This is daybreak asia, coming to you live. I am betty liu in new york. 7 00 it is just after a. M. In hong kong. I am shery ahn. We are seeing geopolitical tensions being great for Global Markets and volatility retreating as well, but i guess the key question is whether President Trumps new actions on china will in fact stoke more trade tensions. Betty we have not seen that affect the markets before, but who knows . The markets are even more jittery these days. It seems like you cannot make sense of what headlines will move what index. You may as well follow buffett. Im pretty confident you will make money if you follow him. Our sources talk more about that story. Shery with the rally here, we are setting up for a bullish trend in asia. Betty that is always good advice, isnt it . Always follow buffett. Out onseeing korea Independence Day and usually around this time, we could have further escalation of tensions. So far, as he mentioned, the market seems to be weathering all of that. New zealand is up. 5 as well. Story for same australia, which was up yesterday by. 7 . We are seeing futures gaining. 4 . Butaussie holding steady, keep in mind, we do get the rba minute Meeting Minutes later on today. Also, in japan, the nikkei fell yesterday, but they have a lot of catching up to do because they went away on a long holiday weekend. Nikkei futures pointing up. 1 . We are seeing the japanese yen weakened again, which could be great news for the equity markets over in japan. When it comes to tensions easing, it has been great for the u. S. Markets. Betty it absolutely has been. We followed right along with the surge in european stocks. Pull up the boards, guys. We closed here considerably higher. 135 points. Nasdaq, a gain of almost 1. 5 . However, all of that could be spoiled with more geopolitical tensions. President trump taking that First Step Towards investigating china over intellectual property violations. That is adding to the trade tensions we are seeing between washington and beijing. Joining us now is matt larson in san francisco. SigningPresident Trump this order to look into reviewing these ip violations, plaza live be possible ip violations. Guest the practices they are looking at here has to do with a compulsory transfer of Different Technology in order for a u. S. Company to enter chinese markets. So the idea would be, if you have some kind of patent or intellectual property assets, that in order to do business in ,hina or manufacture or do launch a drug, that you would have to transfer that ip to either a Chinese Company or make it widely available to other companies in the chinese market. Betty but what is chinas position on these transfers . What do they say . Guest they have not run afoul of any trade ruling or law that is in compliance with wto standards and rules. From chinas perspective, there is a balance between the antitrust considerations in the intellectual properties. Has obviously advised against inflammatory statements is kind of focused encouraging the u. S. To focus on the issues and what is good for competition versus protecting innovation. Chinese intellectual property courts have gone through a lot of strength in the last couple years. It is a bounds between antitrust and also recognizing the strength of different companie intellectual property rights. Shery what is interesting about this memorandum is that instead this, they asked the representative to consider launching an investigation. What are the chances that he will . It is interesting. It is a less aggressive posture. There is some speculation as to whether that opens the doors for a negotiation. It is testing the waters. Is no reception. If china does not like they are willing to talk, there is a high likelihood of an investigation. Well see how that plays out, whether the two countries are able to reach some kind of deal or agreement and build on existing relationships and make some concessions. I think it is fairly likely you see investigation for additional leverage in trade talks down the road. Betty it looks like it will take some time. Matt larson, thank you so much bloombergg us on our intelligence team. First word news with ammo. Mma it has reassured south korea that a diplomatic situation is washingtons top priority. The jennifer reaffirmed americas commitment to its ally after meeting the president. James mattis has said the situation could escalate quickly if north korea fires a missile at u. S. Territory. Reports from north korea say kim jongun has discussed the strike plan with his senior generals. Missile towards the u. S. Territory was on the agenda as an inspection of the norths Strategic Force command. They said pyongyang wants the u. S. To stop what it called arrogant provocation. Kim jongun said he would for a military strike sometime in the middle of this month. New york fed president bill bradley says it is reasonable to expect a timeline for trimming the Balance Sheets when the fomc next month. He supports another rate hike this year if the u. S. Economy continues to grow. His comments signal optimism among policymakers despite sluggish inflation. Employment is growing and the economy in the u. S. Is chugging along reasonably well. Our outlook has not changed. We continue to anticipate a moderate growth trend. We think it will push inflation over the medium term thats who our objective of 2 . Emma integrating update reporting a cash profit of 1. 4 billion. The bank declared that the equity ratio of 9. 8 as of june 30. They are in a. Of lower revenue growth. Some parts of the economy experiencing challenges. Has improved. Lity global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than on hundred 20 countries. This is bloomberg. Betty thank you. We saw wall street kick off the week on this bullish note for stocks pretty much all around the world. Let us take a closer look at what that means. What top investors are seeing behind all of these numbers. Joining us now is su keenan. We have retail sales coming and some economic data. The second half, strong rebound the first half. A lot of strategist saying we set up strong for tuesday. If you look at the close, big gains, especially the nasdaq. The tech heavy nasdaq. Movers,aw the big nvidia, advanced micro, up very strong through the day. Interestingly enough, jcpenney the retail numbers coming out took a big drop. It could fall to one dollar this year. That would be a 74 drop from where it is trading right now. Some concern. Let us go into the bloomberg at g btv 5232, because while there are growing concerns in the market, it certainly looks like a big risk off day. You look at this risk on riskoff index, and you see it plunge. It came back in a very big way for the moment. These numbers about to hit the tape. It could change things. We begin