♪ >> russia and china say they will work together on north korea and say the u.s. should start holding her games with the south. scarlet: pyongyang claiming its latest rocket launch was an icbm. hot povertynd's market begins to cool with prices rising last month. the heatijing turns up on mobile gaming, accusing $.10 of harming children in profit.

>> hello from sydney. this is daybreak australia. it's just after 6 p.m. in new york. the markets were closed today. the fireworks have not started yet. we are still several hours away from that here, but we saw some fireworks over the last few weeks in the markets. the expectation is where are we going to see when the markets open up tomorrow? are these tech shares going to sell off and what about the dance we see from various markets, except australia. a very interesting statement that came out there. let's get a check on how the markets are trading that you have new zealand opening up their. a softer tone right at the open. housing prices look to be

finally cooling off in new zealand. on the flipside, in australia, household that had the rba worried and a lack of wage growth, which is why you did not see the iba come out and do anything on rates and seemed worried about hiking anytime soon. dollar see the aussie fall slightly after that statement. australianch if the dollars does strengthen, which has been a complicating factor. compoundingy policymakers, but not really into go against expectations. not much of a hawkish tilt. .ake a look at commodities it will be interesting to see if geo politics continue to dominate headlines. themtionally, we have seen brush off and be sanguine to the saber rattling coming from the

north, but it feels like this target could be different. drop on monday, the biggest loss of the year alongside strength in the u.s. dollar. essentially unchanged before we had those crude stock files fall back in the u.s.. ore, lookingiron at services pmi coming through today. we will see if we can get the stabilization picture a little more filled out with the rebalancing side of the story. let's go to rosalind chin in hong kong. >> pushing back against production cuts and will oppose the idea. speaking anonymously, government officials said it would send the wrong message to the markets and

suggest the cartel and russia are not sure the current agreements work. russia is set to host members and nonmembers on july 24. russia and china used the idea to discuss a investment end of up to $10 million. -- 10 ilion dollars. the new arrangement is intended for select projects and the china development inc. which represents beijing's interest. tarextended deadline for qa to respond to demands. no indication of what it contains. it includes cutting ties with iran. the foreign minister says he expects to reject the response but that doha could simply act now. >> we discussed the crisis in detail and i want to iterate that when there is one side

leveling accusations against the other, that side cannot say yes, i accept everything you say. is fighting hard to as theyts leader ship world lng producer. the company said it would raise output by 30%. role asnforces their the major global supplier. and peter hancock will be the banks next ceo. the incoming chairman is considering internal and external candidates to lead operations in the board has contacted hancock of out it. it had drawn all of its previous leaders from its own ranks over 24 years up global news hours day powered by 2700

journalists in more than 120 countries. this is bloomberg. pause here for a look at what is happening around australia and new zealand. with places like sydney and melbourne, we see these rocketing home prices, but that could be starting to ease. guest: we got the latest house prices for new zealand year on year, so that is slowing down from the reading we got last month. this is the slowest rate of theth is march 2015, but biggest city in new zealand and the epicenter of the property price madness, the average price 1.0 5 million new zealand dollars, but a 0% increase for three months and a 30% drop in sales volumes. a few factors at play here. foropping 40% deposit investment property and banks

having tougher loan value restrictions as well as and there are some seasonal factors. winter, amiddle of miserable time to be shopping. haidi: australia moscow petition regulator is looking for a bid for the struggling network. what is the latest in the ongoing saga here over 10 network? paul: two of the billionaire shareholders have put in a joint bid. the regulator now looking at shares that have cratered to $.16 and now it is the hands of administrators and it is awful for investors, but billion errors can be poised to snap up a bargain here. there is just one problem. this bid as it stands is not loud because of media ownership restrictions in australia. lachlan murdoch would be

breaching the two out of three will because he owns radio stations and newspapers in the gordonrket and bruce would be in violation of what is known as the reach will because he is a majority shareholder and he cannot control 75% of the broadcasting -- it covers 75% of the population. so this is a bet the media ownership laws are going to change. those billionaires would he expecting that would pass. the regulator will make it decision in late august. betty: thank you so much. we are getting some breaking news here -- north korea -- this is more on north korea and the icbm they claim to have tested successfully, saying the intercontinental listed missile can carry a large nuclear warhead. this is what is feared the most by the americans in particular, where this intercontinental

