♪ >> good evening, and welcome to "the u.k. decides." this is the european headquarters in london. general election has ended and the exit polls are out. >> headlines so far .2 inconclusive election results. the tory said to be the largest party. inconclusives to

exit results. set to win 14 seats, 650, so the exit poll, a messy one. pointing to an inconclusive election result. >> let's talk about how sterling is taking to this. let's go to the terminal and see what is going on. not seeing much of our reaction at the moment. honest, the markets are trying to figure out exactly what is going on. you looking at the cable rate, trading 12956. >> prime minister may may actually fall short of the majority, according to the exit poll. 314 of 650 seats. last time we had the exit poll at the lt election it dicated a similar's tory, a

conservative win, but falling short of the majority. what came through was a conservative majority. that is the caveats on the numbers. the story for the market is a big one. the tories could come short of the majority. you see the spike on euro sterling. >> absolutely. let's get analysis of what is going on. let's bring in our macro strategist in singapore, joining us in the studio, simon derrick from bank of new york. mark, let's start with you. in singapore, give us a walk-through of what your first reaction to the first reaction we are now seeing. will be a very negative exit poll for sterling. i think we will see it drift slower. polls have historically been good since -- for the last 25 years. they have not missed more than 15 seats to read this points to a tight race.

even if conservatives do get a majority, it implies a narrow majority, a bit of a disaster for theresa may. have made exit polls a massive mistake for the first time in a quarter of a century, this is a bad result for sterling and we will see a drift lower. for now, we are watching the first results, which will be the southern boroughs. we are expecting conservatives to pull 35%. that may be skewed lower because of the exit poll. polle big story, the exit points to an inconclusive election result. the conservative party may fall short if the exit poll is anything to go by. we are down by 1.5%. your initial reaction to this a month ago, if i had told you this would be, what would you have said to me? >> i would have said you were joking. were inonsider where we terms of the polling six weeks ago, we were talking about 20%,

a reduced number in polling. aboutre talking insufficient to be a majority government. we will have to go with the numbers., the opposite correct me if i am wrong, but i think i am right with that. is it going to be a minority government? are we going to see the numbers change overnight? historically, perhaps these are sliding. underestimating the conservative number. overall, it does not paint a great picture. it suggests that what we have seen so far, -- down 1.9%.lows are a month ago, what did we call this election for? not this result, that is for sure. you wonder what the future of the conservative party is, even if they do secure a narrow

majority off the back of it. itare we pointing in hard , a conservative party that does not have leadership? in, there is an unclear picture going into the brexit negotiations. we do not know what we have, we do not know if it is the minority government. the last time we had a minority government in the united kingdom without any support from a party was 1974. that only lasted seven months. good point.s up a does this price in a hung parliament. if i said you, by the end of tomorrow, it will be a hung parliament, where does cable finish friday night? >> somewhere below 120. >> that bad? how itou think of

performs over the last year and a half, we are either heading in a now or range, or are moving 3%, 4%, radically. last october theresa may told us about heartaches, leaving the single market. we were trending 130. within a week we traded down to 114. i do not think it is particularly radical. understanding to what happens when the dust settles. the dust is going to settle in the next two hours. the market will look at this and think, brexit is off. -- i do not understand how we take the next step at this point. negotiation is meant to start in the next few days. investorse acting --

are reacting negatively because they do not understand. how can you say what the negotiating team will look like in brussels, when we have yet to see -- think back to 2010. realistically, to start talk --ut negotiating >> what if we end up with a majority of five or six or seven? >> we are back to the same stories we would have had, had this been a 2015 majority, the same. then you have whether you have trade talks in parliament with a divorce proceedings. story, a that ft walkout. let's talk about things.

