♪ betty: president trump turned up sayingt on north korea, perhaps his fire and fury message was not tough enough. yvonne: the rising uncertainty winner,uced an unlikely the yen, the winner of 30 currencies. betty: snapchat plunging an extended trade as growth fell short. competition from facebook is taking its toll. yvonne: the rise of the detail means clouds are

gathering over stores. but there may be a silver lining. betty: this is "daybreak asia," live from bloomberg's u.s. and asian headquarters. i am betty liu in new york where it is just after 7:00 p.m. yvonne: i am yvonne man. attention in the korean peninsula with duck -- with president trump doubling down on rhetoric in pyongyang. an ugly day ine asia after ending the trading day rough. pretty strong declines. we have been remarking how the markets have seemed resilient to these headlines coming out, whether it is on china, north korea, or russia. here we are at the second day of the big losses. it looks like the market not quite knowing how to price in these ratcheting tensions, setting you up for a pretty dismal opening in asia. there are some guests we have talked to over the last 24

hours, is this all geopolitical risk, or an excuse for investors , investments that have gone too far and are too expensive? it is a risk off across the board. i love this line, hard to price in an extinction event. something to keep in mind. betty: he does not need to price that in. yvonne: i hope none of us do. new zealand, pretty ugly for the nzx 50. we are down 1% for the index. 7.wn also is the kiwi at .726 trouble withng possible intervention. down day for stocks after the asx 200 ended the day flat on thursday. oil, wti fell

overnight despite saudi arabia and iraq strengthening production curves. in japan, equity futures, we are seeing possibly more than a 350 points drop with the nikkei 225. we see the yen strengthening for four straight days. currency. the there are new havens out there. a year ago you could not imagine this. andchinese yuan cryptocurrencies. they are now betting on ethereum as the safety net. betty: what is this world coming to come out when it cryptocurrencies might be safer than the dollar? let's take a closer look. speaking of the dollar, what is happening in the u.s. stocks,p drop in u.s.

the biggest one-day drop since may. i want to bring in su keenan. we thought it would be summer doldrums in august. but it is anything but. su: with stocks it records, strategists had already warned we were setting up for a change in direction. we talk about how the now range for the s&p got knocked out of the range. we had not seen many weeks with less than 1% change. we definitely got that in the thursday market. let's go to the big movers. earnings were a catalyst for big moves in the market. coming in with's disappointing numbers, showing retail cannot get out of the slump it is in. macy's announced a new recovery effort and it was not met with much and is he is in. afterso had nvidia down hours. let's go to the bloomberg g #btv 9336.

this is a graphic look at the negative same source sales. macy's.es are kohl's, if you look far to the right, you see a large box in terms of negative sales. in spite of rebound efforts, they are still struggling. u, let's talk about that busy after the bell reporting and that unusual situation out of nvidia. unusual, they crashed on the numbers. strong, better than expected on revenue and outlook. but disappointment, the datacenter failed. little changed from the preceding three months. there is a view that with no real growth in datacenter, that is a disappointment.

we saw nvidia down in the regular session. when you have the kind of performance your today, up 60%, it is priced to perfection. without a perfect report, investors are going to sell. you saw a little money taken off the table, which we can anticipate will be reflected in friday trade. yvonne: snap falling as much as 11% on the earnings miss. user growth continued its slow. su: a different story going into the report. snap has been far below, 19% below its ipo price. there was concern about its growth. it missed growth estimates. facebook is copying a lot of its unique features, that is taking a toll. aggressive competition from facebook is really going to blunt its growth. this was a make or break order. one analyst said it has a tremendous potential, but can it

capitalize on the opportunity? this was not really demonstrated, capitalizing on this opportunity, in its latest report. as it becomes cheaper, it will become more to acquirers, they are saying. it will be interesting to see the friday wall street trade. dig into those earnings from snap at the bottom of the hour. let's get first word news with haslinda amin in singapore. surgeda: noble saw a net by one billion u.s. dollars as trading losses and limited access to funds piled on the pressure. reaches $3.8 million by the end of june, with a $1.75 billion second-quarter loss. roots,ing to its asian the stock lost more than 90% since 2015.

benchmark is trying to get theis kalanick kicked off board. they were an early uber backer. bill gurley led the effort to have travis kalanick removed as ceo in june. nick gain deceits by hiding his growth -- is gross mismanagement at the company. robert mueller appears to be bearing down on president trump's former campaign chairman in the investigation into alleged collusion with russia. his washington grand journey is said to have issued subpoenas for financial records of paul manafort and rick gates. manaforte's alexandria -- ort's alexandria home was raided. trump is that perhaps his fire and fury message was not enough.

his latest remarks follow days of escalating rhetoric from both against a largely u.n. vote against sanctions. pyongyang has threatened a preemptive strike on guam. if north korea: does anything in terms of even thinking about attack of anyone that we love or represent or our allies or us, they can be very, very nervous. i will tell you why. and they should be very nervous. because things will happen to them that they never thought possible. unsettling has made the yuan the unlikely winner. 6.66se more than 1% to against the dollar. in january, the yuan was at its weakest since 2008.

they're concerned about capital outflows and rising optimism on the chinese economy. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. yvonne: -- betty: thank you. for more on the escalating words between president trump and north korea, bill daley is joining us from chicago, head of a swiss hedge fund. careera long and storied in washington, served as chief of staff to barack obama him and was commerce secretary under president bill clinton. bill, great to see you tonight. bill: thank you for having me. you heard comments that north korea would see things they never thought possible. what do you read into that? bill: obviously the president thinks that will somehow back down the kim jong-un. there is no one in the world,

who is rational, that does not realize the power of the u.s. military is unparalleled. it is, without question, the most formidable military. i do not think it will surprise anyone we have capacity beyond anyone else. hesitate,use one to because it is not normal for a president to draw a line, basically. ornorth korea attacks guam fires any missile toward guam over japan, that is different. but this president is different than the previous ones. betty: very different, bill. do you condone this kind of strategy? bill: the bottom line is, what works? betty: do you think it will work? bill: i do not believe it works with kim jong-un. it might work with another leader.