ballistic missile can reach the shores of the united states. carry a large can nuclear warhead. the un security council is meeting behind closed doors to discuss this claim of a successful test. northeast asia correspondent has been following these developments. how surprising is this? this is what is feared most by the white house, that these missiles can carry these nuclear warheads that can reach the shores, they believe up to alaska. guest: obviously alaska is not with 1.7ly the target, million square kilometers of land, it would be the continental united dates or the threat of that. isthe ballistic missile classified as traveling 5500

8000.ters, seattle is but north korea yesterday saying its newly developed icbm can reach anywhere in the world. bluster or is it real? we have to wait and see. the timing of the announcement and test is quite interesting because it is the fourth of july isthe united dates and their simmering more boiling u.s.-china tensions after the $1.3 billion arms sale to taiwan and other issues between the two countries. the chinese president talked about the rising negativity of u.s.-china ties, so the timing is quite interesting. the un security council at the urging of the ambassador to the united nations will meet behind closed doors in an emergency session on wednesday in new york, but to members on the --

to permanent members of the security council, russia and china put out a joint statement on the north korea test today, calling on kym johnson to halt nuclear test, halt nuclear missile launches and large-scale military exercises. andng north korea apostate violate un security council resolutions, but at the same time, the russians and chinese say they do not support any military action to resolve this issue and oppose the appointments of the antimissile system in south korea. this is not going to make china happy at all. we are getting breaking news south korea and the u.s. will be holding joint ballistic missile

drills, so a very fast developing story. korea insuring it has a spot at the top of the agenda. as with everything that comes out of john yang, we are trying to parse out what is real and what is luster. what does the missile test itself tell us? that this is the 11th missile test so far this year. they have definitely ramped up their program and you have to wear that -- you have to bear the claims versus the reality. they claim that it hit target in the middle of the sea of japan, about 900 kilometers from the launch site. if you look at the altitude and the trajectory, analysts are saying that it indeed could be classified as an icbm, reaching into the 6000 kilometer range were even beyond as north korea

has claimed. it looks as though from their test and the data we can see that this is indeed an icbm, whether they have the guidance capabilities, that's another question. north korea's own fireworks on the fourth of july. this fromare getting the state department, the u.s. saying it strongly condemns north korea's use of an icbm, but the state government saying testedan ice abm that a and it represents an escalation of the situation. the usa will never accept a nuclear armed north korea, making these comments in a statement from the state artman. you have been covering china closely and we know the economic and trade fallout could be severe. we are already seeing that. >> the key player here is the president china.

he is meeting with putin and will be meeting with angela merkel and donald trump. his vivid to europe as well, he holds all the cards stuff i've been to the border in china and north korea and you saw plenty of goods going across that border from china into north korea. north korea needs china and china in many ways needs north korea as well. let's bring up this comment from the japanese prime minister -- he had an urgent call for members of the security council and the global community to take more assertive action against north korea. at the g-20 meeting where the world leaders will gather together, i would like to strongly appeals for unity in the approach of the international committee regarding the north korea issue. -- i would like to urge

them to take even more constructive measures toward this issue. we will be on top of the story as it no doubt develops continually. betty: i continue to look at these headlines coming out -- it says u.s. says north korea tested an icbm and it represents an escalation, so it looks like we are getting some confirmation. this is something that was threatened by the north korean dictator. how much of a game changer is this? those whether he has capabilities to strike the united states, that has always been the threat, that eventually he will have those capabilities

for if all of this is true and he has an icbm that can strike anywhere in the world dominated is a game changer. that is why use the russians and chinese come out with a joint statement saying they do not work any military strike in retaliation on the part of the united dates. they are referring obviously because that would escalate it much, much further. but if he has an icbm that can strike anywhere in the world and 8n go as far as 6000, 7000, house and kilometers in distance, i hate to pinpoint my hometown of seattle, but that's only 8000 kilometers away from pyongyang and a highly militarized area of the united dates. it is definitely a threat thankted full top betty: you so much. we will continue to keep our eye on the headlines coming out of north korea. we will have much more on the tensions flaring up around the korean peninsula later on

daybreak asia. theill be joined by director of the center for conflict management. he will weigh in on this in about one hour from now.

