manus: u.k. signs divorce papers. inkedminister theresa may article 50 last night and britain's 44 year long number .hip of the eu the letter will be delivered to thisu council president afternoon. scotland defies u.k. backing plans to pursue a second independence referendum. may's call for energy. guidelines for a brexit negotiator. the scope of talks thethe talks would include

terms of the divorce, not the trade relationship. ♪ you are welcome to bloomberg daybreak, our flagship morning show in the city of london. i am and is cranny. -- manus cranny. anna: the prime minister theresa may has been putting the -- a finishing touch to the letter. it will be delivered by the barroweu ambassador tim into the hands of donald fisk. at the same time the prime minister addresses the comment hear are the to details. will it address divorce proceedings, will it talk about the right to be a citizen, we

tone it to hear what adopts. we have lots to talk about over the next day and a half -- hour and a half. manus: it will be a long haul over the next few years. what will the content due to markets? this is your brexit barometer and sterling. chart goes all the way back to 2001. the pound is how we are seeing growth. all part of the brexit parameter. bloomberg intelligence has adopted it. that relationship between the pound and how we feel is almost in syncopated move all the way through 2009. here's the debt crisis were the feel and how we accelerates ahead of the rest of europe but the pound in the beginning of a moderately long goodbye.

is isestion for markets that pessimism over done? brexitlook at the riskometer. the pound has dropped since the 23rd of june. the euro sterling is down. the euro up by 14% and the ftse up by 16%. the pound is the cheapest currency in the g10 basket on a relative sense. we are overly pessimistic is what they are saying. that 136 could be attainable in the next few months. the risk radar is slightly different personification. we have enough with the negative vibe from the u.s. and you are seeing the dollar put in a baseline 99.74. the dollar on a decline, we had a four and five month low yesterday. yieldsr yeilds should --

. two hikes is what we will have. nymex crude, you have a second day of rallying in crude. libya's biggest oilfield, reducing by 560000 and there is the aussie market closing up by .8 of 1%. coastlineucers on the have shuttered their operations. that is the day in the markets. the: we will talk about markets and the fed commodities, all of that coming into the program as a go through the next hour and half. let's go to denver mouth -- deborah mao. deborah: the u.k. is set to trigger its exit from the eu. ofy will limit the scope

upcoming talks. according to three people familiar with the matter they will be negotiating divorce terms and not the future trade relationship. that would be a blow to the u.k. that wants to discuss the breakup and future ties in tandem. scottish lawmakers have backed plans by the national government to pursue a second independence referendum. allowment voted 69-59 to nicola sturgeon to request the legal means from u.k. 30's to hold the vote by spring of 2019. to decision sets of promises be lengthy and acrimonious showdown in the u.k. in the midst of exit negotiations. president trump has issued an executive order rolling back his predecessors carbon cutting commitment, or missing a new energy in -- revolution and fossil fuel resources.

he rolled back rules interactive's to combat climate change that president barack obama made a central issue. he called climate change a hoax and wants to reorient policy to help u.s. oil and coal producers. >> we have already eliminated a devastating anti-coal regulation area that was just the beginning. today, i am taking bold action to follow through on that promise. my administration is putting an end to the war on coal, clean coal, really clean coal. >> call miners have halted a third of output from the biggest coking coal revolution. that is as the remnants of cyclone debbie continue to dump rain on the state of queensland. when court is among producers that suspended operations in a total of 12 mines. it was the worst storm to hit since 2011 which helped push prices to record highs at the

time. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . anna: thank you. let's get you an update on the markets. juliette saly has that for us. confidence -- consumer confidence putting a lift under asian equities. juliette: that is right. we did have that strong reading and consumer confidence and that has boosted asian equity markets. you have seen the nikkei close looking fairly flat. topiding to the topics -- x, it is in the red. elsewhere it has been broadly stronger in terms of sentiment. the asx 200 closing up .8 of 1% to its high level -- the highest

level in two years. if we look at some of the stocks we have been watching, this is a nikkei report that the westinghouse unit has filed. to see me is up in the late japanese session. h shares continue to rally and energy players in the back of the rally on oil. to watch ins story australia, one of the best performers on the asx 200 today. it is also worth noting it is 40% below the bloomberg consensus one-year track on that stock at the moment. a good day for that one. let's have a look at the g chart. or come close to rounding out the quarter. the white line is the china volatility index on the msci china index. the blue line is the 12 month estimated price-earnings ratio. stocks are quite expensive but the volatility is low. 's best-performing

interest this quarter. manus: let's talk about the u.k. ended state with destiny. as the u.k. will start the talks. prime minister theresa may trigger the brexit process. her divorce letter reaches the eu president donald tusk. here are what some of the biggest names have had to say about the negotiations. >> the british people decide and the european party -- people will decide. we will accommodate and not ask their opinion of what no one -- of what it does. no one wants to the script markets. that could be devastating. >> i've value -- i value

