francine: a new conservative party leader, theresa may prepares to take over as prime minister. who will she appoint? life after cameron. . -- the pound rallies. diagnosedone like last week's -- while pimco loads up. ♪ francine: welcome to "the pulse."

live from bloomberg's european headquarter. i am francine lacqua. a conservative party leader theresa may repairs for government. to name her brexit -- we speak to black rocks -- rupert harrison pit we have some breaking news. let's get straight to markets and see what oil is doing as the ia putting up reports saying there is records of oil supplies while the u.s. output slumps. we had some rejection raise for how much demand for oil will factor in for the second half of the year. this is brent, 47.74. this is just the latest from the oil markets. overall, i wanted to talk to you about stocks and pound. the pound set for the longest rally in two months as theresa may takes office. we are seeing something strange.

the european stoxx 600 seen a little bit of volatility. the stock has lost the momentum that it had in asia. let's get to the bloomberg first word news with nejra cehic. their mark carney begin two-week pilot -- there today policy meet later. and are expected to cut that is the first time since 2009 according to a majority of economists. 30 of the 54 people pulled predict a 25 basis point cut to 0.25%. japan's chief cabinet secretary has denied a report that officials are considering introducing helicopter money. that comes after the newspaper said the policy is being mode and a boost to the economy. -- mode in a boost to the economy. the currency would weaken if

japan took such a step. japan's biggest bank is quitting its role as one of the 22 binary deals -- dealers -- 22 primary dealers. it is the first financial institution to withdraw since the central bank introduction of negative interest rates this year caused yields to tumble below zero. saysse premier leader beijing can achieve its growth target of 6.5% through continuous reform and innovation. he was speaking at the eu china business summit. sownid chinese economy has -- shown great resistance -- great resilience. he says that china greatly reformation. global news, 24 hours a day, powered by 2600 journalists in more than 120 countries. this is bloomberg. francine: by the end of the day, the u.k. will have a new prime minister, theresa may.

david cameron offers his resignation this afternoon. theresa may has a new important post to fill in order to negotiate the uk's divorce from the eu. a brexit department is to be created headed up by a brexit's are. -- a brexit czar. >> good morning, francine. one of the first appointment that she will make as the new prime minister to be, brexit czar. michael gove, could she that's could he be considered damaged -- could he be considered damaged? worse johnson, lacking professionalism as some people have said. -- boris johnson, lacking professionalism as some people have said. led to believe that somebody from the brexit camp will be preferred for that kind

of position. watch out for david davis as well. george osborne has said that he wants to play a role in the brexit talks. we will see what is future has. we should watch out for some women to step up to the top table or to increase their level of standing. francine? francine: the other big appointment is going to be chancellor. how much do we know about who she may pick? anna: that of course will be a crucial appointment. we should -- appointment which should come fairly soon. -- he has held a big office of state. chief bankersbig association just yesterday. he was going to be the chief secretary to the treasury in 2010 but things are not workout.

-- she is energy manager, but she has been mentioned as a home secretary. george osborne is in the role right now. people consider him the continuity candidate come already -- even though theresa may has already distanced herself. -- theresabanker may's campaign manager from the brexit camp. a leader of the house of commons right now. all of those names meant -- names being mentioned. let's remember we are not going to see a group in a great deal of hurry to take this as desk to take this to the next stage. -- to take this to the next stage. francine: the labour party still in disarray. we're seeing more people wanting to run.

--a: exactly, we know that we are heading toward that competition to see who is going to lead the labour party. labor leader corbyn found out late into the evening yesterday that he was going to be automatically able to be on the ballot. he doesn't need to get the sport of 51 of the labor leaders. they could've been a challenge for him. this could be crucial. if we do see a -- cn early -- see an early election here. what would the labor party to --d to -- managed francine? francine: think he so much, anna edwards. and will be with us throughout the day. -- anna will be with us throughout the day.

my guest this morning says the prospect for high growth stocks has not been damaged by brexit votes. , thank you so much for joining us. when you look at the big challenges ahead for theresa may, i guess she needs to study -- steady the ship. she needs to make it clear -- that we need access to the single market? .ark: you are right studying the ship is the name of the game could let's see who she puts into the cabinet. i think she has been fairly clear she is not going to rush into anything. it is likely parliament will have to debate to repeal the act of 1972 before we can trigger article 50. it may be the end of next year -- it may be the end of the year into next year. going to be clear who hurt brexit czar is is going to be