the week on a bullish note. Betty we saw oil fall in most in five weeks. That is caused by these fears over the climbing chinese demand. What are the traders saying . Is that justified . Su one offset the other. What the concern is, clearly, with chinese demand, that is one of the bigger consumers. It is not just the fundamentals in the market, but we look at this lackluster market. Hedge funds have stepped back. It is in a tighter chain. If you go into the bloomberg, what youre looking at is the very tight range on the forehand side of the chart. He blue is the price the white is the net long positions. There is a lot of concerns. What is the concern is a very big trade on the street known as the oil gone, andy haldane. We have a picture of him closed. It was down some 30 year to date. He made 100 million in a single year. He was a legend Going Forward. The bearish outlook for oil, it is not really going to rise above 50 as he had projected for 2018. It has made it very challenging to trade on fundamentals and has the rise of these algorithmic traders which make the market very chaotic. When he is a leader in the intermediatestech talking about a lot of those factors on the market. Says goodbye to its longtime investment in ge. Why Warren Buffett is extending his bet on credit cards instead. Shery up next, trump goes after china on alleged ip theft. We discussed what it means for to a ties. This is bloomberg. Shery this is daybreak. Im shery ahn in hong kong. Betty i am betty liu in new york. President trump has taken the first step toward an investigation into alleged ip theft by china. Pressure oning more strained twoway ties as we look at the possible ramifications. Ramy inocencio has three bloomberg chart you need to know. Ramy first off, i want to head into the bloomberg terminal. This is the trade flow function between china as well as the united rates. You can see on the righthand side of your screen, the United States is at nearly 600 billion. Of this has been rising over the , ever since 1998, when it took the title from hong kong here. This is what is at stake when were looking ahead and talking wart this potential trade with regards to china and the United States if something should happen from this china ip probe. Going into the bloomberg terminal, g btv 109, this has to do with aluminum. You are probably wondering why are we talking about aluminum . Commerce, the Department Said they would hire terriffeliminary on aluminum coming out of china. They are down in the past month or so. The green represents u. S. Imports. We are starting to see how this might go up or down. Looking ahead to october 23, the the carsrom department will give their opinion on this. This is g actually, this is the supply chain function. Let me walk you through it basically. What we are going to be taking a look at are the trade values of u. S. Firms in china. For example, china with apple has a 1. 1 billion trade value, but with that said, you think one point 1 billion is a lot. Not exactly so much. There is a larger trade value with south korea or taiwan. Looking ahead, let us trade the board here. I will show you how that actually compares with some other companies here if you put that up, guys, with the fullscreen chart. About that. To you on your screen right now, we can see what we are looking at in terms of other trade values. Apple being 1. 1 billion there. Boeing, amazon, microsoft, and google, billion dollar companies. These are falling. These are not very much. 480 million for boeing. Getting farther and farther down here. These are the chart you want to know going ahead as we continue this conversation. Betty no lack of activity. Thank you so much, ramy inocencio, with those three charts as you look at u. S. China trade. The president and ceo of cmm international and the wb trade representative lighthizer responsible for u. S. Trade and investment relations with asia. Robert, thank you so much for joining us. I want to just read for you we know there is so much at stake between the u. S. And china in terms of trade. I want to read to you a quote from the u. S. Trade representative from earlier today, talking about this order signedesident trump about looking into ip violations, saying the united rates have faced a very serious problem. China industrial policies and other practices reportedly have forced the transfer of vital u. S. Technology to Chinese Companies. Case, why didnt they find something much more forceful than we saw today, robert . Robert the announcement we saw from the white house was really just a kickoff stage to broader, more detailed examinations, so the white house can decide which among the possible tools it has to deal with this issue they may use. So it was really the warmup call, if you will. Not really the kickoff to the game. Betty right, the pregame, i guess you could say. Robert the pregame color commentary. [laughter] know, the timing, shall i say, is curious perhaps. These tensions with north korea. Im sure this has always been in the works for months. The timing is curious and i wonder what kind of signal obviously, the u. S. Want to send a strong signal to china on trade. Robert i think the timing is not unexpected. There were observers who thought this would happen a couple of weeks ago. I imagine that may have been delayed while the u. S. And china and other nations were working on the u. N. Resolution regarding the latest north korean actions. It should not be any surprise to china were china absurd china or chinese observers that this would happen. There are many folks who thought that the u. S. Would announce a 301al start of a section investigation. The u. S. Did not go that far. Rather, the president asked a broad examination that could 301 into the three or 10 investigation. The u. S. Doesnt want to be too quick out of the gate to allow all the options. Take thischina will seriously, but i do not think this should jeopardize certainly the important work in u. S. And china are doing around the north korean threat. Shery how do you view this linking . Is this the right approach . Robert that approach is not the right approach. There have been some suggestions the two should be linked. I think we should avoid any linkage and i think china would avoid any linkage. China has a direct Significant Interest in dealing with minerals korea threat as those the u. S. And the rest of the world. That is very distinct from the concerns that exist around trade. The u. S. And my recommendation should not link these issues. They are separate issues. There is the ability by china and the u. S. To work on both of these issues in isolation. It would be a mistake to say there is a tradeoff on trade to the of how related share they are asked of what north korea is doing. Betty someone very