francine: frozen. for more u.k. property funds halt withdrawals after investors look to dump assess after post-brexit. talks between heavily in the european commission over safeguarding the nation's banks hit a wall. a will speak to the ceo -- $12 billion bid for whitewave foods. it is about currencies and organic foods good this is bloomberg surveillance. i am francine lacqua with tom keene in new york.

there is a little bit more bullish than an hour ago on stocks. there is a lot of money going to havens. tom: the flow of news into this morning's call more. -- is calmer. the fragility, within the united kingdom and united states political scenes, something else to talk about today. francine: there is a second vote and we understand it will be a two-way race between andrea leadsom and theresa may. let's get to the bloomberg first word news with nejra cehic. nejra: francine, exactly as you say, the race to succeed david cameron is narrowed to two candidates today. theresa may and andrea leadsom are the favorites. conservative party lawmakers vote in the second round today. the two contenders will face the parties wider membership. the new leader will be selected by september 9. germany's chancellor angela

merkel says there can be no sustainable security in europe but without russia. germany and its partners the -- agree -- an offer to have a dialogue. merkel told lawmakers she plans to boost defense spending by more than $2 billion next year. in australia, prime minister to -- toting leads form a majority in parliament according to an estonian tv projection, he has one with 82% of the vote counted. a three-day truce and serious civil war appears to be holding. still fighting continues between syrian troops and islamic state forces. the justice department has made noofficial, there will be

criminal charges against hillary clinton over her use of private e-mail while secretary of state. prosecutors have ended their investigation. fbi director james coney testified -- will testify today. he recommended that no charges be filed. global news, 24 hours a day, powered by 2600 journalists in more than 120 countries. i am nejra cehic. this is bloomberg. tom: let's get words on a data check today. equities, bonds, currencies, commodities, futures, the 10 year yield, 1.3. larry summers writing about low yields yesterday. secretary summers all over the low yield place of where are we right now. bill gross talking yesterday it will have some views of mr. gross through the morning. come on voting, let's get to it. perfection.ced to stunning, 109.99

-- 100.99. i'm getting used to sterling under 1.30. francine, yours has to be more interesting than mine. francine: tom, you're on fire. i think it is due to with a little more optimism and maybe realizing that the selloff we had yesterday was overdone. the pound under 1.30. i want to look at gold because we are seeing gold advancing. we are seeing yen higher. arehe same time, people concerned about the fallout from brexit. tom: here's what i had for breakfast. all of our interns are demanding i switch to soy milk. have you had soymilk? -- that is what we want as well. tom: soymilk. i am not having soymilk.

francine: it is probably what the company is buying. tom: we will have more that later. let's go to an optimistic chart. this is the mother of all optimistic charts it not just charts. .ot to america's -- charts not two america's. ugliness in this lack of claims as compared to employ it is absolutely unprecedented and extraordinary good this is that one part of america, they are employed, they are feeling good. it is a job shortage. this goes to that strange jobs report we are going to be looking at tomorrow. francine: yes, that is the one thing we need to look out for good i did not want to do --

look out for. i did not want to do pound because a look at pound every two minutes. gold -- this is what i charted. this is spot gold and this is the price. the rest is basically global etf's. what it tells us, it is another way to look at banks. slideates will not anytime soon. that may fire up a hunt for haven assets. european stocks on the rebound. the longer a losing streak for three weeks good we need to talk -- 43 weeks. we need to talk havens. with us is george saravelos. george, great to have you on the program as always. we need to ask about these funds. we are seeing redemptions. we are seeing liquidity problems. is this like 2008? does this resemble a canary in the coal mine?

retail, real estate problem in the u.k.? george: i don't think it is like 2008. i think it is a part of a necessary rebalancing this country has to go through in terms of the uncertainty shock. 2008 and 2010 was all about a big credit event. the bulk of it went through in 2010, it was european government . in 2008, it was big bank. here, we're talking about rebalancing the flows. as a result, you will be seeing very big moves. the fact that the market is not unraveling globally is close to my expectation. francine: we spoke to bill gross and he weighed in. go -- brexit's -- bill six of which have been forced to close to close the door on withdrawals. reminiscent of bear stearns prime funds before the

debacle. francine: talking about the first casualty, even if it doesn't feel like 2008, what is the next casualty tackled there must be others. george: what we are going to just going through is the market try to understand the impact on the u.k. economy. were going to focus on commercial real estate. if you look at the statement from yesterday, that was a risk that was identified in our own research. the next six months are going to be about how big the economic cost is going to be . i do not expect other big casualties, because this is mostly a u.k. issue. it is a big political shock to the system that is going to take a long time to play out. i would not expect a lehman type contagion in terms of what we are saying on the commercial property side. tom: with property, you've got a liquidity issue. i understand it is a different beast, but a standard life chart

-- your member six or seven of these things in the first one was a standard life. i threw on their regression from up we gow's of 2009. and we are two standard deviations out on the rising recovery. i get that. can you extrapolate or expand property dynamics over to the more liquid ftse? can you break it over to the equity market -- can you bring it over to the equity market? george: these are very different markets. it is remarkable that the ftse is outperforming almost other european stock indices. it is benefiting from currency weakness. we have to look at the individual markets and how they are impacted by this uncertainty. the fund closures, probably the right thing to do because it is a very liquid market and you need to earn back the liquidity so this can take place in an orderly way. agencies, companies that

are challenged by the responsibility of other systems andscal monetary systems. we spoke yesterday to the governor of the swedish bank. is sweden the next switzerland? are thanks so screwed up in europe that there is going to be sweden as a safe haven? george: sweden historically the tends tohe currency suffer when there are fears around global growth. the manufacturing base is here to help global growth does. we are a bit reluctant to draw the parallels between switzerland and sweden. tom: very well. we will come back. david foralso to being with us yesterday. tomorrow, jobs day in america. yeareak to citigroup every . he has been way out front on global slowdown. the usual victims at 8:30 we are live on radio and television. william gross.

