That continues to decrease as gold and other assets move higher. A big deal today, allergan up theon the neil that on news that abbvie will buy it. 20 is not as much as the 45 premium that abbvie is offering. Hsbcs ceost guy john flint weighing in on President Trumps trade war with china. Take a listen. When we get past trade, i think it is clear that there is a broader desire to see china contained in some way. I think we will move into a chapter that covers technology, and maybe bifurcation of technology and technology standards. Guy containment. Havent heard that in a while. We are joined by john rochester, nomura asset strategy. Does trump do a sort of kim jongun and walk away . It could go that way. The market is not expecting that, so that is a long dollar trade. In essence, holding long dollar is the better choice of the two because since last tuesday when we had the news of the beating between the two sides, we have , the feddollars often now having 95 basis points in cuts priced over the next year. How much for their how much further cannot be pushed . Instead we could see that that pricing is less relevant. Instead, we see, at best, both sides agreed to continue talks, but that means tariffs in september, they are going to go ahead. I dont see risk doing well on that. Reacting directly to trade tariffs. Fromata has slowed down before the trade tariffs became a concern. If you have the tariffs go d ino effect, you see each tranche slow downata even more, and it will justify those fed cuts. Right now the fed is in a weird place where they are open to the idea of said cuts, a few even saying it in the dots, but the data doesnt justify it just yet. They are still being data dependent. Go into effect, fed cuts happen anyway. Tariffs deescalate, fed cuts happen anyway. It is kind of irrelevant. Vonnie some people say you can get the fed cuts if you want, but it is not going to help. Jordan the credit cycle is turning. I guess youve kind of summed it up. The fed would probably need to do a lot the data was to slow down as much as people are extrapolating. Right now, u. S. Data has reversed its trend. Some measures have gone slightly below trend, so it is going to when the fed98, cuts by 25 basis points, 25 basis points, and another on top of that. If you get those fed cuts down to zero, youre right. You will probably need to see some fiscal stimulus because that is a story where those tariffs have led to an escalation of financial conditions tightening further. It has led to a worse slow down them with the fed is looking for or we are looking for. I think it is all in extrapolation, and it is a little bit too much at this stage. From us, the messages we are expecting it when he five basis point cut in july. We will expect perhaps another one by year end. This is not a fed that is going to cut straight down to zero straightaway. They are going to be datadependent if those tariffs go into effect. If the data does warrant it, they will react. As things stand, without extrapolating three months in data, it is not that bad. Vonnie how would a 25 basis point cut be translated into the real economy . For now we are counting on cios to not stall until everything is sorted out with the u. S. And china, and to make decisions on investments. Even if the fed were to cut by 25 basis points, that wouldnt necessarily spur decisions, but it . That wouldnt necessarily spur decisions, would it . Jordan no it wouldnt. I agree with that. But if that is signaling, the market is already pricing 95 basis points of rate cuts over the next year, so the signaling is pretty strong. 25 basis points wont do much for the economy, but if they have Forward Guidance that suggests rates continue to go lower, it is about what they do in the months following that decision. I think they are going to have pretty strong Forward Guidance. They are going to continue to suggest more rate cuts to come. Therefore it does have an effect, and it has an effect for the long end as well. Guy jordan is going to stick around. Us, fxrochester joining strategist for nomura. Vonnie we will get more insight on the economy from senator tim scott of South Carolina, member of the finance and banking committees. Coming up at 12 30 new york time and 5 30 london time, an exclusive interview with st. Louis fed president jim bullard. We know his thoughts on a cut. At 1 00 p. M. New york time, fed onir jay powell speaks fed policy. We will bring that to you live. All of that to come. This is bloomberg. Vonnie live from new york, im vonnie quinn. Guy from london, im guy johnson. This is the european close on bloomberg markets. Lets catch up on the bloomberg first word news with courtney donohoe. Courtney it is the latest huge merger and a huge merger in an industry being shaped by deals. Allerganreeing to buy in a deal valued at 63 billion. The deal is expected to close early next year. The u. S. Downplaying expectations for this weeks meeting between President Trump and chinas xi jinping. They insist to the at administration is not willing to compromise on demands for meaningful tiny Economic Reforms meaningful chinese Economic Reforms. Bloomberg has learned that china may blacklist fedex, a move certain to escalate tensions with the u. S. Fedex got on beijings bad side after huawei said documents it asked to be shipped from japan to china were instead diverted to the u. S. The Trump Administration has imposed a number of restrictions on huawei. Secretary of state mike pompeo has made an unannounced trip to afghanistan. It is not clear what he is therefore. He was in saudi arabia discussing the need for Stronger Security in the streets for moos in the straits of hormuz. