♪ up, the story that shaped the weekend business around the world. the aftershocks of brexit continue to make markets queasy. >> the level of panic is spreading. >> the lady diana hysteria. >> the dominoes are not falling. matt: in the u.s. investors digest said minutes and jobs data from june. >> i don't think this change is much. matt: italian banks struggle for stability. >> it might be too big to fail and to make the bailout. matt: and the best business minds from around the globe try

to place all of this volatility in perspective. >> but we see is a flight to quality. >> we are in for a very long negotiation. that is what the markets are afraid of. matt: "bloomberg best" is straight ahead. ♪ matt: hello and welcome. i'm matt miller. this is "bloomberg best," mostweekly review of the important business news, analysis and interviews from bloomberg television around the world. let's begin with a day by day look at the top headlines. monday sought more potential fallout from britain's vote to leave the european union. a little over a week after the u.k. voted to leave, francis pushing ahead with the claim for the city of london's euro clearing business.

they have laid out why he thinks paris is the new natural home for the operation. >> you have france in terms of organization. i think we have much more players now in paris. and much more deep marketplace interest. >> he seemed confidence that france could get its piece of the u.k. financial cake. >> is a euro clearing business. they are competing to get a piece of the nearly $500 trillion. and the clearing business they have to do to complete the transactions. at the moment it's 70% of its euro dominated clearing space in the u.k. only 11% and stamp -- paris. angela merkel is confident that

despite the reputation of france in terms of doing business and the labor market here, france and paris could get a big part of this euro denominated clearing. the bank of capital cutting financial requirements for banks. he spoke earlier as the bank published its biannual financial stability report. >> they had the financial stability side of the bank of england. they outlined five key risks they see for the brexit feeding into the economy. that is from the commercial real estate property markets, the households economy, that might be vulnerable to changing and economic circumstances. andy could be fragile market liquidity conditions. what we heard from today was the banks say the risks have begun to crystallize and they were

buffers.eir capital mark: look at amoeba short financial stability? >> it's been about liquidity and thereupon make as much as the banks want into the financial system since 12 days ago only have the referendum. that covers liquidity and the capital we have at so far. the missing end his demand and interest rates. mark carney has made it clear they are thinking about loosening policy of the coming months. >> returned to japan. government bonds have set another record. is there no end to this? what is causing this? >> there is no real end to this trend insight just yet. japan is feeling the rest of the safe like everywhere else. it's not just a 20-year yield is some are expecting. the 30-year yield is dipping to negative.

it's on the back of the u.k. vote to leave the european union. there are worries over the european union growth, the italian bank situation. a lot of this money is pouring into japanese bonds. >> 1.33. that is the 10-year yield in the u.s.. the 30 having year, 2.1%. what part of this is that global flight to safety and was part of that is the negative on the u.s. economy? >> i think a big part of it is global concerns. we heard from the your president bill dudley today. he mentioned it's a contagion iteading out from the u.k., could be really a big concern for the u.s. economy. race ofts away from the them -- release of the moments from the june fomc meeting. >> if you're looking for guidance for future fed moves, he will not find in these minutes. you are seeing a committee that

is 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 ahead of the break to vote. brexit get surprisingly little mention in the minutes. the vote could be a risk and a pledge to monitor development. no detail on what members thought the risks might be or what policy response might be appropriate. inis there anything you saw the fed's commentary that would lead you to change your view of what the fed is going to do next. >> highlight two things. the first is prior to brexit the fomc principles for highlighting the increase in uncertainty due to the slowdown in job growth. it's a concern and something to watch carefully and something that is weighing on them. the second thing is the fomc participants, a small number of them were flagging downside risk through economic outlook. that means there are some people

at the fomc sitting on the table saying it may not be appropriate to raise rates in the future. we have to be foul pole about this and see how it goes. -- thoughtful about this and see how it goes. >> investors seek to dump real estate holdings in the wake of the u.k. brexit vote. columbia threadneedle investment and canada life i've suspended -- have suspended trading assets. >> we are 48 hours into the story. we are thinking about global ramifications. is that a fair judgment call? >> i think the level of panic is spreading. i would say it's going back to tuesday m&a, the 17% reduction shows that after they closed the fun of monday it has spread. you now have more than half of these real estate funds in the u.k. by value frozen in the space of four days. fund freezes.