this is bloomberg. ♪

francine: i am francine lacqua in london. tom keene is in new york. here is narrow. samsung reported its biggest profit in more than two years. -- the phone went on sale earlier than usual because of the advantage of a new low and iphones. apple does not come out with a new device until september. regulators want more information about a kevlar crash -- a tesla crash. inriver was injured pennsylvania when his car hit the median strip.

the autopilot system was engaged when the accident occurred. lastly, investigators said they are investigating a similar type crash. danone beau biden whitewave foods for $10 billion. will buy whitewave foods for $10 billion. francine: for more on the deal between whitewave and danon. -- he speaks with us on the phone from zurich. still with us george saravelos. -- john, and i know thank you for joining us here at you kind of distilled what i was thinking when i heard the news this morning. it is a $10 billion deal. the timing seems awkward, two weeks after brexit.

we don't know what valuations do. we don't know about the global macroeconomic environment and how that impacts consumer spending. add, danonenly, to wants to focus on organic sales growth as it sort of turns around it is this. -- turns around its business. the community was taken by surprise this morning, quite a few questions as a result. i would add this whitewave is a very interesting asset. it is capturing the consumer zeitgeist in terms of a preference for healthier living, organics, non-cmo. in this part of the market is growing superfast compared to traditional packaged food which is been under pressure. people want healthier alternatives. the s -- the asset itself looks interesting.

francine: valuations are plenty. that is 19% to what it closed yesterday night. jon: you look at eba -- posted synergies, talking about 14 offs -- that is not too far where the overall sector is at the moment. the multiple does look punchy. they were saying on the call that it would take six or seven years for them to return the cost. go on. tom: i don't mean to interrupt. i guess it is a transaction of the time where you go out and buying something instead of trying to grow it. whitewave is a double-digit growth. is it a fad. in your world, this is not conflicts.

is soymilk a fad? is this something to it? >> i think this is a megatrend in food. much more focused on healthier and clean labels good -- clean labels. people do not like the idea of putting chemicals into themselves what you're seeing is -- thechus food market packaged food market is being compressed. cost.west possible i think the trend is going to last for at least for the next few years. tom: i like the trend. did danone by this company so somebody else could not? jon: i don't think so. they seemed to desk this seemed to be a bit of a bromance. -- there seems to have been a bit of a bromance.

i think they thought it was just the right time and moment to do it. francine: john coxe, thank you. looking at swiss stocks. trend ofious that this this is ay lattes -- point evaluation that they will benefit because sales in the u.s. -- if we think the u.s. will look through some of what -- through somewhat of a dollar -- y, george: in our research for the currency angle, we have been very focused on foreign direct investment. we argued they will be big drivers going forward. one of the trends we have been picking up is an increased appetite for american companies from european corporate's. from the u.s. -- that is one reason why the flow

dynamic remains solid for your. are you going to see the big inflows into the u.k.? i worry that over the next six months, until we get clarity on what the politics are going to be like, the relationship, that is what boys -- and that is what is going to push down the pound. tom: i do want to get you in trouble with the deutsche bank bankers, the idea of free money. even the financing with danone is under question. when we look at the lower interest rates, that carries right over to corporate and the answer is money costs nothing, right? that is the policy intent of what the ecb is doing good you can get very cheap -- is doing. you can get very cheap deals. it is a part of the float weakening. -- the float weakening. this is what is encouraging

these deals. at what theto look danone coupon is going to cost me? next to nothing. christopher merengue will join us. we will speak to him about the overall american view, even better, we will talk to him about media priced to perfection . this is bloomberg surveillance, good morning. ♪

♪ francine: i am francine lacqua in london.

this is what we picked out. we heard from the uk's energy minister, andrea leadsome, the candidate to become the next prime minister. she just delivered a speech from westminster. this is a blueprint renegotiating with the eu. >> trade must be the top priority. continued terror free trade with the eu -- tariff free trade with the eu. continue trade with countries we have an agreement with. vitally, speeding the opportunities to take up new free trade agreements with fast-growing economies around the world. francine: there is of course a second round of voting today in the u.k. the majority leadership will be narrowed to two people, and you let some and theresa may -- andrea let some and theresa may. george, if we have two contenders, theresa may, per remain but was pretty much

neutral. and you let some who was -- andrea let some who campaigned for brexit. george: the short answer is no. the market is too focused on the endpoint on why these negotiations are going to be. the relationship between the eu and the u.k.. it is going to take a very long time. we are not going to know what this is going to look like in one year, two years or even three years. what matters is the economic impact over the next few months. how big is the hit to the u.k. economy? saycine: which one could would be if you have a progressive candidate -- would that not mean more volatility? frisco listening to the candidates position, most want to start this off on good terms. i don't think there will be on competition.ont it will take a long time for this to start.

the next few for months, the market is going to focus on the economics and not the politics. francine: what level? george: we got 1.15 instilling dollar once again. francine: thank you so much. .e stays with us we will talk about some of the havens next, including yen. we speak with the ceo. we'll be asking him about italian banks. we'll be asking him about what he thinks -- angela merkel being more flexible. this is bloomberg. ♪

morning, everyone. i am tom keene. we say good morning, one day before the jobs report. we will do that tomorrow in the united states.

first would news. >> the u.s. justice department investigating the fatal shooting of a black man by police in louisiana. protesters in baton rouge, louisiana, held a peaceful protest last night. video shows two white officers arresting alton sterling. the police had sterling pinned to the ground when one of them shot him. of an be another sign economic slowdown in europe. industrial production in germany unexpectedly fell in may by the most in 21 months. the report underscores the challenges facing german manufacturers. the president of germany's central bank said the british vote to leave the eu could hurt the german economy. in a few hours, but will be only two candidates to secede david cameron. lawmakers are voting today. the two top vote getters will go before the parties wider

membership. the new leader will be declared by september 9. jp morgan ceo jamie dimon has a warning for the u.k.. you told in a tie in newspaper he may relocate a few thousand of his -- he told a newspaper he may relocate a few thousand. jim and him and called on europe to address britain's complaint about labor roles, bureaucracy, and regulation. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 20 countries. this is bloomberg. tom: francine, i read an article on jamie dimon and i think he, like everybody else post-brexit, is talking their book. i read it carefully. i guess they're measured comments, but it goes back to this idea of passporting. would you inform our global audience what he means when he says "past boarding --