haidi: i'm haidi lun in sydney. betty: i'm betty liu in new york will stop you are watching daybreak australia. as we are watching the north korean crisis am we have our eyes on the middle east. the extended deadline for a response to saudi-led demands are running out in the coming hours. go hot delivered its response to the mediator in kuwait. the german foreign minister says he expects the alliance to reject stop i want to ring in a professor of clinical science. heard some of the middle east allies who have noted the demand from the saudi arabia led

much.ion, they are too they are unreasonable, so what do you think the response is going to be? guest: these demands are the ones that should be reject it expect them tod arecally say these demands acceptable. they would probably do that in the next 24 to 48 hours. betty: and respond with what leverage? economic sanctions? guest: there are a number of options open to the saudi led group. it could push more toward turkey

that is self-defeating for saudi's and their allies. one of the things they want is for qatar to break off relations with iran and move the turkish military base. the saudi's could in gauge and military action. myhink that does not to see -- seem to be on the horizon. engage in somey emergency actions. it seems like there ought to be several steps before we get into the feasibility or reality of military action stop is there any sense at all that there some flexibility on the saudi arabia side or that -- it

sounds almost impossible they are going to cut ties completely with iran, but what is the middle ground here if there is any? guest: i think the middle ground and have aown discussion about all of these issues and the united states will have to engage in more mediation. i think that's what the secretary of the state has said, to unite against extremism and terrorism and all of that. not really bemay the case, nonetheless, i think there's room for negotiations and the only power could bring some degree of influence is the united states. it depends on what the trump administration is going to do at this point. haidi: domestically after that

hoardinganic with the following these developments, it seems like it continues as usual and if anything, it has caused residents and civilians to rally around the flag stop do you think it is dangerous that this is giving rise to a stronger sense of patriotism? guest: this is what i keep tar.ing from qa itsgovernment has hardened prepared tois not capitulate entirely to their demands made, but at the same time, this will have an economic impact and already, billions of dollars have been wiped off the stock market and they will have to pay more for the importation

of food and other basic commodities that they require. in terms of the trade military, itds and is not business as normal. how sustainable is the situation? guest: i think they can do this and i think it is sustainable because the airspace with iran taropen, particularly qa airlines. two other members of the council have not broken off relations and have not participated in the siege and i think kuwait he's are doing everything possible to act as a mediator, but whether they are going to be successful

and have an understanding around some of the issues, that remains to be seen. but it is the united states that holds the important cards if there will be some kind of settlement. betty: what do you think the u.s. should do? guest: it is important for the united states because one voice. we have had contradictory statements coming out of the united states. president trump will say one thing and a secretary of state will say another. washington is sending confusing message -- sending confusing messages to the region and it could make it more dangerous, but if washington has that willlicy, then ratherth a united voice than contradictory statements coming out of washington. not ani know you are

economist and i know you're not an expert on what is going on in north korea by any means, but i'm curious in your view, what's a bigger threat right now? is it this brewing crisis that seems to be dividing the middle east -- there are two factions here vying for dominance, or is it the crisis ruing in north america? what's the biggest threat to the global economy right now? guest: , the korean thing is one, but at the same time, we have a levy conflict going on in iraq and syria. we are facing a very dangerous it can have a

serious impact on the world economic situations. that's obviously going to have i impact on oil prices and think that could have a serious impact. betty: thank you so much. just recapping quickly, the comments we got from secretary of state rex tillerson. in a statement moments ago, saying north korea did indeed test an icbm, that represents a new escalation threat to the united they come our allies, partners, our region and the world. bringing.s. will be the provocative action before the un security council and the president are continuing to assess the situation. we have heard a global response

to what we saw yesterday. for cam says he will be sending a gift package to the u.s. more frequently, so provocative comments from him. this is bloomberg. ♪

open a 19 minutes in sydney. setting up to be a beautiful day in sydney. 0.1%, thoughng at we are looking at a fast developing situation, the response to north korea. headlinese of the coming across in new york, 6:30 and new york. let me recap the headlines. jong-nam will be giving a

