included liam hemsworth to save the world from a new alien threat or us from brexit. sort of [ inaudible ]. >> interesting time. >> thank you for being here. >> sure. >> it was fun. >> see you back here wednesday. >> if i'm not, alert the authorities. >> join us tomorrow. "squawk on the street" begins right now. good morning and welcome to "squawk on the street." i'm david faber with jim cramer. we're live from the new york stock exchange. carol quintanilla has the day off. give you a look at futures. the key here as we start the day, after friday, after brexit. and there we are with a look at the s&p which is going to be lower, the dow as well. see the nasdaq also which was the weakest of those three, i believe, on friday. certainly weakening as the day went along. european markets a key here. last night when jim and i were on, with kelly, from inglewood

delivers we watched the ftse down 3.7% before it had opened. you can see those losses have not quite been realized but it is still down over 2%. germany which had a very bad day on friday and france as well, also down. still more than france than the uk. italy, spain. you get the picture. not good. follow through in terms of the losses thomarkets saw on friday. the dollar stronger, the pound 1.31. get your bags packed we're going to london. see the tower of london. westminster. a lot of fun things to do and we will be able to do it for a lot less. the euro, jim. and now we'll get to our road map. >> you get to see a lot of what will be see-through buildings in the uk. >> yeah. >> we're going to start with the brexit. global markets facing that continued fallout and break down what is at risk here in the u.s. plus, we, of course, go live to london for a look at what

happens now. and how companies around the world are trying to figure out the impact. and treasure secretary jack lew spoke to cnbc this morning. we're going to get his take on the brexit's market impact and why secretary lew says he sees a long period of change ahead. first, though, stocks set for another rough day after all the major averages fell at least 3rs on friday. goldman sachs says a recession is coming in the uk next year. it downgrades its global growth forecast. treasury secretary lew joined steve liesman in the last hour talking about the brexit impact on the mustp ta ache listen. >> now the challenge is for leaders in the uk, europe around the world to manage through a time of change to provide as much continuity, stability and foundation for strong economic growth as possible. i believe there will be economic headwinds but as we've seen friday through the early market hours today, there is a kind of

orderliness in the markets, there was a surprise and a reaction but the systems are all working. >> systems are working and they are, jim. >> right. >> which is a key point. i mean yeah. >> look, this was a colossal mistake in terms of finance for the brits. now you may be a big win for the zen know phobes -- >> given some of the coverage we've seen in the last three days some of the brits are starting to wonder whether they haven't made a significant mistake and some of the comments out of scottish parliament ahead of parliament there and it's funny, is there a way to revisit this? i bring that up because that's now got to be part of the dialog even though it seems unlikely. >> the banks that we're talking about, we're talking about about rbs and lloyds they were the subject of giant buyouts. government was able to sell down the lloyd's stake. for the 8 billion pounds that uk saves over time in dues, so to

speak, to the eu, it's possible using a 50% haircut for what the british may have to bail the banks out they end up with $72 billion lost. $80 billion plus the $8 billion received. all i'm doing is giving a 50% haircut to what they had to do last time for the banks. not including barclays. hsbc, you have to put the chart up, the firmest. >> jim, barclays, that's got to be scaring people. down another 20%. watching it trade right now, not that anything else is doing particularly well but that has been an outlier. what is the concern at barclays versus some of the other european and uk base banks that we're talking about? >> okay. just alone with lloyds and rbs you're speaking about 160 billion pound hit. >> you say that, where is that coming from? >> they have the big stakes already. they weren't able to sell a lot of the stakes. >> talking about the uk's

ownership. >> rbs cost the british government 73 billion pounds. >> when you say hit i'm thinking on the credit side. you're not talking about the credit side. >> the side that keeps them in business. >> okay. >> makes it so you do not have any sort of -- there won't be a run because the government will inject what's necessary -- >> why are we having that conversation at this point? i mean nothing has really happened. there's a concern, of course, and goldman brings up the idea that a recession could hit in the uk. that will hurt. >> i'm trying to put pen to paper but what happens if things really go wrong if they don't undo this. looking at the trajectory of the stocks. the stocks are telling me -- now the credit side not nearly as bad by the way. i was doing work on the credit side on the prefers, on the bonds, not as bad. that was friday's numbers. but they weren't that bad, david. the bonds were all holding in pretty well the credit default side -- >> the credit side is the more important part, isn't it? >> absolutely. i am trying to do is say okay, listen, if the government has to do what it did last time, in

order to be able to save these banks so to speak, if things got ugly, you're talking about a lot of money. >> lot of money. >> much more than they say. remember, they're saving 8 billion euros over time. the campaign, the leave campaign, the distortions of the leave campaign versus what people got, remember, what is the eu is the most googled term over the weekend in britain. clearly the government did not explain at all about what the bailouts were like and how they could end up owning rbs again. they were trying to sell rbs stake. i'm being mathematical. >> but talking about things that haven't ha end. >> right. >> in terms of dealing with the president, reporting interestingly enough from deutsche bank, a research report about the uk banks but they point out, for example, lending balances are 46% lower than pre-2008, financial crisis, significantly lower risk for uk banks than previously, bank of england, data revealing

cumulative 7.4% writeoff to the present day as per current percent balances. put this in perspective. the stocks are suffering greatly. that worries people about the idea of contagion but we don't have that. >> no. the credit side says that the stocks are wrong. >> right. >> and, therefore, a bailout is a ridiculous thing to talk about. a bailout going on in the italian banks but that's different because they never raised money at all. those are corny banks. here the credit side when you look at the opportunities in the british preferreds, they're nil. you don't make much money at all. the stocks are wrong or the credit side is wrong. the credit side is always smarter than the stock snide what you bring up and the reason we're focused on these banks in particular, if there is going to be a real systemic problem this is where it would be, why investors have been focused on those banks, that you've been watching the percentage -- i mean, listen, barclays has to be worrisome. huge presence here in the u.s.

many people, of course, get that equity investment bankers and the likes, former lee man brothers, barclays behind that, and that hurts people's pocket booxs and deutsche bank, big u.s. operations or credit suisse, so many of them. this is the road people have to go down. now as i said on friday as you and i will say, who knows. we just don't know the path here. the unknown, the uncertainty that may keep a lid on some activity, may create some volatility for some time. >> it's clear that ruling party did not think through or explain to people what happened last time when the banks were under capitalized and the reason is, because they were smug. so was mr. carney about how the banks have raised a lot of money. look at our banks, for instance, our banks are -- have so much capital they do nothing but belly ache about it. their banks have a lot of capital and raised a lot of money. the stocks are saying they didn't. i'm saying if you look at the

smart money, the preferreds and even the 30-year debt of these companies, david, they trade almost like they're just american companies that have these okay balance sheets. the stocks are not an opportunity because everyone had to downgrade them and because the government owns such a big stake in rbs they've managed to sell down the lloyd's stake, will these be an opportunity? if you say that you're going right in front of a freight train. >> right. >> but i refuse to just sit here and say you know what you got to sells u.s. stocks because of that royal bank of scotland comment because that's an aberration. that's, as we said last night off camera, may be, other than a rock in washington mutual, really up there in terms of just the banks that went too far. >> the ab deal. we're going back in time. rbs was once -- the balance sheets of the banks are enormous, market caps are tiny, disparity continues to amazing.

we will talk about that but let's get back to what is next for the uk and its leaders in the wake, of course, of the vote to leave. wilfred frost is live in london. he will give us a closer look. >> thanks very much. the next thing to focus on is in about 90 minutes time, 10:30 a.m. eastern time, prime minister david cameron will be making a speech addressing the house of parliament behind me. that will certainly be one to watch. tomorrow the focus turns to brussels where there is an eu summit of all 28 leaders including prime minister david cameron where he will officially inform eu leaders of the result of the referendum. their aware already. the eu summit continues but without david cameron. the 27 leaders will discuss what the implications are for the future of europe and how they plan to move forward. now let's talk about the speech david cameron is about to make. two key things to focus on. the first one, does he maintain the position he made on friday

that he will stay in his post until the autumn. if he does that's important. remember it's up to the uk when to invoke article 50 and begin the negotiations for the uk's withdraw from the eu. if he maintains that position that means negotiations won't even begin until some time this fall. the second thing to watch is the reaction from the mps. what kind of reception will he get. around about 450 of the 650 members of parliament were backing remain. so a vote will have to be passed at some point to invoke the article and that's going to need mps to go against their initial wishes. we expect them to do that because they will back the voice of the people, but it is going to be interesting to see the reception david cameron gets when he begins speaking in about 90 minutes time. >> any word, i mean, wilfred, are we focused on the idea that article 50 will not be invoked until there is a new prime minister so we're talking perhaps as late as november 1st?