"passportint"? is not a basically, it real passport but you can imagine it being a real passport, that means as a bank, you can do business in the , andnent, france, germany elsewhere. because now we are in a limbo state where we do not know the relationship between the u.k. and the rest of europe, you don't know if a bank can do that transaction. if they cannot, it is likely they will move operations to berlin, frankfurt, or wherever they choose to be able to do business. tom: why would the eu ever allow is the nation's just said, we don't want to do this? francine: first of all, you could argue once again that a lot of other people have passporting rights. the other argument would be, we responsey emotional saying, they broke up with me, i'm not going to give them

anything. otherwise, you say, let's think about this. if the u.k. loses banks, we may lose jobs that go further field. they go to single -- sin singapore or new york. you still want them in proximity to build a do business in your country. esteemedi guess our guest does not want to talk about passporting? francine: he can talk about italian banks. when we look at systemic risk, we always forget -- we don't always forget but sometimes we forget that banks are a transmission mechanism for monetary policy. we sometimes forget despite all the rules, we are people out there, including a former ecb member, saying of the italian banks were to go under, it is systemic. are you concerned? >> we are concerned, but we're twoing at it using different approaches. one is a financial one. how big is the financial problem in the economic cost of what it

is happening? the second one is politics. can we make a political decisions? on the financial side, the problem actually is surmountable. we can do with it because the amount involved is not that large. needs, wef bank recap have $30 billion to $40 billion. that is about 2%. when compared to the spanish crisis or the irish crisis, the problem is much, much smaller. the bigger issue seems to be the recovery directive. that is a political decision. we are more comfortable on the financial side of the crisis, but we need carrots in the politic decision-making. tom: what is your euro call wrapped around this banking crisis? versusave the euro sterling going up to 90 pence. we see the euro doing better than the pound. versus the dollar, we have a going down to 105 by the end of the year. only a moderate decline.

if europe is risk-averse, historically, the euro tends to perform slightly better because you get europeans repatriating assets. we still see weakness, but not as much as the pound. more, theno man knows founding ceo, davide serra. negotiating with the eu and their stock because they do not know who is going to take the burden if they had to take losses. the eu would become more flexible because they cannot really afford to have a banking crisis at this very moment. >> i think -- let's go for the numbers come a first. the issue is the country has a stock of about 200 billion euro. fore are cash provisions 120. you're left with a net

nonperforming loan of 80. against this, you have the about 120, 100 30 billion. francine: to figure we have is 360. >> that is not nonperforming. apple to apple. it is 200 billion. you can make up any numbers you want. if i take the eba definition, the ecb definition is 200 billion. 120 cash provisions. your net stock is 80 and collateral for 120, 130. the atr stress test of the ecb has a ready gone through and said, because you had 120, 100 30 billion and collateral, there is clearly enough collateral. if you then go through a fire sale of this collateral, you won't be worth 130, it will be worth less. in two years, we become the largest investor in secured real estate nonperforming loan in the

country. we have analyzed the 6 billion euro loans loan by loan, house by house, building by building. when i see the valuation, there is not a huge discrepancy. what is the key difference is the banks can finance these loans at 1% of the ecb, investors clearly don't expect 1% return. the key difference is in the time value and in the financing rates. i do not believe there is a major hold. on the number 30 billion the 40 allion, i analyze and it is 40 billion provision. i wish i could make 100% return in today's is zero great environment. i think the 40 billion number makes no sense whatsoever. tom: now that is brilliant, but what is the cash call that the banking system needs from the italian government? >> i don't know what the italian government wants to do or the ecb wants to do. i can take you to issue is the

ecb is running stress test after brexit and they're going to say, well, you have an ongoing concern bank. of course, if italy already have the 6% hit, you would assume hits,r 3% to 4% gdp clearly, bank collateral is not worth as much. this is an assumption. it is done happening. -- it is not happening. we're running a stress test .cenario at the situation that is just assumption. it is not guaranteed it is going to happen. actually, it won't happen. as a result, they need, whatever, 3 billion or 5 billion the system. tom: that is a number i want to get to. chart, this isa a chart of the italian banks. it is pretty ugly back to december 1980. that chart tells me the italian

banks are in crisis. you are telling me they are not. when do you finally flipped over to where the market vigilantes are? >> i think, in my view what is lots of money and brexit, saying england is going to be fine because you have the pound. let's all europe because that is where there's going to be a breakout. inhas a ready been here 2011. -- it has already been here in 2011. with mario draghi, you're not going to break anything. tom: this is critical. this is absolute -- >> i think here, 1.6 euro in my view is a great long-term

investment. why? if you look at the ecb stress test results, the bank with the must capital in europe and has a. you can buy it at the all-time low. francine: i need to interrupt. we're not talking about intesa. euros theyis 500 need, if it comes from taxpayers, there are rules that you are saying you need to stick to a new cannot subsidize, right? shouldn't you be flexible? even if it is 200 euros, some of the commission says, go ahead and put those 200 euros in italian banks. >> my view here is, rules should be followed. there are clear rules whereby under certain circumstances you can do preemptive recapitalization also using state money. germany has 70% of its banking public banks. privatizing every

bank, bringing them on market, yes? i cannot believe that for a country that did not require esm money or state aid -- so every betweensystem is used 50 million to 100 billion dust on tom: ok -- >> 80 billion. come on. tom: what you're saying is completely opposite of the panic that is out there. does a derivative cocoa structure help solve the problem or do they need to be more to akoni and do some sort of cramdown and lower bondholders value to get this thing fixed? is,ell, so, my view remember, we specialize in hybridng in hybrid -- capital. i think hybrid capital is there as a potential equity conversion tool if you're to have, let's

say, 2008 event were global gdp does -56 globally. right now gb -- gdp is running at 0.5 plus one. we shall see, if there is a repeat of the crisis. globally.e 29 crisis at that point, the hybrid capital by get converted into equity. the biggest risk you run is maybe keeping one coupon. now yielding a percent to 9% -- 8% to 9% with brexit zero. the issue is, is it the right risk or not? in my view, it is a great risk reward. tom: interesting on the hybrid securities. we will continue with davide serra on italian banks. a special thanks to george serve ellis -- sravelos.