it surely does not work. this kind of rhetoric we have it seldomrically, ratchets down. you have a mixed signal from secretary tillerson, who was talking about face-to-face negotiations with the north koreans, with conditions. then, the president goes out and raises the level, not lowers the level, of rhetoric. betty: the other player in all of this is china, a very important player. i want to play for you and our viewers a comment president trump made about how he is using north korea to leverage the trade relations with china. let's play that. we'll loserump: hundreds of billions of dollars a year on trade with china. they know how i feel. it is not going to continue like that. but if china helps us, i feel a lot differently toward trade.

a lot differently toward trade. betty: do think that is going to work, bill? bill: the chinese do not take too kindly to being threatened. everyone knows the president ran on a very tough trade change with china. that is a given. two-putt solving the north korean problem only in the lap, and see if you do not solve this we will take a actions against you in trade, i do not know if that is a strategy that can work. the chinese will not be threatened into doing something. they did vote at the u.n. for sanctions. they have to enforce those sanctions. no one else is in a position to enforce those. but those will take a long time to hurt in north korea. whether or not the north koreans, who have proven they can take a lot of pain, with a bad economy, will respond

because the economic issues -- i think it is more nuanced than what the president is saying. yvonne:approach? we spoke with the former u.s. special envoy for human rights in north korea. for theit might be time u.s. to abandon the one korea -- the one china policy. they need to get china on board because of the fear of a unified korea is greater than destabilizing pyongyang. korea extent is the one idea not viable? bill: it does not look like it is viable right now. it is not as though we have pressed to that one korea policy. anything overne the last 60, almost 70 years, to

reengage north and south. at times, the south has wanted on their own to take steps to lessen the tension. 20 something years ago there was effort made before this new leader to reestablish family relationships between the north and south. that is probably an idea that should be put on the table. the line the president has drawn is, they are having the capacity of nuclear weapons to strike our shores, that is a redline that every president has said cannot be crossed. it looks like the north koreans are very, very close, having the capacity. it is a situation that is probably the most serious that withve had in the u.s. another country since the cuban missile crisis in the early 1960's. yvonne: stay with us, we will

have more with bill daley, former u.s. commerce secretary and chief of staff. we have big interviews to tell you about. bankhilippine central governor joins us live in bloomberg markets with his debuted late decision. that is at 11:00 in sydney. betty: we will look at the latest sing tao earnings that is it a: 30 eastern. this is bloomberg. ♪

betty: this is "daybreak asia," i am betty lou in new york. yvonne: i am yvonne man in hong kong. it is been two weeks since john kelly was named white house chief of staff. he has fired to medications director anthony scaramucci and dismissed two aides, who had

attempted to tame president trump's tweets. we have someone with inside knowledge of the workings of the white house. bill daley joining us. give us contrast on the obama administration that you served, and the trump administration you see now. how does it john kelly tame and unpredictable president trump? bill: i do not think he can tame the president. it is obvious the expectation, that somehow general kelly would control the tweets, has not quite happened. on thee comments, rhetoric regarding north korea. he has brought stability and the control in the white house with of the white house staff. them as less leaking less pointing fingers at each other, less of the infighting that seemed so prevalent for the first seven months. from that perspective he is extremely good. during thethere

crisis with north korea is a tremendous advantage for the president. obviously, the general knows the subject. he has strong relationships with the people that would have to prosecute some kind of military action and the options in the process the military goes out there. his being very this critical time is invaluable to president trump. the thought that he or someone else would change the president after 70 years of the style he has had and the success he has it.added, -- at why do think the president is surrounding himself with military men in general? is it because they take orders? bill: that is part of it. many clinical people, they are very disciplined, follow the process style. it is so contrary to the president's style.

it is understandable why your national security adviser would be a military person. donald trump has had no experience with these subjects in his entire life. he admitted during the campaign he got his news about the military from generals on television. at least there he is a knowledge in a shortcoming in trying to make up for it. betty: you were and of podcast with jason axelrod, the senior advisor to the president obama. you said you did not think trump was going to run in 2020. why? bill: i think the president will not run because he will probably see that there is a good possibility he will not win. he, in my mind, to use gambling terms, pulled an inside straight and pulled off an election that was quite surprising. even though he lost by almost 3 million popular votes, he won

the electoral college. to win that twice -- i do not think he will do that. i do not think you will risk the thought of losing and going out on a high. betty: something not helping that situation is trying to repeal obamacare. with saw earlier today president trump tweeting out, lambasting mitch mcconnell for not getting it done. -- canredo that tweet you believe that mitch mcconnell, who has screamed repeal and replace for seven years could not get it done? must repeal and replace obamacare. as always, an exclamation market the end of it. do think it is completely dead? is,: the irony of this president trump has talked about this, but he never put a plan out to repeal and then replace. betty: it is going to be harder

to do that then he realized. bill: he realizes health care is complicated. that is a big mission at this stage. it big -- it makes it very hard. he has a debt ceiling, a continuing resolution with the budget to keep the government going in september, he may have more and tougher sanctions on north korea, and there may be a tax bill. hard, especially with these immediate crises going on and challenges for congress. you were commerce secretary, how do you think wilbur ross is doing right now? bill: i think he is doing fine. he is lacking people within the agency to help them. but they put their markdown that the commerce department will be negotiating -- renegotiating nafta. nafta is 24 years old. improving it, updating it, is

needed. there is a challenge that if it did not get improved the way he wants it, he might do away with it. that is a bold statement that could have an enormous impact on our economy, the north american economy overall. betty: thank you for joining us, bill daley, former white house chief of staff and former commerce secretary. you can get a roundup of that story in more detail your day going in today's edition of "daybreak asia." subscribers go to dayb on your terminal. it is also available on the mobile anywhere app. customized settings to get the news you care about. this is bloomberg. ♪

yvonne: a quick check of the latest business flash headlines. slowing recovery from a housing scandal, they insisted there are no more skeletons in the closet.

