♪ betty: north korea threatens a strike on guam, and says president trump is bereft of a reason to read yvonne: markets -- bereft of reason. goes, theydy as she say policymakers should press pause when they meet next month. yvonne: deleveraging and debt. china's attempts to tackle the original sin. betty: this is "daybreak asia,"

live from bloomberg's u.s. and asian headquarters. i am live in new york, where it is just after 7:00 p.m. yvonne: it is 7:00 a.m. here in hong kong. i am yvonne man. there is something about the month of august where crazy things just happen. two years ago it was china, the devaluation. the jury is still out to see whether geopolitics will be the trigger this year in triggering the volatility. betty: who knew a year ago we would be talking about north korea and the possibility of military conflict between the u.s. and north korea? but here we are in august. volume is still relatively thin. any movement will be exaggerated by the thin volume. that is exactly what we saw. despite all these headlines, the markets remains relatively resilient.

which is confusing to some investors who say, we should be moving more on these headlines. right now it looks like the markets are focused on earnings and the fed. yvonne: those are still some likely catalysts. from -- a comments little movement from yen. not much in gold. pretty muted with the safe haven plays. in new zealand, no change in policy after the rbnz. inflation slow. perhaps a little less dovish than expected, the kiwi at a pop. did buck the trend, led by financials and tech. looks like we could be continuing that. quite moderate in those gains, equity futures pointing to eight points for the benchmark. well.for the aussie, as

japan, we mentioned the yen. we are back below 110 territory right now. that is back to the two-year highs we have seen for the currency. the nikkei, one of the biggest losers yesterday. forould see a little upside the market this thursday morning. that is the pulse we get from asia. rex tillerson, secretary of state, tried to calm nerves out there after trump's rhetoric around it north korea. trying to calm investors overall. earnings,are getting investors still focused on earnings. they are coming out with second-quarter adjusted earnings. slightly -- 3.86.

slightly less than what wall street had estimated. 1.94 billion dollars for the tech company that develops apps and other software in china. we will watch for more of those headlines coming out on netease. overall on wall street, they are looking at not just a earnings come a but other numbers that were moving the market. i want to bring in su keenan, who has more on what investors are focused on. one eye on north korea. su: earnings are still a driver. ease a bit.ngst at the government tried to calm things down. at the close, it was close to unchanged. we have that lighter volume. big moves.seeing stocks did flip from the big rise. let's going to the big movers if

we can. disney and the loss after hours. we will take a look at priceline, which has big drops. they had a negative outlook, even though china is an area for growth. and a fossil, which makes 29%, continuing erosion in demand for watches besides fitbits. let's going to the bloomberg. 9015. when we talk about reaction to korea in terms of the vix rising, you can see in the overall scheme of things, it is -- slow and steady is the way the s&p was talked about. long periods without more than a 1% move one way or another.

there was a tiny move yesterday. the market is digesting the tensions between north korea and trump, and writing it off for the moment as rhetoric. says the players are new, mostly referring to trump. we are not used to him being in this situation, as it comes to a head. yvonne: turning to commodities, the subplot -- that surprise jump. su: it was the biggest gain since january. that was a surprise. if we going to the chart in take a look at how oil has performed, it is not been able to budget above the $50 since a week ago, monday. u.s. crude stocks falling 6.5 million barrels. the focus was on the gas supply gain. if we listen to goldman sachs's

head of commodities, he points out how difficult it is for commodity traders to trade longer-term, particularly when you have data showing the uptick in shale production in the u.s. let's listen. >> it means you cannot be trading oil three to six months out. when we put those together, you cannot be trading long anymore. su: that makes it difficult to project the direction of the oil markets, beyond short-term. yvonne: su keenan, thank you for joining us live from new york. jumped as thellar bank of new zealand kept its official cash rate on hold at 1.75%. governor graeme wheeler says worries about inflation and gdp growth, was lower than expected in the fourth quarter. they see declines in coming quarters, saying monetary policy

will remain accommodative. inflation is likely to decline in the coming quarters, as a fuel and food prices dissipate. monetary policy will remain accommodative for a considerable period. numerous uncertainties remain, and policy may need to adjust accordingly. > australia reported a loss of 220 million aussie dollars. however, it is forecasting in the first quarter, saying a better business program is ahead of schedule. however, it isthe airline is pay hna. they want to tap into the record flow of chinese visitors heading to australia. considering a shakeup of hotel units as part of a wide-ranging overhaul of the falling group. an entirel name buy

trouble group, in a deal worth $940 million. they are reorganizing. to sellth, they agrees their hotel and theme park efforts for almost $10 billion. the recent headlines about sexual harassment at google and the gender diversity have put behavior on the first page. google has struggled with a string of incidents, and worked swiftly to fire an engineer who questioned women's ability to work in tech. sandbergcoo sheryl said companies and employees must step up to the plate. sexual-harassment has been around for a long time in every industry. it is abominable that it still exists in this day and age. people know better. it is great when people lose their jobs when it happens because that will get people -- it is a leadership challenge. there needs to be no tolerance

for it. >> global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. yvonne: thank you. betweening tensions u.s. and north korea, rex tillerson hard at work reducing the rhetoric. pyongyang still to the flames again with a new threat against guam. let's bring in our editor from d.c. say americans can sleep soundly, but you hear about north korea talking about an attack. is the ball back in the u.s.'s court. >> the ball may be back in china's court. china was one of the audiences of trump's remarks yesterday. it puts into a pattern that is more familiar with the blunt talk from the president, followed by soothing words from a cabinet official.