coming up in our next hour, again on the italian banks, roberto nicastro will join us. there are really bad banks and then there are good banks as well. this is "bloomberg surveillance." ♪

everyone,morning, "bloomberg surveillance." tomorrow, jobs day. we will have the usual the m's with us to the five hours will the -- victims with us for five hours. italian banks. he flaterra with us and out says, stop panic. speaking to reuters yesterday,

gets to single-digit dbk. it is like 11 hi, maybe 12 euros per share. this is not the stock. these are the credit default swaps of dbk. look at what deutsche bank is doing in terms of a new level of sweat. how can you tell me the italian banks are not affected by a pan-european crisis? the deutsche bank has some structural profitability. know, the, you balance test. it is a liquid instrument. i care more about the funding cause. tom: fair. >> the beauty of the funding cause today is because of the lower rate environment, the refinancing the bank, the pnl of deutsche bank is not going to be affected by the price.

we're talking about limited liquidity. it is good for a chart. there is no quantity behind it. thanity matters more little price. tom: i will go with that but i want to bring it back to the discussion we just had on the italian banks. in chicago, making clear the government could literally fall off of the italian banking crisis. you seem to be the polar opposite of that belief. what is your optimal workout for the major banks in italy? >> i think the optimal workout first, for the last seven or eight years, they have been slow as selling nonperforming loans. most importantly, that limited success in getting the information ready, and preparing the servicer, preparing the rating agency. and myok it too easy, view. now the ecb, i think will get a clear timetable.

i think a timetable for such a stock, you will have to dispose 50% of your npl in the next three to five years. i think you're looking at disposing basically 7 billion to 8 billion with collateral of 10 billion to 11 billion over the next three or four years. i think there will be plenty of demand. the last three years, we deployed 500 million of equity real estate,red by high-end, small hotel. we are generating extremely high returns. we are raising fund. there is plenty of investor demand. i think this is one of the places in the stress market where you can actually achieve double-digit net returns unsecured assets, which i can't see nor is globally. as a result, i think capital will come in. now you have panic because you have the stress test announced on a stressant area. it is not the real scenario. iancine: in hindsight, and

know hindsight is a great thing, they could have dealt with that in a start and a much more robust way. do you think this will be dealt with and valuations will go higher. what happens if we have a bank run, because of some technicality or the european commission isn't willing to be flexible or germany or whoever is inflexible, we have a bank run on a bank, how systemic is it? is it a domino effect that takes all of the atelier and banks down with them? -- et's be clear, we did friends go they say it is possible. >> we have the positive insurance. we have not yet completed -- you cannot have the first two. you only apply to 30% of germany because of the percent is public. hang on. it is ridiculous.

i think the government of the commission had guaranteed 150 billion of retail bonds. -- i cannot believe, as i said, when a country has 8 billion euro net wealth, you're discussing about 5 billion and a banking system, and 0.5 business points. let's be pragmatic. i am sure within the rules, they're going to find a solution because it will be so ridiculous that they don't. europe, at a time when everyone is panicking, that is when they move. francine: i like this. the breaking news is that he is bullish on the european commission. this is the picture for equities across the globe. european stocks a little higher. an interesting move. i think they called it a goofy data check because haven assets are also being bid. this is "bloomberg."

♪

tom: good morning.

tomorrow, jobs day. william grows -- william gross joining us. thank you so much for your response to our jobs day coverage. joining us right now, michael mckee. back and forth to washington including a conversation with mr. gorss. he did not help right the minutes of the fed, right? michael: he did not. he said they are looking at falls gods. tom: is he running the trump campaign? nohael: he said there is inflation out there right now. the fed is worrying about what the report will show us, whether or not there will be a rebound or not. the majority of the people on the fed said they thought the lousy made jobs report was this is just a goal lines -- let me show you what they mean. notice how for essentially three years in the chart we have, there's little change in job creation. it was pretty steady around

200,000. if there was a bad month -- they want to know, do we come back from this lousy month? tom: we have done that three times before. michael: to the extent that bond prices are reflecting any kind of realistic view, what is going to happen, they are seeing at the same way as the fed, looking for 180,000 jobs created. a slight bump up in the planet rate, and reasonably decent hourly earnings average number. bill gross says he is concerned about bond prices right now. he thinks they are too high and he is not buying. it is a dangerous situation he said because with durations this long and yields the slocum italy takes a very small move and you can lose a lot of money. tom: it is incredibly difficult. to meody is saying yesterday talking about this as well, it is really difficult. michael: lisa abramowicz has an interesting article talking about how many people are now

going into corporate on. billion whene $2.9 into corporate last week. they are even buying u.k. corporate in the bully -- tom: heaven for bid. michael: gross says that is crazy. to theoking forward mystery. remember last month? shocking the numbers. we will talk about this. what are we doing? i'm having soy. that is what i'm doing. in the next hour, christopher on u.s. investment. we will open the day with davide serra on his italian banks. good morning. ♪

tom: the european banks, markets

and all of europe await an italian bailout. how large will be crammed down be? giving europe turbulence. should u.s. investors moved to cash? republican, will he takes the measure of his cleveland convention. good morning, this is "bloomberg surveillance." we are live from our world headquarters in new york, thursday, july 7, i am tom keene in london, francine lacqua. it short very conversation with davide serra about italian banks. but today, almost a pause over the last two days of turmoil. know,ne: all you need to tom, no pound is rebounding a touch. we touched a fresh record low, the lowest in 31 years. today as we get closer to possibly choosing a new prime minister, pound rebounding. i say a touch, but let's be optimistic. tom: looking at gold as well. sort of unched morning. not with news.

