They see an increase in the price of steel thanks to tariffs , so conagra is not doing well today. Down 2. 1 . There is a takeover attempt. It is being bought primarily for some of its features. Guy . Guy g20 leaders meeting in osaka this weekend. We seen the chinese president arrive in the u. S. President arrive. Investors watching for the outcome of the bilateral discussion between these two gentlemen, in particular whether or not we are going to make progress when it comes to the trade war. We are joined now by Neil Ferguson, senior fellow at the hoover institution. Good afternoon. What is your expectation for what is going to come out of this meeting . Neil i dont think a great deal is going to come out of it because i dont really see that either of the two leaders, trump and xi, have a strong incentive to make concessions. Trump i think senses that the chinese are on the back foot, that he has the upper hand here. Hes playing them, as he loves to do, by saying on one hand he is interested in some kind of deal, and then threatening to put more tariffs on if there isnt a deal. The chinese have said we want to talk about huawei. Lets get some linkage to the tech war. My suspicion is that not much will come of this except a photo opportunity, but there is a small chance that there could be some progress. , i would not do the deal this year. If youre thinking in terms of reelection, this is something you really want to save until 2020, especially when the economic costs of the trade war can be offset by a fed that seems ready to cut rates. In the end, a rate cut is more important for markets right now then escalating trade war. Guy is this really about trade, or about containments . This feels very kanaan like in terms of where we are in this process. It is about containing china economically, militarily. It is about a whole range of aspects of the relationship. We seem to be focusing on trade at the moment, but i wonder whether that is the end game. Neil ive been saying for months that this is really much more about the escalation from trade war to tech war to cold war, and that we may well be in the early stages of cold war ii if it gets more and more difficult to deescalate. It is certainly no longer just about tariffs. It has become about technology. The most striking picture of the last year is the way in which there is something of an a centric position on trumps part something of an eccentric position on trumps part. When he said he would put on tariffs into any 16, he was something of a maverick. Now it is a consensus because the United States has woken up to the geopolitical challenge that china poses. It is bipartisan. There are very few bipartisan issues right now in washington, d. C. Beating up on china is one. I dont think you will hear any of the candidates for the democratic nomination disagreeing with trumps strategy. None of them did last night. Fromicuous bias absence the debate is highly significant. A majory has led change in attitudes. It is not just about 5g. It is also about Artificial Intelligence and the National Security implications of the technology war. Vonnie whether an agreement happens this year or next, what is a happy outcome on huawei . Neil im not sure that huaweis is going to be destroyed as a company, though in some ways, the United States has the power to do that. I think the key word here is linkage. This is an old word that goes back to the 1970s. It was a favorite word of henry kissinger. You connect issues. If you have leverage in one area, you make it concessions in another. We already saw him use another chinese companys ete in negotiation with the chinese last year, and i think huawei is a kind of hostage that trump can use to get concessions on the trade issue, about which hes always had very strong feelings. Donald trump is noted for his principles come up but being donald trump isnt known for his principles, but this is one thing he has been consistent on. The u. S. Can bully allies into taking a position towards huawei in shutting it out of markets, although i dont think every ally is going to fall into line. But i think that huawei will be spared as part of a broader deal next year. Vonnie that bullying is certainly not working in europe, many of them saying we need huawei. The u. S. Also needs huawei, and president xi is saying that is my high watermark. This is not some thing i will budge on. You have to wonder if it is wise for the u. S. President to wait until next year, unless he signals that that is what hes doing to presidency. Are we at risk of alienating the chinese further and having the move towards other allies that may not be the u. S. . Trump has think that the upper hand here, and ive said this all along. I wrote early last year that in a trade war, the United States would have the advantage because the costs are significantly greater to china, and chinas more vulnerable to the pressures that arise from the trade war. I dont think trump is making a major mistake here. In fact, i think hes discovered what he is so good at discovering, which is the weak spot of any adversary. He showed this in 2016 when he kept consistently finding the weak spot of his to domestic opponents. The weaknk hes found spot, and the chinese want a deal on trade more than trump does, and he knows how to exploit that advantage almost intuitively. The problem which is only gradually become apparent in washington is the end of key european allies on this issue is the ambivalence of key european allies on this issue. When i go to the continent, ive been frequently in the last few howhs, i am struck by lukewarm, say, the germans are. There is antiamericanism abroad which the trump a bennis a station has almost made legitimate. You see in opinion polls that the germans regard the u. S. Is a bigger threat to their security than russia and china, which is