"gift package" to the united states recently, and icbm capable of hitting the u.s. in 2017. these the latest headlines. let's get more with rosalind. reporter: and one from it says his country once -- in his speech of the national assembly, he promised that government spending in france would fall along with $23 billion of tax cuts. france has underperformed in the eurozone for three years. bank seeing adest bailout goo. failed to raise funding from investors. a crisis eraping

legacy of $350 billion of soured loans. to put the bank back on track with the market valuation which not only we do fear but we also believe will be positive. maximize value 10 backs of my stakeholders. this is a goal that will be rapidly pursued. reporter: new zealand's soaring market posted its weakest price rise last month in more than two years. home prices rose, the slowest increase. at thed values climbed slowest rates in september 2012. the national home average price is the equivalent of $466,000, above the previous peak. global news 24 hours a day powered by more than 2600 journalists and analysts, i'm rosalind chin. this is bloomberg.

let's get to our top story. 's president ordering a missile firing according to yonhap. the south koreans and americans will conduct a ballistic missile drew from 7:00 a.m. in seoul, anytime from now it would appear . we are also getting the response from north korea, kim saying he will not discuss issues and less the u.s. gibson. also giving escalating threats saying that the north koreans will send a gift package to the u.s. frequently and that the light that gift on independence day, according to north korean state media heard earlier, we had a statement from rex tillerson confirming that the north koreans tested and icbm, representing an escalation of the situation that will be before the un security

council and that the u.s. will not accept a nuclear armed north korea. how we are on shaping up. new zealand trading is underway. digesting some of those property numbers that came through, the weakest in two years. australian futures, the australian dollar in light of the u.s. dollar index largely unchanged and the u.s. is away on holiday. low volumes globally but the australian dollar trading weaker after the lack of a hawkish tilt yesterday. let's take a look at what we should be watching in asia. adam is here with that. north korea. headlines,test interesting to see how the dollar to the yen is reacting. i think the overall picture is

the the dollar-yen after initial strength has come back to where it was before. a lot of the news was breaking 24 hours ago. interesting to see the equity market reaction in south korea. i love this chart. this shows you south korean stocks in the context of what is happening and they are outperforming global stocks. they are one of the best-performing markets in asia. that yellow line shows you foreign investment. foreign investors are very used to this political uncertainty and they have been prepared to look through it. they are still getting dividends, they are still companies that want to buy back stock. the question is whether this situation developing here is different to what we are seeing historically. betty: the discussion around

volatility, that has dominated the attention for much of the year. goldman sachs saying it is going to take a crisis to break the volatility. tell us more about what goldman's saying about this. the interesting thing is that they have done a long historical analysis of volatility, specifically periods of low volatility going back to 1928. moment, we are at the proxy lows for indents for equity volatility, volatilitye bond index and both of those are incredibly low and the folks at goldman are saying that this is quite normal, and could last for 2-3 years. they all need a trigger, something like a recession or

escalation or a war to trigger a surge in volatility and get you out of periods of suppressed onatility and escalations the korean peninsula are dominating thoughts at the moment but we are far from knowing whether any kind of escalation there is more significant than what we have veryin the past but just interesting to see the historical comparison and we must remember that these. last for a couple of years betty. betty: thank you. some reactions going on. ,espite wti and crude down russia has preemptively put the cup -- on further production cuts ahead of it in ministerial meeting later this month there'd walk us through the rationale. they are saying it is too early. have alreadye they

just fired cuts just in the past few months or so. it is too early -- not only that. they don't want to prolong the cuts even further because the energy ministers have said we are going to postpone this through the first quarter of 2018. i want to show you as well as our viewers a reminder of where we are in terms of russia's cuts. that is the purple line. the purple line, ever since the start of the year, a 11.2 million barrels is where we were. the russia as well as opec wants to see a reflection in the price. look at where we are. we have given up on the number gains. we did see a spike but this is not going in terms of the direction that anyone in opec or is countries who are allied with it want it to go.

