♪ betty: stocks flipping, treasuries jumping the most as anotherths atlantic hurricane moves in to read north korean tensions continue to mount. yvonne: vladimir putin joins china in resisting new calls for sanctions over kim jong-un's latest nuclear test. betty: president trump talks tax reform with his advisers. they slam his move to end protections for child migrants. yvonne: facing the music,

facebook said to offer hundreds of millions of dollars to allow users to pay for play. betty: welcome to "daybreak asia ," i am betty liu at bloomberg's global headquarters in new york. yvonne: i am yvonne man out of seoul this wednesday morning. appear in south korea, we are watching what is happening about 30 something miles away from seoul. our neighbors to the north, so to speak. for the markets, it has been a perfect storm. for not only what is happening in pyongyang, but the hurricane heading to the u.s. amid debt concerns. betty: we are putting out fires left and right. that was reflected in the markets today. let's pull up the board. we opened up after the long labor day weekend and went straight down. you can see the dow closing off 234 points. the nasdaq taking it on the chin, as well as the s&p. selling across the board.

asia, whiching into had been reacting the past several sessions this week to the north korean headlines. let's bring up new zealand, which is just opening up, down 6/10 of 1%. the kiwi staying stable. we're counting down to the open in australia, japan, and south korea, which has been really hit by the north korean headlines. futures point to the lower open following what we have seen in the u.s. the aussie dollar ahead of the gdp report later this morning. japanese futures, how they are trading in chicago. nikkei futures also lower, as well. the nikkei to 2/10 of 1%. that safety trade continuing into the japanese yen, trading at 108.60 against the dollar. yvonne: i keep watching for the

key levels for the dollar-yen and the aussie levels. let's get the first word news with a alisa parenti. round of talksnd on renegotiating nafta has ended amid resistance over discussing mexico's low wages. relatively few concrete proposals have reached consensus. labors. wants to tighten standards among other proposals. but business groups want to keep wages out of the talks. >> we must address the needs of those harmed by the current nafta. especially our manufacturing workers. we must have a trade agreement that benefits all americans, and not just some come at the expense of others. alisa: federal reserve interest-rate increases may be doing real harm to the u.s. economy. according to minneapolis fed president who says interest rate rises may explain why inflation is low and job growth has slowed.

he has been an outspoken critic of the said's drive to tighten monetary policy come he was speaking at the university of minnesota in minneapolis. facebook is spending big on music rights of users can legally upload songs and videos they post. it is reportedly offering labeled hundreds of millions of dollars for those rights. under current laws, rights holders can ask facebook to take material.nging they want a quick deal so they no longer frustrate their users. hewlett-packard enterprises emerging from an aggressive effort to slim down, with promising prospects and stronger-than-expected sales. 8.2 dollars.5% billion come on the first time in five quarters the business tech provider beat estimates. moremers are buying storage and networking gear, although demand was slightly down. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. let's take a closer look

at the sharp selloff we saw in the u.s. across the board, all that risk off trading piling into treasuries. the dollar, gold. su keenan is here with more. there is hurricane harvey, but concerning investors. su: it is a perfect storm of risk off. there is the korean conflict, "begging for war," raising concerns across asset classes. the threat from irma is significant. the dow jones industrial average was down 270 and closed come off the low. big movers included a big insurance company. carnival cruise lines with drew withdrew four ships.

issues, such as lending in issues hit by the hurricane. let's talk about the merger deal that was big news yesterday. it hit the market, rockwell posted any gains, though it has been up about 10% since talk with the deal of united technologies. it would make one of the biggest aviation, aerospace producers in the industry. boeing has come out and said it would oppose the deal if it at all undercut the business. it has been squeezing suppliers and adding to the scores of skeptics about the deal. this'll be a big deal going forward. let's go to g #btv 86. we are talking about volatility. look at the big spike in august. over here, the return from the labor day holiday weekend, a big spike across all asset. this will be the story of the

week as we count down to irma hitting landfall. yvonne: talk a little bit more about hurricane irma. this is really coming as a one-two punch, after what the markets faced after harvey. we are not just seeing a ripple effect in stocks, but commodities. su: particularly orange juice futures. florida, where orange juice is king, have declared a state of emergency. let's go to video, there are fascinating pictures of the hurricane-tracking planes that fly into the hurricane zone to help meteorologists track where it is going to hit. right now, it is forecast to go through the british virgin islands, where sir richard branson is said to be riding it out on an island. he says he has ridden out three hurricanes and that they have built especially strong structures with hurricane blinds.

he will see firsthand how they work. relighting -- changing. hurricane irma could be the worst in history, presenting $120 billion in damage. orange juice up from 5% on the day alone. let's go to how the energy commodities are performing. oil up during the regular session, now trending down in extended trading. gasoline was up last week. let's go into copper. copper hitting in almost three year high. money managers piling into that as part of a commodities momentum. it has to do with china. commodities are going to be a class to watch, going into wednesday trade. yvonne: certainly we're watching that here in the asian session. and japanews, toshiba

at the top of the hour. we're hearing from nhk, saying board directors will discuss the chip unit sales today. this is been delayed time and time again, given the legal risk we have seen, the dispute with western digital. apple joining in the mix, as well, with a their bid with a consortium of investors. we have heard all of this from different agencies over the past couple days. hopefully that could be resolved this week. western digital apologizing to toshiba for the strained ties. we will see if those results come through later in asia. heading back to d.c., u.s. lawmakers back at work with plenty on the to do list. moved to endmp

obama-era protections for undocumented migrants. there was also a looming debate on the debt ceiling, and rising tensions with north korea. let's check in with our senior washington editor, joe sobczyk. joe, good to see you. how likely is congress going to act to protect people covered by this law known as deferred action for childhood arrivals? joe: thanks. there is a critical mass of lawmakers from both parties. most, if not all democrats, and a large number of republicans, who would vote to get protection for these people. but that is been true since the issue first arose during the bush administration. there is a very, very strong minority within the republicans in both house and senate who are hard line on immigration. they are also represented in trump's political base. this is a very complex issue that it will be difficult for congress to grapple with while they have so much else on their plate. betty: they have so much on their plate, joe.