>> exactly right. it is up to the uk when to invoke that, not to the eu. lots of european leaders coming out to try to push for an earlier set of negotiations, but david cameron has said he's not going to stand down for three or four months and so until a new government is in place, we can't expect to see article 50 invoked. perhaps he will say in the next 90 minutes he will bring that forward but no indication of that. >> got it. thanks, wilfred. i've recently spent about 35 minutes reading a new yorker piece on jeremy kocorbyn a wast of my time. >> a lot of people feel this is an opportunistic move by boris johnson, kind of throw him -- almost a house of cards move, british version not united states. much more vicious. if that's the case there will be a kind of pragmatic way to get out, the norwegian way. all i'm saying is in the interim a lot of damage and, you know, i would certainly bet that if they had to revote, there would be a

different vote. >> perhaps. 17 million people did vote to leave. >> they voted to leave without any sense whatever was going to happen. >> good to google those things before you vote as opposed to after. >> right. >> coming up the biggest questions, of course, facing companies and investors post-brexit. what top ceos across the globe are planning. ahead, a unique perspective on brexit from former commerce secretary carlos gutierrez who spent six years as the ceo of kellogg. futures, we are setting up for a lower open after friday's more than 3% losses on all three of those major averages. more "squawk on the street" is live from post nine when we come back.

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bailout . welcome back to "squawk on the street." companies in the uk and across the globe still trying to figure out what the uk's exit from the eu means for their businesses. sara eisen is in london and has a closer look. good morning, sara. >> good morning, david and jim. predictions for british growth are coming down, but the uncertainties for british business are certainly piling

up. here's just a taste of what a few sectors are worried about. take the airlines, easyjet, the carrier based here and british parent iag out with post-brexit profit warnings for 2016. not only is demand a concern with the airlines with the pound plunging making holidays for europe for brits more expensive but the uk could be locked out of the eu's open skies agreement which has been very beneficial for the british airlines. that could make it harder to launch new routes in europe and make it harder to set prices and add new regulations and potentially even tariffs. the drugmakers. so the big uk drugmakers, glaxo and astrazeneca have held up because they benefit from the weaker pound. do most of their business overseas. the biggest eu agency located in the uk is actually the eu's fda located here in london and there

are already growing calls to move that to another european city. opening up another world of uncertainty as to what it could mean for british drug approvals for pricing for getting it through the door and prioritizing british treatments and funding research, the list goes on and on. another sector we have to highlight these are some of the hardest hit stocks in the uk, the property stocks. anything tied to commercial real estate, especially if there's exposure to london. foxens, a local broker putting out a warning, all these sectors of these stocks have been hammered. british land, great portland real estate, a lot of speculation, guys, that there's going to be a fallout in real estate prices and demand as london and the uk, is a less competitive place to do business. without the eu passport, without the access to the open market, there's a question as to whether companies will expand here, especially financial services and the banks which could hit

the property stocks hard. giving you a little snapshot of what different industries are dealing with, how much of a mess this will be to sort out for the authorities and not even a british prime minister right now to do it or even lay out a timetable. add it up and, of course, you have businesses pausing on hiring and investment and that's weighing on the markets. >> thank you. sara eisen, going to the jim cramer school of sleep deprivation i would point out. >> david, rbs, gave out 110 million in pound bonuses last year, lloyds 369 million pound bonus, so there you got about a -- i would say -- the equivalent of the hamptons going to be hard hit. the property there, i'm not going into barclays but the bonuses are the ones that have propped up the property market. and i think it's important to point out that the equivalent of wall street there is one of the reasons why a four-bedroom flat would be worth -- in brooklyn is

worth one half of what one is in london. >> right. this gets back to our original discussion about the banks and their balance sheets. if you see a significant correction in the real estate market and real recession you have to start to wonder and take a look at some of the real estate assets on the bank balance sheets and some of the sell-off will be justified. we'll. >> we haven't talked 10-year. the 10-year is now -- it's hard for their banks to make money. our 10-year is back to 1.46, frankly people thought that the big trade here once again is gold. no one seems to care gold has been red hot. my favorite rand gold so strong. >> we're going to get more from you in a second. the mad dash coming up because we count down to the opening bell. futures. more "squawk on the street" straight ahead. .

all right. we got about let's call it seven minutes before the opening bell here, of course, for an important trading day on this monday. we want to get to some other news and not a lot of deals. m&a by the way you may see it stuck in a holding pattern given the volatility and uncertainty. but a deal this morning. >> medtronic bought hardware. why i like to point out medtronic, they did the inversion, so it's just a home run for them. look, this is a good little company, 1.1 billion, medtronic has used the inversion to build a powerhouse that is almost unasailable. it's such an unfair thing. >> and the ability to use their cash they generate, it makes things easier and makes it harder for their competitors. interesting on this particular deal, and again it's about a

billion dollars we're talking about, 1.1 billion, $58 a share in cash, 93% premium. >> hudson capital run by a couple of my friends, doug bronstein. >> congratulations. >> they stopped them from doing a deal to buy something and it's a win for hudson. >> was this company up for sale and we didn't know it? it wasn't doing well. >> a belief that yeah, once you had the other deal, in the sector. >> st. jude -- >> thank you. >> this had a follow through and you saw it, so a win for them. >> it is amazing, david, we sit back and think the inversion thing is over but the ones that got through the door, they can just pick and choose. >> that, you know, is the point i think we've tried to make, which is especially with jack lew on our air earlier. >> >> pointing at pfizer and allergen, killing that deal, but setting up a lot of other challenges. for u.s. companies in terms of what they can do at foreign

subsidiaries and use their cash and drawing that wall and making it higher when you're already inverted. >> right and your competitors haven't. >> medtronic did well. they were very smart and figured it out ahead of others. >> with the ka individual yan deal. >> a huge deal. fabulous for them. >> we will talk more about the markets, credit markets and we have a little more on viacom and williams ete all coming your way after this.

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you're watching cnbc "squawk on the street" live from the financial capital of the world where the opening bell will be ringing in about a minute and a half when carl is absent, i turn to you, my old friend, and say, what is the key to this market? >> okay. we're going to say the key to this market is jpmorgan. we really want to see that stock hold. because that's the one that is most impacted in london. now some people could say there's others, but it's the most visible.

the one people might sell and i would caution them. jamie diamond bought the stock at 54, called the bottom correctly, he wasn't trying to do that, that's an interesting opportunity if we report back to that level. when the smoke clears i would begin to say jpmorgan is a winner. >> in an environment we're talking about about 1.5% yields on the 10-year no net interest margin everyone has been hoping for for the banks. >> i meant a longer term winner in terms of share take from entrenched and now retrenching credit suisse, deutsche bank. you go head to head and hit them a lot on deals, you know, if they have to pull back, barclays has to pull back, jpmorgan is the natural. now if there's no deals it won't matter. >> right. >> that's very long term and jamie is not going to give you that. >> no. capital -- whoa. all right. very early ring on the bell there. cardinal dough lan, i don't

think he's going to get booed. >> that would be an ill-advised move. >> we are going to start trading in about 12 seconds. that was cardinal dolan at the big board. catholic charities and cardinal timothy dolan from new york ringing the bell. at the nasdaq -- >> discovery communications. celebrating shark week. by the way, discovery, jim, we've seen that stock, some of these companies that have large international exposure, actually a perfect place for us to start as stocks open, you can see we are looking lower although off the lows of the morning. discovery, by the way, liberty global, anybody looking at that, which is focused in europe and the uk, they have been crushed. discovery was down substantially the other day. the strategy has been, of course, to be more than 50% international is being a key but hurts on the other side. look at that stock. >> people exaggerating the moves