they agreed to the cuts. they agreed to prolonged cuts. if we are talking about july, it is too early. of course, shale production is the other major factor. betty: have a look at your terminal one more time. i want to show you this other terminal charge. is inou are looking at terms of the white line are the active rig counts. we see this rising ever since december, since the middle part of 2016, taking advantage of the .uts that have been happening as that has risen, the price for wti and crude have fallen so they are basically taking advantage of the pullback for opec. you see this little sliding down.

we reported that the active oil rigs have dropped for the first time in the last 24 weeks so that could be a little bit of an easing of the pressure in terms of any talk from opec to increase production cuts but that depends on whether this last or not the right now we are seeing a little bit of a pop. again, it is very early days. meeting doesial happen in st. petersburg. far-reaching effects for tencent. this is bloomberg. ♪

♪ a.m. betty liu in new york you are watching daybreak australia. this is an interesting story be a tencent shares dropping more than 4% on tuesday after a

leading newspaper in china blasted one of their top-selling games. rosalind chin has more on this. what did they say about tencent and the gaming side of it? reporter: it was a particularly harsh peace. i essentially they criticized them for harming children in the pursuit of profit. if they said it was an example of how addictive games spread negative energy and at the and also said that game tradition what traditional social values. a strongly worded piece from the publication. the game itself is the best-selling mobile game similar to league of legends. consistentlyme tops the apple and google lap charts. of the game will contribute more than 60% of tencent's smartphone game revenue. you can see how important this game is.

tencent has about one billion active users. gaming is a key to its business and this is a bit of a blow to them arid they have been facing pressure for a while after saying they would set limits on the times that players under 18 could play but that hasn't been seen as enough by the government. tencent yesterday was down more than 5%, closing at a little more than 4%. we will have to see how tencent performs when the markets open today. tencent is the second-most most heavily rated stock on the hang seng index. if you look at this chart, you will see that what tencent especially since 2016. the correlation between them

getting closer and closer. the section underneath shows the correlation. if you look at this other chart, you can see why. this shows that tencent has increasingly a larger influence over what the hsi is doing because it is a waiting on the benchmark. 17%.er this year, we saw the second half, it struggled to stay above the 26,000 level and we will have to see what the rest of the year has for the markets in general. generally, we are seeing a little bit of a -- for hong kong. has been quite a run for tencent coming down a little bit . let's get you a check of the business headlines. the shanghai listed units of

the parentup say company is discussing restructuring with a large state owned energy firm. they stopped short of naming a merger. reported that the coal sector companies were in talks to create a mining and power china and with assets around $268 billion. >> a fund led by gray star is buying monogram residential trust for $3 billion. monogram owns and operates luxury apartments in the u.s. in the coastal regions. stockholders will receive $12 per share in cash. amazon may still have an appetite for grocery acquisitions even after whole foods and it could be looking at europe. that is according to a former ceo at tesco.

amazon will take time to integrate whole foods which is a major commitment. >> it depends very much on how they see the way forward with food. i could expect they will take time to absorb whole foods, which is there forced -- at first their biggest brick-and-mortar network. they will want to grow in that space. they may make an acquisition in europe as part of that. >> much more ahead on daybreak australia. a roller coaster ride, why some say iron ore is going to struggle with extreme volatility not just through the end of the year but for years to come. this is bloomberg. ♪

♪ i am betty lou in new york.

you are watching "daybreak: australia." the u.s. government is involved in apple's tax dispute. washington has filed an application with the eu general court over the retroactive application of state aid rules to apple. irelandr the eu ordered to recoup money in unpaid taxes from the company. uber has suffered a setback in the eu after a french law was backed leading the sanctions on managers. last year, uber executives were whichver their service allows unlicensed drivers to pick up riders. they argue that the law was invalid. >> volkswagen plans to sell cars in iran for the first time in 17 years taking advantage of easing sanctions.