the u.s. is leaning heavily on china to put the pressure on pyongyang. that will be stopping, short of any military confrontation. it remains to be seen whether kim jong-un is able to follow through on his latest threat. yvonne: what has been the reaction from asia in particular? i think a lot of the asian countries, allies like south korea and japan, were caught offguard by comments from trump. did tillerson do enough to calm parts of this region? a bit ofeems to be discounting of the president's rhetoric. south korean officials were trying to put a calm face on it. in japan, a senior official told bloomberg news they did not take seriously the threat the u.s. made.

whether or not the threat from kim jong-un is more serious remains to be seen as well. betty: it does. we will see how this plays out. i imagine the next few days, few weeks. what is next in these tensions? what is next to watch out for? joe: the next step will be whether north korea fires off a missile, whether they do something provocative, short of a strike on guam. there are a number of things they have done in the past, attacks off the coast of the korean peninsula. to formld sneak across a kidnapping. but something far less than a military strike. they know that escalation will end badly for them, even though it will cause quite a bit of pain for u.s. allies. betty: joe, thank you.

we will continue to monitor this with you. su had mentioned, stocks, very little change. u.s. officials are trying to ease concerns around our conflict with north korea. ramy inocencio has a different perspective. he has three charts you need to know today about this conflict. ramy: i want to ask whether you're in the market for risk if you are losing your appetite? if you are not in that market, taking a look at g #btv 5232, you are not alone. this is the risk on, risk off index, a bloomberg exclusive index. come to the right. we are at the marker 35.46. this is its lowest in a month and a half. because of the war of words with u.s. and north korea. what is involved in this index?

it involves six stock indices and five sovereign bonds, two currency indicators and two commodities. most are correlated positively to risk and risk appetite. if there is less risk appetite, these will be falling. negative correlation means there is interest in safe havens. we have not seen a moving. let's go into g #btv 7722. it says investors are flocking to safe havens. in the past few days we have seen interest in gold. it was in the yen, both traditional safe havens rise. over the course of the last month, gold has jumped $77. the yen is at a two-month high. what could this be, moving ahead? the price and fund managers saying they are looking to get out of risk in order to get into some safety. these are some of the charts. i will send it back to you.

yvonne: we will continue our conversations throughout the morning on north korea. working with director john park. he joins us next hour. ahead, we speak to the blackberry ceo, john chen. joiningbe in indonesia, us at 8:30 eastern time. this is bloomberg. ♪

betty: this is "daybreak asia," i am betty lou in new york. man in and i am yvonne hong kong. central banks making headlines. held for the fifth meeting in a row. in the philippines, the new governor.

the odds are increasingly against the fed hiking next month. said, steady as she goes. -- we havewe are pretty good rates right now. weekend that leave them how they are in see how the data develops. betty: pretty dovish. they will start a gradual process to shrink the $4.5 trillion balance sheet. let's talk about this with a strategist. christina, let's start with you on the market view of this. if we get a more dovish fed, they will start shrinking their balance sheet. how will that affect the markets? what are they pricing in right now? >> there is still a huge question mark how the market

prices. that may change as the reality of balance sheet normalization prevent -- present itself. is there denial going on? onthere is assumption based what chair yellen has said that this could operate in the background. while the fed focuses on rate hikes. in fact, it may not just operate in the background it might be a disruptive force for markets. betty: what would be disruptive? they have been talking about this so long. >> they have been talking so long about it. they basically think that everybody knows what we are doing, we released a schedule. but nobody knows what is actually going to happen. it is uncharted territory. will do this tapering

off. betty: what could go wrong? yelena: the markets couldn't react abruptly if something happens to the dollar. it makes a reaction. interest rates react to that. anything could happen. kristina: i harken back to the taper tantrum of 2013. the start ofent of normalization could disrupt markets in some ways and send a shockwave. betty: so far, do you think the fed has done a good job managing expectations? kristina: absolutely. but there are great unknowns when it comes to the fed. theave a few open seats and potential of a new fed chair in february. so much of the confidence around what the fed is doing is centered around the current members. that could change. --et yellen is

yvonne: it all comes down to inflation. he is one of the inflation doves. we have seen breakeven rates signaling inflation expectations are rising, and a bump up in commodity prices. how important is it when it comes to cpi? yelena: the data on cpi is crucial, obviously. so far, we saw deceleration in inflation data. says inflation is not going to rise, even if the unemployment rate declined significantly further. he spoke earlier this week and presented this table. it shows even if the unemployment rate goes down to 3%, you won't see much of a pickup in inflation.

only be 1.8%, which is below the fed's target. there is something wrong with this model. we need to go down to 2% on the unemployment rate, to get to the fed's target. i think we will probably not get 282% unemployment rate. yvonne: doesn't seem like the case. it is interesting, our equity analysts are talking about how we have not seen the four horsemen when it comes to corrections. what would likely lead to the said deposit? at the moment, volatility is low, high yield spreads tighten, unemployment still falling. can we still rest easy? kristina: i do not think so. there is the potential for a perfect storm or imperfect storm.

we could have a few event seconds buyer to shake confidence. i am thinking of a debt ceiling crisis or government shut down this fall, as well as geopolitical risks growing regarding north korea. there is a lot that could potentially derail the stock market. betty: there absolutely is a lot for investors to digest. before we go i want to bring in a chart of my bloomberg, g #btv 240. we are talking about inflation and the fed mandate with the jobs market. the low unemployment rate has as low as it is going, not inflating wages. here are the average hourly earnings in blue. it is almost like they are going to intersect at some point, right? what is the level we will get? not think the relation between unemployment rate and inflation is broken.