important disagree, robert, which is President Trump. You heard him last week do exactly that. I want to play you a reminder of what he said about that. Pres. Trump we lose 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, a lot differently. Betty why is linking the two a mistake . Robert because both of those are both trade and north korea are significant issues. There should not be a tradeoff. There should be an ability for the u. S. And other nations to work with china on dealing with the challenge of north korea and there are clear trade obligations that china has made in the context of the wto and bilaterally that can be addressed. I am confident that both Security Leaders on capitol hill and trade officials do not believe these two issues should be linked, and i hope that what we see with todays announcement is an effort to try to unlink these issues by the white house. Shery my next question was will the investigation lead to unilateral u. S. Action against china or action through the wto, and which one would be more expected . That is a great question. It remains to be seen how the u. S. Takes this on. I will say it think the most effective tool the u. S. Can use is to do something through the wto because the u. S. Would not be acting alone. Indeed, the type of transfer of technology concerns the president raised today are not unique to the United States, so the u. S. Would be much stronger in a proceeding to the wto that acting independently. On the other hand, if the u. S. Acts independently, i suspect china will challenge in the wto any unilateral action the United States takes. This is likely to end up in the wto regardless of how it is kicked off. Has alreadyng criticized the plan. What sort of challenging actions could we see from them . Robert either there could be a series of challenging actions in deals withw china the u. S. On a whole host of economic issues. I hope that does not happen because i think todays announcement is an appropriate way for government to look at concerned that are expressed. Requiring china is forced Technology Transfers or violating ip our rights. This really started in the United States with china in 1992, wherein the george h. W. Bush action, when carla hills was u. S. Trade representative. There was a significant engagement with china. It happened in 1995 and 1996, in the clinton administration. It happened subsequently in 2005 and the george w. Bush administration. We raised a number of these. I think china will recognize that they should not overreact. This is an appropriate exercise by the u. S. Of our factfinding ability, and we should allow all the facts to get out on the table and hopefully find a dramaticn short of a sanctions by either the u. S. Or by china in retaliation. Shery the only thing we know for certain right now is that this will take time. Robert, thank you so much for joining us. Mm sident and ceo at cn international. We will be joined exclusively by the chairman of mcdonalds china. Betty we are going to hear exclusively from airbnbs cofounder. That will be at 8 40 a. M. Hong kong time. Stay tuned for that. This is bloomberg. Shery welcome back. Let us get a quick check of the latest headlines. Target is targeting amazon and walmart by picking up a Software Company that manages sameday delivery to improve its digital business. Retailers and distribution to a network of 700 carriers across north america. It targets web operations including a data breach, website outages, and jason goldberger. Surgedchryslers shares after Morgan Stanley said it could see substantial hidden value in several of its brands. The jeepvalues division, more than the companys Closing Price of 10 euros, . 62. They saw the highest close since listing and have jumped more than 30 so far this year. Shery spacex launched a rocket to the International Space station with a cargo of Scientific Research and ice cream. Takeoff was followed by the successful landing back at Cape Canaveral a few moments later. We will have plenty more coming up. This is bloomberg. Track your pack. Set a curfew, or two. Make dinnertime device free. [ music stops ] [ music plays again ] a smarter way to wifi is awesome. Introducing xfinity xfi. Amazing speed, coverage and control. Change the way you wifi. Xfinity. The future of awesome. Shery it is 7 30 a. M. Tuesday in hong kong. A clear, sunny day. It looks like it could be a bright day for equities as well. Features across asia pointing higher. We are 30 minutes away from asias first major market open. Betty it is a Beautiful Day. It is also a Beautiful Day in terms of the markets. We saw this nice rally here. A pullback from the volatility over the last several days. Kind of cloudy looking in new york this evening. 7 30 p. M. In new york, where markets closed higher. I am betty liu in new york. Shery i am shery ahn in hong kong. You are watching daybreak asia, and now, first word news. President trump has finally announced White Supremacy denounced White Supremacists. Said those who cause violence in his name are criminals and thugs. Heather was killed when a man drove his car into a group of counterprotesters. Pres. Trump racism is evoke, and those who cause violence in its name are criminals and thugs. Including the kkk, neonazis, White Supremacists, and other hate groups that are repugnant to everything we hold dear us americans. TakenPresident Trump has the first steps towards investigating china over intellectual property violations. Adding to the trade tensions between washington and beijing, he signed an executive memo directing Robert Lighthizer to consider an inquiry into how American Companies in china are forced to hand over expertise. Potential reprisals include tariffs on chinese goods. Steeper than expected inflation. Cpi rose 2. 4 in july from one year earlier, and that is faster than the 2. 1 estimated in the Bloomberg Survey. It is in line with the r. B. I. s view. Also prices also rose, indicating building pressure. On jd. Com posted a wider quarterly loss after raising spending to drive sales at its midyear promotion. Of 74 million is twice that from one year ago, despite sales rising 14 . Shares fell sharply in the regular session. Jd. Com is facing competition from alibaba and smaller players while expanding rapidly into southeast asia. