Foreign investment really rising here. It is our top story today. Indeed, it is. Raising the stakes on the korean peninsula. The United States confirming that the north did indeed test an intercontinental ballistic missile. Agency,a central news the government they are saying kim jongun launched a missile capable of hitting the mainland by the end of the year. Peter is there in seoul. How is the city responding to the drama . A lot of noise, but not much reaction here. Many of the folks on the street view this as another provocation by north korea. , or atg, but nothing least they do not feel it is threatening. Life is normal, business as usual. And i think you saw that with the financial markets. After a little blip yesterday afternoon, it seems to have come back to business as usual. It is onw with kospi, the positive territory. Again, the reaction as i reverted back to basically a new normal. Rishaad this is just it, we were talking earlier on about how sanguine and prosaic people are when it comes to the view of the north and what it means to them on the streets. The government does not quite see it that way. The missile test created another huge conundrum for the south koreas new president , moon jaein. He has immediately convened a National Security ounce of, condemned to the missile test. Then, he ordered a military drill with the u. S. Army to launch precision missiles into the south korean see. Sea. Again, showing they can react with similar type of provocation. Moon, the problem is that has taken a two tack approach, applying sanctions. But on the other hand, being more conciliatory and seeking a dialogue with north korea. If taking itonder in stride, people on the streets in korea, is a part of being desensitized by the relationship that it has had with north korea , facing multiple threats at every level . Peter yes. I think you put it correctly. It is almost callousness to all the provocations. Over the last 60 years, the country people forget, it is still in a state of war. There is a ceasefire, but there is that war. There been a number of incidences where south koreans have been killed, they have attacked an island. There were asked murderers. You can make a laundry list of incidents that have escalated tensions here. Day, they havehe desensitized, i think you could say, to these provocations. I am not sure. Nobody is quite sure what would trial up the public here. Provocationype of would really make these folks here run to the stores to stock up on water or anything like that. Pae, thank you so much for joining us from seoul. Lets get a check of other top stories from around the world. Here is Rosalind Chin with headlines. Washington federal be pushing back at Rising Oil Production cuts and well talk about the opec meeting this month. Government officials told us further cuts send the wrong message to the market. They are not sure it will work. Russia plans to host opec ministers on july 24. To respondfor qatar to a saudiinspired list of demands. Doha delivered them, but there is no indication what they contained. The demands are due to closing off ties with iran and hosing down aljazeera. We discussed the crisis in detail and i want to reiterate that when in there is one side leveling accusations against another, that side cannot say, yes, i accept everything you say. Qatar is fighting hard to keep its crown despite diplomatic isolation. Qatar is expected to keep the title for at least seven years after the Energy Company said it would raise output by 7 . That reinforces qatar as being a major global supplier. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am Rosalind Chin. This is bloomberg. Lets get a flavor of the markets. Japan on its lunch break. Not much in the way of direction. We have seen quite a few fluctuations when it comes equity session so far today. Take a look at chinese stocks, up 0. 4 . China life contribute in the most to that. This, even as Short Interest has jumped to a record. The hang seng has reversed its earlier losses, up about 0. 3 . The auto leading gainers in that market. Painfulslumping as the 5g cycle starts. Those stanley downgraded for that 5g journey. The kospi making gains about 0. 1 . A morning of fluctuations. Hastility on the kospi fallen a perspective on tuesday. Of the won said to snap a threeday drop of up to 0. 1 . It has risen from a fourmonth low. This is the circle on the chart, 1154. The pressure is on for them won. They sold off the most korean debt since 2011 on tuesday. For today, the korean won is the secondbest korean asian currency after the yuan. Investors are wanting to see what will happen on the political front when it comes to the north korean provocation. There are several key meetings this week, as peter pae outlined in the show. Both onshore and offshore rates, despite weaker rates from the pboc, the offshore yuan up about 1 10 of 1 . The Chinese Dollar up marginally higher. It is seeing general weakness here as it did fall to its weakest level on since april on tuesday. All in all, it does not seem like we are seeing too much to shake asian currencies so far today. Thanks. Rishaad that is what we have coming up. You can see that woman on the lectern. Who cannot be . Janet yellen. Plans to reduce the Balance Sheet. But when is that going to start . Rishaad north korea raising the stakes. What the United States can do to rein in pyongyang. This