it is just that the phillips curve is really flat at this point, but not broken. in this business cycle, we see -- in wages. we look at employment to population ratio. it seems like a better indicator in the cycle. [indiscernible] it has been only very slow improvement. betty: thank you so much. plenty more to come on "daybreak asia." this is bloomberg. ♪

yvonne: a quick check of the latest business headlines. assembling a team of dealmakers to refocus the group's broad

range of interest. 1/3 of their 100 plus groups could rebound. consumer and retail businesses bring infrastructure together to pull units under one umbrella and combine tata's interest in tech. betty: they continue to offer incentives to win buyers as sales growth slows. rover postednd profits. that includes a one-off credit related to retention plans. deliveries rose at 4% last quarter, due to weaker demand for suvs. yvonne: volkswagen facing resistance. a short list of fivea short lise due to submit amounts next

month. but other things may derail the process. it is valued at $1.8 billion.

yvonne: 7:30 a.m. this morning in hong kong. minutes away from asia's first major market open. betty: quite cloudy there. it is 7:30 p.m. wednesday in new york, where markets close slightly lower, based on those tensions. in particular, the geopolitical tensions with north korea. a beautiful summer day in new york. strange to think it is almost over this summer. i am betty lou in new york. yvonne: i am yvonne man in hong kong. you are watching "daybreak asia ." >> north korea has called

president trump bereft of reason and threatened guam. the secretary of state rex tillerson visited the island, attempting to ease concerns that they are headed toward military confrontation. i think what the president was reaffirming is, the united states has the capability to fully defend itself from any attack and defend its allies, and we will do so. the american people should sleep well tonight. president trump has unleashed a twitter attack on majority leader mitch mcconnell, suggesting he is a political novice. presidenthas said the has excessive expectations and set early deadlines. trump wrote, after hearing seven years of repeal and replace, why not done? mcconnell declined to comment on the tweets. invaded-- of the fbi

the home of paul manafort. we are told investigators collected and took away certain items. it happened under the weighting investigation as to whether the trump campaign colluded with russia during the election. manafort matt forte -- cooperated with the fbi. the surprise announcement affecting the recommendation from the regulator staff to give the deal the green light. it drew opposition from congress and criticism from president trump on the campaign trail last year. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. yvonne: we are counting down to major market opens in the asia-pacific.

let's get to our global markets editor, adam haigh, live from sydney. kept it steady. we do see a bounce in the kiwi dollar. what is the main message we got from graeme wheeler and co? adam: they kicked off fx trade in asia this morning. largely keeping the picture the same as before. just a slightly less dovish tone, giving pop to the kiwi. some went into the meeting expecting they may use the opportunity to give a little bit of a talk at down to the kiwi dollar. that did not happen and just flushed out, just up 2/10 of 1%. we're looking at the same position from the rbnz, and the next rate hike, they think it will occur in the third quarter of 2019. some ways off from where we are today.

that is helping support the kiwi. betty: i am sure the biggest fund managers are warning investors it is time to reduce the risk. what are there specific concerns? adam: this feels like a common refrain from big managers. in position,ies they are paring them back. let's start with pimco. they want to pull back -- pair back u.s. stocks and that. -- debt. they still have a tilt to risk assets better paring that back a bit. another large manager in the we, is morero aggressive in terms of lowering their stance. and in some of their equities

portfolio, they have this smallest -- the smallest equity position since 2000. this week, we have heard from big money managers, including blackrock and double line. many concerns are around extreme valuations and pockets of the market, and an overall feeling that a lot of markets are expensive at the moment. if you are prepared to pay up for those valuations, some at this point aren't. the important thing to notice here in a week that has been characterized by an uptick in geopolitical concerns, is that it is not a case of large managers running for the hills and slashing massively their equity position. it is a small dialing back of risk, given outstretched valuations are in many markets. betty: adam haigh on the

markets, and the sentiment there. let's get back on wall street. investment bankers expecting hefty gains this year. traders may have to steel themselves for little increases. associatesom johnson shows a pronounced diversions between bankers and traders. the traders seem to be losing out. >> yes, as they have for the last few years, losing out to banker colleagues across the aisle. johnson associates is predicting, if you are in an underwriting function, you could see a raise on your bonus of 10% to 20%, which is quite great, versus some of the fixed income and traders, maybe 0% or up to 5%. for equities traders because they could see a decline

of 5%. that is what johnson associates are telling us now. betty: income traders have at the worst? laura: no, the equity traders are worse off. but it is tough. if you look at what we forecasted, it is looking even worse for the fixed income traders. they have been bearing the brunt of some of these downfalls. goldman sachs down 40% in fixed income trading. bank of america, j.p. morgan, not doing as well, either. these revenues always help inform what the conversation will be. of course you will have a little bit of a downturn. much different story than we saw from last year, compared to numbers now? how different is it? laura: it is not, really. i looked back to a story i had written last year, almost the same day in august.

the prediction from johnson associates, to fall for fixed income trading, 12% to 15%. worse than what we are predicting this year, which is a flat, up 5%. it is still not what you will see from underwriting banking colleagues, which could see increases of 20%. that is where we have seen the underwriting markets go. bankers on the underwriting side of done a great job the last couple quarters. keep in mind it has only happened through the year. we could see things shift around the last two quarters. let's place the focus back to china, the debt mountain has been characterized as the original sin of the financial system. let's dig into this more with o'brien, who- emma

is in hong kong. the unsustainable debt levels we see in china -- give us a progress report on where we are going now with beijing's campaign on deleveraging. how bad is it now? there was a realization around april, may, where we saw an uptick in the flurries of regulations coming out about this, and the rhetoric. the economy has gotten to a point where they decided, we can do something about this. we are talking about a leverage pile more than two times the size of china's economy. it is not a looming, horrible problem. but it has to be dealt with when you talk about off-balance-sheet shadow banking. did puts us at trillions of yuan. the shadow banking sector. what we tried to do in our analysis is break it down, see where the pressure points are,

see what we're dealing with to see how they will be tackling it. basically said they have only scratched the surface. emma: basically. so far they are not deleveraging. some of the areas we looked at, bank loans to nonbank financial institutions, even wealth management projects -- products, are still going up. the one area they have tackled, because they have been dealing it -- dealing with it since beginning of the year [indiscernible] perhaps the biggest component here, tell us more about that. how have they been able to grow so big? they are over