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im courtney donohoe. This is bloomberg. Vonnie thank you. Lets get a check on where we stand with global markets. Lets get to abigail doolittle. Abigail theres a bit of a risk off tone on this tuesday. The s p 500 and the nasdaq declining for the third day in a row, the first time thats happening since early may. We will be looking at some of those movers dragging more so on the nasdaq. Investors waiting for talks from fed chair powell and some of the other fed officials, and the g20 later this week that investors are looking forward to. Emerging markets lower with u. S. Markets. Stocks on the downside at this point on this tuesday, confirmed by the fact we have haven bonds rally in. Lets take a look at the german bund over the last 30 days. This is really extraordinary, losing by 26 basis points, now yielding 33 basis points at a record low. Investors are paying the German Government to park their money. Some are saying this has to do with a supply issue. Clearly a bit of a haven bid. Relative to the 10 year yield, back below 2 , that is weighing on the dollar. We are going to see this climbing slightly higher. On the months, though, the dollar down almost 2 , the worst month since january 2018. That is helping gold, up about 10 . Crude oil getting a bid over the wheat down and slightly on the day, but pretty positive at the dollar drops. Lets take a look at the shares of alphabet on a two day chart. Shares dropping quite precipitously, down 3. 1 . The wall street journal report that some competitors could be helping u. S. Officials in an antitrust case that is weighing on alphabet, but also on the faang complex, the worst for the s p 500, down 1. 3 . Take a look at the other faang stocks. Facebook, amazon, and netflix also lower, explaining the underperformance 40 tech and communications heavy nasdaq. Vonnie abigail, thank you for that. Lets get more perspective on geopolitical tensions in the economy. Bloombergs chief washington correspondent Kevin Cirilli is with a key senator on the finance and banking committees. Kevin yes, we are here with senator tim scott of South Carolina. The president is headed to japan to meet president xi jinping up china. What are you hoping from that . Sen. Scott i am optimistic that we will see progress come out of it, and that will mean more stability, more stability in our economy, and the consumer will be excited about no increases in the prices of goods. Companies have so far been absorbing some of the cost of the straight dispute of the trade dispute. That will not last forever. While we are having this challenge, china is trying to seal the future. This is a chance to recalibrate our systems and have a fair for trade relations. Kevin should huawei be a negotiating chip in these trade talks . Sen. Scott it certainly has been so far. I think it will continue to be a major part of the discussion Going Forward. It is undeniable that huawei seems to have come from our perspective, nefarious intentions as they get involved in our technology. The pushback is an understandable pushback. Members ofalked to your constituency and movers of the finance committee. Chair Chuck Grassley has pushed back aggressively against the notion of tariffs. He wants to come up with a vetoproof majority against the president against implement and tariffs. What do you make of the landscape right now in the republican on tariffs . Sen. Scott mostly we are free traders. We oppose tariffs without any question. What the president is doing is setting a tectonic shift in our relation with china for the for seeable future. That is what is in jeopardy. Can steel the future stealing our ip and resetting the tables on technology . I think that the tariffs are like russian roulette. It is hard to see that a Security Risk is not posed. Isaac a very different position i take a very different position from the president. Sending talk about bmw 80,000 vehicles to china from production, exported from South Carolina to china, that is next financial risk to the employees that is an exponential risk to the employees for the supply chain of automobiles in our country, specifically at home in greenville. Kevin the president yesterday implementing new aggressive criticized for being symbolic. What you make of how the president is dealing with iran . Sen. Scott i thought he was restrained on calling off the strikes. Saving 150 lives was president ial. It was a very strong president s will move. I think we all celebrate that. I hope we do. The president is doing what is necessary. Hes putting pressure on the leadership of iran to bring them to the table. I know they said they are no longer willing to negotiate america. That is hogwash. They will still be there. Kevin the president on his twitter account has been really going after fed chair james powell fed chair Jerome Powell. Is that good . Should spendo one too much time commenting on the president s twitter account. They have the same goal in mind, which is low unemployment and a healthy economy. The good news is weve achieved both goals. The challenge is how long can we sustain the good economy. This month we will surpass the longest economic recovery expansion in the history of the country. That is really good news. There is joy bit of a kerfuffle between the two leaders as it relates to how we continue to extend this economic activity. Im not concerned about it. Kevin ive got to go back to greenville. It is beautiful down there. Sen. Scott you are welcome back. Kevin back to you in new york, vonnie. Vonnie our thanks to blumbergs chief washington correspondent bloombergsi to chief washington correspondent Kevin Cirilli. Guy we will continue our coverage of u. S. Politics. Bloomberg will have previews, analysis, and reaction for the first Democratic National debate. They start wednesday. That will be on balance of power with david westin and Kevin Cirilli, live from miami. This is bloomberg. Guy from london, im guy johnson. Vonnie from new york come on vonnie quinn. This is the europe from new york, im vonnie quinn. This is the european close on bloomberg markets. Guy Boris Johnson, leading candidate for the next Prime Minister of the united kingdom, says parliament is ready to support a no deal brexit. However, other embers of the conservative party have warned that they have the numbers to stop him. Still with us is jordan rochester, fx strategist for nomura. What do i need to discount in my investments . Should i be looking at a hard brexit . Can boris deliver that . Should i be looking at a general election . Would boris win that . Walk us through the most likely scenario right now. Jordan the most likely scenario is election, more likely than a hard brexit. I think about how well would be brexit party do in that election. Will the conservatives form a coalition with them, or is it corbyn . The way the polls are looking now, it is all over the shop. Ryone is around 20 2. 