shares rose for a fourth day. they gave a qualified endorsement of a much delayed earning. that included a net loss for fiscal 2016 of $8.8 billion, slightly better than estimates. toshiba may be delisted in tokyo. betty: softbank's vision fund investing $2.5 billion in india company flipkart. it will make mashayoshi son flipkart's biggest shareholder. amazon bossa jeff bezos plans to spend at least $5 billion on his indian market that is seen growing at 30% a year. yvonne: international and shanghai farms among the bidders for a specialty drugmaker. they are looking for a stake of 20% to 30%, $700 million. arbor is looking for a potential ipo.

management prefers to sell only a minority stake. parent missing's growth estimates again in the face of competition from facebook, instagram. this is bloomberg. ♪

yvonne: it is 7:30 a.m. friday in hong kong. we are waiting for the first major market opens. equities in the red after this escalation and the trump talks. jumping 44%.x it was a down day for wall street, overnight. betty: certainly a down day in wall street. the s&p down almost 1.5%. 7:30 p.m. thursday evening in new york. markets are in the red. i am betty liu in new york. yvonne: i am yvonne man in hong kong. this is "daybreak asia." >> the new york fed president is

more positive about the u.s. painting a picture that is improving for those in the financial crisis. they say optimism is improving for the economy. he added that he expects that to continue. next month and bets are rising as policy will announce a timeline for reducing the balance sheet. >> our outlook has not changed, we anticipate a moderate growth trend with further strengthening in the labor market, which we think will push inflation over the medium-term back to 2%. >> opec raising forecast for demand this year and the next, with consumption stronger-than-expected, and a weaker outlook for suppliers. projections that 200,000 barrels a day, even though the recovery in libya has forced its overall output to the highest this year.

opec lowered forecast for rivals, for north america, last quarter. the bank of india pay the government and annual dividend of $4.8 billion, which may drain public finances. paid more than twice as much last year, and even more in 2015. had reported the government a dividend of $9 billion. philippines governor nestor espenilla cap to rates unchanged at his first policy meeting, but slightly raised inflation forecasts. the rate was left at 3%, as predicted by all 17 economists surveyed by bloomberg. they raise the forecast to 3.2% this year and next. governor nestor espenilla will join us on bloomberg markets at 11: a.m. sydney time. in hong kong, 9:00 a.m.

google has canceled a staff meeting that would've addressed the firing of an engineer for questioning diversity in tech. the meeting was cut after questions were leaked, raising concerns employees that question might be harassed online. james damore said women are less suited to working in tech than men. his firing on monday has accused google of smearing him. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am haslinda amin. this is bloomberg. yvonne: we are counting you down to the major market opens in the asia-pacific. let's get to the global markets editor, adam haigh. volatility is back. it is showing no signs of abating. absolutely, and we have been waiting sometime.

volatility not just in the equity market, but bond and currency markets, at or near record lows for long time. iss 44% surge in the vix quite significant, and we see three times as many puts relative to calls come in chicago trading overnight. a big change. it has been spiking and volatility in asia this week. vix-stylelevels in currencies in asia. friday we will see when trading gets underway. japan closed today, said they do not get a chance to react until monday. betty: you have been looking at asia's booming bond market. why are china and the philippines missing this rally? it has been a very strong story for companies in asia,

working in the u.s. currency. the noticeable absenteeism with thailand's in philippines tells you the story of how cfo's in those countries are still fresh in the memory of the crisis from the late 1990's, which was partly contributed to the fact that they had a lot of debt denominated in u.s. dollars. it proved very costly for their economies. in thailand in thailand and the philippines, $3.7 billion. that compares the places like india and indonesia. they may be paying the price at the moment, missing out on the rally. indicative that overtime, governments and companies will be reluctant to issue in u.s. dollars. that may be a price worth paying for now. betty: indeed.

thank you so much, adam haigh in sydney. some headlines from that testimony by the rba governor, philip lowe, in front of the economics committee in parliament. comments as he is making this testimony, saying, the global economy has strengthened the since february. china has surprised on the upside, however, domestically they watch consumer spending very carefully. also noting the banks of adjusted to the new advisory requirements, and the noting what we have been talking about with australia, high debt and prices are affecting household budget. -- budgets. those are some of the headlines to the parliamentarian committee. you can continue to watch that testimony on live on your

bloomberg. snapchat's parents luncheon trading as growth fell short. that said fears that aggressive come petition from facebook is blunting snap's potential months after it went public. it is a face plant, as cory said earlier, for the stock. we have sarah frier here. snap has said it is not just about instagram. they are perhaps in denial. but it looks like instagram is the culprit in their inability to grow revenue and users. sarah: all of those things. it is really tough for them on the user and advertising side. remember that google and facebook have the majority of growth in digital advertising right now. facebook is the one copying a lot of snap's most popular features. although they have been trying to update the app with a their new snapmap to show you where

your friends are hanging out, it has not helped accelerate their daily user growth. the company is reporting user growth and revenue that has missed estimates, all across the board. it is tough. went public, everyone was skeptical about that ipo. they just have to prove themselves. now snap is going public and they have to approved of smiles -- they have to prove themselves against facebook. betty: what are they saying to approve -- to prove to investors they have a plan in place? sarah: they said they have been against incumbents, and they have been last to market. he does not see concerns. certainly a lot of analysts that cover the company are concerned and aree competition,