astounding considering the u. S. Provides their security. Vonnie it is not just in europe. One of the Democratic Candidates said that last night, too. Neil the democrats are in a difficult position here because they know that antichina is something that resonates with their voters as well as with republicans. I think that if you look back on the last few years, if anything, democrats were the one who were most eager to take china on, whether on trade or currency manipulation. Trump has put them in a difficult position, and i dont think any of the democratic hopefuls are going to be taking him on on this issue. When joe biden said a few weeks ago after he announced he was running that he thought the china threat was being overhyped, it immediately was on it,and trump jumped that biden made a mistake. He had to dial it back and reposition himself. There is a kind of consensus on this issue right across the parties. Guy is the achilles heel of the plan that the fed has to play ball . Neil yes, absolutely. Guy if the fed doesnt play ball, this doesnt work . Neil markets have convinced themselves that the fed is going to give covering fire while the trade war continues with rate cuts. Inthe fed should disappoint july, i think it would be quite ugly for markets. Guy for the president has well . The two are linked. Neil the president sees his popularity as being in some measure correlated with stocks, but it is perhaps more correlated with wages, with growth. Trump only has to worry if the economy slows down significantly between now and this time next year. If the economy is still growing, than most people i think would reckon he has a pretty strong chance of reelection, even with his quite remarkably poor approval ratings. A president who was more conventional with an economy on athis would be pedestal, and we would not be even discussing democratic challengers. I dont know why anyone should assume that he is a shooin for a second term. At best it is 50 to 60 possibility. Guy Neil Ferguson is going to stay with us. It was leaked that Howard Hughes is looking at exploring a sale. We now have confirmation from Howard Hughes corporation it is working with advisors to explore Strategic Options. We understand it is working with partners on the review that may result in a sale of certain assets, including 60 acres of beachfront property in hawaii. Is about 200 per share based on the value of its assets. A few days ago, citi says it was undervalued. Today, Howard Hughes was up about 30 before the stock was halted. 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 now with the first word news. Heres courtney donohoe. Courtney two Big Decisions from the Supreme Court today. Justices ruled that the constitution does not let courts throughout voting mats for being to voting maps for being too partisan. The Supreme Court also blocked question on the census for now, saying the reason he was contrived. The fed is likely to cut rates in1 4 percentage point september and again in december. Before the last meeting, economists were expecting just one rate cut. For the first time, iran is set to breach the landmark nuclear deal signed in 2015. Irans Atomic Energy agency said the country will probably exceed a cap on stockpiles of lowgrade uranium today. That puts pressure on european powers to try to salvage the agreement from u. S. Sanctions and avert a slide towards war. More tiesears to have to the Chinese Military than the previously knowledged. Several employees have collaborated on projects with Chinese Military personnel. Wally says those projects huawei says those projects were not authorized. 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 to Global Markets here. Es ever get a little heres abigail doolittle. Look at the s p 500, up 3 10 of 1 . Snapping a fourday losing streak. A bit of outperformance for the emerging markets. Back intoare stepping that arena, up 7 10 of 1 ahead of that g20 later this week, starting tomorrow. The meeting between President Trump and xi on saturday. We have very hot weather in the u. S. Despite all of this being a bit risk on, bonds are trading slightly higher as well. Interestingly, trading higher finally is net excess is net on the is natixis being banks h2o fund downgraded my morningstar, but we also have an upgrade from ubs, saying the market is to bearish. The shares on the day up about 3 . In the u. S. , some standout leaders helping the s p 500 include trip advisor, up 5. 4 . They were upgraded at da davidson to a buy from a neutral, saying the revenue quality has improved. Centurylink up nearly 5 . Wells fargo seeing improvement for the mitigation company. Ford up 2. 1 as they have announced a european overhaul plan. The biggest piece of that, cutting jobs in europe by about 20 , also cutting factories, and focusing on higher margin pickups and suvs. Finally, lots of whipsaws up and down here at the highs. Down now is the british pound. Theresa may earlier warning her tory rivals she could vote to expectno deal brexit and either Boris Johnson or jeremy hunt to put a brexit plan to the mps. Not a lot of action, but lots of volatility within a small range. Guy the pound certainly a factor in what we are watching here. Staying with that story, Boris Johnson appearing to be softening his stance on brexit. The leading contender to be Prime Minister now says that the chance of leaving the European Union with no deal is one million to one. We are back with Neil Ferguson, senior fellow at the hoover institution. A million to one. Neil im struggling a bit with that because it seems only the other day, we were told that we had to threaten credibly a no deal brexit to get concessions from brussels to improve on theresa mays much rejected withdrawal agreement. Im struggling a bit to know where he got that particular probability from. I conclude from it that hes realized