financial services and i assure you we can keep financial services in london and global britain. , werrespective of brexit need to get on and execute it. andon will return -- remain global financial center. i believe that the revenue impact of brexit on financial services will be made good into a three years time. >> may be the most difficult issue and of course, prime minister may has announced there is no passports and we will have complex negotiations. >> this will take a very long time to get the full clarity that the banks and corporations and investors and people want to have. >> it will go down that it will end up being a fantastic thing for the united kingdom. it will be a tremendous asset, not a tremendous liability. >> with the financial sector is looking for for the fact that financial services make it to

the top of the priority list of theresa may's government. from what we read and what we hear we do not have that impression that that has yet happened. manus: political and business leaders speaking to bloomberg on the run up to the triggering of article 50. welcome to the show. a historic day for the u.k. but as it starts, and we understand the thing that the u.k. wanted to try and achieve which was a and theon about trade, divorce proceedings probably will not happen. donald tusk me give guidelines where he can talk about the divorce terms but not the trade relationship. it does not bode well. there is a unanimity in europe in terms of they driving the agenda, not her. >> it seems the case that when you break down what the next steps are, achieve the negotiation and discussion about trade, it will be 12 months time.

they talk about the exit deal and settling the accounts with the eu and the next stage will be talking about securing the rights of eu citizens within the to tradewe will get on negotiations. anna: good to see you. what are the chances that we will make it onto trade within the two-year time horizon or one and a half years when you factor in the ratification process is that need to take place. what are the chances we do not get onto that subject and we spend whole time talking divorce? guest: it is unlikely that we spend the whole time talking divorce because theresa may will want to move on with those negotiations so they can get on with the bulk of the negotiations but when you look at that bulk, the likelihood of it being completed by the end of that two-year deadline seems very unlikely. we think a transitional deal is

likely. about this. talk this is the brexitometer. model we havei. created. it shows the syncopation between sterling and the economy. that relationship has been breaking down for some time. give your worst-case scenario on sterling and give what causes tactic rally and short covering rally. guest: we have done a lot of modeling of currencies and what we find is if we put the worst-case scenario into our models, the level we get for cable comes in around 113. all that is suggesting is that a lot of value is priced into the pound but not quite all of the bad news. the risk and scope is negotiations do turn out to be [inaudible]

and the pound will lose more value. you tell me the flip side and throwing this question. how do you overlay on top of that the performance of the u.k. economy and what the bank of england does? bloomberg intelligence is assuming the bank stays on hold for two years through this crisis. does that seem at a fair assumption? yes: yes. that is a very good point. you have this disparity where the u.k. economy is doing very well. if you look around the globe, the u.k. looks most like the u.s. in terms of having a tight labor market and narrow outlook cap. the way we think investors should position is not in sterling. we think the better opportunity is in gilt. low givens are too the state of the economy. make slowhey

progress. room for bond yields to survive. we like our position, short position in yields. manus: have a look at this. it is more like a slow-motion slowdown. growth becomes anemic rather than anything like a sharp accession. this is the most prescient risk, a slow demise. misering of optimism. guest: this has been important over the last five years. inflow stood at 15% of gdp. that is huge. if you do get this erosion to investor confidence you could see some of these inflows into the u.k. be demised and that is

a threat to the pound. manus: the japanese lobbying groups are saying negotiate. anna edwards is outside westminster. she will be with us throughout this daybreak show. and starting today at 9:00 p.m. ak. time, the team will take deeper look at the rise of populism and speak with experts from around the world including jean-claude touche -- triche and othe coming up, janet yellen highlights unemployment. rs. challenges what president trump does to bring back the coal jobs. herewith they have to say. this is bloomberg. ♪

manus: it is daybreak. it is 6:19 a.m. debra: toshiba's board has approved a bankruptcy filing for its westinghouse unit. a spokeswoman was not immediately available for comment. last month, the japanese conglomerate warned of a possible $6.2 billion write-down on the energy -- nuclear energy business. blackrock is said to be shaking up its struggling stock picking unit by cutting jobs and lowering fees. the revamped which embraces quantitative strategies moves $8 runion of the $201 billion by traditional stock pickers into cheaper offerings with some fees cut half -- cut by half.