wondering if there will be an opportunity for them to carve out a larger slice of the market. yvonne: is there too much fixation on user growth numbers? it seems there was a green shoe from these earnings, they were able to grow their average revenue per user to an average of five cents. it does not seem they need user growth to keep the business growing. sarah: snap is not twitter. they are still growing. the company wants to have a different strategy. they said all users are not created equal. a user in north america, for example, is worth 10 times the user in an emerging market. much on not focused so the user growth in number, as the quality of the users they trainnd the ability to

the users to get completely addicted to the app. old areder 25 years spending average of 40 minutes on snapchat every day. yvonne: 40 minutes, well. -- wow. let's head closer to the commodities sector. recorded pimco have earnings. noble, $1.9 billion loss in the same period. ramy inocencio is at the wall with the chart. ramy: this is the great wall of bloomberg, i suppose. this is g #btv 8765. this is the drumbeat of debt. glencoreentral to both and noble. noble as a percentage of wage and debt is 84%. just for the first half of this

year, the latest numbers show it has added debt on the order of nearly $1 billion. not going away investors wanted to be. looking at glencore, net is that 36%.- at they chopped their debt by $1.6 billion. in december of 2014 the share price of noble has tanked by 96%. but since the end of 2015 for glencore, it has shot up by two under 50%. that is debt. i want to look at default risk. k function.r the green line is share price pence inthe 339 london. in comparison, the default for noble at 12.4%. this is a distress category.

the share price over the past year or so has actually been $.35, downw at about from $2.50 in spring earlier this year. you can see what is happening in terms of debt and default, both going in opposite ways, even though they are in the same sphere. one as a trader will be hit because they had to take out a stronger credit line. and one has to get a bump the higher consumer prices and producer prices in the bloomberg commodities index, specifically with industrials and precious metals. betty: let's speak to a columnist who is written extensively about noble and its troubles. you look at what noble blames for its woes. are they reasoned? i tended to us skepticism

with the company reporting a bad result. we were operating in a tough environment of this quarter. in a strange way, i do have a bit of sympathy for noble. commodity traders in general are in a tough operating environment. look at that glencore result, a fantastic result, debt down. a giant version of noble, is in quite a different situation to noble. --we go back to the history, they have similar businesses in many ways. the big difference has entirely to do with credit and the nature of the business. glencore managed to get itself a significant operating business. noble try to do that, but it

does not have much. that means and prices are as strong as they are now, it is not getting much for margin. they are buying products from are raisingminers their prices. another is the issue about credit. swapsre's credit default are around 120 basis points, which is pretty healthy. is 12,000 basis points, almost unheard levels. they are trading at $.30 on the dollar. without the support, you are in trouble. yvonne: does noble offer any way out of its problem? bleak.it looks pretty is up quitethe debt significantly. it is a fundamental problem with noble.

they have not been able to consistently over the past four years return positive operating cash flow, which is the basic thing you need to do as a commodity trader. you need to sell your product for more than you are spending on storing and trading them. there is that problem, and another thing buried in that. arecost of trading -- they -- were up 72% in this last quarter. that is a massive increase. one reason they gave is having to pay more retention bonuses to stop staff from leaving. the aluminum team left over the past week or so. there are real issues that make it difficult over the past few months. noble will have to get a lot of things right if they want to survive this period. sydney joining us from with context on glencore and noble.

brick and mortar department stores see disappointing sales. is there room for optimism? our guest says maybe. this is bloomberg. ♪

yvonne: we are counting you down to asia's major market opens. at the korean market will be the one to watch, given the escalation between the u.s. and north korea, and the ratcheting up of language from president trump. mountain day in japan, no trading in tokyo today. also no treasuries trading. this is "daybreak asia," i am yvonne man in hong kong. betty: i am betty liu here in new york. almost nine of 10 companies in the s&p have reported earnings. it is retailers in the spotlight. here to talk more about what to march -- what the watches mark sergeant -- matt sergeant.

the focus has been on department stores. macy's come untoward, their sales continue to fall -- , their salestrom continue to fall. it is an ice age-- matt: pretty bleak. it is. two cities. of you have macy's, kohl's, and dillards, that are struggling. we have the physical side of apparel in department stores struggling. the one big surprise is what we saw from nordstrom today. they came about with very strong earnings. the big news is an increase in sales.

they attributed that to their e-commerce mark -- market. if you can grow your e-commerce and drive customers in store, they have a chance. nordstrom's is able to do that. we have seen a from macy's. dillards struggling horribly and kohl's has been somewhat stagnant. betty: you go to any mall and you can see that in action. i want to pull up a chart i am sure you are familiar with that shows the amazon affect. g #btv 7326. take a look at the outperformance of amazon. that stock has pulled away from the other retailers and s&p as a whole. we know amazon is not just a retailer. force in the biggest retailing.

matt: it is tough, there are a in the valuation defies gravity and any rules that retailers have played by. it is very hard for any of these retailers that are judged quarter to quarter, based on their profitability, and conversely, amazon is given a free pass. it is tougher retailers who traditionally have been very disciplined on the amount of debt they carry. they have the ability to have growth and profits. a different arena in terms of how they leverage cloud computing into retail. we are seeing potentially whole foods with growth. yvonne: they talking about jumping into apparel.

the could we see from sector in general -- could it be more consolidation? matt: i think we will see more consolidation. retailers could do what nordstrom has done, which is take -- they know what they're customer very well. they are not as big and diverse as macy's. that is perhaps the issue macy's is having. macy's means too many things to too many people. nordstrom's and smaller retailers have the ability to be more nimble and focus on specific customers and do well with them. i think we will see more compression in the department store apparel space that is likely to be at the top. the big retailers get smaller. amazon will take a share of that, as will smaller, mourn and bull retailers.