in simple, there is a chance still the conservatives have achieved a narrow majority, there is a chance of that happening. there is a chance prime minister may remains prime minister. smalles in with a majority at home. what ds mean inms of basic leverage? >> when y start thinking about case, itthat is the increases toward a harder brexit . however, let's think how sterling has reacted this year. it reacted favorably on the single market. to theted positively trump election. formarket was perfectly ok a soft brexit, as long as there was clear leadership, a strong political message. the problem tonight is, we do not know what the message is, that is why sterling is

struggling. cudmore bring up mark back. what you talking about? we are in the studio waiting. i think there will be a lot of volatility in the next few hours. the people trading in this market at the moment have brought u.k. specialists in. but the asian markets may be panicked. they do not know what it means. we will have volatility in the next few hours. the results were linning more toward labor, which will make it seem more confusing. especially if people are not experts in that area. whether we finish in the lower 120's is harder to know. if we have a sll conservative majority it will be a disaster for may. there will be a decent dose of skepticism across the city of

london, whether that exit poll is close to the final result, given a suggestion of 314 for the conservative party. the suggestion in the exit poll was 316, underestimated their performance. you will have a decent dose of skepticism around the numbers. pollsfairness, those exit have been far more accurate than the opinion polls over time. they did underestimated. i will tell you why there is a bounce back. if you go back to 2015, they announced 50 minutes after. whether it will be close this time around. there was a heavy amount of campaigning. that there story were heavy voters. equally subtle, strongly labor. if we see no signs within the

votes that the brexit issue has --sed any issues and labor >> at what point does the market look at this and say, it will be a small majority. there is a lot of turbulence around it and a lot of trying to understand what it means. that is either going to lay tot -- all arro point brexit. >> let's say we have a repeat of what we saw in 2015. not a 15 a sea majority, say a 12 or 13. that makes the prime minister less answerable. they will likely support the hard brexit story. in fairness, it gives her a mandate.

we know the conservative party is always prepared infighting if necessary. it seems unlikely you would have that going in to a brexit negotiation. infighting if necessary. >> i am not a political analyst, so i cannot tell you that. it is not out of question. it would be amazing to have that going into the brexit negotiations. stability is what we need now. look at these numbers and wonder what the election was for. this for theresa may was it political mandate. to get a monster majority. if these numbers are anything to go by, as a market participant looking at the negotiations for the next several years, has she got a mandate based on these numbers? >> there were two things this was about. it was to get a stronger mandate, but to extend when the

next election they would be so that in those negotiations, you were not beg essured by the need to get a deal done before the next election. question would be, -- my point, yes you are right. it is still a mandate. majority, theest market loves it. but i think they will say, fine. we got through by the skin of our teeth. we will have a clearly defined position on negotiations. my concern is, if we do not get the outright majority it becomes far harder. market, where does this leave europe? the other this leave side of the fence? we heard from mario draghi, a cautious tone applied to europe. it is a major path of the european economy, gripped by

indecision at this time. a major, major negotiation about to happen. in aggregate, where does this leave us? i am trying to pick a pair we should be focused on. is that the cable rates, the euro sterling, where do i focused my attention? because this result is so clearly bad and we are talking about how bad it is, we do not know the degree if it is a minor escape or really the worst case outcome of a hung parliament, the best care to watchis cae. i would have normally said euro , but tonight it will be a cable sterling cross. it is ultimately not great for europe. it seems good in the short term. u.k.'s handle the weekend, which but theyor them e.u.

do not want a week u.k. economy. they want the upper hand in negotiations, but they want the u.k. to do well, as well. it is slightly bad for europe. as for the broader market, they will react negatively because there is a worry in asia -- is this another brexit repeat? but it will not be a bigger outcome beyond the u.k. u.k.-europe much a story. withrk, great to have you us, mark cudmore, macro strategist. if you want to follow all the action, you can if you are a bloomberg professional subscriber. up next, we get the view of a conservative here and former prime minister, frances moore. the u.k. decides the exit poll was inconclusive. much more. ♪ ♪

from london and viewers worldwide, bloomberg tv and bloomberg radio, breaking news. the united kingdom appears to be headed for a hung parliament after the general election called by theresa may. the conservative party will fall short of the majority, with only 314 seats, down from the 330 they had before the poll.