they said more than 30 employees including fund managers and analysts were let go. that is your bloomberg business flash. manus: thank you very much. fed watchers tried to predict the piece of interest rate hikes. chairear and beyond fed janet yellen gave some clues in her speech on the labor market yesterday. she noted improvements on the job pictures but highlighted challenges that still remain in poor and minority communities. u.s. as a whole has improved market -- markedly since the depths of the financial crisis. the persistently high unemployment rates in low income and minority communities show why workforce of element is so essential. president trump has signed an executive order in rolling back a number of obama era regulations to combat

climate change. the order aims to bring back fossil fuel jobs by reversing president obama's clean power plan. that discourages utilities from using coal to generate electricity. some said his administration was putting an end to what he called the war on coal. >> the miners tell me about that attacks and their jobs and livelihood, they told me about the efforts to shut down their minds, their communities and their very way of life. i made them this promise, we will put our miners back to work. trump making good on many of his electoral promises. janet yellen along with her cohorts trying to garrison toward the consensus of the dot which is to hikes rather than three. what does it take to shift the dynamic of the dots and the thinking of the fed to be more onressive and three bid

hike. guest: they have time on their hide -- on their side to start pricing in. there are two more hikes this have as a view. while that is our base case and the fed's base case the market looks at the ability weightings. it has to be within the data. as you get the data from -- slowly coming out, then you should start to see the markets are to be more comfortable in pricing that fed hike by the end of the year. what is important is the money that you have behind do, the earnings growth. manus: that is the earnings growth we have in the blue. the debate is how much slack is there and why the weights number has not gone higher. guest: you are comparing the labor market slant with nominal wages.

that leaves you free to look at real wages. they have made an much stronger the last couple of years because inflation has been so low. now is the time of the litmus test, inflation is starting to increase, our -- our employees going to be passing through those higher prices to the labor force and causing the average wage growth, that nominal wage growth to increase? the things you have said there -- is having some technical problems. let's go back into the charts. i mentioned it. a 4.5 month low. not everyone knows what i do behind the scenes early in the morning. anna steers the wheels and i change the gears. this is the great debate in the big boy indices.

through theake it moving average. they have reduced their positions and now the market as a whole we think is probably neutral. that is one of the reasons we have not gone through that average. constant enough to go out right short. i went to ask you given what you said, however domestic should we be and how are you about u.s. equities right now? guest: we are quite cautious. the reason being the amount of positive sentiment in the sector has been very strong. when you look at things like the earnings expectations and the profit market expectations for this year, they are very high. and also when you look at the

gauges they are optimistic. this makes us three cautious. where we think there is a better trade that is euro equities u.s. equities. there is a lot of room from here for european equities to outperform which takes away from the u.s. and toward europe. do youwhere in europe think is the strongest opportunity, is a germany or france once political issues get out of the way? guest: they then if it from the weak currency the most. they are also benefiting from the continued phasing. -- phasing of fiscal risk. anna: thank you very much. joining us.d we will bring you the boston fed president at 7:00 p.m. u.k. time. more on triggering article 50. we will head -- hear from the head of the food and drink challenges inhe

the industry that lie ahead. a big day for the european union. we will hear from donald tusk as well. this is bloomberg. ♪

manus: it has gone 6:30 a.m. here in london. you are looking at tokyo where it is to 3 p.m. the dollar advancing the yen. some are saying it is a little bit of short covering as you see treasury yields climbing and technicalities at 1139. you get everything here on daybreak. to -- let's get across to guy johnson. what is's talk about

going on. at the moment this cable move is interesting. you have the pound selling off overnight. take a look at what is being said. in londonpparently and we will see that liquidity story come back shortly. traders a little surprised that we are seeing the selloff overnight into the triggering of article 50. in some ways you could argue that this is the reality of the situation. the next chart highlights the thing you need to know. does you see data this work with a flag, it comes through wednesday and thursday and gets reported friday. the market is incredibly short the pound at this point. in some ways maybe it could be better to travel and arrived. it is interesting to see how the banks are changing some of their forecasts. his take is that cable advances from here on not aggressively but the stabilization with the

move upward. that is something the market is talking about. the market is short. positioning is important. the other thing i have been picking up over the last few days is all the fund managers that have looked really smart since brexit because they have belonged to the ftse 100, life could be about to get tougher. you can find that on your weei screen. this is a one-year change and this is the euro story in the ftse. and towns and local currency, the ftse has done 27% over the last year. in euros, it is a percent. if you take that into dollars, the situation is even more negative. you have done very well in the ftse 100 because of that dollar-euro revenue stream. that has been priced back into pounds. managers reconsider the positions, will they change their positions on commodity

trade? that is interesting as well. we are going to be about the pound today. probably 7:30 a.m. to around 8:30 a.m., it will be interesting to see whether the short position starts to get squeezed in how that feeds through in equity markets. back to you. a new edition of daybreak. this is on your mobile, on your bloomberg, anna edwards is outside that particular image you have. it is brexit time, the cover story, it is all about theresa may. she begins two years of negotiations to leave the eu. when the letter is delivered, the pound is lower and against currencies in asian trade. that is the question on everybody's minds. you could see on an extremely negative scenario a dip to one

dollar 13. and getting back to 130. stanley fischer said the federal open median estimate of two or more rate hikes seems about right. and finally, daybreak focuses on oil. year gained during the session after the api data shows american inventories rose one .9 one million barrels last week. wti has rallied on reports that libyan output dropped following the shutdown of its pipeline from the sahara see. let's get back to westminster we're anna is standing by with a guest. take it away. anna: thank you. businesses from all parts of the u.k., businesses from across the eu watching closely what happens. we think negotiations as we have seen negotiations over the years. the food and drink sector has a lot of -- at stake.