28,000,000,000,001 -- 28 trillion won. that led to an explosion in borrowing. they have a system in china where banks do not make it very attractive, public rates are kept low. and an explosion in wealth, public and personal over the last decade. there is a lot of money, and people need to know where to put it. do you put it in a deposit 1%? or do you want 4% or 5% and a wealth management product? in the bondis market, but it is quite risky to get those higher returns. there are lots of popular investments for chinese to put their money. this is why it is grown so big. betty: indeed, it has been put

on the radar. president xi has thrown his weight behind this deleveraging. what is the progress? emma: credit growth has slowed. we have seen that in the data that is come out. down, we arek it probably only seeing deleveraging and purchase agreements, areas like certificates of deposit, which are really key source for smaller banks that are not able to get access to loans in china. they have continued to rise. they may bump down once the deleveraging rhetoric wraps up. but they started to rise again. as i said, these loans to nonbank financial institutions still rising, as well. shadow banking, a catchall word for a lot of things, they are

still rising as well. not really deleveraging as yet. the market seems to have got the message, and things are not growing at the rapid pace they were. betty: thank you for joining us on this original sin china has with the debt. bitcoin hits another high. we will see how it is harder for institutional investors to ignore the cryptocurrency. this is bloomberg. ♪

betty: this is "daybreak asia," i am betty lou in new york. yvonne: i am yvonne man in new york. bitcoin at 25% this week, gaining momentum with the decision to upgrade at the start of this month. let's talk more about this and

the outlook for cryptocurrencies. the ceo bobby lea joining us here in the studio. great to have you. we weathered through the split last week and now we see bitcoin back to record highs. what you thinking in terms of the price and where goes from here? are we getting to 4000 or back below 2000? >> the higher price is in the future of bitcoin. we are in the ninth year. in the grand scheme of things, bitcoin is still a baby furl asset classes. they talk about bitcoin as a new digital gold, as gold 2.0. despite reaching all-time high, it is only at $55 billion of worldwide of value. yvonne: what will drive it? the early adopter enjoyed the sharp appreciation. but it is hard to tell with no way to predict it. bobby: there is.

we have many different asset classes in the world, from real estate to stocks to bonds and currencies. they are all it trillion dollar levels. gold itself is at $7 trillion. billion is less than 1% of the gold out there. gold, as atute for new digital asset class, bitcoin has more room for rice appreciation. -- price appreciation. betty: i am curious about it coin mining. bobby: this is something we anticipated many years ago. mining bitcoin is no different than mining gold or other commodities. it appears russia will do it. there will be a race were different countries start operations to mind bitcoin and hold it as their foreign currency reserves.

this will come in the next 5, 10, 20 years. betty: what impact will it have on the price of it -- of bitcoin, demand and volatility -- but also, the chinese miners? betty: china has a lot of bitcoin miners. over 70% is done in china. it has to do with the availability of bitcoin mining shifts. people call it a miner split last week. how do you see november playing out? it is expected to be activated. do you see another split then? bobby: we will see. the split last week was not anticipated. we only heard about it one or two weeks -- with one or two weeks of notice.

the new york agreement was reached in may. , the activation, which locked in yesterday. that should take effect in two weeks time. in november, the plan was to change the size itself to go to two megabytes. recently, with the split off of bcash, we willr have to figure out what is the next step. yvonne: what is your view? nowt it was ethereum, bitcoin cash. is this the right way to introduce it to the masses? bobby: the first, the very first 2009.tcoin, a came out in ethereum came out later. the value has gone into the multibillion-dollar range. this is how it is.

because it is open source software, decentralized, there will be more than one. there are over hundreds of digital currencies out there. this is the new world, where money is not just issued by central banks, but uses a digital asset, a token around the internet. tohave different choices choose from, they are all competitive to each other. thank you.by lee, you have breaking news? betty: i see the numbers trickle out from japan. machinery orders coming for the month of june. a decline of 1.9% for june. that is far short of what economists had estimated in terms of the gain of 3.6%. it presents a rebound from the sharp drop we saw in the prior month. another decline in machinery,

month on month. year on year, a sharper than expected fall at 5.2%. on the inflation front, ppi numbers month on month up 0.3%. that is slightly above what economists had estimated. it is an improvement from the 1/10 of 1% gain we saw. the year on year gain is also above what economists had estimated at 2.3%. you have machinery orders, concerns in japan. inflation continues to pick up slightly. you can get a roundup of that story and many more to get your day going in today's edition of daybreak. bloomberg subscribers go to dayb on your terminal. you can customize your settings so you only get the news on the industries and assets you care about. this is bloomberg. ♪

♪ ,"onne: this is "daybreak asia i am yvonne man in hong kong. betty: i am betty lou in new york. charter communications may receive a bid from a european telecom company. an offer is being discussed. charter has other suitors, including softbank, that wants to merge with sprint. they have lined up $65 billion to do so. they rejected softbank's initial proposal. 21st century fox is thriving financially as it survived allegations of sexual harassment at fox news. this is thanks to the strength of its cable business. billion, a6.75 fraction below forecast. there were gains in ad sales.