is there more to come? >> there are different strategies being applied. aberdeen says they will have a 24 hour gating of the fund. they will market down by 17%. we will allow you 24 hours to figure out if you want to exit with a 17%. others are taking a different strategy and saying we will gate the funds for north of 20 days until the situation calls down. i have a lot of people here in the city of london saying they knew this was in place. they knew people were looking to exit some of these finds. what we saw brexit do is accelerate the process. >> pigeon table report is right here with julie hyman. julie: 287,000 jobs added in june. that is the best gain since october of 2015 and better than the 180,000 estimated by economists. bill: things are not as

hunky-dory as 287,000 but suggest. 102,000, thated is nothing to get excited about. >> but does it get anyone interested in what janet yellen and company are going to do? does this change the calculation of when they might move it all you? -- for you? bill: i don't think so. they still have brexit to look brexit's eyes. the ecb and the eu do have problems with u.k. property mutual funds. there is a sense of illiquidity in markets and the fed is very obsessed and concerned with markets to the extent that there is discord around the world. i think the fed stays where it is. they wanted to raise interest rates, they did it once.

they want to have us believe they will raise several times and there forever pretty positive yield curve which will help banks and insurance companies. for the most part i don't think this change is much. italy'sill to come, banking difficulties may force europe's leaders into difficult decisions. and more fuel for anxiety in the u k from evaporating bonus pools to frozen real estate funds. this is bloomberg. ♪

♪ ."tt: this is "bloomberg best the implications of the u.k. brexit vote continues to unfold. this week saw the pound plummet,

clouds gather in the forecast for banks, in person or most convulsions and commercial real estate. commercial property companies slumped after standard life ofestment suspended trading its two point 9 billion pound real estate fund after a series of redemptions. froze property trust also on extraordinary market conditions. where do we begin with this? a series of redemptions forced it to freeze the fund. at what point in the series of redemptions make themselves -- sound assets in the fund. >> we are almost unequivocally there. this holds a value of about 30%. summer in the prospectus they will have the maximum amount they can borrow. you can meet redemptions by borrowing money and just paying people out of leverage. what happens is the remaining investors and of more levered.

that generally has a way of ending in an unhappy situation and in a courtroom. as it is you have $.30 of debt for $.70 a capital. they goes to 50-50. they are leveraged to do one -- two to one knows advertise something that was sold to the stable income trust. jon: is there a signal in this right here right now? does it feed on itself? canada become real -- can it become real? >> you've seen the almost a stereo with boris johnson calling it the lady diana death-like hysteria. a lot of the is jim by domestic investors pulling out. that will not give you the fx mitigation. >> regulators in britain are meeting with the country's biggest asset managers. are the dominoes embraces starting the fall? if you watch only equities, it has not looked that bad.

you are in the black if you were an investor. in other asset classes you are starting to see real weakness, argue? ren't you? >> the dominoes are starting to show to. >> if i'm not invested in a fund that has not been gated already, i'm thinking i want to -- will more be gated? >> it always happens. once one starts, they all go. it happened about a week ago. from reducing the prices of the funds. lots of clients suddenly want all their money back. i would presume. we had a lot more publicity, more than we had in 2008 when the situation arose. >> brackets first casualty -- brexit's first casualties have

been u.k. property funds which of been forced to close. it's reminiscent of bear stearns subprime klinsmann fourth the lehman debacle -- 25% are closed. this is an indication of illiquidity in the system. central banks would counter and say all the liquidity you want. the system basically does not allow liquidity flow into the proper places and certainly here in terms of these property funds if they are just one indication that perhaps there will be others to follow. i think it is something to worry about. >> june 27, 1985. that is how long you have to go back to find sterling trading at these kind of levels. red.esh 31-year low on the e goldman sachs said it three-month target.