let me talk to about access to labor. this is an issue for your industry and to the future but is that having a negative impact, are you finding it more difficult to get the people you need from the eu at the moment question mark >> we have 120,000 workers in our workforce, that is one third of our workforce. there is across a range of skills. the main driver of this is not the brexit but the currency valuation. remiss.them are their salaries have been cut. if they can find somewhere else turn enough of that 20%, they will do so. the other part is you can't simply replace them. the currency devaluation reflects people who might come here anyway and there is a degree of uncertainty about their future. they might choose not to come. anna: what is your industry expecting and preparing for in regard to the possibility of

frictionless trade? is that the civil -- signals you are getting? sure theym not understand how to make that practical. the best way to think about it is the irish border. that is the only manned border we have with the eu and i think the irish order is an interesting example of how this may or may not work. there are 20 lows as the government could control during the troubles. after 200. that is why hundred 90 opportunities to smuggle. how are you going to manage that? are you going to put quest -- customers post-in? of governments with i.t. systems is lamentable. there is not a lot of confidence those things will work immediately which is why the transition is so important. anna: when you talk about exports for the food and drink

industry, we talking about the relationship between the u.k. and ireland, is that where the bulk of that business is being done? guest: it is massively our most important customer and supplier. the supply chains are completely integrated so there is virtually no [inaudible] priced in. if you are talking about meet -- slaughteredre across the border, [inaudible] the milk passes the border five times before the bottle is sold. how is that going to work with tariffs question market will be the practicalities that are important. phil hogan talking about how he hopes for tariff free hot trade. this is something -- sounds like

something the british government is involved with. guest: that further east you go the less they care apart from germany. that is the key audience for all of this. i think the negotiators understand one thing very well. all of these have done trade deals, they have done them with the u.k. in and those countries want to retain the u.k. in the form of membership or they want to renegotiate. that is quite a strong cut to play. anna: are you getting the audiences that you want, having its voice heard around the tables, the cabinet tables that are making decisions? >> a get axis, we are listened to, we are treated with great respect. people know that food and drink is the largest industry and foot andrity, national security they are beginning to get to

that point. what we do not know is how that plays in the decisions they might make and when they get to trade-offs between individual indices. those will be the key moment when we get into the negotiation, the other side of the german election, how are those doing in the negotiation? -- if they decide to play off one sector against another. anna: if you are thinking about what could be a worst-case could a hard, what brexit look like? >> one example, milk or derry products. 30% and tariffs. when 5% of our milk is imported and most of the major milk players in this country who were linked to create the new investing we need to make up european countries. they need to have particular interest. there would be a lot of other sectors that are those -- also facing crude prices. this is not catastrophically

increasing. deflation has been part of the food and drink industry. partly given by the supermarket wars. i do not know what appetites the grandmother has writing about -- and that they have writing about for prices. what do you want the priority to be? guest: that should be labor and access to labor and all ranges of skill. on thehould be clarity regulatory framework on which food and drink will sit and that will work with europe and there should be a commitment to an early deal and early transition deal so people can act with certainty on customs and tariffs. -- thanks for talking to us. some deep divers into one sector. it's hopes and aspirations for the future. manus: thank you. the cost of your

daily bread. our guest is still with the team. was inflation threat that ran through that conversation was my take. in writing inflation around the world is a global thing. do you think it remains fully intact and in play question mark the global re-inflation trade. the last six months, investors have looked at reflation is a global thing. how that is likely to change over the next six months is that looking they will be more individually at the inflation theme. what i mean by that is the u.s., there was that tight labor market. and is pushing up inflation

underlying inflation pressures. in the u.k. inflation is going up but maybe that currency coming through. you talked about your base case scenario for the european central bank. tell me about your thinking and what that might mean for landing in europe. what is going to happen, when is it going to happen, and what is guest: the ecb will be raising rates later this year in september. manus: at negative 4.2. guest: zero toward the end of this year next to her. we do not think about the ecb heading toward the exit. it is in unwind of the aggressive accommodative policy. that is not needed now that core inflation is heading higher. manus: i applaud the thought and aspiration. i do nothing markets will buy the nice theory.