nimble retailers. yvonne: it is still too early to call bottom. time to be contrarian and bet on the sector once again? matt: a lot of people look at that and see the same source sales as better than expected. the way i look at it is still in decline. , now theot bet customers are coming up to speed with what they can do with amazon in apparel. that amazon thread is now coming to fruition in the apparel space. -- threat is now coming to fruition in the apparel space. if they can differentiate themselves, we will see more compression in the places like larger places's,

that do not have the ability to be agile. no, i do not think it is time to call the bottom. the bottom has a way to go for these department store retailers. matt sargent, great to have you there, live from minneapolis. a feature we would like to bring to your attention is our interactive tv function. at tv you can watch us live, check out interviews and dive into functions we talk about. be part of the conversation by sending us an instant message on our shows. it is for subscribers only. this is bloomberg. ♪

♪ yvonne: this is daybreak asia. i am yvonne man in hong kong. betty: there is more to come

with the first major market open. watching the open for australia and korea. >> it is important to be close fairly we are looking red across the asia-pacific. we do have futures trading in japan. plus 35 points is any sort of consolation -- is hardly any sort of consolation. of 76 points on futures. we actually closed well above yesterday. 5640 that would open. number good for equity markets. look at the software we are watching. have a look at how these south

korean names have done so far this week. we know the underlying story why a lot of these names have been here. how these things open up about two minutes or so. this is bloomberg.

♪ >> volatility surges across asia. the message wasn't tough enough. >> now the tensions will create a new winner among the u.n. the first quarter net fell more than 5%. rising competition at home and in australia. snapchat grows in trade. facebook taking its toll.

>> this is the second hour of "daybreak asia." i am yvonne man in hong kong. betty: i am betty lou. we are watching the events that happened here in the u.s. markets. i know we have breaking news right now in singapore. like it was ams pretty big beats for the second quarter. david: yes it was. here we go take a look at this. this is your second-quarter gdp growth. we were looking for about 0.5%. if you're looking year to year, what are we looking at here? 2.5%.timate was in terms of if you break it down through sectors, we are getting what goods and manufacturers are

at 7.8%. a fairly decent set of numbers. when you are looking at the gap, you are looking at 2% to 3%. they added a hedge. 3%.e looking at a 1% to we are not seeing a very good day. a big drop in the u.s. and across asian equity markets. stocks are down. we are poised for the first weekly drop in about five weeks. yields on the way down. we are getting edited for the bond markets and for gold. -- is very much 1.9 % drop there. looking at old, we're closing in up 1300. here is the move up over the past three sessions or so. we have gone of the session --

essentially one to 50. 10% of your portfolio recommendation is to get here right now. if you look at the risk, not really economic or with geopolitics. it is hard to price in. $1300 is what we're watching for spot gold. have a look at where we are in australia. 5733. asx 200. watch out for the 200 day moving 5689.e, which is it is gearing narrow in error. narrower. that is the level to watch here. it is very much a risk off given all the events we will be talking about, especially what is happening in north korea. >> absolutely.

a lot of risk off going on. let us get to the first word news in singapore. trade after trading losses with unlimited access. reached $3.8 billion of the company reported a loss. 's retreating to its asian roots and selling assets. shareholder is suing. it has been backing with a 13% stake. claims they can control of the botched seats.

special counsel robert mueller appears to be bearing down on president trump's former campaign chairman in a widening investigation into alleged collusion with russia. the grand jury is said to have issued subpoenas for the financial records of paul manafort. fort -- manafort's home was raided by the fbi last month. president trump is saying his message to north korea maybe was not tough enough. it is getting rhetoric on both sides. there is a preemptive strike on guam. if north korea does anything in terms of even thinking about an attack of anybody that we love or represent or our allies or us, they can be very, very nervous.

i will tell you why. and they should be very nervous. and will happen to them like they never thought possible. the one is the unlikely the unlikelyn is winner. yuan in january, the traded at its lowest since 2008. global news 24 hours a day. powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. >> thank you so much. bloomberg's macro strategist says north korea could be the match that sparks a credit bonfire with investors. market joins us from singapore.

another round of north korean threat. instead of rushing in, you see investors reacting differently this time. why is that? mark: one of the major themes that has been driving these risk on markets over the last year, and we have seen new records over equity markets globally, due to the fact there has been excess capital chasing too few returns. investors have been piling in because they need to cash in and chased the returns. a few things suggested that might change. -- earningings is a implied thereu.s. is a saturation point in terms of capital. people did not have the money to buy into these good stocks. another is that retail is back to the same numbers they were at 2000. that is another indicator showing there is not the excess cash out there.

inis the middle of summer the northern hemisphere, and people are not inclined to fight markets when they are on the holiday. it is kind of a dangerous time. you say a credit bonfire could wipe out billion. what is the reasoning behind that? mark: credit is where we are seeing the first signs of stress. north korea has been the catalyst. expect at does not major escalation to a war, but that is enough to trigger a sentiment ship in credits. in credits.ship small spike in volatility hurts the market more because when there is low volatility, they have to take extra turns. high credit markets are at the widest spread since april. investment grade is that the highest since june. even though equities are only 2% off their peak, stress will

feature to equity and globally. what other areas of stress should investors keep their eye on in the short-term? hit: i think this could across a lot of assets. emerging markets have also had a very good run. this is not a sign that the world is turning bearish or there is massive panic. it needs there has been extreme complacency and people have been forced to invest because of low volatility. this implies there might be a correction across many assets, whether it is global equities or credit, they can also for in the short-term. it is important to remember and any risk adverse market, it doesn't go in a straight line. the weekly closes are important. there will be a lot of people checking into the market in today's or reading the weekly

reports. bite managed to do a little of a they say, people may say this is only a short-term thing. i think it could be very negative next week. yvonne: it is good to get your context on that. more about the north korean tensions and their implications when it comes to the economy, particularly in asia. let us bring in our asia correspondence. the big impact will be the asian supply chain overall. what are we talking about? >> we are starting to see analysts run the numbers. when you think of south korea, it makes up 2% of the economy