leading the discussion. brexitd probably be a eer. it has to be someone she has to trust. the keyson will be the triangle. guess a lot saw i of animosity, especially for certain people in brussels that took it really at heart, that -- how much of this is diplomacy? mark: there is a great deal that is going to be diplomacy. here it matters. can theresa may start a dialogue with angela merkel your -- angela merkel? if merkel wants to set a tone that is positive about let's make something work, we are not good give britain anything they want -- i think the bureaucrats will get the tone and move

forward. if they don't manage to generate a relationship, then i think something more difficult is going to be critical. francine: what will be the chancellor's main role? -- would that make the europeans mad? mark: we have a number of things that is going to be interesting. mark carney is going to be critical here of the bank of england. he is provided the liquidity, stability. what theresa may said in a wasement earlier this week in terms of how she wants to set the agenda for economics, it was a much more inclusive strategy. i was thinking about promoting entrepreneur ship but it was trying to do it with union representatives on board. it was trying to be capping ceo pay. it was trying to think about a different type of conservatism. i suspect that is why you see a change at the chancellorship,

simple because it is easy for a new person to come up with a new strategy. idea that i think a steady hand -- philip hammond for example would do a sensible job. hawkish in terms of finances, but the tone she set suggests that she is going to try for strategy or one nation strategy. in that regard, maybe not so much austerity. that is going to be key globally as we are looking at the markets . slightly schizophrenic bond. equity seems to be telling another. francine: that seems to be worldwide. mark phelps, thank you for now. pulse.th the coming up, mass psychosis it -- so chris's -- psychosis. worried. should be

the capability for a new premise osborne's george former chief of staff on what to expect. brexit and the city. what will london's financial service sector look like after the u.k. leaves the eu. this is bloomberg. you're looking at live pictures of downing street. whoever gets the job as brexit czar has probably to find that balance. ♪

francine: welcome back to "the pulse." let's get to the bloomberg business flash with nejra cehic. nejra: cutting output of the a3 80 in the face of dwindling orders for the world's biggest passenger pain -- passenger plane. only 193 delivered with wanted to 26 currently on its books -- with 126 currently on its books. chain has agreed to a takeover. the deal comes after the third attempt by steinhoff international to take control of the retailer. more than the closing price on june 13, before the

shares surge on this speculation. unicredit shares have risen. the italian lender is selling a 10% stake in poland bank. that is the bloomberg business flash. francine. francine: mass psychosis is the .iagnosis from jeff gulag buyers will feel the pain as the market finds the bottom and rates begin to rebound. that is what he warns. there's something of a mass psychosis going on. the starvation for yields. call me old-fashioned but i don't like investments were if you're right you do not make any money. year as demand sags. tumbled to lowe's last month. let's get more from mark phelps.

mark, -- he has a point, right echo -- right? are we missed cut leading risks and if so, when will it be corrected? mark: the bond market is telling you a clerestory. there is little growth around the world and yields have been coming down to reflect the lack of growth and people are looking to for some -- looking for some degree of certainty. as jeffrey said, getting their money back is a priority. if you get a 50 year in switzerland goes negative, this is not normal. there's something strange going on. there is a structure in the markets. -- there is a distortion in the market. when you look at the treasury, you look at 150 odds with 1.5% return.

for international investors, that doesn't look like such a bad thing compared to europe or japan. francine: if you look at all of ,he yield curves, negatives isn't that we also hate everything high -- we hit a record high for the s&p 500. you have the crazy yields but then you have records for equities could what will correct first -- for equities. what will correct first? mark: we will see a combination of things. the equity market relative to bonds does look attractive. we are going to see more volatility, but you are going to see a market where the earning of four in the region against 150 on the bond yields good on that basis, equities give you better returns. the u.s. economy is doing pretty well. gdp growth not great. unemployment at 5%. wages in some sectors are

picking up a little bit. there is not too much inflation up there. jobs are rising wanted to 50,000 on a quarter by quarter basis. this feels ok. 150,000 on aising quarter by quarter basis. this feels ok. it is not the end of the world. francine: when? in the u.k., sometimes i wonder. my concern is mark carney is keeping the ship going as it were. we may start to import inflation it when people realize that, then do interest rates go high very fast? competition.re the outlook does not look good. mark: you are absolutely right. consumer demand is going to have an impact on the u.k.