projectionyear and from johnson associates says investment bankers can expect hefty bonuses, but traders may have to settle for little to no gains. today, they have boosted investment and in -- at banks. incentives and equity trading nearly flat. they might even fall. yvonne: the recent headlines on sexual harassment at uber and the gender diversity row at google has put it on the front page. google work quickly to fire an engineer who questioned women's ability to work in tech. sheryl sandberg said companies and employees must step up to the plate. >> sexual-harassment has been around a long time in every industry. it is abominable that it still

exists in this day and age. people know better. i think it is great when people lose their jobs when it happens, because that will get people to not do it in the future. this is a leadership challenge. as the leader of a company, there needs to be no tolerance for it. no one should go to work in face this. >> what is your advice to the next leader of uber? >> people respond to what is tolerated and encouraged. a greatly are can change the culture of almost any company and situation. you put in new policies, have new procedures, the language is different. i am always optimistic. >> one uber investors said he would die to have you in that spot. why not? >> because i love facebook. i love our new mission, about building community, and i love the community that is this company. something ithis,

deeply believe in, with my best -- with one of my best friends, mark zuckerberg. just prevent sexual-harassment, we can do better. betty: sheryl sandberg speaking exclusively to emily chang. plenty more to come with asia's first major market open moments away. we are watching the opens in australia, tokyo, korea. yvonne: we had japan machine orders coming in short of estimates. yvonne: it certainly was a big mess. we saw the dollar-yen bounceback lower. about 110. that could be a good boost for japan equities. we are expecting a risk off tone. theseto be halting tensions in the u.s. and north korea. open will be the key

thing to watch, and the kospi. toh more as we look ahead the korea defense stocks and yuan. this is bloomberg. ♪

♪ >> north korea stokes the fire, threatening a for missile strike on guam. they say president trump is bereft of reason. markets remain muted. theasia-pacific will halt flight to safe haven assets. , viewersury fox demanding more cable news. estimates, launching half $1 billion drive into online finance.

is the second hour of daybreak asia coming to you live . i'm is on -- yvonne. betty: i'm betty liu. we are watching how the headlines coming out of north korea are affecting the markets. asia-pacific is headed lower. we have japan numbers coming out, machinery numbers worse than estimated. inflation a little touch higher. we are looking ahead to our exclusive interview with a blackberry -- the blackberry ceo , joining us from jakarta, as he discusses the companies shift -- company's shift to services. deeper intooking

blackberry, indonesia is a big market for them. crackberryill on the . that is still very popular in indonesia. yvonne: we are going to watch that. popular, which i thought was fascinating. how things are looking in the asia-pacific, i have some closed .arkets looking ahead to the market opens coming through now, we sell the risk off day in the with a whimper on wall street after we got comments from rex trying to backtrack what president trump said about fire and fury on north korea. we did get those comments from pyongyang talking about some type of attack on want. we are seeing dollar-yen. machine orders did miss estimates.

we are sitting around 110 territory now. nikkei, 1.3% lower on the nikkei. try to update this now to include the settings market. and a policy decision from new zealand. no change there. no rate hikes in particular until 2019. the key thing to watch is the key way. that decision, the less dovish statement and what the traders were hoping for. we did see relief when it comes to the currency. korea is going to be the key one to watch. we have seen tension in the korean markets. look at the corporate default spreads. one of the worst performers in

the currency is week. is an hasn't exactly spread to the treasury market just yet. we do save relatively speaking, do seem relatively speaking, they usually track in here. that has since changed in the last couple of days where we do see higher yields in korea versus u.s. treasuries. something we have not seen in some time here. the president's chat with kathleen hays, talking about lower inflation may be weighing on yields from going higher. of quality has stayed moderate at best. this could be a directional change for where year notes --

yields are going to go. betty: let's get the first word news with roslyn. jumped.iwi dollar governor graham wheeler says worries remain about gdp growth, which was lower than it in the march quarter. remain forlicy will a considerable time. >> inflation is likely to decline as the effect of higher prices dissipates. monetary policy were main accommodative -- will remain accommodative for a consum a considerable period. >> a four-year loss of aussie dollar's with an underlying pretax loss of 3.7 million.

it is forecasting improvement on a year and the first quarter. the airline is part owned by age and a -- agent a. considering a shakeup of the hotel units as part of an overhaul of the following group. wonder hotel made by the equity interest of wonder culture travel group in a deal worth 940 million dollars, reorganizing after coming under officials scrutiny. it agreed to sell its assets for $10 billion. the recent headlines about sexual harassment at uber and the gender diversity row at google have put work place behavior on the front place. google fired an engineer who question women's ability to work in tech. in an exclusive bloomberg

interview, sheryl sandberg says companies must step up to the plate. quick sexual-harassment has been around for a long time in every industry. it is abominable that it still exists. people know better. it is great when people lose their jobs when it happens. that is what will get people to not do it in the future. this is a leadership challenge. there needs to be no tolerance for it. >> global news 24 hours a day powered by 2700 journalists and 120 countries. this is bloomberg. our top story remains the growing tensions between the u.s. and north korea. rex tillerson has been hard at work reducing that rhetoric. pyongyang stoke the flames with a new threat against qualm. -- qualm -- guam.

three charts you need to know to get your day started. >> i want to look at risk appetite. a look, we are seeing this fall over the past few days in terms of risk appetite. an exclusive index we've got here, taking a look at .ommodities and stock indices we are at 35.6. ahead, this could fall for word. -- forward. off of that, you talk about safe havens. 7722, we are seeing this flight to safety here in gold and the yen. gold is up $77 over the past month or so. similarly with the yen at a two-month high, around the one.