for this. to spill over would be quite significant. when you consider that south korea is one of the biggest makers of semiconductors. could be a shortage of smartphones and telephones and car parts around the world. we are not there yet, but certainly people are raising the flag that it is one of the reasons why diplomatic challenge should be lost. yvonne: they on electronics. -- big on electronics. the shipping line is also important. i can have a dramatic effect. enda: very dramatic. this is where we talk about northeast asia is one of the biggest eight export -- exporter. there are huge trade challenges and that part of the world. we could be talking about shortages of all kinds. abouten they are talking

inflation and prices going up around the world. that would have an incredible consequence for global gdp. there could be a disruption in advance of the conflict, if it were to get that far. yvonne: what about the cost of the u.s. if it comes at a retracted effort? if there was to be a conflict and if the u.s. didn't have to contribute to those , if theuction costs u.s. were to spend proportionately the same amount in korea that they spent in iraq and afghanistan, it would add 30% of gdp to u.s. national debt. u.s. national debt is already at a pretty high level. that is probably not what people in washington would want. we are not there yet.

some of the analysis is overdone and the diplomatic challenge may work. yvonne: talking about the implications that could happen if anything does bring further escalation. thank you. from ahead, competition facebook and snapchat. we will break down the results later in the show. despite aith toshiba, hesitant thumbs-up. this is bloomberg. ♪

yvonne: this is daybreak asia. toshiba is saying it is slowly recovering from the accounting scandal and saying there are numerous skeletons in the closet. we got a qualified endorsement. of $8.8e a net loss billion.

toshiba may be delisted in tokyo if it fails to improve in the book. >> the auditors had opinions for our internal control is related to westinghouse. it is currently disconnected from our consolidated balance sheets so we can avoid situations in the future. we are working to improve our internal control, and i can a --re is no inadequate active n practice. yvonne: holding a neutral position on the price with ¥288. good to see you. is this a qualified endorsement on earnings? it seems like a set of the right direction but not exactly in the clear. -- i think it is a necessary step but the thing they should do now is perceived

-- proceed. it was only a few months ago before they cleared a point where the window is too narrow. they have to clear it position by the end of march to avoid delisting. i think this is a significant model and we have to watch for a carefully to see. i think this is contingent on the deal getting through. yvonne: the clock is ticking. is not givingl them anything at all when it comes to the spat. how do you think both can come out of this with something to gain? should toshiba very the hatchet and let western digital get this? for canada still have other bidders? > i think a sale will eventually be done one way or the another. opennk toshiba seems to be

to anything apart from the bitter. if that is the case, i think a number of options expand. if the listing is no longer avoidable by the end of the year, you might consider western digital. the main problem though is the antitrust review might take more time because western digital is a producer. issue, time has been an it has not been an ideal partner. if the listing is unavoidable, i think the range of potential investors in this business expands. i think it is now up to toshiba to balance -- to weigh the balance and see which is an ideal partner for it in an absolute sense. helping explain something. you are neutral right now, but we see investor sentiment improving. higherck has been edging

a little by the last couple of weeks. what are they betting on? is it too optimistic? joe: damian: there is still time -- damian: there is still time. it is still august. if there is enough time, toshiba will get the cash required to pay off its liability and the restructuring. ifthey don't get it done, you are a shareholder in this business, this is not necessarily an issue of the share, it is just hard to trade. i think for the largest investors in toshiba, they must be looking to invest in the enlisting process and to have influence in the reforms in restructuring days to come. clearly, this is a big step for the company to get an endorsement from the auditors and ensuring investors there are

no skeletons left in the closet. youbelieve that? -- do believe that? damian: toshiba was going through purgatory over the last couple of years. i believe so. i don't think there are further issues. from here, the main issues are more fundamental. can you turn around the remaining businesses? i think significant work must be done and strategy. betty: clearly, the memory chip business is a huge challenge for the company that they need to get done. it is still a big sprawling business. one of the items on cap is the decommissioning of their fukushima nuclear plants. that will be another challenge. what is your view on that? damian: the government this way.

for toshiba in particular, they are seen as a vital part of the fukushima recovery efforts. that is one of the reasons why the government has an interest in preserving toshiba's financial health. this role that toshiba has in fukushima will extend for decades. i don't see that ending anytime soon. doesn'tit certainly seem that way at all. what you expect in the coming quarter for toshiba? now that they have this endorsement, what is your short-term outlook from what you want to see coming out from the company? the new term results for the second quarter after the third quarter, they have continuing strength in the memory business. if you look at the first quarter thelts, and if you look at

whole year, it shows all the strength was in flash memory. this will continue to be a theme. a shame that toshiba can't benefit from the upside because the sale values have already been determined. >> thank you so much. thong, senior analyst. is ourng on bloomberg interactive tv function. you can find it at tv . you can watch us live and see previous interviews and dive into the securities of the bloomberg function we talk about. you can be part of the conversation by sending us instant messages during our shows. check it out at tv . this is bloomberg. ♪

"daybreak: asia."

vision fund is set to be investing around $2.5 billion. they stepped up and challenged amazon. it will swallow the company's cash file to more than $4 billion. they claim to spend at least $5 billion on an indian market that is seen to grow at 30% a year. the drugmaker arbor is seeking a stake. they are raising new funds for growth that may have an -- a potential ipo. --ty: insurers are pacing facing pressure from a labor group. they are forcing the company to shine light on its ownership and financing. the union went to the labor relations board after bloomberg reported they plan to sell

overseas assets. caroline kennedy is joining the board of boeing. they say she brings professional and global perspectives that are highly valued. kennedy was president obama's envoy to tokyo. she is reliant on the asian pacific. homes jumpedion after agreeing to a $4.3 billion largestcreate the single-family landlord. it will have more than 82,000 homes. imitation shareholders will own 59%, with starwood investors holding the rest. yvonne: let us take a look at the markets trading. here is how we're steering so far.

the asx 200, we are seeing shares lose more than 1% on this friday morning. we do have a rough day on wall street overnight. 44%.ix at president trump dialing up his warning to north korea. they're calling a game of chicken between u.s. and north korean leaders. bonds also rising, as well. we are seeing the japanese yen of about 0.1%. the south korean won continues to weaken. weaken.continues to at thetaking a look geopolitical tensions here. a lot of people are saying if this is all military fear of threat or actually an excuse for a lot of investors to try and sell off some of their assets.

we will see if this will be continued through the day. this could actually lead to further downside if we see selling into the close. who knew that phones would start doing everything?