bet of alike a one-way weaker pound. is verynk 120 pessimistic for the short run. i think it is my worst-case scenario. we get into the negotiations, the eu-u.k. negotiations in the breakdown. there is no flexibility on either side. i think it is unlikely we are going to have a situation of processing capital outflows from sterling. aggressive em outflows from sterling. the boe is likely to act and they would talk about asset purchases. once financial markets and investors see the type of assets they might have lined up on the private sector, that will prevent fulltilt -- full-scale capital flight. london's investment bank bonus pools are said to because by at least a quarter. some bankers won't even be that joby as a further round of

cuts is likely in september if client activity does not pick up. this is according to multiple banking executives who asked not to be named. not good news but at least they can to keep their jobs is the bottom line for most of them. bankers willondon be lucky come the end of the year the still have a job in this industry is some of the more pessimistic predictions come true about investment banking revenues. a lot are expected to get bonuses cut by a half or doughnuted, which is getting zero. we are talking about deutsche bank and barclays and credits we's best credit suisse. how will brexit effect that? stuart gulliver said they might have to move up to 1000 investment bankers to their office in paris. that's a fairly large exit is from their trading cohort in london. they are also hearing from barclays they may be moving something to dublin, which will

remain inside the eu press london is looking increasingly likely to be out. we really like to see some the banks can i coach her after just having revealed the strategies in the past six months, sometimes even four months. they will have to look at not only the structure of the bank of whether they will put their people in the region. dimon outspoken in his unhappiness with the brexit vote. the more he be relocated a few thousand of his employees in the u.k. to countries. >> this is really a story of the financial site and london. london is the question the european center of finance. it's a global one. everyone is wondering about the uncertainty about brexit does that mean you start to see relocation very soon. know the details of the brexit agreement that could take and probably will

take years to finalize. ♪

♪ matt: you are watching "bloomberg best." i'm matt miller. let's continue our global tour of the week's top business stories. in italy with troubles mounted for the banking sector. >> italy said he considered capital injection. italy wants to save its bank and the eu has rules that you might not be able to do that. >> is a crucial sticking point, this aspect of competition rules. it seems from our reporting that what italy is trying to illustrate is this is an exceptional situation. after the brexit vote clearly italian banking shares have just been clobbered. one of the banks in the spotlight right now, the number three bank, is a bank that has

lost more than 70% of its market cap. it's already been bailed out twice by the italian government. the discussions now are centering on potentially a third bailout. >> italy is systemically important. it is not like greece. there is a real issue if italy needs help because it might be too big to fail and too big to bailout. it is by definition a major issue for europe as a whole. and on the banking side and political side, tempers are rising. had a reallyank interesting turnout over the weekend that shows banks claims on italy. france's claim is about $300 billion, meaning is not an isolated event. all of europe needs italy to stabilize. >> and if we compare italy to the u.k., and the u.k. his strong financial links, eurozone countries are more tightly integrated with each other on the trade site and the financial side.

any major issue italy has is undoubtedly going to spill over to many of the other countries. >> i don't understand why it's so -- is a problem they don't actually understand some of the nonperforming loans? is at the political system not dealing with it in the right way? >> this is a very precarious situation. it requires lots of attention and flexibility in approaching this. that has not always been there the last couple of weeks. basically italian banks anywhere between 300 and 400 billion and nonperforming loans. they are in desperate need of capital infusion of about 40 billion. clause does not allow the italian government to directly capitalize the banks. there is some difficulties in dealing with it directly. my view strongly is that the

regulatory policy has to be countercyclical, not pro cyclical. and by tightening up on the regime enforced -- and forcing it to go down is just making things worse. that is the difficulty in making decisions and a european context. you can't quite react as quickly as you like or be as flexible as you would like. the eu commissioner has come out and saying the italians cannot recapitalize. that's kind of that the bottom. there is a set of rules in the center that makes it difficult for a country to respond flexibly to a local problem. and that problem could spin out of control. >> from midas of where the talks are about the recapitalization of the italian banking sector. >> we have been told people that there is a sticking point. it is basically you should foot the bill. the plan according to these

people familiar is a design a plan which would help to overhaul banks, not just in italy, but other italian banks also. and also -- possibly european banks after. this taking point is whether burden sharing should kick in. whether there is state aid or bondholders should be called into for the bill as well, which is an explosive political issue. >> jpmorgan in and of this morning said the italian banking issues are political and not financial. the sums involved a relatively small compared with greece and that italy could fit the bill itself, did disney's the political will to do that. is that a realistic assessment? but there isit is, a constitutional vote coming up at the end of the year. 80's the deal to be in place. i guess that you have the state aid that is impossible under eu laws. give it another month or two of prices -- >> it just need someone else to