this is the european benchmark. out to -.2 at to zero. let's give you six months or eight months. the bond markets will absolutely freak if that is the time span. >> here's a couple of key points. one is we should not look at the way the fed has inflated its exit strategy and apply the same ecb.c to the the ecb will continuing with qe into next year. the other very important point implemented its negative rates when they are trying to implementing qe. that is not really required as much. the other important point is a reduction of the rate. there will be very positive for bank hours and that will

[inaudible] manus: a banker loves a bit of interest. more on the day's news. it is an historic day. there is a letter on the way to europe. everything you want to do, you can have it here. it is on tv and that is what you want to click on. it has all the video stream and that lovely [inaudible] bree.u want to contact ib chat witha new our producer. coming up on daybreak. cut at last. libyan production takes a hit. the question for the markets is did that trump the u.s. data? this is bloomberg. ♪

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anna: extensive coverage coming to you today. let's get to debra mao. may rally to $15 an -- 150 an ounce. the precious metal may be in the early stages of a bull market. thattors weighed risk president trump will be able to edelman his agenda adding to uncertainty surrounding european elections and brexit. toshiba's board has approved a chapter 11 bankruptcy filing of its westinghouse unit according

to japan's nikkei. a spokeswoman was not immediately available for comment. conglomerate warned of a possible $6.2 billion write-down on the nuclear energy business. of one ofxecutive turkey's largest state-owned banks has been arrested in the u.s. on charges to evade trade sanctions on iran. is accused of conspiring to launder hundreds of millions of dollars through the u.s. on behalf of iran and its companies. are droppedthere following the arrest. that is your bloomberg business flash. manus: let's talk about the oil market. under .51%.ng up by on wti and brent. set, production was set

to fall by 60,000 barrels a day from libya'seline biggest oilfields stopped working. is it a temporary glitch? the chart. yusuf: the latest shutdown in the pipeline that connects the pipeline to libya's largest oilfields field came as a bit of a surprise. it is not clear why according to a person familiar with the matter. libya is exempt him this opec-non-opec agreement. it was a bit of a red herring. if you are a bull in this market you can breathe a sigh of relief. the other thing is what is happening on the technical levels. i have crafted this for you. the 200 daying with

moving average. this is reminiscent of a scenario we had before the agreement late lester when you had the drop in oil prices. au can see a highlight with red arrow, rebound all the way up to $60 a barrel. that could be one of the scenarios that would confirm the forecast which forecast $60 a barrel in the second quarter if that extension happens. and the ramifications would be widespread. citigroup's morris also sees a tighter second quarter oil market saying we will see an opaque extension. all this ahead of key u.s. inventories. at the more -- moment forecast to build by under 2 million euros. in line with what the api reports but also the drawdown that people taking a position in this market would be hoping for. manus: thank you. on the machinations of libyan supply. michael sneed joins us from bnp

paribas. kuwait and in tracking opec ministers and the need to get another deal to give to $50 oil. take $50 oil, translate it for me, we have had the move from deflation to reflation. it does not hold. does bnp paribas thinks $50 holds? guest: on the outlook for oil. three pieces to the oil puzzle. it is supply where you have had a lot of compliance with opec. you also have the increased supply about 500,000 barrels a day. increased apply from u.s. shale producers. that is all setting events. with thet is louche global economy doing well. the third piece of the puzzle that is bearish is the oil

inventories which are at skyhigh levels. demandifficult for even being better than supply to feed through two substantially higher prices. in terms of the outlook for inflation, we did some calculations. oil staying at the current level means for the next three to six months we are likely seeing some of those jumps in headline inflation. what that means is we could get headline inflation in places like the euro zone the u.s., japan, moving back toward core inflation. in the u.s., this is not really a threat to the reflation fee. core inflation is moving higher. in europe it could be more of a threat because core inflation move tire but it is still really at quite low levels, a long way below the ecb target. that could mean investors and start to look at inflation and the u.s. differently from inflation in the eurozone.

anna: that is the inflation picture. if you look at the emerging markets you have seen considerable appetite for emerging markets for -- in recent months. how does the oil story play and and are the countries you like related to the oil story or far away from it? michael: themes around emerging markets are a little bit separate. we have seen a lot of investing -- investor inflows into emerging markets especially the last two weeks as you have financial conditions ease following the fed's. manus: this is the black rock i .hare posting the largest inflow ever. does that say to me that emerging markets are going to seem very different in a rising cycle from the fed then once before? ofhael: this is telling us easing financial conditions. people are going to em stocks.