trump will be meeting with senate and house leadership. i imagine daca will be part of that discussion, maybe even at the top of the discussion. joe: it will certainly be part of that discussion. they also have a lot of other ironies, a jammed congressional calendar. by the end of the month, they have to deal with raising the debt ceiling, funding government for the rest of the year to keep the government open after september 30, at the end of the fiscal year. and, providing emergency aid to the victims of hurricane harvey in texas. plus, irma make cause complications -- may cause complications. 12 days of legislating the house will be in for, and the senate is in for 17 days. once they come back from that, there is a tax overhaul plan, and now, the issue of the daca

for creating some sort of legal status for these people brought into the country illegally as children. weeks, less than two this pile of things to do on the agenda for congress. what is next for the u.s. when it comes to north korea? how does the white house responded comments weird from china and russia that tougher sanctions are not going to work? joe: the u.s. will try to push ahead for a vote next week in the un security council, more sanctions. there is some talk of a are looking at targeted sanctions, perhaps banks in china. but not really widespread. it could be that russia and china are both getting negotiating position here. nikki haley, the u.s. ambassador to the u.n., said sanctions will

not do the trick in terms of bringing north korea to the table. but what the u.s. is seeking to do is cut off revenue so the north koreans cannot go so quickly so far with their development of both missiles a nuclear weapons -- and nuclear weapons. yvonne: joe sobczyk, joining us from d.c., thank you. trade negotiators play down their differences at nafta talks. what progress has been made. betty: talking tough on north korea, our next guest says slapping sanctions on chinese banks could set up a gunfight in the ok corral. this is bloomberg. ♪

betty: we are counting you down to asia's first major market open this morning. it japanese futures looking lower, given declined we had seen here in the u.s. also headlines coming across on toshiba. the board of directors likely going to be making a decision a decision on the sale of their chip unit. western digital possibly dropping out of it in order to have a say in its venture business with toshiba. something to watch as the japanese markets open. this is "daybreak asia," i am betty liu in new york. yvonne: and i am yvonne man in seoul. putin has echoed china in rejecting u.s. sanctions on north korea after the latest nuclear test. south korea's pushing for a military overhaul. the u.s. is weighing a number of military and diplomatic options. tuesday, the ambassador in geneva held the u.s. directly

responsible for its current crisis. here is what he said. >> the u.s. imposed nuclear threats and blackmail for more than half a century against my with a ceaseless political and military pressure, and economic sanctions. now, douglasng us powell. he was also in the national security council staff for presidents reagan and george h.w. bush. thank you so much for joining us. hearing those comments from the north korean ambassador directly targeting the u.s. on what they call the latest self-defense measures -- what do you make of

this? it seems like reconciliation is not going anywhere. economic sanctions are not having affect. military options we are exploring, but what will work? douglas: all of the above and none of the above. there was a long way to go over the next few years for north korea to develop the capabilities it is trying to develop. it is a guessing game, but looks as if when we get to the point where they think they have a reliable intercontinental ballistic warhead that can threaten the u.s., they might be willing to open talks and persuade the u.s. to dismantle alliances with korea and japan, withdraw troops from the korean peninsula, and make life easier for north korea. they may also want economic inducements. that is not going to unfold for us until they believe they have a loaded pistol at the bargaining table pointed at the american representatives. we heard from russia president vladimir putin, which is a very interesting comment on whether to put tougher sanctions on pyongyang or not. he said they will eat grass, but not abandon the program unless they feel secure. does he have a point?

do oil sanctions, food sections, will not do much to rein in their nuclear ambitions? douglas: there is some truth to that, but it is mostly a talking point. tremendous strides in north korean missile launching capabilities just recently. russia has a lot of unemployed rocket scientists. the likelihood is that russians have been helping, not official assistance, but of their own a former rocket scientists have helped north korea develop these capabilities. i am sure putin wants us to talk about something else besides that. yvonne: does it come down to wledging north korea as a nuclear power? douglas: yes, they want to be formally or informally ackno wledged, to say it is their

right to have nuclear capabilities. they talk about not going the way of mo market off become a who turned over his biological weapons secrets to the u.s. and ended up in a ditch in 2011. they want to point to a weapon system that can protect their regime, keep their family role in place as long as possible. they want to have an irreducible nuclear capability that will deterred from taking drastic action against north korea. betty: these headlines and news --north korea does not seem we have been tackling this all year long. you previously served as vice chairman of j.p. morgan chase international. from a business perspective, is it business as usual in the region? what is happening right now in global board rooms on their

business in asia, particularly in that region? is there any reassessment going on? there is concern i am hearing from a lot of businesses, in the supply chain and financial world, whether they are taking risks, having their people in south korea or nearby in the region. my feeling is that this is not an immediate danger, we are on a slow boil. this past weekend was an important milestone for the north koreans. there is a lot more attention than normal to the development. it is part of a slow, steady progression. people should not draw immediate and drastic conclusions from it. over the next two years come a long-term plans ought to take into account the possibility we will not be able to manage this to a peaceful outcome. but i do not think it requires immediate decision-making. they: all this reaction,

reaction we have seen in the suggests theres, is a redline now. there seems to be a redline drawn on dealing with north korea. i am curious what you think will happen the next time around, which does not seem like it will be far from now, we will see another icbm test from north korea -- then what? as long asesidents, i have known them, have drawn a redline, saying it is unacceptable. north korea is trying to prove it is unenforceable. at some point, one of our presidents in the global community will have to decided that that time has come. many people who have followed the korean question want to negotiate a freeze on current nuclear. i doubt it can be achieved. they want a loaded gun, then nuclear weapon to protect the

regime from pressures from the outside to overthrow it. they will stick with that for quite some time. the most unpredictable characteristic of the current situation is, the still new administration of donald trump nsd his irruptions -- eruptio on twitter that have unnerved people, thinking he may take a preemptive account. i tend to look at secretary mattis and draw reassurance. the man that has to deliver weapons knows what he is doing. go,ne: before we let you where does china play now? threat ofint does the a nuclear war overshadow the threat of some type of regime collapse or the fact we see the united front coming from the likes of japan and south korea? douglas: there are lots of divisions in china. the result of the divisions has been a policy of no major change.