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than hundred 20 countries. This is bloomberg. Betty thank you. Shery let us get more on what we should be watching in asia with adam haigh. Adam, we saw commodities bubble,. Eing propped up we are hearing from one hedge fund saying that this could be about to burst. Why . Adam good morning. He is the old head of research, Commodities Research at citigroup, and he is very concerned about what he has seen in the speculative moves of some of the metals traded in china. Let us have a look at the chart, and this gives us a sense of the extent of some of these run ups we have been seeing. We have talked about it on this show a lot, but a lot of these , and a lott recently of speculative investors just jumping into those. He thinks these have gone as far as they can. He sees china continuing to cut capacity around the seal market. He expects growth over the next 18 months in china to start to disappoint. Many of the bears and china have been flushed out in recent months in the past couple of. Ears the economic numbers have been surprising to the upside, making it a pretty tough place for the bears, so he thinks this market has run its course and is likely to come back the likes of iron ore. He says they are pretty right for short positions at the moment. He does have a good past president and historical he called the rally that started last year. Tois worth listening academia capital on this one. There is onebetty measure of correlation that is receding. That is good news for the active stock pickers, right . Leastthat is right, or at it could be. Let us have a look at it on the chart. G btv 101. This gives us a sense here. All boatsd this moving together in the sense that the correlation with stocks, whether or not they are moving in tandem with each other in u. S. Equities. The correlation now slipping away and indeed, it could be a boon for stock figures. It continues to be a very tough environment for active managers. Thered is not a day that goes by where we did not hear someone alluding to the opponents of passive investing, bringing the cost argument, or whatever it is. A little bit of good news potentially given the back in the last week. A lot of risk assets and indeed stocks just moved to gather and started together and in tandem. Betty thanks so much, adam haigh in sydney. We will have much more in just a few moments. We will be joined from the center for strategic and international studies. Stay tuned on that. Now, onto Warren Buffett. Filings shows Berkshire Hathaway has a stake in synchrony financial, 520 million. Jenny serene joining us now. This used to be part of ge, right . And then it got spun out. Why is he so adjusted in this . You are right. Synchrony used to be the Financial Services arm of ge. When you go to jc penny and they offer you 5 off, that is synchrony behind that card. It is similar to some of the ones made in the past. Synchrony is the lender and the Payments Network come exactly like american express, the largest holder. He likes the kind of businesses where there is a high barrier to entry, but then payments, obviously, we always need to pay with something. Betty even more so now. Froms it different mastercard or visa . With the store cards, they may be Attractive Customer that is with a lower ficus core. Amex is among these wealthy, opulent cardholders. Sigourney is more downmarket. We are seeing buffet kind of take a bet in a way on the private label space. They have had a lot of troubles this year with credit quality. They had to raise their forecast twice in the last 12 months, but you know, a lot of folks say this is the bottom, and now it is the time to get in. Buffet obviously buys into that. This year, the worst performer on the s p 500 financials index. Why is buffett just looking past all of these problems . Jennifer that is a good question. A lot of folks say that this is the bottom. Forecast raised their for losses from here, so we are hoping that, you know, we have and ready to hit the ground running. It is something that banks are really struggling to do. Synchrony it works with these to make compelling offers and are able to put the numbers on the board. Obviously, buffett is noticed. Passingredit card debt an ominous milestone. That is huge. The last time we saw that this high is 2008. We want to trust Warren Buffett, but is this a good time to be upping that . Jennifer it is a really hard thing. It is a confusing conundrum. We have unemployment near alltime lows and folks are paying off their debts. Yeah, when you see Credit Card Debt reaching a record, it has not been this high since the crisis. Investors have been given pause and that has been reflected in stock prices. They are down, the worst in their index. It is a confusing conundrum. What folks are pointing to when they look at credit quality is their debt load is so high, but they are paying off their debts. It is a weird time. Shery is it a coincidence that he is buying into synchrony when he is exiting ge . Jennifer we have a call into the company about that. Analysts are saying the conversion happened in 2015. He is exiting ge. That has been dwindling for him for a few quarters now. Wasnt such a surprise. It is kind of funny timing. Betty a coincidence. Thank you so much for joining us. Up next, the war of words continues. Not as much today. North korea discussing the Missile Launch and all the u. S. To stop being so aggressive. We will discuss the strengths of each side and how to resolve this. This is bloomberg. Shery we are counting down to asias first major market open this morning. Japan futures pointing up. Not surprising given the japanese yen is weakening for a second session. Unofficial holiday period. Many firms are closed. Few are staffed as well. This is daybreak asia. I am shery ahn in hong kong. Betty i am betty liu in new york. S p has warned struggling commodity trader noble may default on its debt obligations. Notches to by two triple c minus with a negative outlook. Moodys cup by two levels, citing significant default risk. Declining liquidity and large debt maturities. 23 , fall in the First Quarter profit. Income through june dropped to 300 67 million from a year earlier, making a fifth Consecutive Year on year decline in quarterly profits. Sales rose 4 . Costs jumped 6 . Betty singapores Sovereign Wealth Fund is the latest to sell out of snapchat parents. 6. 7 5 million. It follows a similar news. They could sell after a blackout period. Snap reversed early losses to close up 6. 