always, there's first would news. >> the rest to secede david cameron narrows to two candidates. home secretary theresa may and energy minister are the favorites. conservative party lawmakers vote in the second round today. the two contenders were the most votes will then face the parties wider membership. the new leader will be selected by september 9. germany's chancellor angela merkel says there can be necessary noble security in europe without russia. at the same time, she says germany and its nato partners agree toward russia and offering to have a data logger not opposite. she plans to boost defense spending by more than $2 billion next year. truce in syria civil war appears to be holding. the government announced it told hold military operation coincide with the end of roma don. still, fighting content discontinued.

-- still, fighting continues. in australia, the prime minister says upcoming points to election victory for his coalition. seats to form a majority in parliament. according to an australian tv production, he has 170 three seats with 82% of the vote counted. the justice department is made it official. there will be no criminal charges against hillary clinton over her use of private e-mail while secretary of state. prosecutors have ended their investigation. fbi director james comey will testify before a congressional committee today. he recommended no charges be filed. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is "bloomberg." quickly, checks, investment futures unged. 10 year yield.

nymex finally gets a bid. on to the next screen -- the yen underscores the fragility of the bid this morning. it is better, but not that much better. francine, what do you have? francine: for people who do not look at our screens every two unchanged.ch'ed is crude stockpiles in the u.s. falling but overall, little bit of rebound and the havens continue. gold strengthening. there is still concern about brexit. it just feels a little bit better. tom: we're going to go back to be italian banks. but right now, intrinsic lannett view. -- a transatlantic view. christopher merengue. marangi.

and continuing with us, davide serra. can't take the contagion of the italian banks, deutsche bank and the rest, and bring it over to the european markets. you got to tell me there has got to be incredible multinational value in europe. is that so? tom, absolutely. let me give you this data. today, the value of jpmorgan, i can give you in exchange, the largest think in spain, the largest bank in the u.k., the largest bank in france, the largest bank in germany, the largest bank in switzerland, and i can give you and has a for free. -- intessa for free. you're talking about 180 billion revenue combined. the differences, bottom line, the profitability is 20 billion. at the balance sheet is seven

times to one. i think for those who believe, if you take the view that europe will not break up, the brexit, it is a chance for europe together act together, then i think you have an opportunity of at least doubling your money within the european banking. tom: there is the value proposition for europe. we come to europe and chris marangi,, are we priced to perfection because where the safe haven of last resort? >> it seems that way. the margin safety is limited at a time when you're looking for a bit more of a margin safety even the uncertainty in the world. tom: can you buy jpmorgan? >> it looks like a cheap stock. we have been nibbling at it. they are black boxes. at some point, you got to look. tom: my head is spinning. francine: i want to talk about london. we can take the bank conversation in a million different ways. the u.k. bank, if you're sitting

in london, would you be thinking of moving at the moment? jamie dimon saying clearly, look, there will be job losses if brexit happens. theirst of all, i think -- first, the training of europe will have to go on the continent. you're going to clear dollar and -- in new york. for asset manager, they will have in order to be able to distribute your own funds and manage european savings, they will have to have regulated manager on the continent. this is huge. when i started in london 20 years ago, you used to have make -- now it is 18 london, 20 us were. you'll see lots of money going back and manage on the continent. it is a legal requirement. you do not have a choice.

francine: you do not think they will be more flexible? the thinking now is that money will be lost to singapore and money will be lost to new york. it is not good that banks will choose to go to frankfurt. >> it is not the question of banks. the banks balance sheet i think will stay mainly u.k., france, and germany. the only country with the same rating -- france and germany have a better rating. the balance sheet might move left. what matters is, where are the savings? there's never going to be a prime minister that is going to say, takes and its, french, and a tie in savings, please, bring them in london and have them regulated by an englishman under the u.k. regulator. it cannot happen. what is going to happen, that money will go back on the continent. example, mng.r u.k. unitrust, which

they sell on the continent. so far they were passportted. -- it ise taking illegal. the same entity. will not be allowed. they will have adoption to the business model. tom: chris marangi, is there an opportunity for covelli in europe? you guys are all was looking for value. do you look at the turmoil that davide describes in say, we got to study this? >> we look at companies and industries globally. we look at the dynamics in europe and say, how is this going to affect each individual company? tomko who are the winners? >> in the u.k., exporters. there more competitive in cost. you have u.k. domicile companies that have big sales outside of the u.k. who now have a translation benefit, then you

have companies that become m&a targets. itv now looks cheaper for a u.s. acquirer than it did. stephanie flanders was on the night of the referendum. i mean, the u.s. media companies , they basically have to look at the entire for folio, right? >> the u.s. media companies and content are global. significant business in europe. they were hurt last year and will be hurt this year by weakness in the currency. but there are opportunities for them to perhaps pick up some assets on the cheap. francine: chris was talking about possible m&a. whether you talk about italian banks or europe in general, , you have one regulator. because of the troubles in the banks and the stock prices, is there no way that we will see cross-border consolidation to make things easier? >> i don't think you will have

cross-border consolidation. there will be an important decision by september, october. in europe, the basle committee thinks french banks loaning germany or belgium goes -- those are foreign operations. same central bank, same currency, same ingle resolution. i think what is going to happen is they're going to neutralize this regulatory uncertainty. you can lend across europe and have the same risk. when that happens, it you create a single european market. right now the basle committee mainly for the lauding of americans, the americans want it to be applied but they do not apply to themselves. i think this is going to change. i do not think you will have classic m&a style for a simple reason. you have digitalization. it makes no sense. tom: francene asked the most in question -- important question of the moment, which is can it

be through mergers, acquisitions , and combinations? it is happened a little bit. do you predict that for 2016? >> i don't think you will have them in a cross-border in europe -- m&a cross-border in europe. i think you'll see some consolidation. i think you'll have lots of people reducing risk assets and shedding those assets which are not profitable in the new regulatory environment, should not be held on banks balance sheets. i think what will happen is the so-called shadow banking, which is so big in america, will be starting to be bigger in europe, too. francine: davide serra, thank you for joining us. we get back with chris marangi shortly. coming up, we speak with roberto nicastro. we will be talking italian banks. we may be talking consolidation as well and u.s. funds. you're watching "surveillance."