they have a longtime attachment to north korea. not likeot like it, do the current ruler, but do not want to give up a buffer state between u.s. forces in south korea and the chinese border. that could change, but i do not expect any change before their 19th party congress in late october. after that, whatever change comes from china to reconsider its position, and there are many voices calling for reconsideration, won't come for months from now. they have to prepare from when month of transpired and we may find more cooperation by engaging in intensive diplomacy. yvonne: appreciate your perspective on all of this, douglas paal. of big names coming up on bloomberg television in the next hour. we hear from one of the world's biggest producers of energy.

easternn us at 8:40 time. chief marketing officer after 2:00 this afternoon in hong kong. 4:00 p.m. in sydney. yvonne: don't miss our interview with t-mobile ceo tomorrow on bloomberg technology. 5:00 p.m. eastern time. this is bloomberg. ♪

yvonne: a check of the latest business flash headlines. says thatregulator they suspend the new property investments amid a push to reduce financial risk. regulators have asked state backed companies to get money back as soon as possible.

boeing and airbus have concerns about the $23 billion acquisition of rockwell collins. they have been squeezing suppliers for discounts and want them to take action to protect themselves if the merger harms its business. this is bloomberg. ♪

yvonne: 7:30 a.m. wednesday in hong kong. cloudy with a chance of rain. similar theme in seoul. 30 minutes away from asia's first major market open. betty: it is 7:30 p.m. here in new york on this tuesday. feels like a long week already. you can see, pretty clear skies today. still latching onto the last remnants of summer, despite it being september. dismal.ets, pretty at the s&p lower almost 1% after coming back on board from the

labor day holiday. i am betty liu, in new york. yvonne: i am yvonne man in seoul . you are watching "daybreak asia ." let's get the first word news with alisa parenti. russia's president harris rejected u.s. calls for sanctions over north korea after its sixth and most powerful nuclear test yet. toechoed china's resistance pressure pyongyang into abandoning it its atomic programs. he called sanctions useless and ineffective, instead, urging the international community to offer security guarantees to north korea. the trump administration has laid out its rationale for possibly walking away from the 2015 nuclear deal with iran, declaring the islamic republic's ballistic missile program violates yuan resolutions and threatens to make the country the next north korea. saidambassador nikki haley

the agreement reached during the obama administration was flawed and does not take into account iran's role in supporting terrorism. he will also end the deportation move would impact one million people who consider themselves americans, throwing them into legal limbo. high-profile ceos including mark zuckerberg and jack dorsey have criticized that decision. the president has promoted attacks overall has -- overhaul as a central. -- as essential. gary cohn and the stephen paul ryan, mitch mcconnell, and leaders of the congressional tax-writing middies were at the white house. global news 24 hours a day, powered by more than 2700 journalists and analysts in more

than 120 countries. this is bloomberg. ♪ yvonne: let's get more now on what we should be watching is trading gets underway in asia. sophie kamaruddin joining us from hong kong. catch-uptreet playing after the weekend with risk on the retreat. asia, we are bracing for more worries. that is the case, given markets have a lot on the plate. you have geopolitics and extreme weather on one hand, but prospects could be a more risk on tone possible. overnight, u.s. stocks slid and treasuries rallied. pointing out the asian futures for that session today, we are looking at another risk off trading day. nikkei contracts under pressure with the yen looking to tested the year-to-date high. aussie futures are pointing lower ahead of data due today. the rba cap the policy rate unchanged at a record low, 1.5%.

the rba saying loose policy is needed for the economy. i want to go back to the specter of north korean risk. that is driving up hedging activities. 3,u can see by g #btv 669 investor anxiety is pushing up the ratio for the nikkei 225. monday, it hit a seven-year high. the last time we saw this kind of event happening was back in april, 2010, during the greek bailout crisis. betty: we did, certainly worrisome. other asian markets -- ubs management saying to load up? piling we do have bears up, even though the index has rallied 19% this year. that is the steepest annual gain since 2009. some crack's are showing. .ou can see that on g #btv 6676 it is hovering near a 17 month high.

90,000 we did have over bearish options traded. that is the highest for 2017. although we are seeing gains, there could be some potential for that gauge. you talk aboute: clouds gathering around h h-shareshat about the in hong kong? stock --hey said on onshore stocks could have a rally that would last two to three years. chinese stocks were out in the cold most of this year. up 9% year to date. valence small caps are finding favors here. this is typically the most speculative part of the mainland market. you can check that out on g #btv 1172.

the yuan's strength has helped underpin this rally for china small-caps. this panel shows you the 10 day correlation between the onshore next and the china -- chi indexed. -- index. chinese congress gathering, we have brokers from credit suisse saying there is more room to run when it comes to the chinese valence stocks. run as wellroom to it seems in these defense stocks on this aggression here in your part of the world. that has helped pile more money into these defense stocks in the u.s. i want to pull up a chart that

shows how much money has been pouring into this defense-related etf. g #btv 6620. it is the u.s. aerospace and defense etf. $2.5 billion has been poured into this etf, now valued at $4 billion, since president trump was elected. of course, you can imagine those who piled in are more pleased seeing that tweet today from ing the u.s. isdg green lighting more equipment sales to south korea and japan. yvonne: a similar picture to what we see every time we see geopolitical tensions, the defense stocks in japan in south korea rally. they seem to be the only gainers right now, at least were

the only gainers today in a market that was pretty much across the board, in the red. in the meantime, staying in the u.s., a bond rally kicking into overtime. lael brainard urging caution. minneapolis fed president neel kashkari said it may be hurting the u.s. economy. headlines from the dallas fed president saying, the fed cannot do all the work of driving growth, and that he is repeating that the fed is not as accommodative as some might think. out, ourll of this policy editor kathleen hays is here with more. are they trying to cool expectations? kathleen: he made it clear a signal he is ready to raise rates again this year, maybe even in september. also said inflation

is lagging, the data is not there. he is saying, i have to see inflation before i can believe it. his monetary policy alone cannot do the trick. to, rates alluding are still relatively low. inflation is not rising. what can the fed do to change this with interest rates? i think he is saying we need fiscal policy, the white house, to do something. we have to monitor it very closely for our viewers this evening. i want to get to what neel kashkari said. he said something different in the scheme of what we have heard from fed officials. he said said rate hikes may actually be hurting the u.s. economy. >> may be our rate hikes are actually doing real harm to the economy. it is very possible our rate hikes over the past 18 months are leading to slower job growth, leaving more people on the sidelines, leading to lower