meanwhile, jeremy corbyn's labour party will win 266, up from 229. read, andeliminary exit poll. but the market is adjusting. >> it is significantly tighter than when we started this process on april 18. there was an expectation we would see a big majority for the conservative party. the markets have been adjusting, but we have seen a big adjustment this morning when it comes to the foreign-exchange story. we will show you what is going on. the cable rate down by nearly -- euro sterling traded 8 .8807. it may be simplistic to say, but sterling never likes uncertainty. sterling has d a lot of uncertainty to deal with the last 18 months. this morning, absolutely no exception in asian trade. >> joining us now, conservative

here francis maude, he served in the house of commons for more than 25 years. and alongside him, simon derrick. let's begin with you, frances -- francis. --this is the base case francis: it is still speculation, we do not know what the outcome will be. this is what the exit poll said in 2015, and that turned out to be a majority, albeit a very slim majority. that may turn out to be where we are. there are some very odd things here. i know it is a boring how much right thing to wait. on -- odd this exit

polls adjusting the s&p losing significant numbers in scotland, and labour doing so well. my expectation was, we were not going to do brilliantly and london, perhaps in the southeast. theacross the middle and north of england and scotland we were making significant progress. pollsters have had lots of things to deal with, different crosscurrents, the old rules do not apply anymore. we need to wait and see some actual results. i would not all exclude at this stage that this does turn out to be a better outcome. it will not be a landslide, clearly, unless something very surprising changes. behink it could turn out to certainly within the realm of possibility in the market. >> what happened to the landslide? francis: conservatives had a terrible campaign.

lead.art off 24% poll in 1997, all tony blair had to do to be prime minister was kerry a vase across the slippery floor without dropping it. well, we dropped it. if you start with a big poll lead and do not do anything to radical -- too radical. bland,ifesto quite nothing radical in it and we had a big majority in 1987. not a brilliant campaign, but enough of a majority of 100. a goods absolutely election for her to call. but the absolute rule should

have been, do not ta risks. i thought it would be a boring campgn, was very interesting results. we are getting interesting results, maybe. but it has turned out to be not a boring campaign at all and the conservatives should have been absolutely him blazed across everything we were doing to make this boring. >> should it have been about brexit? francis: i think she was on the right thing to begin with, this is about leadership. her versus jeremy corbyn. bad shape, they played a bit of a blinder. if this is anywhere near right, he will be locked in place as labour leader. we had a better result from ed miller, if that turns out to be the case. a lot of the moderates in the labour party will be in despair. alongsidea picture

john paul juncker. what does he think when he sees these exit polls? francis: i have no idea what he thinks it -- it depends what time of day it is, i suppose. >> 11:00 in brussels. >> does that make a difference? francis: our counterparts in the e.u. want to know who they are dealing with, what sort of hand the prime minister is going to have. theresa may? francis: i would think so, unless it turns out to be worse than this projection, i would expect her to be prime minister, of course. >> what does the market need to see in t next 24 hours to settle down? >> they need to see what the government is going to look like. head back to 2010. we did not have the brexit negotiations.

we carried most of that election with the hung parliament. sterling reacted badly. you then have a period of consolidation were people waited to see what would happen. think we are going to have a weak -- >> thank you very much. more for u.k. trade. simon derrick. remember, the functionality you can use on your terminal. next, we go to europe for its take. ♪ ♪

>> good evening, welcome back, you're watching "the u.k. decides."

special coverage of the u.k. general election on bloomberg television and radio. let's recap. we have an inconclusive outcome to the u.k. general election. >> pretty conclusive move for the fx market. sterling, you know what to do with it, it gets sold. by 1.65%. u.s. sterling, up by 1.6%. a stronger euro, stronger dollar against the much, much weaker pound. you speak to simon derrick, the guys on the trading floors area the reaction i am getting, that is on the hung parliament story. amazing the tories get a majority. you get a really inconclusive results once we tally up over the next 24 hours. sterling could go lower from here. guy: what you do with it from there? this indecision will cause a sterling to weaken. do you then buy it because you assume that will make a soft brexit?