like you wouldn't believe. the british group et, vodafone getting killed. might be opportunities when the smoke clears. wilfred e-mailing me, reminding me on the british weakness yield curve move we've covered that, loss of market share, i say that's a jpmorgan thing. i want jpmorgan to say it. i don't want to put words in jamie's mouth but a lot of things that are just say opportunistic away from the banks that will happen. i'm not recommending an etf out of europe but i will. if it keeps up. >> yeah. >> i will. because the times we had this before, people looked the other way and say it's too dangerous. major opportunities in some of the etfs. shortly. our country, i wish i had more stocks that were of companies doing well. we were going into a period of weakness why the fed didn't raise. don't have a lot to recommend. >> we started off showing you discovery, down substantially given its large international

exposure. vodafone, a champion of the uk market, liberty global i mentioned if you take a look at that you will see it has suffered. these are all, by the way, with substantial u.s.-based investment bases. >> right. >> certainly discovery and vodafone and liberty global controlled by john malone. >> by the way, back to the bigger question, jim, which derives from the stronger dollar, and by the way the chinese yuan hit its lowest level since 2010 -- >> yeah. >> what is the impact on our multinationals and we've gone through some of the names, is it going to continue to be significant? do you have to take a closer look? any of these companies that derive let's call it 40, 50, more percentage? >> hp. >> facebook is another. google. >> yeah. what we were looking at year over year we had felt that they would no longer have to caveat their numbers. >> right. >> we're leaded back to the region where they will. they do annualize at a certain

point, but roughly -- people at home can watch it through the fxe. we're back to 107. we were looking at 11, 112. ibf, it's going to be have to be when you read the quarters say once again, at a certain point we will rebel against it and simply going to say this is the new normal. that's one of the terms i hear these bond guys use. it always seems repulsive but i will go for it. >> i don't know what that -- >> what i'm saying you're going to end up having to cut numbers again based on this. it's technology. that's one of the reasons i'm struggling to recommend really great technology companies is they move so aggressively into europe. >> yeah. >> but look we get a haircut. i don't think we're going back to the 15,000 level we had in february because david, that was credit. once again, i want to say, that the banks over there, the credit market is right. rbs, by the way, called the preferred a few weeks ago. how brilliant was that.

they called it preferred. a lot of the european bank preferreds are noncumulativnonc. that helps them. it wasn't like these guys weren't completely up aware that they're hobbled. lloyd's bank by the way the government has been selling selling selling. they didn't get hurt on that one. royal bank they got hung. everyone has gotten hung by royal. anyone that hasn't been hung by royal bank? >> that company should have been put out of its misery. that deal i'll never forget that, one of the largest deals of all time done and it was basically a writeoff from day one of a -- >> of a bank anhime, bridged too far, good movie. >> it was. >> unfortunate situation. that was montgomery, he tried to take germany too soon. they weren't ready. >> also makes me think of the bridge over the river, different star, alec guinness. >> david, that was real acting. >> that was. hope the bridge doesn't blow. >> no. look, yes.

can i say i'm absolutely certain, by the way, there will come a time when we will sit here and buy u.s., but what's going to have to happen first, david. >> what? >> i should have mentioned this. didn't ask me about the key to the market away from stocks. >> what has to happen? >> you're going to want to buy things. >> want to buy. >> want to buy mckessen, i'm sorry mccormick this week, conagra, general mills reports this week. if we see oil up every one will be a buy as insane as that is. oil going up is going to turn the table. >> some of the same themes we were discussing on friday in play. at&t is up, of course. >> i love that stock here. >> dividend yield about 4.6%. >> versus the 10-year. >> 10-year yield of 3% -- 300 basis points less. >> did you see your bill this month? >> i try not to look. >> i have a verizon bill that is always -- >> it's exceeding my tax bill. >> it's bad. verizon by the way which has been a very strong performer

this year. >> that's a great stock to own. >> little over 4%, is down ever so slightly. >> these are the stocks you've talked about that will hang in there and certainly in this environment. decent yield, not a lot of international exposure. not the case of verizon or by the way our own parent company comcast very, very little. >> where you want to look at, look, some companies are just -- the stocks -- they won't stop going down. easicy easyjet an airline company reported a tremendous shortfall. once again, america is going to be punished because they have 29% is overseas. it doesn't stop with the airlines. and, of course, it's always a great irony. ever been on a plane where they didn't say this is an extremely full flight and you will have to put your bags in some place you're never going to get them. >> not in recent memory. >> i've been -- >> they overbook everything. >> everything. >> i was on a full disgusting flight during the super bowl game where there was no wi-fi. >> we've heard. >> that's --

>> go go didn't work. >> it's via sat that can give it to you for the record. i'm seeing some american companies, pure american companies, holding well. that's what i've been waiting for. the home desk spot, the home depot, up from 15 points from where it was february low. if you want to gauge february lows where we are, we still have more to fall. i continue to believe as you taught me february lows were related to credit. credit crisis in this country that was averted not because of deutsche bank which was hard hit during that period. >> a new filing in the ongoing war between viacom's board of directors and its controlling shareholder sumner red stone and his daughter sherry red stone who control national amusements which controls the stakes that control cbs and viacom. the new filing this morning in a massachusetts court, which may be sort of the key focus for us, at this point given what we heard from delaware last week, explains how the family

controlled the trust, skips sumner's children, has from george abrams long-time trustee talking about what sumner red stone wanted why he put the trust together in the way he did, it also goes into more detail about their charges of undue influence, they think they're germane and can be proved and need to be proved in massachusetts. that being undue influence that mr. red stone is under from his daughter sherri they say is controlling his life in every facet and also talking about why it should remain in massachusetts if you recall, the red stone camp is looking to move that case, that probate case from massachusetts to california, where mr. red stone resides. all of this, of course, coming down to the fight from one side trying to get, i would say, a mental competency test for mr. red stone and the other saying that is not part of what we're doing here. i continue to wonder when and if they will ever get to a settlement. we have to keep an eye on viacom, shares down about 2%

after a nice rally. this could go on for a while longer but i would direct people to the latest filing if you're interested in the blow by blow in that massachusetts probate court. >> that run to 44, david, that's the kind of enough run i hate. we were there was never anybody that was going to buy them. the cbs so-called merger talks. never got there. >> there's no -- first of all it is early days and nothing is going to happen until this is resolved and until the new directors that they -- national amusement has elected to the board take their seats and the new ceo whether interim or not is put in, then we can start to revisit or talk about the idea of will they try to put cbs and viacom back together. does that make sense. some say yes, some say no. and what else conceivably could come up. there's not an expectation, jim, you're going to see a buyer for either one of those assets other than them being together. >> i'm glad you put that out there. >> you have the paramount deal, which i've reported people close to viacom tell me is an enormous

price for paramount that would put a -- a new number on the overall valuation that would be very significant for the studio and, therefore, for the underlying stock price of viacom but it's unclear whether we're going to get to the point where we're going to get that deal done jim. >> can i throw calm on people. >> please. >> i go back and forth with wilfred. i don't know, like his work. sara too. and, you know, we're just talking about the mass amount of lik liquidity that is ready. liquidity is code for they're not a bunch of idiots. what's happened is there is total chaos in government. we don't know who's running the government. where is alexander hey who is in charge here. we don't know who's in charge of the conservatives. you mentioned wasted how much time? >> about 35 minutes on reading about jeremy corbyn head of the labor party potentially going to be out. >> in a vacuum of leadership without anyone to come forward and the exchecker, carney not saying anything i mean mark

carney must stop being art carney. he has to come out and say listen, this is ridiculous, look at the way these banks are set up. they gave the press interviews but mostly to print. david, the days when that is of the record, sorry. >> you heard it. mr. carney -- >> come on. >> we miss art carney. >> he was so good. >> very good. >> away we go, david. >> and we do. let's go with that to bob pisan the weakest part over there and the banks are the weakest part of our market. >> it's alarming the financials continuing to drop including the insurance companies. show you what europe is doing. we're down about 1% in the u.s. but europe, mostly 2%, declines across the board right now, look at the fats ftse, germany, spai. the elections in spain did favor the two largest parties there. no big gains for the left there. a little bit of good news on