5 . Jim mattis is warning it could be game on if north korea fires missiles that hit u. S. Territories, including the island of guam. Kim jongun has discussed plans for an attack with his senior generals. Joining us now from albuquerque is the senior fellow with the International Security program at the sis. Much forhank you so joining us. Game on, locked and loaded. What can you tell us about the u. S. And also its allies defense capabilities . This is the kind of situation no one wants to have happen. We do not want a crisis or conflict with north korea, but frankly, this is why we have kind of been preparing in all these different ways for so many years to have not merely a mix of strike assets and go in there and respond, to retaliate, but to have some sort of defensive capability to perhaps engage and support something north korea might throw at guam or the United States or a u. S. Base in south korea or japan. We have got some limited defenses. That is a good thing. We have kind of been seeing the north korean threat developed for some time. We have a limited but important degree of protection to give us a little bit of insurance in the event he does something unsettling. Flappinge saw the u. N. North korea with their most severe sanctions yet. I wonder how much of an impact they will have given how advanced north Koreas Nuclear capabilities are already. Thomas i think they have the prospect to have an effect that they have not in the past. We have sanctioned just about everything that we have an interaction with. But what will really determine isat is different whether china gets involved in a meaningful way, not really talking the words and saying it is concerned about north korea, but they hold the reigns in terms of the economic, power, resources. China want to bring this to heal, they more than anybody else could potentially do so. It is possible that might be a path if the United States is serious. They might go the secondary sanctions route and sanction any entity that deals with north korea. Including was in china. If we want toide sanction that deeply, but they are there. Betty what about we were just talking with a former deputy trade representative who says it is a mistake to link north korea and trade in the u. S. And china. That is a mistake, two separate issues. Is that a mistake . Is that going to give the u. S. Some leverage . Thomas they would rather not have this interfere, but at the end of the day, one has to ask, is this a big, national priority, yes or no . If it is, some of those linkages may have to be made, not because they are the most optimal, but because we only have so many tools on the toolbox, and if we have tried Everything Else, and Everything Else is not working, we may have to pull some of those beavers that will get chinas attention, and if we get their attention, could get north koreas. Shery the south Korean Defense minister said yesterday that there is a very low chance we are going to see north korea go anywhere near guam, i cap one. Attack guam. Do you agree with that . Thomas that is the latest as of right now assessment. Just last week, however, they were threatening to do exactly that. They were saying they were going to launch this particular kind of missile, basically at the four corners of guam, this far away from the island. They were talking about a missile they had demonstrated on multiple occasions, a robust ability we know that they have. It was a real enough threat to spin everybody up. It is possible that behindthescenes, we have seen a little bit of that being pushed back in some way. Maybe somebody leaned on them and they got assurance on this. This is kind of why we have our military posture we do, why we have the military defenses we do in the defense that this cannot be out back. They still have the prospect to provoke us in some way. Chairman is the chairman of the chief done for . Alitary action was still possibility. At what point should the u. S. Damagethat collateral among its asian allies in order to stop north korea . At what point does it act . Thomas i would say it is never acceptable, but whether it happens or not, whether the military action happens or not, that is up to north korea more than us. That is a function of do they decide to provoke, frankly, miscalculated we have tried to be very clear that if you do this, bad things will happen to you. The is not the day to upset upper part. This is not the day to test u. S. And allied result. The United States have been very clear about this. The Trump Administration has shown 59 tomahawk strikes into syria to stop the chemical attack. The United States has demonstrated their willingness to use committed force. That frankly should hopefully have a deterrent effect. The Technical Capability to go the ground a lot of stuff. That has a deterrent effect. Much he was in seoul. He will also be in beijing, helping easing these tensions and bringing out concrete resolutions to the tensions. I think it demonstrates in the first instance a highlevel commitment on the part of the United States. This is not going to be an opportunity for north korea to kind of drive a wage and split the United States and its allies. They want to kind of use this Missile Nuclear leverage to drive wages and push us apart. That highlevel presence and attention is going to suggest that if they do something provocative, we are all in this together. The United States, south korea, japan you are seeing a lot of solidarity here. She is mentioning about dunford, the comments he made about denuclearization in the korean peninsula. Is that a pipe dream . Thomas i think it still has to remain a policy goal and should the right opportunity arise, we would want to exploit it and pursue it aggressively. So far, we are not in a place where we are going to say that is fine, go ahead. We are going to accept that. We are not willing to accept Russian Occupation of crimea. As a policy matter, we have to maintain that that is illegal and improper. I think that is the right place from a defense position. We have to hedge that. That is what we have been doing for a number of years already, having the assumptions based in that we can react to this in a crisis either way. Fory thank you so much joining us, senior fellow at the center for strategic and international studies. I imagine the issue may have receded today, but likely to get back to the headlines in the coming days. You can get around up about tori to get your day going in todays edition of daybreak. Bloomberg subscribers tended to dayb on your terminals. It is available on mobile in the bloomberg anywhere app. This is bloomberg. Shery betty this is daybreak asia. Im betty liu in new york. Shery i am shery ahn and hong kong. Seesis a warning from smb make us securities. A deal is needed to improve the picture. Toshiba negotiations have reportedly sold. Our tech reporter joining us now from tokyo. Poppel, what is the problem pavel, what is the problem here . It has been two months since toshiba announced the group as the preferred bidder for the chip unit. It does not take that long to come to an agreement. This has not been a typical deal. President said the askedng was announced a similar question. He only said to point to the legal dispute with Western Digital. Our sources have been saying the disagreements are actually within the consortium and in fact, toshiba is wanting the consortium to pay upfront for some of the cost of the unit before the legal agreement with Western Digital is resolved, and the group