do you not buy it because you worry about a massive period of uncertainty? a difficult position. where do you start to take it to the next step? jon: everyone i have spoken to on foreign exchange is summarizing as follows. you get a short-term move based on sentiment and sentiment alone. then it kicks in, based on the fundamentals. italy absolute uncertainty. the next story, how does this shape the brexit negotiations if you have a hung parliament? you had toward a softer kind of brexit. guy: let's bring in other voices and the conversation. let's bring in jordan rochester, fx strategist from london. and phillip blon from a think tank. let's stop -- start off with the nomura perspective.

jordan, give us a sense what the last few minutes of been like, what you're hearing from clients, what guys on the trading desks are telling you. give us the position. i had to refresh my screen and made sure i was seeing things clearly. around one were point 2%. in this situation, a lot of people in our survey said the sterling against the dollar fell to 1.26. we will have a bit of uncertainty if that is the result. 2015 et result seta silar thing, hung parliament. but really, it was a slim majority. it is still possible for theresa may to hang in. she is actually quite close to 16 seats she would need. she needs to hang on with those seats from northern ireland. it is not over yet. we still have the night to go. if these exit

polls are 100% correct, we have a hung parliament scenario, where even an alliance of labor up to ais not adding majority. therefore, the pound is not liking this. in 2010, it took a while to come up with a coalition government. in 1974, they could not achieve it. it took 10 months before another election was called. it does not feed into certainty in the u.k. if you do see labor coming to , we willh s&p -- snp -- that shouldut offset negativity. jordan, that is the short term. talk about the next 24 hours. how was this market setting up toward the vote? how well stacked are trading desks across london? what is liquidity during an

event like this? is different to what it would have been three weeks ago. it would have been me and a few other guys area now it is the same across the street because the polls were tight. you and i focused two weeks ago when we talked about the possibility of this scenario, labour rising in the polls. a lot of people laughed at this possibility, fell so certain this election was predetermined. a lot of people will be scratching their heads as to what they -- this means. jordan come up this in the context for me. i will give you a clean look at where the market thinks the ofector and -- direction sterling is headed. nothing compared to the story we saw surrounding the referendum results. a veryted to get

different picture emerging. if you say the market has risen on these polls, how does it compare and contrast with that event? jordan: it is a lot different from brexit. this is choosing your government. but brexit was making the decision to trade -- leave the the trading market. we have to remember, we are trading below 130. 130 the year ago would've seemed very strange before exit. a lot of this is priced in already. a lot of people did not see it as an offense. they saw as a conservative majority, they thought the exit poll with can -- confirm that. stay here allo night and trade this. it is still very concerned. jon: coming into the poll, they had narrowed. the stock prices were sticking 130 spot, even,

though the polls were narrowing. suggested maybe you do not get a tory majority, you have to think about that labour win. and the guy next to me laughed his head off. how much complacency was there coming into this event, with the stock price sticking around 129, 130. jordan: you can argue it is complacency. i do not think so. people are trying to figure out whether it is good or bad. side, they said the corporation tax increase of 1926, issuance of debt, is a negative. , you had argument coalition involving these parties.

i do not think it is going to happen. whether this knee-jerk reaction is where we finish the day is a big question for tonight. is, if it is as conservative majority, the pound should go higher from these levels. 1.24 oncould force a the cable rate if a hung parliament is concerned. polls decent historically? there will be close seats. the first thing francis morris said, the snp losing a majority. you have to think some of those seats are pretty tight in scotland. guy: we will have to see how well it goes. there are a lot of seats there. snapshot.national it does not give you the locality issue. it will be critical for these key constituencies that will be fought over.

the question for many people in the conservative party is, what went wrong, when we thought we were going into the election with a big majority? had we now react to it? it will be difficult to understand. the leadership of the conservative party have been a lot -- effectively run by three may, fillon aesa hill, and nick timothy. how does the rest of the party react? good evening, you are as a -- do you believe the numbers? and what is the reaction function within the leadership of the conservative party now going to deliver? phillip: it is very, very surprising. we had nothing other than the ug

ov poll, which may not have been inaccurate sign. there were no reports of a labour surge. i had conversations this morning it was ale who felt spring tour is the most conservatives. this was very, very surprising. i think it is right to have some lose thatill the snp number of seats in scotland? i would be very surprised. it is hard to cancel the effects of an exit poll. they have a good degree of precision. we do know that all of the polls that were out, they all varied something like turnout rate. all the polls were predicting 100 plus for the conservatives, all relate on the idea the historical turnout by the other bases would remain the same.