wage growth, and lower inflation and inflation expectations. are notemature hikes free and we need to remind ourselves of that. 1.4% versus 2%, that is a big gap. he sees slack in the labor market. that is another reason not to raise rates. he sees expectations on inflation falling, as we can see at g #btv 9362. thecan see the core cpi, companion measure to the cpe core. it is down to about 1.5%. this is expected inflation, five to 10 years ahead. they track each other pretty closely. evasion has gone up and started going down. expected inflation as well. why are we raising rates? i think he is asking the question a lot of investors have

been asking who are starting to doubt the fed will raise rates. brainard as relatively been in line with the neel kashkari as a dove. but it seems lately she has been willing to go along with rate hikes. what is she saying now? with the she is cooing doves. too is getting wary. have been falling short of our inflation objective not just in the last year but a , we should because us about tightening policy further, until we are confident they are on track to achieve target. kathleen: as long as inflation is below 2%, she said it is prudent for the fed to move gradually on rate hikes. said, it is fine to let

the balance sheet unwind. she notes something a lot of people have been talking about. the phillips curve is a relationship where unemployment goes down, inflation has gone up. let's look at g #btv 7564. fishers you how inflation has come down, 4.4%. here is the average hourly earnings. that is a measure of wages. look at when unemployment was low back in 2007, how high average earnings were. the same kind of drop in unemployment, we seeing wages plateauing around 2.5%, year-over-year. wages are flat, with another impetus to boost it toward that 2% target. rainard is putting that in the spotlight again when it comes to thinking about whether the fed should be raising rates anytime soon. yvonne: the bond market relating to neel kashkari.

kathleen, thank you. nafta negotiations, all smiles after two rounds, despite no major breakthroughs. this is bloomberg. ♪

yvonne: this is "daybreak asia," i am yvonne man in seoul. betty: i am betty lou in new york. the second round of talks have ended in nafta, without any breakthroughs. what about moving forward by the end of the year? the seniort is economist and director of trade and manufacturing policies that research for the policy institute. he joins us from washington. your piece is like putting lipstick on a paid -- what did you mean by that?

robert: nafta is a set of rules designed to increase trade and investment between the u.s., mexico and canada. i think it is very difficult to achieve improvements in our trade with those countries, with the world at large, simply by changing the rules. in part, because the process itself was -- is flawed. there are hundreds of business advisors who work with negotiators and tell them what they want. most of what is in these agreements concerns roles regarding the right to invest, the right to increase profits. these sorts of things. that will have a fundamental effect on balance or trade in the u.s. or the loss of manufacturing jobs, which is what the workers have been complaining about. negotiations these

, some contentious issues are mexico raisingd wages for its own workers. that, these are the most contentious parts. will that have an effect on the balance of trade? robert: i think it will be a good thing, it might help workers in mexico and in the u.s. and canada. i do not think it will have an enormous impact on trade. today. 9-1 ratio wages and mexico are about four and in the u.s. and canada, a 9-1 gap. even if wages and mexico would double, it would still be a big gap of 5-1. almost 700,000 jobs

to mexico since nafta took effect. we have lost tens of thousands of plants. that is been the problem. betty: i am curious, we have seen a record pace there is a completed two rounds, they are set for the next at the end of this month. we have not seen the heated rhetoric we usually see at of this. does that give you any sense that we might at least get progress? robert: if we look at objectives traderth by the u.s. representative robert lighthizer, they were pretty big. it sounds like a lot of what was accomplished has now failed negotiations to create a transpacific partnership. they're been suggestions of what they're going to do, the try to harvest some of the agreements that were made there to read for example, to with trade and digital services and things that were not thought of 20 years ago when nafta was put into place. they may make some cosmetic andges in labor

environmental standards, perhaps moving to the core of the agreement. i do not expect those to have significant effect on trade goals or the way those agreements affect workers on the ground. yvonne: we have heard from president trump, and he has criticized mexico and china for taking jobs away from everyday americans. i have a chart that shows the course of history and where everything fits right now. this is g #btv 2191. what we see, the pink line shows were nafta was established. u.s. exports and imports to mexico, rising. and, china enters the wto, you see manufacturing jobs in the u.s. has plummeted. who should president trump blame the four stealing jobs? is it more nafta or china? robert: it is really china. the agreement to bring china in 2001 opened up

the floodgates and led to a flood of imports into the u.s. by comparison, we have lost 700,000 jobs due to growing trade deficits with mexico. we have lost 3.4 million jobs due to trade deficits with china. the other big contributors to our trade problems are japan, germany, and some other western european countries that maintain big trade surpluses with the u.s. and rest of the world. that is where we should be focusing our attention. yvonne: the u.s. threatening to impose more sanctions, possibly on chinese banks. do you think these escalating trade tensions could get worse from here on? robert: that is a possibility. frankly, the way these things have gone, president trump as frequently threatened -- at one point he was ready to tear up the nafta agreement. he was hit with a flood of

complaints from wall street and his own advisors. i expect something similar to be the outcome. he talked about cutting off all trade with china. i would be shocked if that actually happened. yvonne: robert scott, senior economist and director of trade for policy research at the policy institute. you can get a roundup of stories to get your day going in today's edition of daybreak. for bloomberg subscribers, go to dayb on your terminals. it is also available on mobile in the bloomberg anywhere app. customize your settings to get news that you care about. this is bloomberg. ♪

♪ betty: this is "daybreak asia," i am betty liu in new york. yvonne: i am yvonne man in seoul

. facebook said to be offering hundreds of millions of dollars to major record labels and publishers for music rights. in exchange, users can use the songs and videos they upload. talking about the story out of los angeles is our media and entertainer -- entertainment reporter. i remember doing this when i was younger. any time there was a new music video, i would post it on facebook. isn't there already a feature for that? what is the latest in this agreement we see? >> facebook hosts videos that include music already. a lot of those videos do not have -- they do not have the rights to. they do not have the rights to the music that is featured. if you were to go on and record yourself doing something and decide, i want to put a great song in the backup track and maybe millions will like it, you can put it up there, but you do not have the clearance for those

rights. the record label find out about it, send the notice to facebook, and asked them to take it down. that is frustrating for facebook users and something facebook would like to stop. it wants to host more and more video. they're working on a deal to pay a lump sum to all of these labels and publishers to cover the rights for those songs. in the meantime, they will be building a tool to help had any videos that have infringing material. betty: how might this impacts, if it does at all, spotify, pandora, apple, amazon? lucas: the biggest threat is probably to youtube. at the moment, facebook is not pursuing the rights to millions of professional songs, like spotify and apple music. it does not have a radio service like pandora. youtube is home to all things video and it features a lot of music.