10 mark. mark.10 one thing i want to take a look at, this is volatility. there might be more volatility based on a 20 year moving average. this is btv 197 312 percent over the past 20 years. -- 197. looking ahead, it looks like in september, 8.2% for the average ,s the second biggest jump looking at a 20 year timeframe. in this month into next. yvonne: let's take a closer look at north korea -- north korea's rejection of negotiation with the u.s.

boston, therom harvard kennedy school. from hongbring in kong, our asia government editor . let's talk about what we have seen in the last 24 hours or so. the rhetoric has been ramping up. president'sis the rattling?stable -- sable rattling? >> in south korea, the presidential office said there is no immediate crisis. in japan they said we are not taking this seriously. this is trump being trump. -- at the same time north korea had specific --

we are going to fire missiles 30 come all at her stash kilometers 30 kilometers of of guam. there is a risk of provocation from north korea that could escalate rings further. -- things further. likes has the president painted himself into a corner, provoking north korea? there is a chance if he does respond, things will escalate quickly. there is a question of credibility for the president. hours,e is now after 24 the initial statements he has made, a nuanced explanation of what he meant. secretary mattis, the secretary of defense did that earlier on the east coast. there is the effort to dial it back. we are not seeing this communication.

this is unprecedented. previous presidents made statements after very intense internal dialogue and communication. the fact that we have the leader of the united states making these statements, then sometime after word, an effort to clarify, that is troubling for analysts. >> it is troubling. is all of this -- what is the likelihood of actual military action to follow? when do we get the point where there is a point of no return? abnormalisn't any extraordinary mobilization of military forces. coming up is a u.s. south korea military exercise. you are going to have the deployment capabilities there. if there is another statement that comes out of the blue, that is the area we are concerned about miscommunication.

>> particularly in south korea, what is the feeling now? it feels very disturbing and then comfortable here. what is the press saying? >> south koreans are used to this kind of thing. hearing it from kim jong-un. the rhetoric is coming from the president of the united states. seoulardened people in are beginning to say what is going on here? am i too blasé? there is a bit of unease. we have seen the allies reinforcing trump but at the same time it is raising questions within these countries, is the u.s. going to be there at the end of the day?

we can start a war in northeast asia as long as the american homeland is safe. >> we were talking about what russia rollshes -- were. >> china has been can distant. they have been proposing a freeze for freeze, asking both sides to take a step back. they did release a statement urging no escalate tory rhetoric. they did just agree to the un's sanctions. china is trying to get both sides to the table. >> what sort of action could we see other countries taken all of this? >> other countries are alarmed. the next ones are between the

united states with their south korean allies. we are concerned again about the alignment of stars and miscommunication with these large-scale deployments. , i want to thank you for joining us. >> our exclusive interview is next. this is bloomberg. ♪

>> this is daybreak asia. betty: continuing the earnings.

21st century fox in the spotlight after the l. fox made news when its own staff became involved in high-profile scandals. this is partly addressed in a statement. su keenan is here with the latest. su: this is a big piece of the murdoch mediart empire. they issued a written statement that they are embracing diversity. part of the scandals that hit talks had to do with sexual discrimination lawsuit, sexual harassment lawsuits. all of that hurting the company. let's take a look at how they did. there actually rising. this stock has been relatively flat. let's go into the video. what they are reporting is a product.urth quarter

political turmoil has been very good to fox. all the political debate about trump, the investigation into russian influence in elections dominated the trump presidency. it has caused a big increase in viewing. if we look at the scandals, bill o'reilly was let go. suspendedst has been because of sexual related allegations. it continues to have this issue. part of the statement issued was that moving forward we aspire to put a it are focused on embracing our differences. we are committed to being an organization where anyone from anywhere deals welcome and can thrive. does insee how it thursday's session. >> thank you. the st. louis fed prayers

boasting concerns about the bath -- at the rate hikes. why he thinks the fed should hold off on further tightening for now. >> i think the idea that there is a lot of growth around the is not thehe u.s. right model to have in mind. there are attempts in washington to push up the growth rate. i applaud that. but so far, not too much has been implemented. it would take a while to have an effect, probably at the earliest he second half of 2018 and 2019. where we are thinking in terms of 18 months or two years, we are not going to move too far off the 2% growth path. standk it is wise just to pat on rates for now.

>> stand pat on rates but full speed ahead on the balance sheet. you said september. for the longest time, when the fed stopped buying bonds, the mayor presence of a big balance sheet is stimulative. the fed is going to let it shrink. you are removing accommodations. i guess you could call it a tighter policy over time. why are you in favor of balance stimulus butng against a rate hike? >> i would have started reducing the balance sheet first been raised interest rates later. the committee did not do that. the we have managed to get discussion going and, with a good plan with how to reduce the size of the balance sheet. slow thatncremental

it is almost nothing. you are starting from zero and barely rolling forward over the next year or so. very good atis a also, go about this and you can create some policy space for the future if you ever needed to go back to balance sheet policy in the future. reducing during relatively good times. i think it is a good approach. if we go ahead and do it in september it will be almost negligible initially and build up over time. >> that was the fed president speaking with kathleen hays. much more ahead. the hong kong stock exchange, he can it when the world's biggest can it when the world's

biggest ipo? the world's biggest ipo? ♪

betty: this is daybreak asia. yvonne: hong kong exchanges and clearing has the second quarter profit of $230 million. a 14% increase. bolstered by a surge in training -- trading and the number of listings. wasetty decent result, what the driver of all that? >> we have seen hk benefited from the strong surge in equities globally. one of the best performers in the first half. it has definitely helped on the equities trading side. >> you kind of see that when the stock goes in tandem with what

we see with the rest of the market. the exchange really high hopes when it came to the derivatives business. it's all revenue fall from 22% in the first half. ?hat is the response >> they blame the low volatility few months, it was a surprise. it seems to underpin the lighting in green hong kong. that is going to be the big challenge for the exchange. charles williams said he is unlikely that they will win the rpl, which has all of the exchanges salivating. what is the latest on this? been seenng has not

as the top favorite to win the ipl. -- the ipo. without that in place it will be difficult if not impossible to win the bid. they will continue trying. he did not sound hopeful that it would happen. >> all right. bit aboutlittle earnings, coming up next, speaking exclusively with charles lee later on in the show. sydney.. in and how markets are trading in the pacific. we are seeing the upside on a third of 1%.