4 20 to 24 . Weve gone from twoParty Politics to for Party Politics two four from twoParty Politics. O fourparty guy labour, conservative,. Iberal democrats david youve got the jordan youve got the liberal democrats centerleft, and conservatives centerright. Win,nservatives were to that is a no deal brexit because the brexit partys main leave. On would be to if you go on the other side, the liberal democrats in jeremy corbyn, this is a clear remain outcome. The Scottish National party will be involved. That is a Scottish Independence referendum, remain, about high taxes for corporations. It is also nationalization of key utilities. Get hit,ties would especially on those specific sectors. The housing market, House Builders could do well because they want to build more houses, but financials will get hit because the labour party is quite antifinance in the remarks. The bank of as well. I am more worried about the bank of england reforms as well. I am more worried about election then no deal brexit. It is quite clear there is a majority against a no deal brexit. So would Boris Johnson says that, it is not really the truth. Manye we have institutions, including the eu, saying it wont take a no deal brexit, but i just want to read some comments Boris Johnson has made in an open letter to the foreign secretary. He said he is not going to countenance another eu referendum. Thanks to the fed becoming more dovish, a softer dollar, it has led to the cable move higher. In fact, i am still biased to sell sterling because i think over the next month, Boris Johnson going to continue to talk to the electric. Right now the electorate is not parliament. It is not people at home who are not conservative members. It is conservative members who, the majority of whom want a hard over anything else. He has to keep a hard brexit over anything else. He has to keep that rhetoric, and the market wont like that. Meanwhile, the data is not strong as all. Inflation rains high, yields low. Sterling will continue to underperform, and if anything come the recent rally was an opportunity to short it. The g20 is not going to be positive for risk. The dollar will outperform, and eurosterling higher. Vonnie how does Boris Johnson secure a Major Overhaul of the agreement in three months . Jordan the short answer is he wont. The eu have said they wont reopen the deal. Politics is politics. When there is a will, there is a way. If Boris Johnson whats to come in and the eu is open to talking about changing parts of the agreement, they could tinker with the political declaration, maybe change the language around the backstop, but there wont be a wholesale change of what was agreed with theresa may unless Boris Johnson can somehow convince the irish and the European Commission to do so, but i dont think there is a will for that. Instead, what will probably happen is Boris Johnson will tinker the edges of what was agreed, maybe bring it back to parliament, and perhaps the brexiters think lets just get brexit done with because they are worried about the brexit party. They might not be happy with the irish backstop, but it looks really bad among the broader electorate to not get brexit done, so you could just see a repackaged Withdrawal Agreement goes through the commons. That is the optimistic vision. The likely outcome is parliament doesnt agree and would take around with votes of noconfidence. Guy jordan is going to stick around. Jordan rochester, fx strategist from nomura. Weve got the european close coming up. Three minutes away now from that close. Ftse 100 trading a little higher, dax a little lower, cac a little higher. Markets basically drifting into the g20 and the month end. You will get some rebalancing around that for the equity markets, which have had a pretty good month. That is coming up. This is bloomberg. Guy 30 seconds until the india regular training for european equities. Until the end of regular trading for european equities. Italy is down a little bit more than most. K. Is up a touch at the headline level, nothing to see. Let me show you the numbers. 7424 for the ftse. The dax trading down. The cac 40 absolutely flat. We are coming into the end of the month. People are probably windowdressing a little bit. That is one factor to bear in mind. It would be interesting to see that after such a good month we get rebalancing. The other factor is what is going on with the g20. Do you want to take risks into the g20 . You want to be risk on after such a good month. I wonder whether peoples books have been closed, lined up, reorganized a little bit earlier than we would have anticipated. That is one factor. That is what is going on. The action is away from fx. The action is in foreignexchange. The action is also in what is happening with the commodities space. Lets show you the sector story. You need to peel the onion when it comes to the equity market to understand. What has been bid up is the bond proxy trades. There is a bit of that knocking around today. Basic re