it is the company facebook seems to be going after. betty: the battle between a youtube and facebook. what about the music industry? they must be happy to see this windfall of hundreds of millions of dollars? lucas: they are happy but cautious. ton ofve been getting a money from spotify and apple and paid streaming services. sales are growing for the first time in two decades. --the same time, they spake facebook has potential to be another youtube. increasingly, you can make some money. but most people in the music industry believe they do not respect copyright, and do not distribute enough money back to artists, that it is getting rich on the backs of artists. this is something youtube rejects. facebook has the potential to be another version of that, a great place for promotion, but that will swallow user time they might spend on a paid service

that would make the music industry more money. betty: a very interesting move. a quick check of the latest business flash headlines at this hour. has seen itsfund, first monthly inflow in more than four years. bloomberg sources say they saw preliminary net inflows for $348 million, not including reinvested dividends. that takes the total to almost $75 billion. that increase was the first since 2013. yvonne: asset management wants to deduct -- wants to double its a japan staff. office billion family sees what they say are enormous opportunities. they have tripled their tokyo staff to 30. point72 is offering 10 week

internships to recruit. come in seoul, tokyo, sydney. another day of risk off. this is bloomberg. ♪

>> asian stocks set default, rallies as tensions persist over korea. the top ceo slammed his moves to an protection for child migrants. waiting on australia second-quarter gdp numbers with economists expressing a move to the top side. >> nissan launches a new version of the world top-selling electric car.

yousef: welcome to the second hour. liu in new betty york. i have a chart here that shows the angst we are feeling here, the nerves are in japan. shows a growing skepticism we see in this market. the hedging activity, the ratio on the is bullish calls gauge hit a seven-year high earlier this week. left me weeks as levels in april 2010 when grace was struggling to reach a bailout and also being waived by the japanese yen with typical classic risk of move. end iftnet shorts on the that is going to unwind and we

had some key levels for dollar-yen at 108 .60 against the dollar. betty: very interesting to see the safety trade. we're talking with our guest yesterday, there is a conundrum about whether you want to be rushing into asset in japan when japan itself is in the middle of this conflict. better ways to play this risk off trade. as you mentioned it looks like we are entrenched with going into some of these safe havens and claim that trade for quite some time. let's get to the first word news with paul allen in sydney. paul: hurricane irma is churning toward florida with the prospect of losses that could

surpass katrina. at $130 billion. the national hurricane center warns that irma is extremely dangerous. the second round of talks on renegotiation of nafta have ended. concretey few proposals appear to have reached consensus. the u.s. wants to tighten labor standards among other proposals. business groups want to keep wages out of the talks. thee also must address needs of those harmed by the current nafta especially our manufacturing workers. we must have a trade agreement that if it's all americans and not just some at the expense of others. paul: federal reserve interest-rate increases may be doing real harm to the u.s. economy according to minneapolis fed president neel kashkari who said interest-rate rises me explain why inflation is low and job growth is years and

outspoken critic of the drive to tighten monetary policy and was speaking in minneapolis. facebook is said to be spending a gun music rights so users can legally upload songs and videos. it is reported to offer major record labels and publishers hundreds of millions of dollars -- they can take down videos with infringing material. the social network once a quick deal so it no longer frustrates its users. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am paul allen. this is bloomberg. for the markets there is plenty of ingredients for risk off day, talk about the u.s. debt ceiling concerns as well. and another hurricane heading stateside. with sophiepen

kamaruddin. sophie: it is making the latest equities we have asian and bonds are rallying. with the dollar dropping them i provide some solace for non-dollar assets. we have the greenback at the lowest level in more than two years further diluting its safe haven quality given the treasury -- sankvernight and overnight and continuing to do so. we have the kiwi leading gains, above that 72 level and the korean won remains a slightly less extensive given the cloud of geopolitics. check out the aussie, that has broken through the level before the release of second-quarter gdp data. coupled with the following dollar, hawkish view perhaps providing a boost to the aussie dollar. we have the yen trading at

strongest level since april and it could test the year to date high at 108.52. the currency is third straight session. trumps tweet speaking of allowing south korea and japan to buy american weapons in that game. there could be more verizon the end looking imminent the -- that at 129.4.ing what euro-yen and how it might move given the cost of risk as we discussed. and a last look at the benchmark treasury 10 year yield sticking below .06%. the lowest in 10 months. fast it iss fading raking through the key fibonacci retracement the first day after

trump's election victory and the next critical level would be 1.93 by 1.71% and this would what about all the postelection gains. with geopolitics bond traders have a list of worries. we have the debt ceiling was, hurricane number two contend with and shrinking debt on the u.s. led rate hike. tol kashkari the latest add pessimism. and the message that he wants to get going on the balance sheet. betty: thank you so much. sophie kamaruddin on the trump trade. president trump is pushing for taxbig overhaul of the u.s. system. seeing the revamp is essential for boosting growth. larry summers is questioning the

effectiveness of the tax code changes being discussed. jodi schneider here to make sense of this. what is the logic doubting that tax cuts or tax reform will have any impact on the economy? concerned this bears little resemblance to the efforts in the 1980's, we had the 1986 tax reform where it was widespread. it was a rewrite of the tax code. his concern that by lowering the corporate rate and lowering rates for the wealthy that that will cost a lot of money and not have an effect on the overall economy. it could cost as much as $2 trillion and it is not clear where the money would come from, how that would be budgeted. that is his main concern that it would not be widespread, it would not be confidence of. -- comprehensive. things on the

agenda. daca is on the agenda. on thefalling list of priorities? jody: congress has to do a few things in september. budget, approve some kind of spending plan even if it is short-term or the government will shut down october 1. they have to do something about the debt ceiling to raise the debt ceiling. the treasury secretary said they have to do it by september 29. some people say they have a few weeks in october but it must be done and there is this big hurricane relief bill for texas. with another hurricane on the horizon, there may be other funding that is needed. occupying congress. hard to see how they fit tax reform in there and the tax plan has not been hashed out.