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francine: this is "bloomberg surveillance." to continue the conversation on italian banks talks between italy and the eu on bank recapitalization have hit a blur -- roadblock. the issue is whether creditors should face losses of public funds are used. joins us fromro rome. great to have you on the program. it seems there's more more concerns regarding italian banks. where are the thought lines? -- fault lines?

how week are they? >> clearly, we're in a situation where the country is now just act from a long recession. 2015, 2016 is positive gdp. stopped growing in the last three or four quarters, however, they are a sizable amount. when i hear the numbers, i often feel puzzled. gross numbers. if you look at the net npl number, the real number, 80 billion, which is a sizable number, far from the numbers that have been floating around in the market recently. much does this have to do with the numbers and how much does it have to do with the european central bank and the eu that will not allow any state funds to help italian banks out?

>> right. first of all, the numbers are important because one has to know the 80 billion over collateralized and still a fraction whenever you compare to gdp. the second important element, while in other countries, this type of problems in the past weeks through massive, massive state intervention with 10%, 20% of gdp being put into this syntel, italy never put can into this type of intervention. in the moment, there is a discussion between european union and italy about the opportunity to do -- by gdp numbers. in a country that is coming out of the gdp drop. quite trustful the will have aoing

positive impact. also because in this context, brexit plays a positive role. as you saw in the recent past, most steps in terms of reform and progress of the european .anking union came after crisis so in this case, i believe brexit will be a catalyst. got yourself a crisis in the united kingdom helps you out a little bit. used to be with mckinsey. dumbarton and the crew parachute and italy today and say, here's how we're going to fix this. what is the optimal solution for italian banks? well, what you need is in improving in the economy. what term, i believe they're undergoing between the government and the eu will fix the remaining problem. i think it is important to focus on the remaining problem because as i said before, npl is stable.

you don't have a situation where you keep any flows inside. which is very important. is, but the money question is it going to be a cram down or damage to bondholders? you predict investors will have to take some of this? >> no. i don't think so. i don't think so. as i said before, you're in a context where massive state intervention prevented it elsewhere. in italy, no state intervention whatsoever. the issue is, you had to regulation introduced -- the regulation introduced. some hint of a potential solution that can be compatible with the regulation. francine: there are so many rumors out there. as a general foreigner -- former manager, what should the new ceo do? will uni credit need to take

state funds? >> frankly, you know, i don't think i should comment on any credit. -- uni credit. manager.rilliant i think he will do well. tom: thank you so much, roberto nicastro, former unicredit general manager and assistance to the good banks of italy. tomorrow on our job state, citigroup, looking for to that as we look at global slowdown. william gross will join us. this is "bloomberg surveillance." ♪

tom: "bloomberg surveillance." in a click big show today. -- eclectic show today. how about a morning must-read? looking toe media, tomorrow. andter market volatility short-term discomfort for the fed would be a small price to pay for a strong jobs report that lays the foundation for a more solid footing for american households, encourages business investment, and bolsters u.s. and global growth prospects. chris marangi was saluting dr. el-erian.

that is the optimistic take. within ok consumer. the morning america, but it is a lot better. >> it is the best looking for cynically factory. tom: how do our viewers and listeners invest if i have el-erian being pretty optimistic? >> i think there are still opportunities. you look for companies with recurring cash flow, pricing power. tom: but they are priced at 25 multiples. >> not all of them. you look at m&a opportunities. tom: did you own that? soymilk? >> is the product of financial engineering. tom: how much did dean foods make on this transaction? >> dean foods shareholders, if they held on to their white

weight, made a lot of money. everyone is saying, the timing is wrong. they probably have been talking for a long time, so they have to go through with it. lessu not expect consolidation as people wait and see? >> deals like this, the u.s. focused asset with a growing business, that deal is probably not going to get impacted by what is going on with brexit. it the margin, cross-border deals, will be put on pause. 123 days until the u.s. election to figure out what the landscape may look like in the u.s. for the next four years? the margin, m&a will get crimped but you will see the's little neck it's get taken over. francine: is a going to be european companies trying to buy u.s. because of dollar strength or the other way around? is it chinese honey coming into europe? >> or japanese. it just got a lot stronger.

especially when it comes to the u.k. assets. this is the case of european company looking to increase -- tom: i want to be clear, on your portfolio, you're trying to cherry pick m&a candidates. >> not at all. we look for industry consolidation. you saw this in cable and now any food group. tom: we will come back and talk to chris marangi. about harryred up potter. coming up on bloomberg radio, dr. el-erian will join us today. there is a lot to talk about. we will talk about the new york jets. this is "bloomberg surveillance." ♪

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good morning, from new york, london. a fragile bid. thrilled you are with us. two first word news.