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the u.s. and north korean tensions escalate. 8:30 in singapore. i am yvonne man in hong kong. betty: you are watching "daybreak: asia." let's us get to the first word news in singapore. /assets in the second quarter. the economy is going faster. it is adjusted 2.2% from the previous two months. the estimate in a survey was

0.5%. there was global trade with strong demand for chinese electronics. commanding 15 point lead with the election soon. support for the cdu. the spd had 24%. she is europe's longest-serving leader and she is seeking a record fourth term next month. we will keep a close eye on germany leading up to the election. don't miss us every monday at 3:30 hong kong time. there's consumption stronger than expected and a week outlook for independent suppliers.

they have around 2000 barrels a day -- 200,000 barrels a day. there are rivals following weaker production in north america last quarter. rates were unchanged at the first policy meeting, but this race inflation forecasts. were left at 3% as predicted by all 17 economists surveyed by bloomberg. they forecast it for 3.2% this year and next year. join us for bloomberg markets 11:00 a.m. sydney time. google has canceled a staff meeting that would have addressed the firing of an engineer for questioning diversity in tech. this came after questions were leaked raising concerns that

employees to post these might be harassed online. saidote in internal memo women are less likely to be working in tech than men. global news 24 hours a day. powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ c how the asian markets are treating us so far this morning. is going down a little bit. 1% each off the major benchmark. here is the story across the markets. the south korean yuan is on the back foot. you're also sing the yen. 109.ncy is up closer to yields are on the way down. on the 10 year, way below 2.6%. as you can see, the futures are

indicating that the yuan will have a drop. let us break things up and have a look at what is happening in australia. every sector is down. i mentioned gold. within the mining space, gold-mining stocks are surprisingly up. we are getting a bit. we are very close to 1300 on the price. -- across the index, the market is in focus. if you think the point out. -- it is aty close support level. $23.03. average --r moving you're 100 day moving average moving in. obviously, we have seen a massive drop your in the index. money break it up. we are actually very close.

the reason i bring this up, if you watch the 40 level, if we don't get a bounce back of above were looking at that sort of in between level as an indication that the momentum has disappeared. we are 31 right now. 40 is what you want to watch. the other thing i want to mention is the vix. now in 14t level months. 1956 on average. we're looking at around $12 on this index. just very quickly, have a look at some of these names over in south korea. they are substantially up for the week. we are thing this come up a little bit for the moment. ..4% the rest are actually here on the index.

they are interconnected. we're looking at $4 billion in revenue there for the biggest one. next.econd one is lig this actually supplies the bottom tqwo. -- two.tough about where the companies get the revenues from. not a very good day in the markets. yvonne: we will get a check update from you a little bit later. more news to talk about now. quarter profits up from the year earlier. inre is tougher competition australia. let us break down the results. --sia e

you said that you thought they would look at the trends from last time but that wasn't quite the case. it is not an apple comparison, but what happened? i think they outperform's efforts. the disappointment came from its and theacross the intel info that it had in thailand. it had exceptional brings at first. -- ranks at first. i think the shareholders should be satisfied with the results. don't forget that they have a $2 billion one-off gain. shareholders should be expecting potential dividends. the company has a pretty diversified revenue base. they are seeing rising mobile

competition from australia and singapore. what is the strategy there? >> i think they definitely need to keep expanding overseas. it is possible they will continue to raise their regional holdings. they did that with the recent acquisition in their new stake. india, theng is, in intel is likely going to see a bump in earnings. recently, they express the concerns about the possible acquisition of arrival. -- a rival. he puts a lot of emphasis on his regional holdings. not to mention, he has a lot of focus on cybersecurity. you can see this for foreign and domestic rivals.

to make some good acquisition moves there to stay on top. they definitely need to defend the position in cybersecurity. yvonne: jump in here really quick. this is seen as a very big threat in singapore. they're at number four in jumping into the market. --re continuously spinning continuously expanding regionally. but we do expect? >> if we look around the world at the impact of the new entrance, it will have an impact on the profitability of the sector overall. we would expect share loss. generally, this will attract value focus customers. they are predominantly ready. we see much bigger down for four

m -- downpour for m1. they can't escape it, but they will be less impacted. they spent a lot of money already. it kind of asks the question what kind of money they have trying to undercut the big three. chris: i think the strategies are a lot different in these companies. i think they're trying to prove that an integrated mobile proposition where they are in singapore nbn trying to mobilize the market will work. australia is a much bigger price. it is their home base. two are the number provider. but it will come under intense competition. their domestic market is under attack. -- are unproven and mobile

in mobile. i think singapore is a test market to prove what they can achieve. long-term, we don't expect them to be thriving in australia. i think they will likely be combining with other companies. they haven't announced spending anywhere near enough to be viable. i think that is the first step. ipo ofwhat about this their 75% share? how beneficial is that for investors? what you think of the price? chris: we think they have a good price for the assets. we also think they played their cards pretty well. under the agreement, they were restricted to open 25% or less. they did negotiate with the regulators to be able to combine their existing dark assets into the trust.