mark carney is very sensible good what he will say to investors is we are going to see an inflationary pick up. i will look through that. it is a short-term one-off because of currently we're going to look to that to try and make the problem work. i am going to be sensible and think about it, and you just have to listen to what i say. after that, we will see. the truth of it is no one quite flirtingyou go from with recession to something worse. suggesting it are might but we don't quite know it sometimes the media has to play a role which is if we talk it down too much, it may become a self fulfilling prophecy. it is going to be a weaker economy. it has an impact on europe. u.s. slightly less affected by that. u.s. economy is doing fine. this is to $4000 question in

europe is are just the 60 $4000 question in europe is if we are moving from austerity? they should be a move from the bond market to saying maybe something else. francine: mark, thank you so much. later on the pulse, as the ukip prepares for a new premise or, we ask george osborne's former chief of staff if he expects theresa may to make a pick. this is bloomberg. ♪

francine: eu leaders have told a china that overcapacity is a serious problem for europe. the two are working to secure trade deals in beijing. it comes as the u.k. prepares for life after brexit. how much has the issue of brexit overshadowed the talk? >> the european delegation told me that the brexit discussion did not change their agenda. it didn't change the list of topics they were bringing to discuss here in beijing. of course it was something that the chinese and -- are concerned about and did want more clarity

and we finished about an hour ago. presidentl jean-claude uecker and donald tusk were pounded with questions about brexit. the chinese are concerned about stability in the largest trading market which is the european union. it would take some relief from the fact that britain is moving closer. today they are getting the new prime minister speeding things up. the chinese are believed about that. they want to see negotiations moving smoothly but they want to get clarity from the european colleagues on this. they want to make sure things are stable. -- that is what was being discussed. also seen as a big ally for the chinese. now his future is in doubt. and big question for china when they think about brexit. francine. francine: tom, thank you so much. let's get more from mark phelps. we look the various trade deals. the u.k. was depending on china.

is china still it interested in investing in the u.k.? mark: the chinese will look at their self interest. i think you'll see quite a lot of chinese buying property in london because there is very good value. the first month of this year, we panicked -- the last three months it has devalued more. china is clearly growing. regard, they are going for us tortunities send this to them and for them to send goods to us. francine: mark, thank you so much for joining us. mark phelps. coming up, by the end of today, theresa may will be the uk's prime minister.

we'll ask george osborne's former chief of staff who she should have on a top team. this is bloomberg. the picture for pound rising for a second day but stocks overall a little bit jittery. ♪ get ready for the rio olympic games

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francine: welcome to "the pulse." in london i am francine lacqua. let's get to the bloomberg first word news. mark carney and his bank of england colleagues begin their today policy meeting ahead of a rate decision. they are expected to cut for the first time since 2009. according to a majority of the economist. they predict a 25 basis point cut to 2.0%.

japan's chief cabinet secretary has designed -- denied a report they are considering introducing helicopter money. warnsief currency analyst that the ends's credibility would be adversely affected and the currency weekend if japan took such a set. japan's lead bank is quitting its role as one of the primary it is the first financial institution to withdraw since the central banks introduction of negative interest rates cause the yield to tumble below zero. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am nejra cehic. this is bloomberg. francine: markets a little bit shy this morning. let's head to the bloomberg with mark barton. mark: stocks holding on to their

gains by the smallest of margins, up by point 02%. the stoxx 600 has risen by 5.6%. onll 2.8% below the close june 23. have a look at the msci going back to the beginning of the year, recouping its post brexit losses on tuesday. 27 it was june sitting on a two day 7% drop and that is what happened from to there and we have rebounded, the index has rebounded since falling to a three-year low in february. they have recouped all of their post brexit losses. the pound has not but is rising for a fourth day against the dollar, the longest winning stretch since may 19 this year. by all 31 ofrisen

its major. and has rebounded from its 30 year low. earlier on june 24 at rose as high as 1.5018. stirling is still down by 10.6% against the dollar. let's call this the cameron index since it is david cameron's last day as prime minister. we have gauged the performance of all of the u.k. assets since he became prime minister in may 2010. , the u.k. line sovereign bond index has risen 35%. bonds are the best-performing asset class. the light blue line is the ftse 100 which has risen roughly 25%. sterling as fascinating because up until june the 23rd, at was flat. we know what happened june the

24th. sterling is down in a matter of days by 11%. for most of cameron's tenure sterling was flat against the dollar but because of brexit it is the underperforming asset. francine: i like that, mark. mark barton. the uk's new prime minister will need to make a decision on a new , the man or woman charged with unpacking the country's eu membership. i'm pleased to welcome herbert harrison who until recently was chief of staff to george osborne and is now chief macro strategist at blackrock. i really want to ask you about who she should pick but let's focus on yields. let's focus on what mr. good ach callingdl

psychosis. rupert: i think the stars have concluded people have a couple of things, the u.s. economy is not going into recession, and the central banks will carry on an increase -- increase extraordinary support. not all of those things can remain true forever. the global reserve is going to come back to the table and people are wondering when rates will go up but now it is a good environment for all asset classes, particularly for carrie. anything that is giving you some yield looks attractive. francine: these record low yield , the swiss is also negative. is it because we miss priced risk -- ms. price risk?