go the crisis is big enough. >> that is what houses indicating. i think he will get the banking deal and we have to look at the institutional referendums in the later part of the year. italy remains very much the political issue. to say that the nonperforming norms is a mere financial note, i think it's also a little bit too much of a mouthful to be honest. matt: it was also a turbulent week in australia are prime minister malcolm turnbull promised an election victory would give his government a platform to deliver political and economic stability. the results are not as inclusive as he had hoped. >> the estrogen election delivered no clear result over the weekend. a hung parliament now the second near certainty.

whenever you going to see an idea what the next government is going to look like? >> it could be a minimum of at least 13 days before we know any results. it could be longer if the recount is affected. we are in a state of flux here. if we look at the current state of play, we have the liberal coalition in 67 seats and the opposition labor party on 71. a lot of things have to fall his way. we have a situation where we are in a complete state of flux. they have opted for total policy paralysis. that could mean widening deficits for australia and possibly a risk of a aaa credit rating as well. bank inalia's central the midst of rising uncertainty holding rates at record lows. how much of the rba being dependent on this as we get to an election that is inconclusive and a political issue as well? >> it's hard to do the heavy

lifting for the past five or six years. they have been front and center in terms of economic policy in australia. given the situation with the election just now to the point that will continue. on trillion treasurer says it's time for sobriety after s&p global ratings lower the outcome of the country's aaa credit rating. this is a sound warning coming from them. >> it is a warning. one suspects a cut. it is not beyond the realm of probability either. they've been try to put a positive spin on all of this. he said there is a one in three chance they can lower the rating within two years if the government is unable to legislate savings. he went on to point out the s&p report agrees that the us trophy and the banks are strong as well. the treasurer went on to say ratings hit stabilize if new budget measures to reduce deficits over the next few years are enacted. that's a clear signal that the

political gain midship has are to become. weber runs the government says the coalition is the responsible one and anybody who opposes the budget policies is physically restless -- fiscally reckless. matt: let's turn to some of the biggest company stories, starting with an asian technology firm. >> japan pies favorite messaging app was on track for an ipo and now it is bigger. it has raised its target price. >> we are now looking at a range between $2900-30 ¥300. the final price will be set on july 11. the company is looking to raise ¥116 billion. with everything roiling the markets in europe, this is a strong show of confidence. >> why do it now? >> this may be a case of better

now or never. slowedpany's growth has down in the past year. the needle has barely budged 0 monthly users. competition breathing down their neck him have to raise money and expand or die. abuhe national bank of dhabi is merging that will create a lender with 155 alien dollars of assets. is this a merger? >> it's a megamerger in the middle east. bank andirst gulf national bank of abba de -- au dhabi which will have combined market value of 29 alien dollars which is larger than deutsche bank. is part of an effort to

diversify its economy in the face of lower oil prices. they want to create a national banking champion that can better compete in emerging markets and potentially on the global stage. >> the electric carmaker cars.red 14,000 it was below what was estimated. they needed this to come earlier so they wanted a slightly smoother extreme production ramp because someone -- because so much was done in the last temperate tells let measures its sales by deliveries. the bigger established automakers sell them to dealers and they are told when they come off the line. there is a little bit of a rationale in that.

how they did it when they set the original goal and i missed the goal. vonnie: it takes a long time to build infrastructure to get to where elon musk wants to be. is it doable? >> there are different stages. first they have the factory which is never made 500,000 cars in a year. it used to make 450,000 when it was a toyota-g.m. joint venture. then they have to get them out to customers. if you make your cars and one factory and delivering them to europe and china and california and new york, it is challenging. samsung which is climbing more than 2% after it reported second-quarter results earlier that beat expectations. how do they do it? >> a came as a surprise.