their part there. you see everything is down essentially 2% here. i want to point out it's very unusual to have these enormous drops in europe and not any kind of drops here. minor drops. so look at the vgk, essentially europe, the vanguard europe index, down about 13% this month. mostly in the last couple days, the s&p down 2.5%. this usually doesn't continue. eventually reversion to the mean once down the road, european stocks come up and the debate over the weekend this is a fundamental break of some kind this brexit where european stocks will dramatically underperform big cap versus u.s. big caps. this is the big debate going on right now. here in the u.s., financials, notably weaker than the rest of the market. even materials energies and industrial stocks weak here. remember the dollar index is about 3% since the brexit on thursday night, oil is down another 1.5% or so here. energy industrials and materials all somewhat dollar related

moving to the downside. utilities and telecom a little bit better here. everybody talking as we were with david the big drop in european stocks but u.s. bank stocks aren't doing much better. look at the money center like jpmorgan, citi and bank of america. the odd thing the second set of stress results should be out later in the week and they should give some solace, the word is they're going to do very well, but they're not trading like they are for certainly, and it doesn't matter whether you have exposure to europe. look at citigroup, for example, citigroup has 10% revenue exposure to europe. it's mostly america and asia pacific two thirds in those areas, but doesn't seem to particularly matter. look at citigroup. citigroup is trading at two-thirds of its book value. put up citi here. it's probably $40 right now. book value for citi is about $60. right now. so we're talking about 0.7 book value. this has been going on for a long time but been getting even worse in the last few weeks as

you can see. citi is down 15% for the month. 25% year to date. so the double whammy, lower rates for longer on top of slow loan growth hurting these stocks. it doesn't matter, though. the odd part the regional banks here fifth third, pnc, all down as well about 11% for the month. life insurers lower for longer same story, met, lincoln, some of them domestic oriented. just the lower rates for longer. with the vix moving dramatically on friday some opportunities historically when you get big moves in the vix in the week after that, that's usually a fair -- with the vix up 40% since friday, six times since 2000 we've seen that, small moves in the big vix or big moves creates opportunities, the s&p usually up 1.6% in the following week according to our friends at kenshow. david, dow down 220 points. >> thank you very much. thank you very much.

>> strugglie ing panic case. struggling. >> i want to talk about a deal i followed closely that is now dead most likely in the dust bin of history. et's deal to once acquire williams in a chancery court on late friday the judge said no, you can get out of this deal ete the tax opinion you needed on that was part of the contract to be relied on that you needed from watkins which they were not willing to give in terms of them saying we feel confident this will be a tax-free transaction when you didn't get it, didn't feel comfortable giving it to you you're allowed out. and despite the protests to the contrary from williams and its lawyers saying this was all a rouse to get them out, the judge did not agree. and, in fact, neither side is covered in glory here. it would seem late from watkins in its testimony some of its lawyers didn't actually understand the transaction for a

while. until they finally figured something out. and then they said wait a second, we got a problem here. of course that problem which seems to be about the misallocation of asset value to purchase price, they did it incorrectly initially, saved kelsey warren the man that controls ete, boy did it save his you know what, they can get out now. williams shareholders will hold a vote today, hope they will appeal it to the delaware supreme court. don't look for anything to step in the way here. the question becomes okay, what about these two companies? both of which really are facing overleveraged balance sheets. in the case of ette, ormly wanted to do -- originally wanted to do the deal at that price and needed to do so to secure future cash flows to plug holes in what will be cash flows coming down as contracts roll off in 2017, '18 and '19 and finds itself in an interesting position here, some believe ete will have to cut its dividend,

williams may have to cut its dividend, it's not clear either one of these shareholder bases wins either way after this extraordinary and incredibly contentious fight that was won by ete. somewhat unexpected some would say because of latham watkins inability to deliver the opinion. >> they don't have to borrow that money and they're doing well. this is natural gas. natural gas is on the resurgence, very strong all year. had they not done this deal you would have said this is one of the better ones. it's possible not recommending the stock but entirely possible this is really good for ete and maybe even -- because they've got the right pipes. >> right. although even those pipes when talking about, for example, low cost pipelines out of the bakken that's not helping anybody. >> no. that's true. i'm looking at their natural gas pipe. >> okay. >> theoretically this would have been, had they not had to change -- lose probably lose the credit rating it would have been a good deal.

once you lose the credit rating you can't lose capital. >> i'm glad you raised that. important point. >> kelsey warren, this was deal too far and he got very lucky, i think. because i found that shocking. the latham -- will they be toasting each other they got it wrong? yes. we made a big mistake and we got our client out as a result. >> oh, my. >> apparently it wasn't due to any undue influence from mr. warren on them to do something different. we screwed up the first time. now we've revisited it, can't give you the opinion. >> lieic that the stock -- our stocks seem to have stopped going down versus what we saw in europe. europe is trying to make a turn. when europe stops closes you can actually -- actually have a little blip up. i'm not going to do more than that. i'm struggling to find things to buy other than utilities, some of the nondiscretionaries and the telcos. >> talk credit which is such an important component of the

market. rick santelli is at the cme group in chicago. rick? >> good morning, david. as everybody continues to try to rethink brexit, we're going to have carlos gutierrez on in a half hour and i'm not sure we're going to see a remorse vote or remorse feeling on the people that voted to leave. the remorse should be on the leaders that voted to stay who didn't have really very clear plans as to how they would handle it if it didn't go the way they thought and hence the marketss. october 1st, last time we were down here around halloween of last year, but the 30-year is the big deal today. it's down in yield over ten basis points we haven't been down at these levels well since we made the all-time low at 2.22. january of 2015. why are they going after the long end? it's the only area that has any goal when it comes to yield so think investors, let's look at bunds, traded as low as minus 17 friday not there but you can see

on the one-week chart not much of a bounce and we need to monitor the difference between the best credit in europe in terms of the bunds and everybody like us. ten minus bunds, check it out. we continue to see the difference is narrowing which means they're pulling us down in yield. why is this important? it is because the two is proactive. we're like in the 1.50s now, we're at 0, 0 in the summer of 2011. pound versus the dollar, 20-year chart we haven't been here since 1985. but the pound versus the our rose at levels -- our ross we were at is right around christmas of 2013. back to you. >> thank you very much, rick santelli. coming up, the brexit aftershock that has continued to hit u.s. markets this morning. a look, in fact, what we're talking about. as jim said we are at least showing a little bit of sus -- >> we shouldn't be down as much as europe. the uk was -- we were almost

down more than the uk on friday. >> we are at session lows. >> all right. >> secretary of treasury -- secretary of the treasury jack lew warning of global economic headwinds following the uk's decision to leave the eu. more from steve liesman's interview coming up. what are you doing? getting faster. huh? detecting threats faster, responding faster, recovering faster. when your security's built in not just bolted on, and you protect the data and not just the perimeter, you get faster. wow, speed kills. systems open to all, but closed to intruders. trusted by 8 of 10 of the world's largest banks.

- omg. you are so funny. in the time it took me to type that,

if i were driving 55 miles an hour, i'd have driven the length of a football field blindly. not funny at all. don't text and drive. the more you know. about 1.25%, we turn to stop trading for this morning. >> mcdonald's has been red hot. 3.5% growth, same-store sales. credit suisse takes that down to 2.5. this stock is dropping. now it is the save by yield perhaps at 3, but it looks like, david, that big move by eastern brook has been annualized. i believe him but the restaurant business is a challenged busine business. we will hear from darden thursday which is olive garden. the minimum wage now. >> food costs. >> on some. >> what's really -- look -- >> minimum wage the key.