we do not know what the rate would be, there is very few details so far. this does seem to be something that will happen after september, after this big crunch of legislative activity that needs to occur. betty: this whole decision to rescind the dock raises -- legislation, that is drawing fire from the business community. what are the ceos bank, is 30 thing that congress can do to address this issue? jodi: the ceo second and that the repeal ca, theend of raqqa -- da way to avoid deportation of over a million people who were brought to the uss children, their concern is this is not a want thet, they do not signal that immigration is not going to happen in america, that

immigrants are not welcome. that is not good for the business. there is some business concerns that many people have jobs, they are taking jobs and entities that need them. likeard from a lot of ceos mark zuckerberg and other ceos that this is not what they want. the president has said he wants congress to do something to have some kind of legislation that would have a permanent fix for this. he said he respects these people and wants these people have something in america but he resending this and sending it back to congress which is already overworked. there are conservatives who do not want to see this happen. the question is what he get tied to funding for a while with mexico or other kinds of tough border restrictions. it is not clear what congress would do, they have a six-month time to do something, it is unfair with that would be.

>> you heard from russia and china, both seem to be a little bit more aligned in terms of rejecting sanctions on pyongyang. spell what will happen in the vote? jodi: the un security council probably will do something, will have tough language and try to do more sanctions. there has been tough sanctions imposed. if china and russia will not go along and will not stop the floor -- flow of oil, there is little effect that more sanctions will have. russia made that clear yesterday they are not going along with that. schneider joining us live from hong kong area nissan develops a rollout of the latest lease model. a look at the electric car push compared to the chinese and american rivals.

relentlessly strong australian dollar may be hurting economic expansion. this is bloomberg. ♪

vonnie: this is daybreak asia. betty: this is betty liu. treasuries also falling low and the dollars the, investors shied away from risk following north korea's biggest nuclear test in the -- and the onset of hurricane,. let's get more on what we should be watching for with mike mccarthy. weekend after the weekend we were watching the market reaction in asia, the u.s. markets were closed and it seemed like what was going on,

was going to be temporary perhaps, contain a there is an over 200 point drop. does it seem like he's factors on the markets here? mark: i think that risk will remain. has caused some concern but it is the sanctions that are worrying market and the potential disruption to global trade. that is where the market will focus. that china and russia have refused to look at more sanctions. that might be positive for the trade outlook. >> we had plenty of it speakers today striking more dovish tone, kerry say we may have heard the

economy with higher rates. a coincidence that we are getting more dovish fed speak today? >> very deliberate strategy. meeting the fomc september 31. markets are doing about whether we will have cable or withdrawal of stimulus. we could hear an announcement for when it will withdraw. if that is the case that will be hawkish and this dovish commentary might be an attempt to prepare the ground for an announcement. that is what some traders are arguing. betty: i am curious about how that the australian dollar and the outlook for australia and i want to the chart that shows you the australian dollar, the aussie dollar. 4639 is the chart you can see that while we see this rise in

the aussie dollar and as you see that you see the fed funds rate continue to step up. if it seems like the chances of a rate hike come less likely, how might that a situation for the aussie dollar and the rba? guess: it is a real concern. difficultiesly that an elevated currency present to the economy in terms of the transition away from mining investments. it is interesting to note the aussie is at a key point and at the same time as the -- a number of other currencies. the dollar-yen above 108. the potential to break through key points of resistance is fascinating from a trading point of view. we could see a simultaneous breakthrough. the problem for australia is

strengthening would be damaging to the economy. for some it is justified in terms of high commodity prices, the softening of prices over the second quarter may mean that trade deteriorated. we would look to see a lower aussie dollar to accommodate the worsening in the terms of trade. that does look to be the case and if we get the simultaneous breakthrough losing currency markets could be substantial and we might see a return to voluntary we have -- we could that we have not seen. our gdp numbers are to be a catalyst for market? test, they appear to be coming through with the are -- revision of the numbers are the could respond to the potential for higher rates and

sell down the markets. any reaction to a rate that is above estimates will give us an indication of what australia and international investors is thinking about the market. we have the market close to a key level. the asx 200 index has been contained by a 3% range and it is sitting on the tour at the moment. negative reaction today would mean very bad news for australian stocks. if on: iron ore -- they have been large among some of the large caps. is it mostly about china, what is going on? biggest shorts, the largest by dollar value is in rio tinto. from70% of their income

iron ore there is speculation hedge, and an iron ore play. there is some speculation that paired against the china exposure. the total value is more than $3 billion, it would be a significant hedge. well we cannot say who is a community the stock position it does appear to be related to prospects for china. with the better data we have seen and the growth in the iron ore rice, this trade is causing some pain at the moment. yvonne: great to have you. journey us live from sydney. you can get a roundup of the stories you need to know to get your day going in today's edition of "a break. -- of daybreak.

settingsustomize your when you get the news of the industries and assets you care about. check it out at tv . this is bloomberg. ♪

betty: this is daybreak asia. i am betty lou in new york. still: pokemon go attracts excitement people around the world. the game is found most the 20 most you look -- most lucrative apps. big plans forat the game. we launched pokemon go last year it was only 10% of what we wanted to achieve. we are working on reading the ability to swap them or have the

covered 140 so far. with more than a hundred figures, there is much more we can come up with. >> this which has been out now for half year. what are your impressions of how it is doing and what will -- what were your impressions before it went out, has anything changed? >> this which -- the us which will not he is success until it went on sale. no one would carry around a game console. it is obvious i was wrong to i can truly is the key to a successful game is quite simple. absolute quality and leave sales of hardware. playing style can be flexible and popular among the early adopters but there needs to be one more step to attract a wider audience. one should not overestimate potential. >> you mentioned strong software is the key to a system. i wanted to ask you about your upcoming game for the switch, it