it's the biggest operating profit in more than two years. it's on the back of strong sales. no new iphones were out during the second quarter that helped samsung sustained growth as many carriers had to boost their market standing to drive sales. that partly shifted from promotion costs away from samsung. altogether, this contributed to stronger than better earnings results. the leader in dairy products is buying white way foods in a deal worth $10 billion. 26 times either.. it's unbelievable. >> it's unbelievable except this pivots toward health and wellness. we are seeing the big food groups trying to do this. it does not come cheap.

there are not many companies that do -- that specialize the way that white wave does. it has a huge amount of noise around it. many people have been interested in it. it's expensive but it makes sense. still ahead, the week's most interesting interviews featuring conversations from the allen and company conference in sun valley, idaho. this is bloomberg. ♪

matt: this is bloomberg best. time to revisit the most compelling interviews of the week. let's begin with a conversation with the bear told group ceo when they talked about the impact of rex it on the --

it on the -- brex economy. >> if you ask me from the wider uncertainty of investment, i suppose you would have to say that europe and the u.k. are moving at a relatively slow pace and that has probably increased. therefore, demand numbers are likely to be less and perhaps that softens overall demand. thing is that we are not in europe. anything, i would say it's reduced bearish of a european demand. >> how does that affect your investments? >> on a business basis, it's probably not huge.

have some relative uncertainty in europe and we will have to see how that plays out. we have moving currencies at the moment. i think we will all have to see what are the arrangement the u.k. government will make with the europeans. where a global arbitrage distribution business and their businesses not directly affected by this. jon: what do you make it what's happening in the bond market versus the u.s. economy? see is ak what we flight to quality after the brexit shock. people are going for sovereign debt of the strongest countries. the feeling of risk aversion is

take meh and they say to the safest asset and those happened to be the sovereign debt of japan and germany and the united states. what's interesting is the u.k. yield is going down. the pound dropped 10%. do well in u.k. bonds if you are a non-sterling investor. the demand for high-quality liquidity has been the story of the last two or three years. you've got to a lecture halls and teach them about what's happening in the market. how do you do that when the biggest buyer of some of these bond markets is price insensitive? what do you tell your students? > i have been a professor 44 years and for 42, i said you cannot have negative yields because the lender can put the

money in his pocket and get zero. why would you lend at a negative and suddenly we see negative yields. you can put $1000 or $10,000 in your pocket but $1 billion is hard to put in your pocket. the swedish central bank kept its rate the same. how much of the thinking on brexit persuaded you in your interest rate setting. >> it has increased sensitivity but it has not change things that much. we will have to watch and see what happens in the u.k. and in europe. we are basically talking indirect for us. : it has not impacted your growth for inflation at the

moment? >> we have moved our forecast down a bit for 2017. have done thatly any way but it has increased uncertainty coming out of the debate. do you think a difficult divorce can be avoided between the u.k. and the eu? how do you see this one working its way through? >> first we need a plan by the u.k. government. it is difficult to start the negotiation without knowing where we want to go. the easiest way would be the norwegian solution but that does not seem to please the british government. what is the alternative? my theory is that we are in for a long negotiation and that's what the market is afraid of. one possibility would be to start in a region and maybe develop from their.

the swiss agreement took a long time. that's what the markets are afraid, a long time of uncertainty and the british economy has been sitting on a major imbalance, 7% deficits. this will not the good for the financing of these deficits and you see the pound sterling the way it is.

matt: you are watching bloomberg best. technology,media, and politics gathered in sun valley, idaho for the allen and company conference. we were there to speak with them. here are some highlights. let's start with the aol ceo tim armstrong.

we have these seismic shifts in television to internet raised consumption of tv material. how do you focus on monetizing that? >> i think there are a few things that are happening there. you are starting to see people like the nfl bringing their content online which will drive more eyeballs and advertisers will be interested. you have not seen it at scale but when you look at virtual reality, which is what a company called riot which is working with the rest of our brands and when you see how that content can be brought to light, consumers and advertisers will love it. the advertising business is over 600 billion dollars. or $90 billion they will switch from video and tv to more online things and mobile platforms. you are at the early stage of another seismic shift that will

happen around video. it will be better for consumers and advertisers. it might be more expensive for advertisers but it will be better outflows for everybody. >> at this conference, there is conversation about the way the country is migrating to new platforms. talk about that in the context of ad revenues. what does this mean? >> a few of eric clients are worried about the lack of data so facebook is a powerful medium. you've got to have data. you cannot have someone refereeing and playing the game. you have to have a referee that has data that is viable. a three second view, does it measure against a 32nd commercial? ishink some of the strength