>> everyone has to pay more. the margins are going to shrink here. i have all my favorite but what a reason -- all my faith but what a reason. >> the numbers now for the fast food chains have not bshs have been flat for a while in terms of it. >> yeah. >> if oil turns around we will be up. the vix is going down. a sign the s&p could follow. but it is oil. and i don't want to sugar coat this. oil going down again, and we're going to have a worse day than europe, a little insane. they have not seized. >> british pound 1.32. >> disarray. i mean -- >> 1.32 by a buck. >> don't forget mark carney, when he should stand up. >> okay. what do we have on mad tonight? >> this is just a classic case of one you would want to buy. you think things are okay. idexx labs. veterinary products, not unlike henry shine. i'm going to ask him about pet res cou cue.

a lot of pet of pets in rescue. probably the biggest use of veterinary drugs. people pay any amount of money for their animals and some of their animals have bankrupted people. >> also insurance you can get. >> insurance is wise. >> is it wise i didn't get it. >> you have a lot of pets. >> i do. this is a major -- real reclamation. we have rescue dogs and will do anything for them. my wife was talking about to our son about having a third dog and i'm knicksing it on air right now. >> it's hard. >> off the table. >> like -- >> three kids, not easy. >> all right. jim, see you right back here tomorrow. >> saw you last night, i will see you again. >> i hope so. i always anticipate we will be seeing each other again. you will be seeing a lot more of us as well because we've got coming up, a lot more "squawk on the street." here at the td ameritrade trader group, they work all the time. sup jj, working hard?

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we need to make sure that we have a beautiful place for our children to live. together, we're building a better california. good morning. welcome back to "squawk on the street." i'm simon hobbs with david faber, kelly evans and mike santoli at the new york stock

exchange. sara eisen and kayla tausche are with us from london and will join us shortly. let's take a look at where we are on the markets this hour. financials leading the dow down over 200 points again after friday's 600 point brexit fall. with the flight to safety the yield on the 10-year dips to 148. oil below $47. of course we're watching the uk banks rbs and barclays which have both lost around 30% of their value over the last two days. david cameron is going to speak in the house of commons in parliament within the next 30 minutes. we will bring that to you live. >> waiting on a possible decision out of the supreme court this morning, we'll bring that to you if and when it crosses. >> coming up, the former com mers secretary carlos gutierrez his take on what it means now that the uk has voted to leave the european union. fallout continues from that brexit vote on thursday. the analysis friday. let's head to london and sara eisen who joins us.

what is the mood there now, sara, with the prime minister about to speak? >> well, the weekend was dominated, simon, by political upheaval and everyone from the pubs to the streets to the taxi cabs are trying to figure out what this monumental decision britain made to leave the eu is going to mean for them. first we'll start with the anger. millennials in this country, overwhelmingly voted to stay inside the eu. while the older population came out with a greater turnout, and voted to leave. that has created a lot of conflict, something people are talking about here. have a look. >> i feel betrayed by the older generation not for the first time in my life and i do believe we have been taken out of our future and our futures jeopardized by an older generation who have not considered what the younger generation wants. >> we remember what it was like before, you see, and the younger

generation don't. >> we encountered nervous business owners that depend on european products preparing to higher products and may have to pass that on to the consumers. have a look at a spanish restaurant manager who is very much afraid. listen to him. >> we get all our ingredients for the pie yell la from spain, so our supplier is like a spanish company. we cget the duck meat from the southwest of france. everything we import, i'm sure is going to get affected. >> not everyone is worried about the economic and business impact of the vote. those who are celebrated and voted to leave are feeling good and nationalistic. have a look. >> i just think that we were an independent, strong independent

country. i think we can more than adequately survive on our own and we did for a long while before. i've never if i'm honest considered myself european, i'm not nationalistic but never considered myself european. >> and there was a developing thread over the weekend, a petition on the parliament website calling for a second referendum that's now reaching almost 4 million signatures which means it will be considered for a debate, but experts, including cameron's own spokesman, saying highly unlikely that there would be a re-run or second referendum. richard branson the ceo of virgin airlines has been tweeting out people should go and sign this. he's been railing against the way the vote went, as well as many other business leaders in london. so clearly, guys, the country is still dealing with the fallout. it's too soon to say whether there's buyers remorse on the part of the leave camp but clearly the 48% of british people who voted to stay in, many of them young and

many here in london, are very angry and they're trying to see if there's a second shot. back to you. >> yeah. maybe we'll get further clues when cameron speaks at half past 10:00. live from london thank you very much. to the markets down 231 points on the dow. so you've got another sell-off. second day of sell-offs in the wake of the brexit aftermath. even as moody's has announced, of course, it's cutting its outlook for the uk to negative. imf managing director christine he guard speaking at the aspen festival addressing the way to minimize the uncertainty ahead. take a listen. >> there is no precedent. there is no real history of how these things happen. so, certainly from our perspective as the imf, we have strongly encouraged and will continue to encourage the parties involved to actually proceed with this transition in

the most efficient, predictable way to reduce the level of uncertainty. >> joining us now is ann, whose credit strategy manager at moody's made the credit outlook negative move on friday. welcome to the program. for many people in this discussion, what the prime minister david cameron lays out at the bottom of the hour is crucial and his successor on frame where the uk goes. from your perspective looking at the data on the credit ratings how impactful is the timetable and the decisions that those politicians now make? >> right. so part of our move to a negative outlook on friday was really to get it two main risks we see now that we have an exit vote. one is around growth and the prospects for growth are a little bit less certain than they would be without an exit and the second is around trade. and the ability of the uk and

the eu to negotiate trade agreements that, again, kind of reserve -- preserve and restore those relationships that are there today that are so important to supporting growth. >> at the heart of what you do, of course, is to, in a sense i guess, grade how likely it is that people are going to get their money back if they invest in government paper and uk government paper. the irony here is, that as a result of the flight to safety, the price of those guilts as they call them, continue to rally and now you have a record low, a record borrowing rate for the uk government, below 1%. i guess in a sense, that would trump the very good academic work you might do? >> well, sure, the rally that we've seen is a sign of flight to quality to u.s. securities and the uk which remains very strong, our second highest rating and so we acknowledge the strong institutional and economic features that exist in

the financial performance of the uk which we think will continue. we're signaling a small diminishment in that quality that's still high quality over the medium interim period. we look at the quick market reactions to a medium term outlook on the country and saying growth will be lower, probably 1 percentage point lower than without an exit, and the trade agreements are really key to preserving that growth going forward. >> and you've also, i believe, affirmed your top rating on the european union's credit. how do the secondary effects play into that calculation? in other words, are you assuming that the rest of the eu is going to be stable in its membership? you're not going to have a lot of turmoil. what goes into that judgment? >> right. so the european union itself has a rating. this is at a very high institutional level and it speaks to adequacy and liquidity and member support. without the uk we have very strong membership among very

highly rated countries, germany, france and many others, that we think will continue to support the triple a for the medium term. >> just to kind of educate everybody at the table, that may be watching here, the -- when you say the uk, the eu sovereign rating, you're talking about a very tiny number of international institutions that might choose to borrow. this is not saying those 18 countries or those 28 countries in the case of the eu i see this from them overall. it's a tiny in a sense technical decision so everybody is on board here? >> it is. it does speaks to the institution itself. >> sure. >> and not the member countries. so we have separate ratings on each of the member countries, but together, their contributions and support to the european union itself as an institution create a lot of, you know, highest quality triple a quality credit strength for the eu itself. >> you've come back again through this interview to talk

about the importance of the trade deals. there's clearly a huge amount of political turmoil in the uk, the labour party is hoping it can push for a good nesh negotiation of those deals. is it possible if the leave campaign is correct and they have a few aces up their sleeves in those negotiations you could reverse this decision despite the fact that they might exit or not follow through on your decision because the trade deals they strike are actually better than people expect? is that a possibility? >> well, i don't think a reversal of the exit vote is very likely at this stage. it is possible and gshs -- that through negotiations of trade agreements they can preserve the agreements that they have today. of course that will be quite a long, drawn out process and it's not without some downside risks so there will be some tension, naturally, between the uk and eu and all of the eu members as they go through this process and

certainly the more efficient and the more predictable and timely that process is, will reduce some of the uncertainties that kind of -- >> okay. >> overshadow at this point the growth prospects for the country. >> forgive me for interrupting you. a decision from the supreme court. joining us from moody's. let's get to hampton with the abortion case. >> a huge win for the pro-choice planned parenthood from the supreme court in a 5-3 decision, the justices have overturned a texas law that put restrictions on access to abortions in terms of what the doctors standards had to be and clinic standards had to be in a 5-3 decision the supreme court has overturned that law. justi justice breyer writing for the majority. essentially what was at stake

here there were two texas laws regulating abortion in that state. one required doctors that perform abortions have privileges at admitting patients at a local hospital and higher standards for the clinics themselves. that is what the supreme court has overturned. there had generally been an expectation this could be one of those 4-4 ties in which the lower court ruling would have kept the texas law in place. but again, in a 5-3 decision the supreme court has overturned that texas law. we'll be back to you later on as we get into the opinion for more of the details as to how the court got there. back to you. >> still a very deeply divided country on the issue. hampton pearson at the supreme court thank you. coming up bank stocks under pressure again this morning. look at credit suisse. they are down nearly 10%. royal bank of scotland down 13%. we're live in london with what to keep an eye on. david cameron getting ready to speak. the prime minister who is stepping down we'll bring that

to you live when it happens. much more "squawk on the street" ahead. stay with us.