caused a lot of excitement when it was announced in you. what else can you tell me about it? well oname's work handheld devices and we are developing games that work on switch. i cannot give you details but for now we focus on ultrasound and ultra moon and deluxe on this which do september 22. we're focused on providing different laying styles to our customers. -- playing styles to our customers. get a quick check of corporate news. the state regulator in china's hubei province is said to ask companies to suspend new property investment in a push to reduce financial risk mario draghi others have asked state backed companies to accelerate the instruction and sales of current projects to get money

back as soon as possible. regulars fear many of the companies face high ratios and raising funding costs. havee: boeing and airbus voiced technologies about the rock will -- rockwell collins acquisition. will protecthey themselves. playmakers are worry -- are wary. the largest purse of profit in jets. betty: noble group says it expects find a buyer for its oil business in september. it sherman said the company is confident -- and the chairman is confident. he was speaking at a meeting. nissan unveiling a new electric car. will it stack up against the likes of teslas model three? that is next. this is bloomberg. ♪

yvonne: gloomy seems to be the theme and markets and the weather. betty: a bit gloomy. you are watching daybreak asia. let's get to the first word news with paul allen in sydney. has: russia's president rejected u.s. calls for sanctions against north korea after its six and most powerful nuclear test echoing china's pyongyang to pressure

into abetting a it's marshall -- it's a missile programs. decreasing its missile programs. the move would throw one million people who consider themselves americans into legal limbo. high-profile ceos including mark zuckerberg and lloyd blankfein and jack dorsey have criticized the decision. the president has committed a tax overhaul is essential to boasting -- boosting economic growth. he hosted national economic andcil tractor gary cohn stephen mnuchin and house speaker paul ryan, senate majority leader mitch mcconnell and the leaders of the

congressional tax-writing committees of the white house. the former currency chief said the boj should and its obsession with 2% inflation rate -- rate. this is the central bank should reduce its annual bond purchase target calling governor kuroda is unprecedented stimulus program and ineffective intravenous drip. this is bloomberg. ♪ global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. let's have the latest with jesse kamaruddin. getting a little bit messy. josie: there are a few things that we are seeing, the bond rally and we have a slightly weaker dollar and you can see from the red column that asian equity markets are under pressure. when it comes to what is dragging the most it is financials, that segment weighing across the benchmarks and we are seeing the treasury

yields continuing to drop below 2.06%. to show you what is going on financialsspi, falling and telcos falling so trading at the lowest level since august 11 falling for a fifth straight session. over this time the kospi index has lost the most ground. nomura downgraded korean banks to neutral too low stressful growth a week industry and issues in the housing market. also highlighting the popularity of internet banks weighing on the players in the sector. this have taken a hit but they are saying that bargain hunters could be waiting in the wings given a solid earnings outlook. you can see the ps4 korean banks in the blue line on this chart. that is the line in white, it

has been dropping of late but when you look at the big picture does not look too bad. year,dex is up 22% this it is the line in white once more and that is against a 50% gain year to date for the kospi. another indicator signals that investors are starting to price in economic pain for korea. that sovereign debt risk is emerging wants more from china but there is a switch up going on with chinese five -- five year cds, the line in blue. this happened was back in 2011 and 2012 so today well we have geopolitics playing apart, other lingering issues weighing on investors minds.

betty: talking about north korea, let's talk about cars for a moment. that is it. nissan unveiling the second -- how cute -- generation of its leaf car first launched in 2010. the model is billed as the world's best-selling electric car. the new leaf is being released to an increasingly and competitive market. tesla a big competitor. quite an impressive show nissan is unveiling this leaf. they are unveiling this and selling this into a market right thethat is like what in electric vehicle industry, describe the state of play right now. >> today we have 2 million on the road and they are one of the first major companies that really stood back in 2010.

they certainly did well in terms of overall sales. to 2009 when this came up, the company was talking about having half a million on the roads by 2015. they certainly undershot even know they have taken the lead. on thes a lot more market. we saw the tesla model three come in a few weeks ago with a range that is almost triple the prior leaf version and the chevy volt has a good range in terms of 300 miles less. the -- what is nissan offering, is it going to try to beat the bolts and try to match the [inaudible] version of the model three. that is what everyone is wondering.

how is the leaf going to perform it markets like china which has been the big leader in ev market. >> that is another major question. the two -- 2 million that i mentioned, while the u.s. was taking the lead, china has taken onelead as being the number country for sales. we expect one million to be sold globally and under half of that will be in china. in the case of china what the chinese government has tried to do is to make sure that the local market benefits local players. automakerswe did and thoseex be at how much of -- index, how much of those are

ev? the chinese government has tried to make sure that the domestic market benefits domestic players. they have tried to make sure that the subsidies that are produced by the manufacturer or the joint venture. the leaf is not directly sold -- brand.leaf bland they announcedar they will try to work to launch more models in china but the chinese market is everyone watching it and it will grow rapidly. it remains to be seen how well the government will able to protect the domestic market to benefit domestic players. betty: china's lead in the market, is that an advantage for the chinese manufacturers? >> good question. one of the long-term goals has

been to have its industry become a global competitor. basically consider in europe on fifth avenue having chinese names going down the street. like it is quite tough to imagine in terms of land recognition, the chinese manufacturers lack the brand recognition. right now when it comes to battery technology, the batters longtteries that can give life, it is a lot of the key materials where these companies own the ip as well as the supply chain. how will the chinese technology -- manufacturer be able to gain the technology is something to watch. couple of weeks ago we saw nissan selloff it's a battery

business to a chinese investment fund. part of this is the interest from the chinese side to gain technology. betty: thank you very we are watching the leaf the non-failed into the market. next, second hurricane heading stateside. we will assess the likely impact on level energy markets. this is bloomberg. ♪

betty: this is daybreak asia. i am betty liu in new york. yvonne: let's talk about lng. 26% the first four

months of this year. guest joining us live from sydney. good to have you, thanks so much for joining us on the program. leaders of the largest when it comes to the lng market and you have at lead in australia where you are here today. you seea take on how that demand window for lng given the fact we are seeing an oversupply in the market wcurrently.ea -- current >> we have invested over the last 10 years, for than -- more than $50 billion of the investment. we have been raised to see strong demand for lng the last few years from asia, particularly from china and other countries that demand