is not going for it. Now, we have to remember the ,eadline for this deal is march 2018, and the clock has been taking for a wild. Betty what about an alternative to the sale . What are the chances of that . Certainly, the unit reported tremendous Earnings Growth in the past quarter, and is excellent. Let us not forget toshiba has invented flash memory. It is second to samsung when it comes to the technology. The right question came out, but like i said, while not ruling out an ipo for the listing of the unit, he did not think it is exactly on the table. Our sources are telling us there is no way the company can make it by march. Betty thank you so much. We are going to continue watching the story on toshiba and Western Digital. We have got plenty more to come with asias first major market open just moments away. Shery geopolitical tensions fading but potential trade frictions are up. Sophie rude in japan kamaruddin in japan. Sophie we could be looking at putting that in the mirror. Have tech and banking stocks leading the gains, which gained 1 for the First Time Since april. Let us you whether that will continue into the asian session. The vix fell toward its one year average. Could this be a return to the new normal . That is a brief look at what well be watching when trade gets underway in australia, japan. This is bloomberg. President trump risks further straining ties with china. A general says that diplomacy is the top priority in korea and there is a warning that things could escalate out of control. Of imminentance war. This is the second hour of daybreak coming to you from europe and asian headquarters. It is just after 8 00 here. The nonstory is between north korea and the u. S. That has been dominating the haveines and, we didnt any of that today and we had the up for a higher open in asia. Trade that global could be looming and this is the next big question. We are seeing geopolitical will tensions and the dollar continues to gain. Its kid a look at how markets ittinue here on holiday and moves and order you seeing . Have the japanese markets opening higher and a drop of thiswe saw on monday and andhe spot and it is up the study ahead and we have dollar looking firmer here. One more rate hike could be in and we have a conversation. Checking on the bond space, we are tracking what we are seeing there is brent falling to 50 hittingave the forecast morbidd in september and deterioration in prices. This is encapsulating the we can see this they have the latest that puts thed end to the asian rally. Comes in the next 7. 5 years. Andre seeing some tremors you can check this out. This is the first look at the thea debt and this is study. Risk inng about that south korea. Lets go with paul allen. It is reasonable to expect that and there is another rate hike this year. These comments signal optimism, despite the employment growing. It charts along reasonably well. There is further strengthening in the labor market. It pushes inflation over the objective of 2 . Cut in months rate gpi it raised from a year earlier. That is faster from the pricesrg survey and the also went up with the benchmark rate cut. And thea cash profit ratioeclared the equity as of june 30. Ceos said that this is a. This is a time of lower structural growth. For the first time, that coin has gone past 4000 on growing optimism that faster transaction times will hasten things. The crypto currency went up 20 after moving some data off of the network went up. I am paul allen. This is bloomberg. Step adding to the trade tensions. Charts the bloomberg that you need to know about relations. Measures the top trading partners. The United States is the top trading partner, at 600 billion for 2016. Kongan see japan and hong are number two and three. If there was a trade war, this is what would happen. This is another chart you need to know. It has to do with aluminum. Why over aluminum . This could be a precursor of more to come. They are going to snap a preliminary levy. Is falling over the month or so. There is a slapping at that levy that this may impact. With the aluminum price . It is that a high that has not been seen in years. This is the function. For all of you who dont know, it is a supply chain function company kind of tech has a presence in china . Long story is that i want to show you this. Values a relationship that apple has with suppliers 342 you want does the seleka lot . Doeslot of money this sound like a lot . It is a lot of money. It is actually 5 billion and, if you scroll down, taiwan is 40 billion. This iseeing that small, relative to other asian countries. A final look at the origin i want to show you a full screenshot of how apple is trading in china. If you think that is a lot, it is less when you go to the other companies. Boeings presence is smaller and smaller. Were talking about Companies Operating in china. It gets smaller. Google and alphabet here. These are the top three bloomberg terminals and you want to know that in terms of u. S. Ip probes. Were talking more about the china investigation. It is great to have you back. Of an following short actual investigation and there a a potential of opening proud. We are a long way from the trade war we thought at the start of the year. Using tradeump is and what of leverage were seeing is a preliminary there arend insideead concerns china. There is areas such as pirated software and counterfeit goods and the like. There is the chamber around the world. Nonetheless, we are a long way from the trade war. What can they do in this legal recourse. There is the arbiter of trade and here we are using this and if they finds violations. It isevied tariffs and the two economies. To leviedlicated tariffs on particular sectors. So, it will be complicated. Complications, what about the complications with a u. S. Response . The north korea story and how it moves. If we get to a diplomatic , this may dissipate. The preliminary action and what they can do with china and merchandise. This is where we are right now. Remember, they couldnt agree on the statements for the top level economic talks in washington. It is still very much there. Still ahead, we are following bnb taking it to the next level. Another exclusive interview. When talking to the chairman of make donalds china. This is daybreak. I am betty liu in new york. Sizingnalds is super the presence in china in a Strategic Partnership with the carlyle group. Is the chairman and ceo of civic capital. It is great having you here. The is the first time capital goes into the fast food business. What led you to take on this new challenge . Done fast food, formal dining, many formats. And at competitive space the top of our mind is food safety, which has many issues in china. To look for the combination of scale and a systematic , oneement system, i think mcdonalds comes up, we leave it. Mcdonalds didnt have a poorly managed business. What did you bring to the table, aside from capital . It is two things. It is the local market knowledge. We know the Market Trends and the more about headquarters in the u. S. A lot of decisions are made driven by better decisions and, it helps companies grow. Had a strategic Cooperation Agreement signed for mcdonalds to get a first look at the locations in china. Each of these markets has look own knowledge. Openinghe vision of 2000 stores in five years. Why such an ambitious plan . China is a large country and you look at the competitor and stores in5000 kfc china and mcdonalds is the it is ane brand and distant second and we feel a lot of room to grow and the differentiation between them and where you see the tremendous consumption power that is why we eve catch up to what they are doing in china. It is what you dont want to do. China is a shifting market and there is the population habits. With consumption you dont see anywhere else in the world. Mcdonalds and in major cities in beijing and shanghai. Almost 25 of the overall is this comes from mindboggling number. Tap that know how to thed or how to harness business. This is extremely important. The food and there is the local knowledge. Obviously were in many industries. There was a great system here. Others in the pipeline. Onwe really want to focus growing the mcdonalds business and we have the opportunity with anda growing tremendously there is a lot of fat which we cannot afford to miss. Is overseas for the Chinese Companies and you have talked about the capital control funds. And these dollar i wonder if you have seen a reversal in this . Absolutely. Is with aat china hundred billion dollars of overseas investment. This had more than doubled and i think we are reverting back to the levels. Of highlya lot speculative with the multiples and overseas and a lot of them ended up getting burned on that. Doing overseas the people who know what they are doing have a lot of experience. Andhis is the under armour andstepping down to focus he discussed the reason for leaving the manufacturing counsel. 10 fraser, from merck, earlier today, step down from the council protest to the reaction in charlottesville. We will have more on that. We just got breaking news of the under armour ceo leaving the manufacturing counsel. We have seen ceos leaving the withil over the protest the charlottesville developments. President trump has been under increasing criticism over the way he has handled charlottesville. Ceore now hearing that the is leaving the manufacturing counsel. Ceos leavingmore the council. Risinginue to see tension and fallout in charlottesville. Stakes forses the other ceos who remain on the council to take a stand. And kevin plank. Musk had athat elon lot of criticism for not resigning from the tech board after the paris climate accords. We will watch for more. Much more ahead. This is bloomberg. Are half an hour from the open of trading and it looks like it is clear for the weather out in singapore and the regional benchmark is gaining ground. Daybreak. Watching once get the first alert news here. Step on property evaluations adds to trade tensions. He signed an executive memo and they will consider an inquiry into why and how Chinese Companies and over technical expertise. President trump has finally denounced White Supremacists for charlottesville. This is as his administration tries to hand her handle the fallout. The president called racism evil a 32yearold was killed when a man drove his car into a group of counterprotesters. And those whovil cause violence are criminals and thugs, including the kkk and other hate groups that are repugnant to everything that we hold dear. Reaction prompted the under armour ceo and the merck ceo to quit the business council. Obliged tot he felt stand against intolerance and extremism. Morgan saids, jamie that this has no place in such a diverse country as america. Raisingation is questions about rate cuts and a scope for further stimulus. Than theent up faster estimates in a Bloomberg Survey and it is in line with the view. Prices builds pressure after the benchmark rate was cut. Thanl news powered by more 2700 journalists and analysts. I am paul allen and this is bloomberg. A diplomatic solution to the current tensions remains the priority in washington stop james mattis later said that the situation could escalate, if north korea attacks a u. S. Territory. Lets have a look at what is happening with the tensions. It seems that the u. S. Is making it clear that military options are on the table and that this means that, at any point, we could see war. The u. S. Is reaffirming some statements made this week of out the American Properties and on,zens being in harm, like they would take action. It is a reaffirmation of what was said by james mattis. He said it would be game on, if they were attacked. He did not say what would happen if a missile was launched into the ocean. He did not say that there would be a deck original form. This seems to be a nuanced war of words of talking tough and holding the line. You always have to read in between the lines. We see the chairman of the joint chiefs of staff here in south korea. Did anything come out of that . And thise two messages was a reaffirmation of support for korea and that the u. S. Would back up south korea, saying that they had their back and that we will take whatever steps are necessary to protect the citizens. It was a combing message that we heard from the defense secretary. It was not in keeping with doing whatever you can to support korea. What about the military exercises coming . Important date for the north and south and they both celebrate the end of the Japanese Occupation and japan has military exercises coming up and these are things that andened on the calendar they take on added significance, given the war of words that we have been talking about. Tensionsch the rising and lets see how that is or is not a acting the markets. Here. Din has more markets have gains here in tokyo. This is leading the asian equity markets here and check out what is going on here. This is on a journal report and said that north korea has pulled back to launch a missile attack. This is according to traders. We have a gain of ground here for a second straight session and the currency markets the former dollar on the back of the comments that weighed on the yuan. At the recovery andiwi the aussie is below the level with minutes to out later. Greenbackk for the space and a last look at the function here. Gain and other encies in the region and thank you so much. They are heading that the head of asia strategy. Took ank one ahead and profits on the currency and you dont see