the ss 200 continuing to buck the trend. this is bloomberg. ♪

>> it is a: 30 in singapore. 8:30 in singapore. betty: a great summer day. let's get to the first word news. >> north korea has caused president trump -- called president trump bereft of reason. they attempted to ease concern the u.s. is heading towards a military confrontation. tillerson said people should have no worries about the level of violent rhetoric.

the president was reaffirming is the united states has the capability to fully defend itself and defend our allies. we will do so. >> president trump has unleashed a twitter attack on mitch mcconnell suggesting he is a political novice to expects things to move faster than congress can deliver. trump wrote after seven years of hearing repeal and replace why not done? mcconnell declined to comment. the fbi has raided a home owned by paul manafort. the operations of the house in investigators will weigh certain items. the rate happened under the investigation into whether the trump campaign colluded with russia. a spokesperson says mena fort

cooperated. the sec delay a decision on whether to approve the takeover of the exchange by a group led by china. surprise announcement overrides a recommendation to give the deal the green light. they drew criticism from president trump on the campaign trail last year. by 2700ews powered .ournalists and analysts when this comes to equity, this risk session we have seen a wall street, we are seeing divergence when it comes to what we are seeing in the nikkei. yesterday, oneop of the biggest losers in the region. yen, easing a bit as

well. the risk aversion moves has been more short-lived. a bige orders missed in way in the vs month. we are seeing it back above 110 territory. south korea going to be the big focus here. down 2/10 of 1%. one to watch year as it continues to weaken, the worst performer we have seen, given these escalations. -- no change in policy. less dovish in their statement. they didn't talk down the key we too much. the aussie sitting three comfortably.

as we do focus today continue to watch. we solve the drop that did offset some of this unexpected rise in gasoline supplies. some decent moves overnight. taking a look at the weakness in singapore, down 2%. could be leading to some of the .osses in the wider set up copper and the soft commodities as well. japan movers as well, some big moves when it comes to the tech names. toshiba is one of them. we are seeing it up one of three quarters of a percent. they said they were going to be cutting off future supply of chips. toshiba tries to selloff its prize chips business. the other is bridgestone nudging their forecast closer to

consensus. have, this upset we is a cosmetics company, listing -- listing their profit by 23%. certainly seen some growth here in japan. before we go, we continue to focus on korea as well. the defense stock is going to be a big one to watch as well. pretty mixed picture here. lawn -- one, if you take a look at these charts, btv, this shows the risk sentiment overall. we won't show it. but it does show we are at the risk levels now. perhaps there could be some

upside for the currency in general. incredible resilience in the face of tensions. thanks so much. haschinese pioneer sena launched a fund. it is going to work with startups and established companies. i want to bring in bloomberg asia tech in beijing, david why are they making this play? said, they were one of the hugest players in the early days of the internet. people move towards their mobile's more and more. that is having an impact on their advertisers on their network. this is an opportunity to try wide --rate new money from what is a burgeoning sector in china.

-- at's switch over negative outlook for offering these kinds of services. >> absolutely. it is a risky area. you are offering loans to people who often never gotten a credit rating from a bank. what they are hoping it is the data they have collect did, the twitter of china, it is worth twice as much as china -- as twitter these days. they are going to give individual credits doors -- scores -- credit scores to lower the risk. those earnings out, i was coming up short when it comes to earnings. >> that is right. we will see more details when the earnings call comes up in 25 minutes.

generally some shortfall in e-commerce is largely to blame for less gross profit than expected. they have been moving away from pc games towards mobile games where the margins are not as healthy. we will have to see what the impact was caused by. >> thank you so much. some of the chinese internet companies. nearly a year ago blackberry stopped making handsets to focus on software. .he stock has jumped 18% still be devised retains a loyal following and remains popular in places such as indonesia. still a sticky product. john chen is there now in indonesia, jakarta. an exclusive interview, great to see you all the way across the world.

>> nice to see you. >> i am sure a lot of viewers have the lesson, why are you in here likew? >> i am you pointed out to make sure that the partnership we have struck a year ago on the messaging side and the hardware side is going well, and whatever i can do to help out. to see how we can expand our business and footprint here. we have a business that we are quite focused on. i'm trying to see what is the best way to enter the market in indonesia. >> what about the market itself? is the market expanding? or are parts of it shrinking? >> it is expanding. i split -- i was with one of the other major telecoms discussing the software business.

institutions, the government users, hospitals. many different enterprises. talking about iot. in this particular case they are looking at growing double digits year-over-year. the business is quite robust. on mobile, like your earlier guess talked about, mobile is taking over everything. when hundred 75 million mobile phones. people.million you take away that, virtually every buddy has a phone. or more than one. it is a vibrant technology market. licensing,u started the number was 6 million users. where is the number now?

some of the local manufacturers. >> i actually don't know. justocal manufacturer rolled these things out. area -- i don't have the data that i will find out soon enough. i am eating my partner in hardware today later on. >> so you will know imminently it sounds like. >> i hope so. ambition,s of your the rest of asia, whether the biggest growth markets you are looking at now? similar with partnership, we , and inen in india china with tcl. indonesia, and not in india. ourill continue to expand

footprint. anything that has an ip address. we are not think people in career. -- in korea. people in china. we already have a footprint in singapore and indonesia. you can see heavily investing in the channels. betty: you mentioned korea. had, the headlines we have does that -- do these tensions give utah's on business in south korea? tensions give you pause on business in south korea? >> i am an optimist. i think it will work out. i really do. i think in this day and age,

with the tension, the world, this is a point of no return if either side hits more aggressive. willa believer that they arrive at certain peaceful resolutions. at least i hope so. to economy will continue grow. i really do. ,> you are going to these areas markets, a lot of it looking at the enterprise mobility business. the enterprise of things is what companies are looking at. with blackberry, i am curious how you are competing with the others offering the same types of services. the microsoft's of the world. ibm. how do you compete and say come with blackberry?