energy to make their energy makes go around and even this year we have seen the demand response to the supply increase being very robust. we have not yet seen an oversupply. over the last 18 months every energy cargo that could be reduced in the world has been produced at it has found a will paying customer. this market is in more balance areapeople wraps perceive -- perceive. confidente you still that you're getting a final investment decision by 2018? guest: the industry is going through quite a range of supply additions from australia and the u.s. as looking reasonably well supplied in the next three years but in the 20 20's, continued demand growth at 45% every year

is going to make supply undershoot demand and the need for new projects to take investment decisions in the coming years is becoming clear. aell has a number of options must in every time zone. we will take the option with the lowest supply cost areas that could be canada and the team is working hard to make sure it qualifies for that. to profitability, the way to strategic advantages a low-cost provider of lng and that is what we will in -- focus on. canada is a player and will be proud to have built a -- l the project. we will take our decisions based on strategic advantage. yvonne: would one of those be selling down your state in that project in canada? portfoliohave

management around the world, we africad to send asia and , the u.s., and canada. one thing is sure, we cannot the mullet same time so we will need to sequence and potentially self part of these projects down as we move forward. one thing is also certain, our leading position that we have today being by far the largest private layer. we will not give up so we will to findcontinue investment opportunities to build that lead. we are about to quarter of the global business and that feels good so focus on profitability but not about to surrender our leadership decision. betty: we were looking a few moments ago at nissan unveiling the new leaf. the top-selling electric vehicle. we know that with the rise of ev's that is likely to

affect the markets. we might seatgeek peak oil in the next two decades. how are you navigating that? guest: it is very exciting to see electrification of transport i wish ourand colleagues success with their new model. fairly mobility is going to electrify where it can over the coming decades and this will start to impact global oil demand and gas demand and global electricity demand to power all these vehicles. it is important to realize that as a hundred 50 million cars in the world and 2 million are electric, that is going to grow over time but it will take some bee for that substitution to impactful. we do see oil demand in the 30's hitting its peak and starting to decline and that is why we are very focused on making sure that we continue to extend our lead in gas but move into new energies area into renewables

which is an important part of the future of the energy system. any: you mentioned about making that competitive with other fossil fuels right now, in particular cheap coal. you mentioned about the competitive with those prices. cheap coal is there. market.ts grip on the how do you compete with that price? i see the future of the energy system where consumers reliable, bute, also clean power and clean energy. and the commendation of renewables and natural gas is going to be competitive against that competes in that mix. coal obviously has the advantage of being cheap but in the future, it has to be low carbon, it has to fight air pollution, we believe that coal is about to hit its peak and we will

[inaudible] and guess ever nobles will take the rightful place in the power macs and the global energy mix and that is what our strategy is all about. betty: thank you so much. from -- the energies director in sydney. one future -- feature we would like to bring to your attention, you can find it at tv , you can watch us live but also see reviews interviews and dive into any of the securities or bloomberg functions we talk about and you can become part of the conversation by sending us instant messages during our shows. this is for bloomberg subscribers only so check it out at tv . this is bloomberg. ♪

yvonne: this is daybreak asia. betty: a quick check of the business headlines. hp is emerging from an aggressive effort to some dumb prospects. revenue rose in the third order. marking the first time in five quarters the business technology provider beat estimates. customers are buying more storage and networking gear although servers were slightly down. hast72 asset management

claimed [inaudible] the family office has received what it calls enormous opportunities. it has tripled its tokyo staff to 30 in the past 3.5 years. they offer 10 week internships and a ten-month academy program to recruit potential analysts. the first monthly inflow in more than four years. netfunds are preliminary, inflows for $48 million not including reinvested evidence. taking current total assets thomas some five yen dollars. the increase was the first since 2013 when acid speaks at $293 billion. assets peaked at $293 billion. a restaurateur is paying a

record. the markets owner announced he was selling the franchise as he -- that he bought for $85 million. the previous record was $2 billion. betty: facebook is offering hundreds of millions of dollars to major record labels and publishers for music rights in -- and in exchange users would be able to include songs and videos they upload. seen music and video, we have seen that for years, why do this now? sarah: facebook does not want to have any reason for its users to have to be prevented from sharing. on his book it is all about be encouraged to to share more.

video is a top priority. the last earnings call he said this is going to be the biggest driver for facebook has future growth. if they want people to post more they see their future revenues coming from video and they do not want to prevent people from sharing but they do not have the technology to be able to easily identify who is using copyrighted material. for now they are needing to spend hundreds of millions of dollars with these record labels to make sure that they do not get in trouble for -- in the meantime. yvonne: how does music fit into all of that? sarah: a lot of times if the music has some is it incorporated that might be top -- copyrighted, facebook has to take that video down. is createdas done

this relationship with users and is somewhat chance facebook wants to make sure that in the future for the social network which might be mostly video in a few years, that people do not have that [inaudible] from sharing. is this a good idea for the music industry? sarah: it is a temporary solution. the industry wants to be paid for each song they have the rights to. fire -- for now that is not technically possible on the facebook site. the music industry will have to take this money for now and in the future hope that facebook comes up with a solution that serves them better. if we look at what has happened with youtube, the music industry is not incredibly happy with how their music is being used without this process in place in

-- in place. betty: thank you for joining us to time for a quick look at what is coming up on bloomberg markets. next, what are you watching? the: where you are and latest, what is going on with north korea. the tensions on the north korean peninsula and this war of words and it remains that at the moment between washington and pyongyang. also looking at that with kerry craig joining us from melbourne and 15 minutes time. and let them are put in set out a warning that sanctions will not make a difference. the north koreans would be prepared to eat grass rather than give up their nuclear weaponry. moving to the latest immigration scandal surrounding donald trump and this repeal of the legislation involving the

dreamers or daca. join us toitor will have a look at the ramifications of that and corporate america goes up against donald trump because they do employ some many of them. gdp numbers coming out of australia at the bottom of the hour. we are looking at the conundrum facing the reserve bank of australia, the cap interest rates on hold on tuesday. back to you. jampacked show i could is in washington. so much to look forward to. markets covered -- coverage with rish and heidi is next. this is bloomberg. ♪

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♪ it is nine :00 tuesday evening in new york city and washington, d.c.. . i am rishaad salamat. financial markets tumbling. on they markets falling possibility the chinese lenders may limit excessive gains. the aussie dollar above $.80. the rba warms that it is adding to price pressures. this is "bloomberg markets: asia."