that actually, he cant do no deal because there will be significant defections on the conservative side if he tries. That is the real significance of this. Guy what is your outcome of this whole situation . A lot of people seem to be pointing us toward a general election later this year. Boris gets to the point where he cant get the deal he wants, and therefore doubly reaches a stalemate, which leads to a general election. The outcome of that is very undecided. Where are we by the end of this year . David neil it is a hard 1 neil it is a hard one. I was a remainer. I was against brexit. Once it happened, i think, ok. Do this if you can. They failed. Its been three years of failing to execute. Towhat happens next it seems me is a hail mary called Boris Johnson. A hail mary is that desperate pass you throw. Theres a desperate pass being thrown here to Boris Johnson in a magical belief that he can achieve something with a majority of three in the house of commons that eluded theresa may for the better part of three years, and i dont see it. I dont see that the europeans will make any concession. I dont see that there is going to be a credible threat of no deal to force them to do that. So i think there is going to have to be an election because this is just an unsustainable government and has been for some time. I think the government should have followed the very first boat. In other areas of history that would have been it, came over. But theresa may went on because of the fixed Term Parliament act, which allowed her to survive this historic defeat. Johnson hask boris any opportunity to improve on this situation from theresa may. The trouble is, i think he may be tempted to think that he can win an election, and i think he will lose an election. Unless nigel farage dissolves the brexit party and announces he is going to endorse Boris Johnson, the tories will lose heavily. Dont believe the polls before the Election Campaign starts. Once a campaign starts, other issues will come to the fore. Everyone will look back and say, what did the tories do for the past three years . It seems the tories will struggle not to lose that election. He will form a coalition. That could well include the lib nationalists,tish and then you are on track for formore referendums, one brexit, one for scotland. What a train wreck. Vonnie do you see any scenario in which the u. K. Is in a stronger position in six months then it has been . Neil i really dont because in the end, since there is no real way forward with this house of commons, they will have to there will have to be an election. I think it is a struggle to imagine, even with all his undoubted charisma and comic appeal, Boris Johnson winning that election, unless the brexit party self flicks it exit party self liquidates the brexit party self liquidates. I think the tories lose many seats in the election, and that is not going to be a strong position for the u. K. If you think you are seeing volatility in serling today, you aint seen nothing yet. A party that has been in power this long in britain and has done so badly in recent years in terms of results is extra nearly vulnerable, especially when there is a new rival Party Offering pure holier than thou brexit. That party is bound to take a chunk of votes away from the tories. And for the dems, one thing i heard George Osborne at a center for policy studies event that we did is that the lived are that the lib dems also deadly from a conservative point of view. It is all about winning seats at the local level, and the tories are not in a strong position, even with the more engaging and genial leader whom some people mistake for the british donald trump. I dont think Boris Johnson is the british donald trump. Even with that new leader, i think they would be in trouble in an election. Guy thank you for coming to cs. Neil ferguson coming to see us. New ferguson, senior fellow at the hoover institution. Vonnie a couple of headlines now from larry kudlow. He is saying the u. S. May move ahead on additional china tariffs and enforcement must be part of the china talks. Basically what weve been saying here along with Neil Ferguson. The u. S. May move ahead on additional china tariffs, and enforcement must be part of the china talks. More on this ahead. This is bloomberg. Guy 26 minutes past the hour. Just under four minutes to go until the end of trading in europe. Weve seen a lot of volatility in glencore over the last halfhour. Reports coming out of a major mine accident in the drc. Nine people reported to have been killed. Much more coming up. This is bloomberg. Guy 30 seconds until the end of regular trading in europe. At a headline level it is more to do with the g20 so we are in a holding pattern. Not going anywhere in a hurry. The ftse is down. The dax is up. There is a buyer there is a bayer story in there. The cac 40 is flat. It is more of a cyclical bias which implies some more positive view of what could be coming out of the g20. Retail is doing well. Travel and leisure doing better. Health care is in there as well. On balance, some of the cyclicals are doing better. Let me show you the bottom end before we move on. Real estate is down. Basic resources are being hit by glencore. Oil and gas is trading up. Let me show you some of the individual names. Glencore a focus. The story coming out of the drc. The initial selloff is fading a little bit. Bayer is trading higher and h m, the numbers were not great but the fact that they are restricting store opens and the web is doing better is helping out. Not surging but up nearly 14 . Vonnie here in the u. S. , we are getting mixed. The dow down. 2 and the s p holding on to gains at two point at. 2 as well. Gold futures are down. They are not testing the 1400 level yet but they are down from where they were. Lets take a quick look at some stocks that are moving. W