rupert: the framework of people are thinking about is in a sluggish growth, growth in an environment where deflation is still more of a fear man reflation, and of course central blanks are buying assets and restricting the pool of assets. that are likely to change over the next year is the deflation-reflation story particularly in the u.s. as the fall in oil price starts to drop out year on year numbers we are going to see a more normal inflation environment the u.s. and i think that will force people to reassess assumptions. francine: how much do you worry about inflation in the u.k.? rupert: we have had a big fall in sterling and that will have some inflationary impact but i think the bank of england should and will look through that as a the biggerssue, and

issue for inflation and the u.k. is we are likely to see demand and business investment falling off. the bigger problem is going to be overcapacity and in the medium-term, downward profession -- downward pressure on inflation. francine: if you look at the u.k., the euro zone or the eu, and japan, who has the toughest job? rupert: i think the toughest job in the moment is in the u.k. we have a new prime minister, a country facing the headline uncertainty of the last few weeks. francine: it has not played out on the market. rupert: that headline uncertainty has been reduced because we do have a new prime minister. fundamentalng uncertainty is still there and will be there for some time because this renegotiation is going to be quite protracted.

most businesses in the u.k. do not know what their trading relationship is going to be with their main trading partner. francine: but it is not priced in? rupert: i do not think it is. i think we will start to see surveys initially and then hard data showing a significant drop-off in demand. i think for the u.k. it is probably not priced in yet. francine: we are going to continue the conversation. former chief of staff to charles osborne -- george osborne, -- we talk brexit and theresa may. ♪

francine: this is "the pulse." as david cameron prepares to hand the keys to theresa may, i think he gave them to her yesterday, but we are discussing who might be dropped into her team. we are joined by rupert harrison, former u.k. chief of staff to george osborne. simon kennedy is also joining us. first of all, we have written a lot, but there are two key positions to fill.

and i the chancellor imagine the foreign secretary. he or she will come into play in negotiations. simon: of course. theresa may publicly said whoever gets the job under her would be someone from the pro brexit campaign which reduces the runners and writers a little. people, but not as many as are available for the other jobs. francine: what was it like working with george osborne and the eu? are the eu bunch quite emotional? do you need to come in with no animosity and wanting to play nice? rupert: i think it is totally different now than the previous five years. then it was trying to find a by day solutions to individual dossiers and now you have an extensive negotiation.

i imagine it will be quite tense and there will be a premium on coming in with a positive attitude and a clear plan. francine: do you think there needs to be a brexiteers in charge? rupert: i think there does. you have a prime minister who is just about on the remain side so she does have to give some senior positions to people who were for leave. this brexit position is an interesting one. i am not quite sure it is going to be the position that it builds because this person will pay for -- will be based in the cabinet office. ultimately this renegotiation is going to be done by the prime minister. it will be theresa may having discussions with angela merkel, francois hollande, all the european partners. this job i think will be an important technocratic job but not the decision-maker. francine: do we know the

announcement, we may already have a cabinet in place by tomorrow lunchtime. simon: the key jobs will be appointed sometime this evening, chancellor, foreign secretary, brexit czar. francine: who are the best people for the job? you know theresa may. does she need people that counterbalance her weak points are make her stronger? rupert: i think the key thing is having some key brexiteers and leave supporters. francine: who? rupert: the key people in the campaign where boris johnson, michael gove, and andrea leadsom. i think andrea leadsom will have a place in the cabinet but i am not sure it will be a good job. michael gove and boris johnson have some issues but i think she cannot but give them significant positions have in the prominence chancellorthink the

secretary is going to be an interesting one. therefore, that is going to be very important because not only do we have to renegotiate our relationship with the eu but the economy is weakening and likely heading into a recession. could be looking a lot weaker this time next year so that will be a very important job. i think she will want the one who is experienced. francine: we're just seeing david cameron. david cameron going to parliament in his car, and we understand he will visit queen elizabeth ii to resign and that is when the monarch will invite theresa may to form a government. do we know anymore about how this all plays out for a global audience? simon: it is quite british. david cameron may have had an inkling last weekend but