it gaining further. There were two drivers and it going relatively well and is relativehow it to the dollar. That is why this remains my target. There is the tensions that seemed to benefit the currency and it continues to weaken. Isnt this going to put a bid on the Chinese Renminbi . I think the index does stay it has ans level and impact. Hike coming and it holds ground and makes it stable where it is. Kind of and stronger. Affectedhow much that the competitiveness, in terms of the exports. Far, minimal. And it was the index 2 , it isnd, with something they cant handle. If it kept on strengthening, it became painful. It has an impact on the chinese economy. About whatd to they haven china and the future in the next few months. Big mover is what happens to the dollar and it will move currency. Is theer one coming up political change that is happening and politics always trumps economics. I think they want to keep the dollar and it is going in. They saw the crash in the chinese currency. Is any of that in the forecast . We dont have it in that forecast. It is getting pretty big and the in theirt is controlling the level of debt and they talk about deleveraging. That does keep this off of the radar for now. Thank you for joining us. The number one forecaster says to watch out because this is going to decline. Speakt, we are going to with a cofounder about how he plans to conquer the market in asia and in china where there are formidable competitors. This is welcome back. Born back in 2008 when they were scrambling to advertise air matches in the living room. By with a standing cofounder for an exclusive interview. Asia andtarget area is , in particular, china. It is not just them. A are all trying to get here in a big way. Lets get perspective from nathan this morning. I know that one of the cofounders talk to at the reaction and what happened following charlottesville. Been to bring has people together and that includes an understanding. When we became aware that there would be a gathering in charlottesville by white canceledsts, we reservations and stop those users from the platform. It was not compatible with our values. Anything else you can put in place to prevent these customers or clients from occupying . We try to take a strong stance against discrimination and hatred. We make users sign a pledge that they will not exhibit hatred. When we become aware of this example, they are stopped from this platform. A strategy in asia. How important is asia . Promoting this in a number of countries and we are very ubiquitous and probably most wellknown in these populations. Chinese travelers are going they aree world and the number one spenders on international travel. China, in particular, you expedias tied up with and you getowing even more. There is local competition it is international travel. Have 4 million and know the local competitors have that and we make sure that were not engage in any local competition. Are you in a different strategy between the u. S. And europe . It is pretty aggressive in the strategy elsewhere. Would try to partner with there is a full potential government by government and there is the japan has beend the number one destination for years. It is a work in progress. Law and said it was illegal to rent a place for less than six months. What are your takes on regulations across asia . It is a difficult marketplace. What we have seen is this play out over time. We figure out what is the right model and it is not a one and done situation. You have turned profitable last years up how do you see this contributing to your profitability . Base, there is the and is the biggest on the planet. And itk at the numbers is promising. You have a generation and they know a fair amount of english and look to experience the world and they want to experience things. It is a huge part of the future. It is the value proposition. If you are on a longterm assignment, you may enjoy the comforts and the amenities of a a settledou may have feeling. You are now a chief strategy officer. What is your vision Going Forward . Thehe biggest evolution of about reinventing every aspect of travel and they focus on experiences. There is the tour operators and it is coming up with something that they are passionate about and you can discover these things. Ands a good way to travel they will do that. Hereank you for joining us in singapore. Back to you. This may be something to try out. You can watch that interview again with the cofounder. Bloomberg. On you can watch the interviews dive and watch us live and into some of the functions of those charts that we are always talking about and ask questions to the guest on the screen and customize your settings. Lenty more coming up this is bloomberg. This is daybreak. Malle Online Shopping posted a shortfall of 74 44 ion will stop it was a job in sales. This take a closer look at with our tech editor. Why are they spending so much on marketing. It is the second and fourth quarters when they have sales theotion days and underlying reason is to attract traffic and users. Battle for the Online Shoppers. That is a big battle. Seems to be merchandise volume. What does that tell us about commerce . We have realized that the chinese are avid Online Shoppers with penetrating rates. I think they can maintain the 45 yearrowth and is on year. I think that investors are not worried about the pace of spending. The bottomortant is line. Targeting they boost. On like alibaba, they have built warehouse is and delivery people in the plan to control the supply chain and that is where it will come from. That is almost it. Bloomberg markets asia is next. , north korea. We saw some tension in the markets getting back in and then mars having a look at state and the machinations of where we are. Late is the bombast of that has not been helpful. Plenty of people would agree. It is about 45 . He will be around in about an hour to discuss where we are currently with this. Very very keen on southeast asia. There is the low of the some people are saying it is an alarm bell. Well is also property in a in a bit, as well as well. That is it for daybreak. Bloomberg markets is next. This is bloomberg. Got you outnumbered. The dinosaurs extinction. Dont listen to them. Not appropriate. Now im mashing these potatoes with my stick of butter. Why dont you sit over here. Find your awesome with the Xfinity Stream app. Included with xfinity tv. More to stream to every screen. 11 00 a. M. Sydney and 9 00 p. M. In new york. Im haidi lun. Rishaad i am Rishaad Salamat coming to you from hong kong. This is Bloomberg Markets asia. Haidi President Trump to restore straining ties with china pursuing an investigation into rp theft. Rishaad americas top general says diplomacy is a top priority in korea, but there is a g