that was the argument i was making earlier that euro stocks are close to their hearts. is em iseans for em still very driven by financial conditions rather than fundamentals. this means when we look at the em outlook for we have the fed tightening policy, those fundamentals will become important again. what we think that means is places like mexico will do quite well. that is partly off the back of also trump and being potentially less aggressive on the trade policy. it means places like south africa that has been in the headlines are going to quite aggressively underperform. anna: on the subject of south africa, how are does close are we to a downgrade and what does that do to south african assets westmark they have been talking about the brand falling 15.5 to the dollar. guest: we had a irish outlook on

the rand. looking for -- also back to inflation and south africa is quite low. growth at 1.5% is quite low. the fundamentals argued that the central action coming rates and the currency would likely we can. the clinical concerns increases our confidence. with that means is the move to 14 in dollar rand is likely. thank you for your time. great to have you on the program. michael sneed joining us from bnp paribas. we are going to be talking next -- we will go to the european parliament in brussels as we await delivery after he said may possibly you -- after theresa may's divorced letter.

the letter goes to donald tusk and we start the countdown. this is bloomberg. ♪

anna: the u.k. signs as papers. theresa may bank the letter. the letter will be delivered to the european council president donald tusk this afternoon. scotland defies the u.k. plans tolawmakers back do a second independence unity -- independence referendum. and limiting the scope of upcoming talks. the tax would include terms of the divorce, not the trade relationship. ♪

a very warm welcome to the program. i am anna edwards in westminster. manus: i am manus cranny in london. signed, as if it is sealed, and technically on its way to be delivered. article and two years of negotiations. the scene from westminster today. anna: theresa may last night spent some time on the phone speaking to jean-claude uecker. what will the tone of the b, that is something we will learn more about later today. the letter spent the morning passing the channel into the hands of the u.k. ambassador to the eu. he hands it to donald tusk. we get more details of what was in that letter, what was the tone like, does it address the divorce bill at all, does it address the rights of eu

citizens in the u.k. or do we have to leave all of that for another day? perhaps it will be some disappointment here if we see the hands of michelle bonnier tied. we will see in the days ahead. let's check in on how the markets are doing. equities are set for a higher open according to futures. you're seeing of risk rebound across the equity space, up by .2 of 1% despite saw the outages from the cyclone down in australia. global stocks are set for the first -- 15th straight month of gains. trading in a whisker of its all-time high. paris and frankfurt set to rise. you talk about brexit, you talk about the risks, let's have a riskometer.brexit a couple of things to bear in mind. thee we'll woke up june 24,

ftse in town terms is up nine point -- 9.16%. euro sterling, the euro is up by 14%. what is your risk reward, how do you play brexit, is the pound the cheapest on our relative value basis according to ups and could make it up to 136 restaurant we overly pessimistic on the negotiations? 113 on the downside, the euro sterling, what does it take to get to parity? between michelle bonnier and the risk. there seems to be this litmus line drawn in the sand between what happened last week and what can happen now. trump is set to meet with cohen in terms of outlining tax. the dollar at quarter and a half lows. fisher and yellen walk the

middle ground on to rate hikes. possibly three. the nymex is up and nigeria has an outage. who would have thought that a pipeline shutdown could give what brexit needs. that is the state of play in the markets. the rates are in the markets, we are keeping an eye asyou came at -- u.k. acids we wait for the triggering of article 50. let's keep a watchful eye on what is happening in the asian sections. here is juliette saly with the details. juliette: we will start with the first word news as the u.k. is set to trigger its exit from the eu. the will probably limit scope of upcoming talks. according to three people familiar with the matter, they will negotiate divorce terms and

not the relationship. tusk is set to publish guidelines for barnier by the end of the week. and pursuing a second independence referendum. 69-59 tot voted request the legal meantime the to hold theties vote by spring 2018. the sets up what promises to be a lengthy and acrimonious showdown if it meets brexit negotiations. president trump has issued an executive order rolling back his predecessors carbon cutting commitment promising a new energy revolution in america's fossil fuel resources. andas unraveled rules directives to combat climate change that president obama made a central issue of his second -- second term. he wants to reorient to help

u.s. oil and coal producers. trump: we have eliminated a devastating anti-coal residue -- regulation but that was just the beginning. today, i'm taking bold action to follow through on that promise. my administration is putting an end to the war on coal. clean coal. really clean coal. juliette: call miners and austria have hot -- halted a third of output from the biggest coproducing region. that is as the remnants of cyclone debbie continue to put down rain in cleveland -- queensland. storm to hitst since 2011 which helped put prices to record highs at the time. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top .