clearly, it must be the case that has not happened. they must've turned out in unprecedented numbers. we know there was a rise in registration. but, we are where we are. where did it go wrong? i think the labour party had actually on reflection a very good manifesto. as we spoke about many time on bloomberg, globalization is not working for an increasingly large number of people. people feel desperately economically and socially insecure. there is been a massive turn back i would argue to security. terror, but, what on earth am i going to do about my schooling, housing, welfare benefits? the labour party, to their credit, produced a positive vision of how the state could be deployed to secure people. conservatives didn't.

apart from the principles which i thought worked really well, the opening 10 pages, the rest was negative. jon: it stopped being a one issue election. the market has to deal with it. one row through, we blew through stocks, markets have to figure out what is going on now. if you do get a proper, parliament, you will see 1.27 and a parliament. we expect underperforming swaps tomorrow, if this poll is accurate. jon: the emphasis is on the word if right now. jordan rochester, great research on this. and phillip blon, he will be sticking with us. coming up on the programming, 2015 proved crucial to the overall election result. affectht the anti-brexit

us this time around? from london on bloomberg tv and radio, this is bloomberg. ♪

♪ the united kingdom appears to be headed for a hung parliament. according to exit polls, they fall short of a majority, with only 314 seats, down from 330. meanwhile, jeremy corbyn and his 266, up from6 --

229. jon: the market has to adjust and it reacts lower for the cable rate. 1.54% on the screen. and it negative territory. u.s. sterling pops higher, 1.4% a stronger euro, stronger dollar, but a weaker pound. a weaker pound has to adjust to a huge amount of insecurity. a hung parliament at this point, from everyone we have spoken to, is a huge amount of uncertainty, fueled by an exit poll. a lot of people are questioning this. guy: we will go to scotland in a minute, where it seems to be the epicenter of that story. we will see what the snp looks like. my big question is, when does the market look at this and say, brexit will change? the notion of brexit as we thought it was 24 hours ago will change. jon: for the market, it was

always the short-term sentiment story, that longer-term brexit story. i think it will take at least 24 hours to get our heads around that. guy: in the 2015 election, the scottish national party won 56 of the 59 seats. nicola sturgeon campaign strongly against brexit and for scottish independence. will that change things north of the border? let's get more from our reporter at the scottish capital, edinburgh. good evening. many people are questioning the exit polls, trying to get their head around exactly why the snp lost at the level of seats it appears to have done. any explanation, rodney? >> if this exit poll is right, it is a disastrous evening for the snp. the main issue, they were not expected to lose anything like this.

that is why they are stressing it is early. they are expected to lose it -- 10 would've been a significant. i guess what it has done is underscored the fact that in scotland, the divide, the political dynamic, is different. all thecotland, districts, voted against brexit. what has happened, is the push for independence, the snp, nicola sturgeon, running with that. unacceptable and we will push for another independence referendum. notle i spoke to do necessarily want another vote. maybe tonight's results has been a reflection of that. what happens in that kind of environment? where does the leave scotland in the union, going forward from here? where does it leave the nicola sturgeon as a leader of the snp?

obviously, this will all be borne out. if we take the exit poll at face value, there are two sides to this. first of all, yes, it will have undermined the independence push. they will still come out with a majority of seats in scotland. but again, weaker and certainly people have demonstrated they do not want to necessarily to have another vote for independence, and have rebelled against the snp. but at the same time, if we are headed for a hung parliament, even though they have a fewer seats in the u.k. parliaments, it could give them scope to be -- to hold more sway in a hung parliament. that is the flip side. in terms of where it leaves sturgeon down the independence