a reflection of a move back to the margin, not fundamental from video, from facebook and google and youtube and others back to more traditional. it's because the audiences stronger in traditional media. when you look at a startup, what are you looking for? >> disruption. it's that simple. it's disruption with the dream of changing the world. if you have a small dream, it's hard to succeed. you will just do something which will be nice but not disruptive enough to interest people. you have to be very disruptive. the winner of the contest is a

small israeli startup. is detectied to do very early on skin cancer. there is 400 million people in the world who have skin cancer. that, then youdo reduce the cost and you save -- if they can do that, then you can reduce the cost and you save lives. you need to dream big. what brings you here and what are the conversations? this is a good opportunity to talk about the impact of the transpacific partnership especially on the digital economy and the media industry. tpp is a rare agreement where we have support from the industry and the technology community. international

property rights on one hand and will make sure the internet thatns open and free and our world-class companies can have access to networks and other countries and other countries will not tax digital products or force companies to move to their countries or force the transfer of technology. those are disciplines in tpp for the first time. withu have been meeting folks for a variety of people. there is not a lot of time left on the congressional calendar. do you think this will became kicked into a lame-duck session? >> we would like to get it done as soon as possible. mitch mcconnell has made it clear he does not anticipate having a vote for the election. we are working with congressional leadership to lay the foundation and make sure it's ready to go for whenever the opportunity is. >> i personally think the u.k. will be increasingly interesting.

be that theld cheaper pound combined with the more pro-business government -- personally, i am a substantial investor in ireland. i worry that the u.k. will start competing with ireland as the most business friendly player. in all seriousness, i think the u.k. will be fine. the reaction has been way overblown. i think this will create investment opportunities. there is a fair chance that they will work out there eu issues entirely,y don'exit they may have a special relationship.

vonnie: this is like the vix index. much traders how in option markets are willing to play for rare but extreme events. there are about 30,000 functions on the bloomberg and we enjoy showing you our favorite. maybe they will become your favorites as well. here is another function that is useful, quic go where you can get fast insight into timely topics. this is a quick take from this week. ofsince 2011, the number abortion clinic set of shut their doors and skyrocketed.

abortion providers have either closed or stopped offering abortions. just 21 have opened. right now, there are five states with just one abortion clinic. what has happened? abortion opponents move the battleground from the picket line to the state house testing how far abortion rights could be limited without being overturned. this up in court provided an answer in june. court inthe supreme roe v wade legalized abortion in all 50 states. in 1992, the high court laid the groundwork to undermine that ruling. it said states could pass restrictions that don't present undue burden to women seeking an abortion. since then, abortion opponents have tested what that means and found that legislation with restrictions to the clinics have proved more potent. the state of texas provides an

case study. it and i law forcing clinics to meet hospital like standards and required abortion doctors to have admitting privileges at local hospitals. that cause half of the states clinics to shut down and threatened to close another 10 if the law had been implemented. the supreme court struck down that law saying it imposed that undue burden on a woman's constitutional right to an abortion. the ruling is likely to do similar restrictions and other states. 24 hours later, the high court turned away appeals from wisconsin and mississippi to revive their privilege laws. how do abortion clinic's actually affect women? the pregnancies -- half of the pregnancies each year are unintended and have of those and an abortion. 31 states outlawed abortion -- if 31 states outlawed abortion tomorrow, the women was still

travel to states where it made legal in the impact and women who can or want travel could result in a 50% drop in abortions nationally. there is also evidence that diminishing access results in more women resorting to dangerous illegal means to avert motherhood. that was just one of many quick takes you can find on the bloomberg you can also find them at. bloomberg.com along with all the latest business news and analysis 24 hours per day. that will be all for bloomberg best this week. this is bloomberg. ♪

>> the contemporary art world is booming as never before. phenomenon,century a global industry in its own right with brilliant ideas looking at the artist at the heart of it, artists with a unique power to stun, challenge, and surprise. in this program, the new york mutu.wangetchi