fears the uk may be about to go into a recession sitting banks stocks on both side of the atlantic. kayla tausche joining us now. good morning. >> good morning. there's a little bit more than an hour left to go in european trading and the worst of the bank stocks today have cut their losses in half but rbs, barclays, lloyds down more than

10% amid the fears you mentioned the uk could be going into recession according to goldman sachs by early 2017. there are earnings targets that have been dramatically reduced and then the calls that we could see a boe rate cut or further quantitative easing. it's not just about the banks or investors are fearing the worst about the balance sheets, it's skmg the fact that this has spread across all industries. the uk home builder index lost about a fourth of its value and it's hardly a banking issue when you think about the fact that the banks are lending to these companies, supporting a lot of this commercial and residential real estate building. people on the streets are looking at their bank accounts, mortgages, pensions and their pounds and seeing them decline in value and the worry now is that the psychology in the market could change and potentially the market could talk itself into a recession sooner than that. but while equity investors have

been selling on mass the credit story at least for now appears intact. people are talking about credit default swaps, the cost to ensure against a bank default on its debts for rbs and barclays. the two i want to show you, those are the equity names that have been selling off the mosts in today's markets and while we have seen a widening in the past week executives are cautious to say well, they're only widening to about 1.70 by comparison in financial crises of past, 600, 800, multiples of those levels. they're not worried yet. as we know from history that can turn quickly why investors and executives are watching them closely. look at the scale of what's come off the market cap of some of these banks, that's leading people to say, maybe there's more here than meets the eye. maybe there were losses that took place in the markets on friday, perhaps over the weekend. barclays is down 38% in just the last three days and there are

questions over what point banks will need to come out and publicly say either yes, we took a massive loss on a position we had on a market we were making for a client or no, we held up okay, we're doing okay and invited these executive on to talk to us about this but there's been a suggestion maybe one of the banks will have to take a goodwill or impairment charge on the fact that their equity value has come down so much. but guys we're only in day two of this. there's much more data that we need to know about what's going on behind the scenes in the market but for now, what we know is that the equity side of this story, is incredibly destructive for market confidence right now. we will see how we close and you will be all over that. i will send it back to you. >> thank you very much for that. kayla tausche joining us live from london. let's bring in a banking analyst, eric is u.s. banking analyst for s&p global market intelligence. eric, good morning to you. >> good morning. >> you know, i'm not talking about any particular banks here but in jen al warning from jpmorgan this morning that in

europe, you should be aware of investment banks at this stage because we've been through this before and as they point out you don't know what the counterparty risk or liquidity risk or sudden market gap in risk might be. not to say there's any problem out there, but having been through what we've been through, inevitably you end up asking those questions. i wonder if you could help us with that and put any color on it? >> sure. what i would say is that a lot of the attention is being focused on the united kingdom but let's look at the rest of the european union. what is left if brexit goes through and the next time that one of the weaker members needs to recapitalize its banking system there will be 15% smaller european union. and then that would cause a lot of risk for the large global banks. so that's one thing that we have our eyes on. >> it's pretty shocking to look at sell-off levels we're seeing. what do you think is priced in here with the banks trading as

low and as weak as they are? >> well, if we look at the multiples that we had in the summer of 2011 and 2012, we're approaching those levels. like citigroup trading 8 times forward of the larger banks about 9 times forward so those are getting to be floor multiples. then again we don't know what earnings will be. there are some positives, some negatives. the negatives are that interest rates will likely stay lower for longer. earnings will have to come down. there might be some offsetting positives. for example, u.s. banks will likely see a mortgage refinancing boom because of the lower interest rates and we still have a strong housing market and the largest capital market banks will likely see higher trading activity. net net it will be some earnings revisions downwards. we're seeing floor multiples right now. >> eric be the largest u.s. money center banks run their

operations out of london, principally, correct? is there any talk there's going to be large institutional upheaval within the banks? >> no. i think that would take years. there might be some shifting of operations towards frankfurt, but they've made a large investment in their london operations and anything that would happen would probably take place over five years. i'm not that concerned about it. >> we do get stress tests in this country i think i'm right in saying on wednesday of this week. presumably, with these banks as we can see under some pressure, that's the point at which you're going to get a lot of people talking about how strong the balance sheet is, maybe that's when a lot of these ceos are able to come out and public -- comment publicly to the effect that kayla tausche was suggesting they might do when she joined us from london, eric? >> sure. as we saw last week, the first part of the stress tests came out which was the quantitative part. on wednesday night we get the qualitative part which is where the fed approves or disapproves

their capital plans for raising dividends or share buyback plans. we have some pretty high expectations that some of the banks that have had low dividends for a while, like bank of america, and citi group may raise their dividends from 5 cents to 10 cents. any of that would be a positive. the largest banks did surprisingly well last week in the quantitative part of their stress tests. >> sure. >> the banks that didn't do as well were the regional banks because they faced the negative interest rate scenario. >> where do you think there's value for investors here? given that the situation is relatively fluid, and we don't yet know how central banks will respond to the interest rate argument where do you think people should put their money if they're not already committed? >> we think select bank stocks like jpmorgan, wells fargo, u.s. bank corp, pnc, are still attractive.

these are some of the best and strongest banks in the world. we recognize the headwinds for low interest rates and what remains of the eu post-uk, but we look at some of the positives with mortgage refinancing stress tests and higher trading volumes and valuation and see some value with these names. >> thank you for helping us out this morning with that analysis. it's good to see you. eric joining us from s&p. >> thank you. coming up, jack lew speaks out. we hear from the treasure secretary on what headwinds he sees ahead for the economy. more "squawk on the street" is next. years ago, i was starring in a one-woman show about a cat allergic to other cats. opening-slash-closing night it hit me: hats for cats. everyone said i was crazy. when i went online. i got my domain, catswithhats.com from godaddy.

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welcome back. treasure secretary jack lew speaking out this morning, sitting down with our own steve liesman who joins us now. >> thanks very much. the treasure secretary's first comments since the brexit vote. public publicly. what he said he is looking for leaders to reassure markets and the world when it comes to issue of confidence and that they are going to be handling this

departure of britain from the european union. he said it would create headwinds for the united states but also that so far, trade in financial markets as it prices in the change has been orderly. >> the u.s. economy is doing pretty well. it's performing in a stable, steady way, even though there have been substantial headwinds, it's something we can manage through and europe and the uk can manage through. you've seen policymakers act in a very responsible way in the days leading up to and through the vote. there's no sense of a financial crisis developing. >> now, there's a major issue developing between the united states and the uk when it comes to trade. the u.s. is currently negotiating a trade deal with europe, and before the vote, president obama said in that case, the uk would have to get, quote, in the back of the queue and i asked jack lew the treasure secretary if that was still law. >> we have been negotiating a

trade agreement with europe for a number of years now. that negotiation is ongoing and it will continue. any separate negotiation with the uk will have to take a course that is n part, determined by what happens between the uk and the eu. >> translation, it's still true that uk would come before the u.s./eu trade deal. that's my interpretation anyway. one other note, kelly, fed chair janet yellen will not be speaking wednesday at a much anticipated meeting of central bankers in portugal. that event has been canceled. kelly? >> yeah. neither her nor the bank of england, mark carney, i think, so reluctant to speak out right now. thank you so much, steve, speaking with treasure secretary jack lew this morning. >> we are going to slot in a commercial break and be back with david cameron who will take questions once defense questions have finished. stay with us.