>> that is a great question. it comes from two areas. we have a very good brand and a lot of great technology. lots of patents. 30 years insecurity. the governments all know about blackberry. i don't have to explain what blackberry does. everybody knows that. you want security, we are high on the list. combat the deep pocket of many of the people that you spoke about, i like to use local partners. i hope i hope i'm taking the advantage that every country wants to expand their i.t. business. every government wants to see that. so i am offering that. my competitors and peers tend to go more direct. i guess because they can. are,ieve where we

providing good technology, hoping to help governments to create jobs in the tech sector will give us a leg up in being more competitive. betty: just really quickly, before we take this break, as you are touring through asia visiting not only your partners, but your clients and potential clients, are you looking at any acquisitions? are you looking at acquiring ip? >> i won't rule that out that i really can't comment. >> ok. >> keeping your options open. hang on with us for a moment. back with the blackberry executive chairman in this exclusive interview. this is bloomberg. ♪

>> this is daybreak asia. betty: earlier this week the u.s. that it would impose duties on imports of aluminum foil in china. it could ratchet up trade tension between the two of the world's largest economies. those tensions have been rising. back with this, john chen, quite vocal about u.s. trade policy. us with this exclusive interview, before we get into talking about the things going on in washington, specifically around trade and immigration, i want to ask you about the patch should bring up not just of tensions of north korea, but many countries out of the white rapid comments coming up from the white house and from trump himself. are you losing confidence in what is going on in washington? is that affecting business?

>> no. i am not losing confidence in washington. this discussion will always end up leveling a new platform. times, asmany president trump got into the white house, he wants to reset some of the roosts. i am not quite sure whether those are good for both or either side. the conversation about renegotiating a and of nafta, i am more focused on that. u.s. china, eventually they will get to a point like to business people talking, to the point where you will get into an equilibrium of sorts that both sides can live with. dialogue is healthy. ratcheting up the tension is not. there needs to be a balance.

behind the scenes i'm confident diplomata seasoned working the issues. we see one part of it and there is people working the other part. this is only my guest. i'm not giving you knowledge. but i believe it is happening. the two economies that you talk about, china and the united states are unable to grow independent of each other. i think we will get to a sensible position. >> thank you for joining us. i know you're one of the many tech leaders who spoke out against president trump's immigration policies earlier this year. you were born in hong kong. what do you make of the latest plans when it comes to legal immigration?

>> well, i was involved in immigration discussion and advisory when it was president bush. of thestand the tension united states unable to provide enough size technology base talent to fulfill all the jobs and the requirement the united states has continued to grow the economy. i understand the needs of that. at the same time i also therstand the basis, principle of immigration policy is about the need. everybody wants to point out that you look at the base of what is inscribed on the base of the statue of liberty. it is about giving to the needy

and sick. and the unification of family. a balance would be a good thing. i don't understand why it has to be at the expense of each other. it is a nation of immigrants. you have good people. you want more good people. you want to help out the families to get together. say not understand why you this will never change. my assertion, if anybody asks me, we should expand the visas. impact could this have on the tech sector overall? a lot of these people at blackberry are younger, highly educated and speak english. perhaps they could benefit from this type of legislation. >> yeah. willech center -- sector

benefit. it is based on technology exports. the most of -- but the tech companies are global. especially where you want to have a fair market president. like in indonesia, the minister said the most important thing is the president. i was getting advice from him. all that is good. i'm not sure this is a tech exclusive thing. this is a more more philosophical thing. inif we can get back to just the limited time we have, back to your business talking about the auto market. i don't think people know you

have 65% of the connected car market right now. the auto market seems to be stalling. is that going to affect your growth in that area? >> it will take a while. the major move is getting more function in cars. don't get this, you the revenue until a year later. model. later on revenue i am very confident in the market. today everybody is thinking of focusing on autonomous vehicles, the level five vehicle is going to come out in 2021. there are policy changes that need to go with it. a huge topic. that i am not concerned about that market. betty: what did you think of the model three unveiled by tesla? >> i have not seen it myself.

can't really comment on it. it is very affordable, i suppose. betty: thank you john chen. interview, youve can get much more ahead on daybreak asia. back in a few moments.

>> that is almost it for us. time for a wake look -- time for

a quick look. exclusive coming up in an hour and 10 minutes. the exchange came out with some good numbers. what about capital controls, how woul is that playing out for them? what about m&a in the future? andrew collier says china is taking on the original sin of the mandolin debt. that is a couple of things coming along. betty: thank you so much. that is it. bloomberg markets is next. this is bloomberg. ♪ we check our phones 85 times a day.

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david: you are now both former presidents. mr. clinton: no one plays a song when you go in the room anymore. david: what do you say to each other? when is: generally, this program start and what is it going to end? mr. clinton: give shorter answers. david: first a you are in the oval office. mr. clinton: it really surprised me how easily i could be turned into a two-dimensional cartoon. saidush: my dad, he welcome mr. president. and i said thank you mr. president. david: people wouldn't recognize me if my tie was fixed.