eriod totrolled the p drive the penetration and get the value as high as possible. by april ofinvest next year. i think they played it well and maximized the value of that asset. i think they will maintain that stake for a while. it is likely we will see a special dividend probably next year to help offset the potential weakness around the timing of the entry. yvonne: i will give you the final word. i don't want to comment on dividends because we are not allowed to do that. management is going to be very hot in what is coming up for the shareholders. yvonne: great to have you as always.

you are staying with us for a while to talk about the telecope earnings -- earnings. an hour forhe half bloomberg markets. this is bloomberg. ♪

yvonne: this is "daybreak: asia." telecom could be on track for their best quarterly results this year. on thursday, china mobile shares jumped as you can see on this news of its first special dividends in nine years. i want to bring back chris who is the senior asia-pacific

analyst. some of the reaction to the press was that are likely to heat up even more. the canceling of these. how important do you think a move like bees dividends -- how supportive do think it will be for china shares going forward? -- investors are clearly valuing that. it will get paid in about a month. it will support the staff through that. we're backpaid out, to business as usual. the backend will be a little more competitive than the front half. for, the deadline long-distance is fast approaching. china mobile said they will have eliminated it by september, but

that means a fairly negative impact on revenues that will drive through for the next few quarters. of howgive me a sense that is exactly going to impact china mobile with canceling these roaming tariffs? be? are they going to it will clearly affect a lot of their voice revenue. chris: this cancellation effectively impacts to g customers.- 2g they have a lot more of those customers than others. this will impact at around 5 billion rmb. we believe they did a fairly big last year in quarter three. they will do another migration effectively in court or three of this year. the year on year in, whether this is -- in terms of year on year growth, a little harder to call. definitely, we will see a decline in service revenue for

quarter on quarter. yvonne: how concerned are you of the intensifying competition icom and telecom? how close are they to closing the gap? near. they are nowhere the coverage extends to 99% of china. by the end of this year, they will have close to 1.8 million 4g based stations. telecom comes closest and u nicom is well below one million. if you are in shanghai were orjing, the difference -- beijing, the differences are dramatic. upgradel continue to customers in rural china, but

they have a lot more in terms of the urban areas where people don't care about the global roaming. probably not the backend of this year. we havewhat might -- seen regulatory interference in the sense that china mobile have had to comply with various directives to increase speed and reduce tariffs. -- getet you think easing, we think we will see profit growth next year. every year so far, they have come out with new directive and that has eaten away at some of the profits. this continues to improve though. we are hopeful longer-term the payout ratio will continue to improve slowly. i think directionally, the company is aiming for stable to increasing, and we think investors may be able to expect

2% to 3% a year. yvonne: what makes this more attractive? will it makes ownership reform, or what you think makes it have an upside? chris: i prefer scale. chris:in that case, china mobile is the best operator in china. the critical difference is this year it has three critical catalysts. met profit falls over 90% last year, there in the midst of a bounce back. we're expecting the profits ago grow 600% this year. the next is next owner reform. we're expecting an announcement quite soon. we think the company is trying to get this done in time for its announcement. whether they do, we don't know. the deal is imminent. co.ly, the power disproportionately impacts the

smaller players. it mightill hopeful begin by the end of this year. if not, it will be early next year. for mobile. but china mobile being so big, it doesn't have the same impact. betty: i want to throw up a question to bring the china telecoms onto the global stage. i have a chart here. this shows you where some of the ecos are.gest tel it seems at&t is leading that. what can help this race here? what is it next? is it 5g? if the question is really about valuation and what china mobile with me to get ahead of at&t or verizon, the answer is capital management.

china mobile has significant cash holdings, no debt. their payout ratio at the moment is 46%, which is relatively low compared to the bigger telcos. is in the awkward adolescent stage. they are no longer the fast-growing, emerging market telco people invested in 20 years ago and they are not a high dividend payer we see in europe or the u.s. as they go through that transition and as the payout continues to increase, they will definitely go ahead of at&t and verizon in valuation metrics. you are absolutely right. 5g is the next battleground. china was late with 2g, 3g, and 4g, and they will absolutely be one of the early and fastest developers of 5g.

from that perspective, this is exciting time for telecommunications, different from the prior generations. >> great to have you. chris lane, a senior analyst for telecommunications. very quickly, we are getting headlines. proceedst an hour ago, will be used for capital expenditures. also looking at increasing stakes and associates and opportunities in cybersecurity. these are some follow-up comments coming up after their earnings report. this is bloomberg. ♪

is "daybreak: asia." we're talking about all the geopolitical risks we have seen with north korea. the surprise winner of all which is the chinese yen, could you imagine a year ago this would be a safety haven play for investors? if you look at the bloomberg, you see the yen surging to an 11-month high in the past couple of months or so. $6.65.seeing it hit

some people are saying we could see more in the next couple of weeks or so. we are continuing to see that this currency is overbought. eb,do have the likes of s when of the best forecasters of the yen. they are taking profits because they don't see further upside from here. they are saying it has recently turned a little neutral and is seeing a slowdown. we don't need a stronger currency. betty: we have heard some of the analysts coming on our program saying the yen will remain particularly meeting later this fall. question, raises the what does it take to be a safe haven currency? are there certain requirements of it not being the dollar or

the yuan right now? let us look ahead of bloomberg markets. safety havens will surely be a big topic. this is from john hopkins university. 3%.e have been no change, he will be on with us and about four or five minutes for now. betty: that is it for "daybreak: asia." this is bloomberg.

rishaad: 9:00 thursday evening in new york city. president trump ramping up the war of words and telling north korea it will suffer like never before it launches an attack. yuan,ikely win among the one of the best performers among 30 major currencies. : demand from china helping singapore smash estimates in the second quarter. the economy growing far faster than thought. this is bloomberg markets: asia. ♪