the focus inas australia. you did see a lot of buys coming through. i might ninelosing of 1% to a two-year high. have a look at the nikkei, it is pretty flat on the close. was lower. three quarters of the index traded without rights to dividends. you are seeing some upsides in the h shares. nikkei and focus on a new support that it's westinghouse unit has filed for bankruptcy. this is a property developer that is in debt and it has planned a $2.9 billion refinancing deal and a taiwanese computer stock, the biggest drag on the index down over 5%. it received some downgrades. have a look at these charts. it is showing you the white line that the china index 90 day

volatility which is showing calm in the market but this blue line is the msci china index. e. months estimated p chinese stocks have had the strong start to the year. it is kolmar in the market but very expensive stocks. manus: thank you. er nine months since the u.k. voted to leave the eu. theresa may began the divorce process. the letter is making its way to the european parliament and brussels. matt miller is therefore its arrival. good to see you this morning. give me the rundown, what events, what the theater is in the process. matt: at 8:00 u.k. time there will be a meeting of the u.k. and the administration. at noon, a question and answer

session will begin in parliament. just about half an hour later, theresa may is expected to give her statement. what about that time we are expecting and eu envoy to bring that letter and hand-deliver it from the u.k. to donald tusk, the president of the eu here. task will read it over and we take a half hour, 45 minutes to collect his thoughts and give his own statement. it should be around 1:45 p.m. here. just after resume at -- take afr theresa may has finished giving her statement in parliament. class will yout be looking at for reaction? these are the immediate manifestations of risk. absolutely. the pound has been talked about the most.

i heard you discussing it this morning. we have seen some incredible forecasts. jim rogers who started the quantum fund with george soros was on bloomberg surveillance. he said he thinks the town could go down to $.80 because of the independence referendum in scotland, assuming that gets -- is able to go through. we heard that the pcp pricing would put the pound closer to a dollar 50. and charlie morris said he expected it to climb closer to that. a lot of people are recasting -- forecasting a rebound because of all the positions put on. after article 50 you could see a bounce in sterling because of the covering of those shorts. anna: thank you very much. matt miller joining us from brussels. joined by stephen isaacs who is in the studio.

thank you for joining us. what is the downside risk, we -- four u.k. acids over the course of this negotiation, what would a crash out if that were to happen, what are the chances of that and what would that do to u.k. assets? them: today we will get all you meant words. both parties want to see a little bit of their own reasonableness brought into the conversation. today once the drama of the , i thinking flourished when we get down to the hard negotiations later in the year, that is a different story. one piece of news that we have had in the last few days a sense of merkel did surprisingly well in regional elections in germany. that strengthens her hand. if the establishment parties in , france, and germany prevail which at the moment seems likely and we get to the

fall when serious negotiation our european friends are being very open and clear about it, they have been that way since june last year. if you do not want to be a member of our club and you cannot sign up to all the rules, sorry, you're out completely. i cannot see why they would change that view. whether it is right or wrong, economically or politically is another matter. it is the fact we are being told repeatedly by everybody within the european establishment. the negotiation is not going to go very well. you have a rather more complicated situation, the internal politics at westminster, particularly within the conservative party where theresa may has a very slim majority. can she literally sell to parliament and i include the house of lords in that a non-treaty? that is a very different question. i'd and not know what the answer to that is. arguably she will not be able to sell it. there is a scintilla of

possibility that these negotiations will drag longer and we will still be in the eu for many years to go. manus: what is the risk, the rhetoric at westminster that no deal is better than a bad deal, if you keep going on like that you are not going to get anything. what is the risk politically of them getting up and walking out and going to wto, is that a real risk? guess: it is the most likely outcome because of the politics. it is the most likely outcome. the reason for that is the politics of europe. night, guesslast who popped up, marine le pen. she has a rather important election coming and her point was to say the u.k. was blackmailed and after that it was project fear and the u.k. has had the courage to sign the letter and that should be on the

point. politics in europe is still up in the air. manus: absolutely. made a greatave deal of hay out of the demise of sterling. it has gone down by 18% since we woke up and voted for brexit. have a look at this. this is our brexit barometer. pound was waving goodbye and 2013. 13.in 203 the pound was on a trajectory down. just something more than brexit. is it a baseline or is there more to come? guest: i agree with you. the pound has been in a bear market for 100 years. why are we in a bear market? we run ae reasons are

huge trade deficit, huge fiscal deficit and courtesy of mr. my threee run a loose policy. if negotiations do not go particularly well which is my base scenario that somehow it will be an you factor that we need to do something easier on monetary policy. more qe? we know what qe is. we know it zero rates are and negative rates. what do you think the who knows is? >> it is to do nothing. not to tighten. wage inflation generally is picking up everywhere in the world. the u.k. is no exception. the u.k. has a history for going beingn time 100 years of a high inflation country. a quarter percent interest rates courtesy of mr. carney will state longer than people -- stay longer than people thing. manus: thank you for joining us.