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the dollar extending losses, down 300 points give or take as you can see. we lost 611 on friday on concerns about what is happening in the uk. uk prime minister david cameron is going to make a statement very, very shortly to parliament in the house of commons. this is really very critical because it is the succession within the conservative party that will shape the way in which they now handle this crisis and that in itself has implications for the market, in terms of the timing of any negotiations, and, of course, as some people would like it to be, maybe a little bit of a walk back on where we are at the moment. that is not the central assumption. >> take her seat. >> they're now just -- the speaker getting everybody in order ready for the prime minister to make his statement and it was defense questions. that may be the introduction of a new member of parliament. >> i'm glad you know more about this process. it's foreign but suddenly important to everybody globally in the markets who lost $2

trillion in wealth on friday. the biggest number we've seen. >> absolutely. absolutely. also a desire to shore up both the finance minister and bank of england and any efforts they may have to go through over the coming days. finance minister osbourne make a statement today and even the leave campaign coming through praising both of the key players. wilfred is watching this the london. wilfred, it goes without saying this is a key statement. >> absolutely right. simon, i think there's two main things to watch out for. the first one is does he maintain his position that, of course, he will keep in his post through the summer and, in fact, we heard from the conservative party headquarters they said the new prime minister would be in place by early september. so small possibility that we'll get some indication that it could be sooner than that. that basically what is we go on. i'm sure the prime minister will confirm that. of course we know that it is unto the uk, not the eu, when

negotiations begin and that's not going to begin until a new prime minister is in place. we expect the current prime minister david cameron to confirm that will happen not before september. we are waiting, i'm looking down for his speech to begin. it hasn't quite begun. the other key thing to focus on is the reaction from the other mps, members of parliament. >> i think -- forgive me -- >> we're ready to take it. >> let's listen to david cameron. >> with permission mr. speaker i would like to make a statement on the result of the eu referendum. last week saw one of the big democratic exercises in our history with 33 million from england, scotland, wales, northern ireland and i go brawl ta having their said. we should be proud of our parliamentary democracy but it is right when we consider questions of this magnitude we don't just leave it to politicians but listen to the people. that is why members from across this house voted for a referendum by a margin of almost 6 to 1. when i talk about this house let me welcome the new member for

her place. i think i would advice her to keep her mobile phone on. she might be in the shadow cabinet by the end of the day. and i thought i was having a bad day. mr. speaker, let me set out for the house what this vote means. the steps we're taking immediately to stabilize the uk economy, the proprietary work for negotiation to leave the eu, plans for fully engaging the involved administrations and the next steps at tomorrow's european council. the british people have voted to leave the european union, not the result i wanted or the outcome i believe that is best for the country i love. no doubt about the result. i don't take back what i said about the risks.

it giz tock difficult. we've seen there are going to be adjustments within our economy. complex, constitutional issues and challenging new negotiation to undertake with europe. but i am clear and the cabinet agreed this morning that decision must be accepted and the process of implementing the decision in the best possible way must now begin. at the same time mr. speaker we have a fundamental responsibility to bring our country together. in the past few days we've seen despicable graffiti on a polish community center, verbal abuse hurled against individuals because they're members of ethnic minorities. these people have come here and made a wonderful contribution to our country. we will not stand for hate crime or these kinds of attacks. they must be stamped out. we can reassure european citizens living here and brits in european countries there will be no immediate changes in their starngss. neither will there be any

initial change in the way our people can travel, our good cans move or the way our services can be sold. the deal we negotiated at the european council in february will now be discarded and a new negotiation to leave the eu will begin under a new prime minister. turning to our economy, it's clear that markets are volatile, some companies considering their investments and we know this is going to be far from plain sailing. however, we should take confidence from the fact that britain is ready to confront what the future holds for us from a position of strength. as a result of our long-term plan we have today one of the strongest major advanced economies in the world. >> here here. >> we are -- we are well placed to face the challenges ahead. we have low stable inflation, the employment rate remains the highest it's ever been, the budget deficit is down from 11% of national income, forecast to be below 3% this year. the financial system is also substantially more resilient

than it was six years ago. capital requirements for the largest banks now ten times higher than before the banking crisis. the markets may not have been expecting the referendum result but as the chancellor set out this morning the treasury, bank of england and other financial authorities have spent the last few months putting in place robust contin yensy plans. as the governor of the bank of england said on friday the bank stress tests have shown uk institutions have enough capital and liquidity reserves to withstand a scenario more severe than the country currently faces and the bank can make available 250 billion of additional funds if it needs to support banks and markets. in the coming days the treasury, bank of england and financial conduct authority will continue to be in very close contact, they have contingency plans in place to maintain financial stability and they will not hesitate to take further measures if required. turning to preparations for negotiating our exit from the eu, the cabinet met this morning

and agreed the creation of a new eu unit in whitehall will bring together officials and policy expertise from across the cabinet office, treasury, foreign office and business departments. clearly this will be the most complex and most important task that the british civil service has undertaken in decades. so the new unit will sit at the heart of government and be led and staffed by the best and brightests from across our civil service. it will report to the cabinet on delivering the outcome of the ref ren dum, advising on transitional issues and exploring objectively options for our future relationships with europe and the rest of the world from outside the eu. and it will be responsible for ensure the new prime minister has the best possible advice from the moment of their arrival. mr. speaker, i know that colleagues on all sides of the house will want to contribute to how we prepare and execute the new negotiation to leave the eu. am i right on offering the chancellor of lancaster will listen to all views and make sure they are all put into this

exercise. he will be playing no part in the leadership election. turning to the administrations, we must ensure that interests of all parts of our united kingdom are protected and advanced so as we prepare for a new negotiation with the european union, we will fully involve the scottish welsh and northern ireland governments. we will also consult gee brawl ta, the overseas territories and all regional centers of power including the london assembly. i've spoken to the first ministers of scotland and wales and the first and deputy first minister in northern ireland and our officials will be working intensively together over the coming weeks to bring our devolved administrations into the process for determining the decisions that need to be taken. mr. speaker, while all of the key decisions will have to wait for the arrival of the new prime minister there is a lot of work that can be started now. for instance, the british and irish governments begin meeting this week to work through the challenges relating to the common border area. mr. speaker, tomorrow i'll attend the european council.

in the last few days i've spoken to chance lor merkel, president hollande and a number of other european leaders and discussed the need to prepare for the negotiations, and in particular, the fact that the british government will not be triggering article 50 at this stage. before we do that, we need to determine the kind of relationship we want with the eu. and that is rightly something for the next prime minister and their cabinet to decide. i've made this point to the presidents of the european council and the european commission and i'll make this clear again at the european council tomorrow, mr. speaker this is our sovereign decision and it will be for britain and britain alone to take. tomorrow is also an opportunity to make this point. britain is leaving the european union but we must not turn our back on europe or on the rest of the world. the nature of the relationship we secure with the eu will be determined by the next government but i think everyone has agreed we will want the strongest possible economic links with our european neighbors as well as with our close friends in north america,

the commonwealth and important partners like india and china. i'm also sure that whatever the precise nature of our future relationship we will want to continue with a great deal of our extensive security cooperation and to do all we can to influence decisions that will affect the prosperity and safety of our people here at home. mr. speaker, this negotiation will require strong, determined and committed leadership. and as i've said think i think the country requires a new prime minister and cabinet to take it in this direction. this is not a decision i've taken lightly but i'm convinced it's in the national interest. although leaving the eu is not the path i recommended i am the first to praise our incredible strengths as a country. as we proceed with implementing this decision and facing the challenges that it will undoubtedly bring, i believe we should hold fast to a vision of britain that wants to be respected abroad, tolerant at home, engaged in the world, and working with our international partners to advance the prosperity and security of our fashion for generations to come.