it signed a contract with a local importer to offer suvs and the sedan in a tehran area. volkswagen is the market leader in europe and china, struggling to rebuild in the u.s. airlines say they expect the u.s. ban on laptops in the cabin on flights to america to be lifted. turkey anticipates an announcement on wednesday well emirates is also counting on the measures being rescinded. 10 middle eastern and african efforts are affected by the ban. they are talking to washington about introducing stronger security arrangement. >> let's check the markets. we are one hour into the trade in new zealand and you can see tonend px50, a softer after news showing the housing market cooling off. the kiwi trading slightly

slightly softer, as well. certainly, nervousness after seeing the north korean headlines after they successfully tested and icbm. cindy futures, looking ahead -- sydni futures, pointing to a -- sydney futures, pointing to a higher australian dollar. it is going to be interesting to see how this space haven there is today. episodes oft few rationing and north korea, you have really seen a sanguine market. south korean stocks are surging higher and we will be watching the south korean stocks today, rallying when we have these developments from the north. we would take a look at how gold is doing, up 0.5%.

oil holding at $47. iron ore is a little bit weaker. we are looking closer at iron ore. a recent rally saw in advance of 20% into a bull market after falling it to bear territory. seeing extreme volatility for the next couple of years. joining us now is a mining analyst. -- given that we are seeing the industrial side of chinese activity holding up well , does that road better for iron ore prices -- does that bode better for iron ore prices? guest: more importantly, the real story is what the rest of the world is doing, and the rest of the world is firing that it has not done for a decade.

the pmi data indicates what is happening globally and that is that we are seeing a convergence of activity, synchronized steel,y, particularly in which is a great barometer of activity. this is a pmi that it is just not china and china has been a story for the decade and now it is the rest of the world and places like europe and japan are printing numbers. so, it is a good backdrop globally. synchronized activity is ultimately good for demand. >> i want to bring up a chart that shows you the buildup and supply by china. they are stockpiling at record highs. a chest does show you particularly this white line just how much these stocks have risen over the last 12 months but as you rightly say, this isn't just a china story.

there is many contributing factors from the currency to other countries and their output as well. citigroup coming up with that forecast that we saw not so long ago that iron ore prices are going to go down below $50. where is your forecast are not iron ore? your forecast on iron ore? >> we see the price lower as well. we see the price heading toward the mid 50's by the end of the year. -- import price to china what is driving that will be some of the factors that we talked about that mostly supplied. that is the marginal cost of production and we have a really simple and age of for explaining why $55 is the number and we have what we call the canary in the iron ore mind. are $55 give or take.

when the iron ore price dipped to $53, alice started losing two dollars per ton and they de-furred a project which they had formally decided to go ahead with. they will be the marginal producer going forward. >> that is sort of like the pain point where we start seeing those production cuts coming up from the iron ore miners. even before that, if we see that trend continued to fall, though, and there is not a terribly big gap from where we are now to $55 per ton, will we see some movements coming out from mining and producers -- are they preparing for that? what are they doing? what should they be doing? >> i think the marginal producers and

when i say that i mean the top four, so the top for being rio and bhp among others. they are at the lower end of the cost curve. abouteed to be thinking currency headwinds, fuel prices, and general cost and inflation. that is where i would be looking. cuts will be triggered more by price. the i-55 dollar number is an interesting flex point. i do expect prices will be more volatile in europe. the exchangeable with prices wi nd -- the exchange will -- -- will whip prices around. a number in the high 40's should

not be unrealistic as well. >> thank you so much for your time. plenty more ahead on "daybreak: asia." this is bloomberg. ♪

♪ betty: north korea raising the stakes, confirming the lot -- missile launch was indeed an icbm. tonne: pyongyang said it was america on independence day and that there will be more to come. back, washington firing ordering joint ballistic missile drills. yvonne: while russia and china city will collaborate on the crisis, --