path, i would think weaker. where it leads sturgeon in terms of the u.k., remains to be seen, but potentially stronger. jon: phillip blon, the big question through the night and we will not know the answer -- is if the numbers plus the unionist parties at up to a majority? i cannot see the other parties supporting the tories. isn't that what is going to be difficult here? given the experience we had previously in this country, recent history over coalitions? phillip: you're absolutely right, that is accurate. the conservatives will need a partner, but nobody will want to partner with them. all the other parties added up giveher are not enough to you a working majority, either. i'm afraid to say, it seems to me that if this exit poll is accurate, we are going to face

another general election. probably in october. i think even if it gets slightly better, even if the conservatives come in with a majority of 10, the prime minister's position will be untenable, they will have to have a new leader. and i still think we will go to the polls within the year. jon: the clock is ticking. guy: we mentioned negotiations in the next few days. how will that work? phillip: it can't work, can it? nowe are in a situation with government to begin negotiations, how can we begin negotiions? the first thing we have to do is have longer time limits on article 50, which you cannot do. if we are in a situation where we are not in a position to begin brexit, or brexit talks, that is pressure for another general election. that is where we are headed. londont's bring our

bureau chief. many questions surrounding this. let's start with a difficult one. is theresa may going to be able to sustain her position as the leader of the conservative party if this poll is in any way accurate? accurate, itl is is unlikely she would think her position is tenable. she called this election when she did not need to. she ran an extremely personal campaign, tight with the people advising her. there are already lots of the voices saying they are disgruntled not only by the way she ran the campaign, but her government, as well. a massive win,of 100 seats, was always in question. guy: where do we go from here?

, you pointed out. perhaps another election. when it comes to bret, remember that during the campaign, theresa may used the boogie man of brussels as a campaigning tactic. how willing are european partners going to be in light of that to give us an extension? thought, we could have the idea of a national government for brexit negotiations. if we cannot form a government and yet the timetable is ticking, something like that i -- partnering with david davis. it is that extreme. if the exit poll is to be borne out when nobody has an active majority, where the government cannot be formed because it is so unstable and we face the most momentous decision we have faced since the world war, arguably, ideas like national government,

that is exactly where they come into play. i do not think this will happen. i hope we will end up with a working majority. taking this at face value, where the margins are so thin and as , theuite rightly say, guy clock is ticking, what else can we do? we cannot delay it another year until we get ourselves sorted. jon: there will be guys and girls on the trading floor that thought they would be clocking out, but we will be working through the night. what is the guide through the night? what you have to look for specifically? forerland has not gone tory 40, 50 years. if may does resign --

hastings, that is one to look at. obviously, scotland. guy: we are trying to understand where the swing has moved. phillip: that is what you look for. us, where thell u.k. vote has gone. the overwhelming assumption was that the conservative party would capture the majority of u.k. votes, that is 4 million votes. at that is a lot of the votes. if this exit poll is accurate, and i stress is, it does not seem they have gone to the conservatives. either they have not voted or have gone for the labour party. if you drill down into u.k. voters that would make sense. front russian --

france and national voters, the idea of the state protecting them, is something that would appeal. one thingto -- emma: to point out on the arithmetic is not the done nominee to. we take up the speaker. with the math so tight, every single seat counts. and theirf the labour coalition takes it to 318. and may, could just get the majority. and what the swing looks like in northern ireland and the seats there. emma: and they had been wrong about the tory share. way of there one monitoring how that will develop over a few hours? there is a wonderful function on your bloomberg, you will end up with the screen that looks something like this. you will get the details of what

is happening in the process. you can use this map here. we will break it up on a constituency basis and you can look at those. they are not populated yet. theill start appear in northeast of england, sunderland county. thank you, another political shocker. the exit polls are anything to go by, election coverage continues threat the night right here on bloomberg. we will speak to a bloomberg view columnist. plenty more to come. on bloomberg tv and bloomberg radio, this is bloomberg. ♪

♪ it is 11:00 p.m. in the united kingdom, where it is pointing to a new day of uncertainty. asia waking up to the news of the polls are pointing to a potentially hung parliament in the united kingdom. the exit polls suggest theresa may will claim the most seats in the u.k. parliament, but will crucially ball short of