i have fought for these things every day of my political life. i will continue to do so and i commend this statement to the house. >> here here! >> so the uk prime minister in a live televised address to parliament there really righting the ship, life is not that easy moving forward but a message of stability and, of course, a process that article 50 of leaving the european union will not be triggered now. it will be under a new prime minister as they work their way towards what type of negotiation the uk would like. of course sara, wilfred, are in london listening to that. sara, what did you make of the speech? >> well, i think it's important to frame the context that we're coming out of a weekend, simon, where britain has felt leaderless since david cameron announced he was stepping down last week as a result of the referendum vote going not in his way. there's been political upheaval, both the opposition party,

shadow ministers resigning, something cameron made a joke of when he came on. he was coming here to sort of bring the country together and make it clear that there's still someone in charge and also, coming here to make it clear that he has britain's best interest in mind and he understands and accepts the results of the referendum when he travels to brussels to confront the 27 members of the eu tomorrow. also reiterating that article 50 as you mentioned will not be invoked which is, obviously, a critical question for the markets because it starts the clock on what is the two-year period or less of negotiations of the exit out of the eu. the only other interesting point that stood out to me was, that on immigration, the sort of anti-immigrant sentiment we've seen or has been reported across britain, he called for an end to that and end to the hate crimes which as you know, was a key factor attributed to the leave camp that there was this dissatisfaction with the more than 300,000 migrants from

mostly eu countries last year the fact that's a growing and record number and that britons are feeling more -- the british people are feeling more insecure about that. he addressed that, thought that was important as well. >> wilfred, to come back importantly to this timing over the weekend we had some of the foreign ministers of the founding members of the european union and the head of the european parliament suggesting britain should move rapidly in order to exit and declare article 50 active. he appears now to have won some ground here alongside angela mercking in slowing this process down and making it perhaps more considereded. i'm assuming there is a silver lining for markets? >> well, i think so, simon. as you rightly say, he hasn't invoked article 50 and made it clear, i don't think it was a case of making ground with angela merkel, this is britain's sovereign decision alone to make and he had informed the likes of angela merkel he doesn't plan to

invoke article 50 yet and will tell the european commission that tomorrow as you said at the top and sara said as well. this is for the new prime minister to invoke. he said there's work that could get done between now and then. two other key points from the speech we haven't mentioned yet. this was not the result i wanted nor the outcome i think is best for the country i love, but here's the important bit, a decision that must be accepted and implementation must now begin. so all of those questions of whether we would see a second referendum, this could be overturned he certainly pouring cold water on that at the moment. the other point, he's reiterate while this wasn't the outcome he wanted and there are negative implication, mentioned the word volatility, britain approaches this from a position of strength. he says the financial system substantially more than six years ago, six years when he came to office, said there were robust contin yensy plans in place and the bank stress tests show they can stand up to scenarios more severe than the

current one they face. those are the key points he's echoing. we focus now on this trip to brussels tomorrow. >> and, indeed, who might succeed him on what they will say about the referendum. wilfred, sara, we'll leave it there for now. thank you. when we return former commerce secretary carlos gutierrez, his take on trade relations with this country and the uk

. did the brexit push the hand of janet yellen. find out on trading nation.cnbc.com. more "squawk on the street" coming your way.

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national, diverse group of financials off between 6 and 7% in early trading. some hitting 52-week lows in trading so far today. financials are the most heavily weighted sector or second most in the s&p 500 down the most, though, so far this year. off by about 10%. kelly, as we look overall at the markets as they stand, only utilities right now and, of course, those other ones out there that are more defensive in nature, positive on the day. back over to you guys. >> all right. dom, thank you. to the markets now, all the major indexes continuing to struggle this morning from the fallout from that british vote to leave the european union. with us now scott hanson, the co-founder and ceo, barron's top 100 wealth adviser and brian jacobson chief portfolio strategist at wells fargo funds. scott, i'll ask you the question being asked of us, dow down 900 points since this vote. what are individual investors expected to do here? >> i think some are getting a little nervous right now. we see a pull back.

for many this should be a wake-up call. look over time we have some serious pullbacks. for the last 50 years we had eight times where the market fell more than 20%. we haven't had a major pullback in a while. a lot of investors need to get ready. >> but a lot of us need to get ready. >> what does that mean? there's a difference in professional investors and getting them ready and people sitting at home that have a 401 k and companies to invest in. are they go to look at this lock term? >> well, most people come to financial advisers not to get rich but to avoid of getting poor. i think that people have to look at do you have the right kind of of balance in the portfolio. since the crisis, we have saw people get conservative and we have more and more clients saying should we get aggressive. should we get aggressive? it's a tough time to stay

broadly diversified. how much do i have out here and how much do i have in foreign markets and how much of the portfolio is safe? >> that raises the question of people looking at stocks and ten it's under one and a half percent. it's hard to find people that find it comfortable to buy the bonds. what do you recommend bryan? >> well, for those that don't want to buy it, you have to sort of bite the bullet and do it at the points and understanding that inflation is lower than what it has been. there's a savings that's in existence and don't expect they're going to go higher. it does not mean that all others are yielding as little as what that is. you can find the good opportunities in the high yield

strategies that are up there. you can beat the inflation by a handy margin. that's where the investors should be looking. if we're looking at the uk and there's a slow down and it's not enough to push the united states into a recession. as a result, there should not be acredited events and there's a strong argument for a high yield strategy here. >> and scott, just quickly where does that leave with with you aquaty. it's acting as a haven right now. >> well, it sneeds to come to the long term portion of the dollar. there's a capital need and then five years and whether it's cause of education ask and those dollars should not be allocated. for the long term investors, it's a great opportunity. it's the uncertain youties that investors do not like. who knows what is coming next. it's fearful and what is it? it's the fall back. >> we will see what people do

here. scott and buy i don't know, thank you so much. coming up we will keep an eye on the markets. that's a session low and squawk on the street right back. the first stock index ♪ (musicwas createdughout) over 100 years ago as a benchmark for average. yet many people still build portfolios with strategies that just track the benchmarks. but investing isn't about achieving average. it's about achieving goals. and invesco believes doing that today requires the art and expertise of high-conviction investing.

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now let's get out to chicago and then the santelle exchange. >> welcome the special guest and secretary of commerce 2005 to 2009. secretary, thank you for taking the time. >> pleasure, rick. thanks for having me. thank you. >> listen, i know that we can talk about brexit. it's been done. what i want to talk about is more the fact that you're the youngest ceo at kellogg in 1999. when it comes to brexit and cameron and george osborne and all of the leader and burr crates of london, why did they not have a plan b if the plan was to leave? seems like they were making it up wrong. would you have had a huge company decision with a forethought on the way to surprise you? would you have done more homewo

homework? >> yeah, i agree with you. now there are talks that there's second talks and wanting to wait longer to submit the article 15 notification and, you know, it's a bit crazy because the one thing that's certain here is that the uk economy is going to go into a dive. it's going to happen very quickly. i think other countries around the world are going to be watching it. on one hand it's an emotional decision and the economic ramifications and i don't think that they fully thought that through. >> i can't disagree with that and i they it's a leadership question. in terms of the market and then taking the hits that it has, we're all of a sudden in the either never land and working on new agreements. it makes sense, but from the standpoint of where the markets

are going, mr. secretary there's very little doubt in anybody's mind that many of the policies that were rejected were kind of like held lee yum. >> yeah, what we have to recognize is that the european union has been growing every since the formation, and it's becoming a monster. there are hundreds and hundreds of legislatures in brussels, and what do legislatures do? they legislate. the amount of regulations and new rules coming out every single day in europe makes it stifling for them to do business. if there's a lesson beyond the uk if it does leave europe is what are they going to do to avoid this. it's going to continue to happen. it's an over reach and they need

to pull back a little bit and see europe as a commercial probl project and not continue down the path of a lit cal project. it's populating the spears. >> absolute willy mr. secretary. i could not agree more. let's cut a little bit deeper here. most likely there's going to be rumbling if it's the dutch and french and the italians and those that let them out in terms of brussels is going make a difference of who comes and approximate goes. in the final analysis we need to frame this as an issue that the uk is paying a price for a difficult decision. if they would have stayed on the same road, it does not mean that the intersection is out there in the future. your final thought. >> yeah, they have to get through the next two to three years. they have to start to cut the free trade aagreements around the world.

50 percent of the exports go to the continents. that is essentially preferencele statement. they have to make an investment and they need to scramble because the economy is going to be in deep trouble. as you say, you unless the european union changes, this is going to happen again. so it's a shame, but we're seeing the small -- this dismantling of the european project at the time when asia is coming together as a region and block, so it's not a good thing. i think that they over shot rick. i think that they went too far and it's a political union, and they just over played their hand. >> i would not agree more, and