up next, pulling the trigger. more of today's news. the u.k. starts its divorce from the eu. we will be live from westminster. this is bloomberg. ♪

manus: 44 years of membership and two years of tough talks begin today at lunchtime as theresa may's letter to trigger article 50 is on the way. you're looking at a shot of westminster on brexit day. juliette saly is standing by with the business flash. thank you. a senior executive at one of turkey's largest state-owned banks has been arrested on -- in the u.s. on charges of conspiring to avoid trade sanctions in iran. a deputy ceo is accused of conspiring with -- to launder hundreds of millions of dollars through the u.s. on behalf of

iran and its companies. the turkish lira weakened as much as one point 2% against the u.s. dollar following news of the arrest. samsung is expected to unveil its next flagship smartphone. it is believed to be preparing 8 four events in new york and london with reports saying it will feature larger screen and come into sciences -- come in two sizes. that is your bloomberg business flash. and is in westminster. anna: thank you. let's talk about the fate of the u.k. economy and credit rating. i'm joined by mark kramer. thank you for joining us. not that long ago you said that your assumption was that the u.k. is heading for a hard brexit. is that what you still think and is that what we see

already priced in two u.k. assets? >> it is still what we're thinking. it is much more now the mainstream that used to be. -- than it used to be. partly it is logistical. it is hard to negotiate the plethora of agreements you need to in such a short time that is available. it is almost inconceivable this can happen in that short time. some reference points, the negotiations with the canadians and the free trade agreement took seven years and that was an agreement of both sides being in agreement. this started when gordon brown was prime minister. this is how long that takes. to do this much more ambitious and in less time, we have little more than a year of true negotiations because of the approval process. anna: you said the hard brexit is more the accepted view, what about no deal or whether the

u.k. -- what would that look like for u.k. assets? guest: that would be pretty dramatic of an outcome. there are so many uncertainties. the markets hate uncertainty. you would not know about the future of the trading relationship to my you would fall back on wto rules which is fine, by and large. the u.k. depends so much on merchandise trade, it depends on trade of services. this is a service powerhouse. everything going around here, with service exports and that is the mainstay of the economy. it is difficult to anticipate what financial and other business services relations would be with the rest of europe. that would come as a nasty surprise. anna: a recent s&p report talked about the gradual softening of the demand picture. is that the trajectory here for the u.k. economy?

guest: this is a look at last year and what has been driving the u.k. growth is consumption. haskell content -- household consumption. what we are seeing is more inflation coming in as a response to the depreciation of the pound. disposableap into incomes of haskell's -- households. this part of the equation will weaken. you could think that exports would pick up. this is not likely to be a very strong impact. if you look at the depreciation 2008 whichn in 2007, were stronger than this one, export reaction was minimal. and a: it looks like we will have to focus on how much it will cost the u.k. to leave the eu before we get to the future relationship between the two parties. we hear the trigger at 50 billion pounds, we do not know

what the eventual figure would look like. ? guest: this is the equivalent of one month of government revenue. it is not massive from that perspective. what is more important as the political consequences. you will have to deal with that pretty early on. of the expectations european side will want to negotiate in sequence. they want to talk about the future status. this means the so-called bill will come quickly. they will a lot -- be a lot of controversy in the building behind me on this and this could lead to early acrimony and souring of the relationship. it is important these negotiations are happening in good faith and a good town. this could be pretty corrosive. anna: if we start to hear rumblings about the possibility of an early exit, with that at

uncertainty? guest: it will be a major distraction for the government. they do not need to negotiate -- get a new need to mandate. this may be slightly overwhelming for government officials. no clearme, there is option to reverse the train that is leaving the station today at 12:30 p.m. i do not figure would make a material difference other than slowing them down. look have you had time to at what an individual rating for scottish economy would look like? one of -- what are the considerations around the integrity of the u.k. at the moment? know what thet

iterations would look like regarding the currency, how the debt is divvied up, it is too uncertain. it would fuel speculation. what we can say is if scotland were to hold a referendum and they would vote to leave the u.k., this would be a double win me for the u.k. and for scotland itself. on theighly dependent rest of the u.k.. this would be the constitutional pressure point that would aggravate the challenges. this would in all certainty create some pressure on the reading of the u.k. anna: thank you for joining us. joining us from s&p global ratings. with: great in of you moritz kramer -- interview with moritz kramer. debates. the the pound is down, 123.90.

the market is during up for the form of delivery of the letter to brussels. the european open is up next. ♪

♪ guy: good morning. this is the european open. i am guy johnson matt miller who is in brussels. here's what we're watching. theresa may pulls the trigger. the prime minister signed article 50. stirling is down. with investors heavily short what are the chances for a squeeze when europe wakes up? europe's response. we are live in brussels and where going to berlin to get a