>> in a few hours, only two candidates to succeed david cameron. theresa may and the energy minister are the favorites in the second round ballot for the conservative party leadership, lawmakers voting today, the two top vote getters will go before the parties wider membership. the u.s. justice department now investigating the fatal shooting of a black man by police in louisiana, protesters in baton rouge, louisiana held a peaceful protest last night, mobile phone video shows two white officers arresting alton sterling and the police have him pen to the ground when one of them shot him. tonie sanders in talks endorse hillary clinton before the democratic presidential convention. according to a person familiar with the matter, there could be an event next week in new hampshire, clinton clinched the nomination weeks ago but bernie sanders has never conceded defeat.

day andews 24 hours a more than 120 countries. this is bloomberg. tom: thank you. breaking news on pepsi-cola. simply put, it dramatically superior view on pepsi, we will see what the share price is, just coming across the bloomberg now. looking at the news. there is a nice pop and pepsico a. tose stocks are priced perfection, are you buying the future or should you because it's -- or should you because his -- be cautious? chris: it is a global business. we thought they might be a buyer of right wave. moving the business toward health and wellness. tom: we will come back with you

about media stocks. on pepsi, what do you have? francine: earnings-per-share second quarter beating estimates one dollar 35 cents, expecting $1.29. they want to go for healthier things, very clear, the market wants more organic or whole sales a snack and soda that are growing the most in north to -- north america. we will have plenty more from pepsico and a couple of minutes. ,omething more familiar political turmoil and the race for the tory leadership. this is what she said about her vision for a post directed economy. >> trade must be the top priority, continued trade with the eu, continued free-trade

with those countries we have agreements with as a current member of the eu. and vitally, seizing the opportunity to take up new free-trade agreements with fast-growing economies around the world. francine: here is one simon kennedy, he leads our bloomberg exit coverage. he has not got much sleep but he joins us from london. when you look at the political landscape, it is very likely that we get to candidates and one will become prime minister, theresa may. win?ill ofthey have a vote tonight parliamentarians, three candidates. the one who gets the fewest votes drops out, there will be talk about whether theresa may will push her support to michael

gove and she will have a better chance in a runoff against him in the summer. we will get to see both candidates and make a decision, currently, a decision is due september 9 although talks about whether they can accelerate that. francine: how much do we know about the party members -- whether they lead towards brexit and will it make a difference in the negotiations with the eu? >> absolutely, democrats of the conservatives, older, more brexit leaning than the country. higher incomes than the average. that is the demographic. the choice will go to them. with may are only the favorite. tom: talk about the september date, i find it unthinkable they can wait that long, particularly

if we see the bank stocks in europe and the united kingdom you wrote further. -- erode further. >> a former chairman of the party calling on a faster time frame, maybe by the end of this month, the main reason is this is how they do it and it requires a ballot and a chance for the two candidates to duke it for the final to try to sway voters. pressure on the party to bring that forward. tom: you mentioned this earlier, chris, the opportunity in the u.k. exporters, true multi-naturalists, extraordinary. chris: the u.k. will be a fine place to invest in or out of the european union. the anglo rule of law with common language from the united states. advantage,ill be

like rolls-royce, those with u.k. domiciled businesses that export to the u.s. and u.s. this miss, like a rental business, we find nuggets like that. tom: the key phrases little negative, not headline companies. chris: some of them are, some pharma companies which should benefit from this event. tom: 50% on sale, currency. -- 15% on sale, currency. interesting. simon kennedy, thank you, leading our leave country. leave coverage. ,his conversation all night extraordinary day for the gop yesterday. the senator from new hampshire, the younger, johnson noon it will join us on his chaos, his republican party. this is bloomberg surveillance.

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francine: tom keene is in new york and i am in london and this is "surveillance." >> the non-agreed to its biggest acquisition in nine years as they will buy white wave roots for $10 billion, quite wave based the best-selling soymilk brand in the u.s.. americans who locked -- lost their home and during the financial crisis will rejoin the economy, the number of foreclosures009,

usually comes off a person credit report in -- they can apply for loans again but -- that could give consumer spending a boost. russia has emerged as a key investor in the transportation technology proposed by yuan must a card on rails from zero to 160 miles per hour in a little more than a second. that is the bloomberg business flash. , the newsf a sudden different, yesterday one of the most extraordinary days in the history of republican politics. i will not begin to address it. it lit up twitter yesterday. honor to bring you the former new hampshire senator john sununa, from one of the great gop families. you will go to cleveland i believe mr. kasich was your guy.

the wall street journal talks about 112 rules committee members and the anti-trump people need 28 or 29 to upset the apple cart. will mr. trump's applecart be upset in cleveland? better than 50-50 chance, the rules committee will allow a minority report, a quarter of the rules committee putting forward a motion on the floor to decide whether delegates can vote their conscience. 50-50 chance, an open vote on the floor should delegates be able to vote their conscience, if that rule passes and it is the delegates who make the rules at the convention, it it passes, they can vote their conscious, 1237, he isump gets the nominee, that is always the case. tom: you are the last guy at in , inute to use a slide rule

your engineering background, do the math, not a talking head, an actual warm body in cleveland, what is the backstory right now, can they pull this off in cleveland? mr. sununa: they have to make the case that there is a better candidate, a better leader than donald trump. tom: who is the candidate? mr. sununa: i think it is john kasich, i have been consistent in that. on the other side, donald trump and his team have to make the case that he has the vision and the message and the consistency to lead the party to victory. that is what so many people have been frustrated by, not a matter of being scripted, a matter of being on message. it, givenled to do the opportunity over the last three or four or five weeks, he has not done that. -- tom: you would stay

miles away from twitter, ms. about the social media storm coming out of republicans yesterday, do you have any confidence people like you can get a more structured donald trump message if you fail in a coup in cleveland? mr. sununa: it is not my job to structure his message, he has people around them and some of them have experience. they should be the one doing this. his choice of a vice presidential candidate will be part of this effort, people want to see someone that reflects his commitment to get things done, to legislate, to lead, to engage with congress. the person he chooses as vice president will help communicate that. finally, what they lay out for a convention, who will speak, what are the themes, ideas, messages, that is what a convention is all about, talk to the american people about your vision, your party, and what you hope to achieve.