probably spent a certain part of last week thinking he had a nice eight week run legacy and he was going to go to africa. and then suddenly, you are out. , theer bit of britishness formal passing over of powers is known as the cutting of hands and whether it happens is not known that is what you do with queen. and then you will rush back into the business. it is another example of just how crazy british politics have been in the last three queen. weeks. right when you think you have got a handle, it is off to the races, andrea leadsom drops off, theresa may is crowned prime minister. francine: does downing street clear out? rupert: we will see what theresa vividels but it is a very demonstration of the brutality

of our democracy. you have one group of people in there one day and then an entirely different team. you get a whole new team coming in, it will be very dramatic, and there will be some tearful exchanges. you were an insider for so long. what surprised you most in the last three weeks? it all must sound like a hollywood movie. rupert: you would have thrown out the plot for being too far-fetched. it is extraordinary the way you have the successful leave campaign and all of the leaders of that campaign have fallen by the wayside. the conservative party has turned to a trusted remain are to remain. there's a pattern here that may be the voters want people to implement new policy who are a little bit skeptical about those policies and my kick the tires a bit rather than being passionate

believers. francine: rupert and simon, thank you so much. what a treat to have report as david cameron left downing street. former chief of staff to george osborne and had a blackrock. up next, we talked rex it and the city. we look at what i post brexit city will look like. ♪

francine: welcome back to "the pulse." let's get to the bloomberg business flash. nejra: airbus is cutting output of the 8380 in the wake of dwindling orders. they once predicted carriers would buy 12 superjumbo's -- 1200 superjumbo's over a decade. rate ofed a breakeven 27 deliveries last year but will cut that only about one per month through 2018. a 597land has agreed to million pound takeover after the third attempt by steinhoff and international. they have offered about 40% more than the closing price june 13 before the shares surged on bid speculation. unicredit shares have risen as the italian lender is selling a 10% stake in the poland bank.

they say it will further help them with their capital position. that is the bloomberg business flash. francine: what will life in the city look like post brexit, we are with rupert harrison. kennedyh us and simon who heads our brexit coverage. in true english humor i need to talk about a piece written. traders in the london -- in london would at least escape the rain. overall, is there a real danger that the city of london loses to frankfurt or paris, or will the eu want to keep them in? simon: i think there will be -- the u.k. is coming to the table saying we need more control over immigration.

the eu will say in exchange, you will have less access to the single market and i think the first sector on the list is financial services. if you look at other countries that have looser arrangements switzerland,ike there is no financial services single market and the swiss deal . i think that has significant impact to some sectors. clearing of euro denominated trade has long been an agenda by the ecb paris but that should happen inside the eurozone. i think that is definitely going to happen now. blackrock, in some ways it can be business as usual because our funds are domiciled in the european union and there may be some relabeling to continue continuity but not much. some of those banking services that are most linked to the

passport and single market, you are already seeing some of that activity moved to the continent. i think the city will remain a global financial center but certainly some of the european focus is this -- focused business is going to move. francine: this i imagine would do little to retain banks. simon: jamie dimon, head of ups both saying it is about passporting. the number of jobs they will move will be more diminished but you have got to remember, it is not about the city. is a huge financial services industry all up and down britain. jpmorgan is the biggest private-sector employer. you have citigroup and deutsche and hsbc with positions. some of these are the back office jobs they may well look to move out of the eu.

if we lose a sizable chunk of the city, can the u.k. make up for it in manufacturing? we are talking about a weaker pound but it is mainly foreign-owned owned companies that are exporting so much. how quickly can the fabric of the u.k. economy change? rupert: that will depend on the nature of the relationship. i think jamie dimon is saying whether we keep passporting, i think there is a low probability of value to financial services. i think the struggle is going to be maintaining as much as the single -- as much of the single market in other industries. what investors that depend on the single market, that is where the real meat of this negotiation will be. when you talk about sterling, it is still down more than 10% but we saw after the financial crisis that is not an automatic

boost for manufacturing. the price response to a lower currency is not that great. many companies are competing on quality and relationship. it did not have the impact that many people thought it would have. are seeing some aerial pictures of the city as we know david cameron was on his way to parliament. worldvery customary for leaders to call a new prime minister. who will speak to theresa may first? rupert: that is a good question. i think her most important partners -- francine: angela merkel. rupert: and francois hollande. but the u.k. and u.s. relationship is very strong. on security matters in particular, that is probably the strongest relationship the u.k. has. francine: rupert harrison, black

rock, and simon kennedy. "surveillance" is up next. tom keene will be joining me from new york. this is bloomberg. ♪

as thee: a new era conservative party leader theresa may plans to take over. life after cameron, the pound --lies, the bank of england mass psychosis, jeffrey good dlach diagnoses madness. this is bloomberg "surveillance."