does that momentum continue? >> that is the xy. manus: it is. >> we have u.s. economic data, which has been fine for the last couple of releases. the ism's, some of the confidence numbers have been pretty good. the dollar has been depreciating against emerging currencies. it has underperformed on

the dxy. this is your emerging market. take us through this. >> i think the formula fo ryor u know, strong emerging market currencies is decent economic data in the u.s. and a very dovish fed, for they look at this and say, not enough. they think that is what the market is reacting to right now. the risks are the bank situation, and whether there is a thread that leads to the financial market crisis. anna: often when we talk about rate rises from central banks in any part of the world, we talk about how that relates to the politics. does that stand in the way of a fed hike for you, that we are approaching elections? skip a meetinght get or two, it looks like a hike or

an ease could be controversial. but yo ugeu get what you pay fo. obama has appointed a dovish fed. manus: tell me this, what does trump in the white house do to the dollar? i should rephrase that, what does the potential of donald trump do to the dollar? >> the market will assume there is going to be a trade war. at the markets are going to fall -- asset markets are going to fall and possibly, the dollar will take a hit. getonjecture is, if he does elected, we will have a republican house, a republican senate, and a republican white house, which would be more thaniv dollar positive negative. i think the expectations will be negative.

i think we will see equities come under pressure, but i think the reality will be different than what the market consensus is right now. manus: we are going to squeeze one more in. ofwas said that the brunt the market evaluation was taken by the yen. who would have gothought this. back in 2011, this is where the dollar was when we had g-7 intervention. we are still 29% above the last intervention level. will they intervene? when will the intervene? you have got 30 seconds. >> they might intervene if it breaks 100. i don't think the rest of the g-10 will be enthusiastic about them doing it. anna: steven, thank you for joining us. joining us.nder, we are back again

tomorrow morning. it is jobs day. that is it for "countdown." this is bloomberg. ♪ get ready for the rio olympic games

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nbcuniversal's coverage of the rio olympic games. call or go online today to switch to x1. move." i'm guy johnson, alongside caroline hyde in berlin. here is what we are watching. property panic. four more real estate funds fr eeze. carney andrmie an osborne do anything to slow the tide? and buying organic growth. danone purchases whitewave in a