francine: if donald trump does get through, what will it mean being a republican in the u.s.? what will the party stand for? mr. sununa: candidates will run their own campaigns. in new hampshire come a great united states senator running for reelection. she is doing well, she will be reelected i think. in the past, people would try to link her with the republican nominee and say they are peas in a pod, nobody can i qs kelly kelly ayotteaccuse of being a donald trump clone, she has a different temperament, different on issues, different personality, whether you are a house or senate candidate, you will run your own race with your own message and visits for your district -- and vision for your district and state, that will be different this year than maybe it was with bob dole or john mccain or george bush. hearing thiseep year is different, who would be

the best possible vice president for donald trump to get your support? about mya: it is not support, it is about winning independents, donald trump will get most republicans and hillary clinton's will get most delegates, who will win the independents? maybe the strongest name i have seen is mike pence, the governor of indiana, he has been in the house, a governor, a great communicator, a strong conservative, a candidate like that would send a strong message about exactly what it is that donald trump wants to achieve. tom: i believe senator cruz upset about giving speaking time, his lot after the twitter storm was taken by elsa from frozen, we will see how that goes, i want to know, seriously, what is the likelihood of non-foreign policy republican elites moving over to secretary clinton.

gopt now the foreign policy are saying we are not doing this, we are going to hillary clinton, will they be joined by other experience republicans? mr. sununa: no. anytime you use the leads all republican elite, you are talking about an infinitesimal fraction of the presidential vote. that is not what will make a difference. not going to be a few people who work in this republican administration or that administration, it is about winning those independents. and the message and the ideas that you are communicating to them on job creation and immigration and even character. .e saw with the e-mail scandal everything republican said about hillary clinton was true, she mishandled classified information, she endangered lives, she lied to the american people about it and the fbi decided not to prosecute, but all of those issues about her

trying to play by a different set of our true. these are things that separate the candidates that can really help donald trump windows independent voters. tom: -- when those independent -- win those independent voters. you here with all due respect to my, our experts will on theire, they was big american political system. this is bloomberg surveillance, this is bloomberg. ♪

tom: "bloomberg surveillance" in new york. the yen 10111. stronger sterling. today, dollar mexico down at the bottom is interesting, nowhere near the crisis of 19 per dollar. francine: coming up, david weston and alex weston and jonathan ferro come a very busy

show for bloomberg . david: we will talk about the bill gross statement challenging the central banks, how risky it might be, we will have the fed watcher for pimco giving his reaction. we will be joined by sir martin talk to us from the allen and company conference from sun valley, talking about the media, brexit, the moguls out there, coming up on bloomberg . tom: single best chart. looking forward to this. this white line is disney doing a little better than harry potter. this is time warner. this is back to the beginning of the crisis. stocks election helps out here within the media, harry potter, i want to rip the script, you can back from universal, i find harry potter to beat a unique focus.

what is the money generated when you get a winner like that? it shows the power of globalizing, harry potter has two lands in universal, it is packed and universal. tom: what is the even. on a theme park -- what is the ebid ta on theme parks. chris: business, $4 billion. tom: your world was a moonshot for a certain number of years, you are enjoying a modest bear market in some of these properties, do you unload the boat or are you cautious? chris: through the noise of breakfast and the cyclical, you have secular trends and that is that americans are watching content differently and not subscribing in the numbers they used to to the big pay-tv bundle.

what does the future look like? americans was to watch harry potter but in different ways and there has to be adaptation. one of the companies doing those adaptations is comcast which signed a deal with netflix to offer their customers netflix. francine: let's go back to brexit. if you look at liberty global, are they being crushed by brexit or can they look at opportunities? we saw media stocks the day after being flat. does that mean liberty global can come in and buy something? stock,a u.s. listed reports and dollars, a third of their business in the united kingdom, the largest cable company in the world by some measures, a business that will be unaffected by brexit, people will still subscribe to broadband. their powder earnings are worth less to u.s. investors are worth less and they got hit by that,

one of the big overhangs on liberty global, there has been some premium built in because there was speculation that vodafone would buy them and that looks like it will be pushed off for some time. itv,ine: we talked about are they going to be taken over? chris: primarily a u.k. business and there has been speculation that comcast looked at them, that liberty global which owns a stake in them would look as well. they are on sale. that is a possibility. tom: would it be a bidding work, , thenswer is yes -- war answer is yes. i see game of thrones come out and in the hours afterwards and in the next few days, article after article about the plot because people read this, what is my pure play on the dragons in game of thrones? chris: the owner of hbo, time warner, clearly game of thrones

has driven subscriptions to hbo. at least two more seasons left. tom: rich greenfield is cautious . you are much more working in the millennial investment. do you have faith in disney away from what's rich greenfield missing -- is saying? chris: espn is the most important property, more profitable because not all the capital that the theme parks have. it will be impacted by fewer subscribers this grabbing two big bundles. ready for them to overcome that through direct subscriptions to the consumer. warrantedcause and is , it trades at a premium to the group, great intellectual property, terrific management, great access, but you are better off buying fox or time warner.

a joy afters such italian banks, brexit, deutsche bank, to talk about equities for five minutes. like fresh air to thank you -- like fresh air. chris will continue on radio. what do i look for this morning on the politics of your united kingdom? francine: we hope to have a better idea of what the voting will look like for the next prime minister but it is not the lawmakers, really the people in the conservative party and we do not know how that will end up. tom: thank you. on radio today, mohamed el-erian. ♪

>> for more -- jon: suspended assets more than 18 billion pounds. david: the jpmorgan chief says he may relocate a few thousand

employees out of the u.k., how the countries divorce statements hurts banks. >> the market says forget 2016, we will lead does look ahead to tomorrow's u.s. jobs report. -- we will look ahead to tomorrow's u.s. jobs report. ♪ jon: from london, a warm welcome, i am jonathan ferro. david weston and alix steel in new york. for the first time in europe, stocks rallying in europe, every single industry group on the stoxx 600 advancing today. joined byaddition, some very strong guests including sir martin sorrell, the ceo of the bbb. >> we will talk