is bloomberg. Rishaad you are back with Bloomberg Markets, i am rishaad salamat. Angie and i am angie lau. Narrowed the list of bidders for its wealth unit, failed to raise 3 billion u. S. Dollars. Bloomberg has been told it has invited metlife in zurich to make second round offers by the middle of september. Anz is offloading its wealth on to focus on its core business. They expect to name the winner by the end of the year. Deal to produce cell iron ore assets. Yes trillion government has been administration for more than here. The biggest dealmaker was chosen as the preferred bidder. Gfg, its a winning bid after a modified offer on tuesday night. Developernas biggest he announced his departure as german. The company agreed to pay a billion dollars. Vanke up 30 this year. Shenzhen shares are trading. Rishaad getting you back now to north korea. Tensions rising dramatically in the last year, washington confirming tuesdays missile test was an icbm. Getjongun says he wants to the u. S. By the end of this year or have a missile that can do that. Angie possibly hawaii, alaska, maybe even the states mainland itself. Lets discuss the control risk. We are joined right now from singapore. What is the reality of that . The reality is that we have g20 coming up in hamburg, people are competing to get their big issue on the table. Chancellor merkel wanted it to be climate change, saudi arabia wanted it to be its battle with qatar. The u. S. Administration wanted to be the International Trading system and steel. North korea played its trump card and launched this intercontinental ballistic missile, and completely changed the game. The number one topic of candor station conversation will be north korea. Trump, we have donald who was pressuring the chinese administration, xi jinping, to do something about the north. Very impact or interest these days. Looking at it from beijings ties, is it a winwin for them to do absolutely nothing, because it leaves donald trump and the administration squirming as to what to do next . China hasistorically, benefited from the fact to the north korea is a thorn in this last thorn in the side of successive u. S. Administrations. But things have changed. The ballistic capability of north korea is troublesome for china. This is not something they can pretend to do something about and then sit back and enjoy the chaos and aggravation the north korea causes. China goes in the second half of internal, in goes word. It is the 19th communist party coming up. It is about the realignment of Political Party power in china for the second section of xi jinpings term in office. They do not want to be distracted during that time by situations on their borders that start to unravel dangerously. The pressure on china to do more to help then might seem apparent in the past is greater. But there is a limit to what china can do. China does not have a magic solution for the north korea situation. It can increase economic sanctions against north korea. But it is reluctant to do so,eluctant to press that agenda for fear of the consequences that might backfire on china. Between china and the u. S. , there is undoubtably room for much tougher, behind the scenes the medic negotiation that will see both countries make some kind of readjustment to their north korea strategy. We could at least see the tension go out of the kind of current situation. As i said, at the moment, it is north korea driving the agenda, ahead of the g20 on the weekend. Day, itt the end of the is all predicated on a possible military conflict, going headtohead. Jets nited states does choose that route, it could be in the crosshairs. That is a bet nobody wants to see blowup in everybodys face. This is the nature of military threat. The higher the stakes, obviously you have to maintain the possibility there are things you can do, militarily, that will work to your vintage. It is hard to your advantage. It is hard to see how that will play out for the United States. The south korean capital is only a matter of 50 kilometers from the border. Ballisticontinental missile threat is not facing south korea. South korea also has an extremely high military threat from north korea. North korea faces it from south korea. South korea is hardly defenseless, itself. Limited,hances of a surgical military strike against the north that resets the Playing Field for further negotiations, is really hard to see. All sides know that, but no one is prepared to say it publicly. Richard, being cynical and looking at it through that lens, in three weeks time will be will we be talking about the same thing, or will the noise die down . Richard that has certainly been the case, hasnt it, historically . We have these conversations in the past, tensions with north anda reach a kind of peak, then they abate because of whatever compromise or deal or the mood music changes somehow. But if you take a longer view, people in the past ever guarded it as being somewhat preposterous that north korea could get itself into a situation where they had the Rocket Technology and Nuclear Technology to pose a real, material threat to north america. Whether it is the lower 48 or alaska or hawaii. We are probably still technically in that situation, but those days are running out. North korea makes advances every time. Rishaad that is what i was going to talk about. In 20 seconds or less, we do not know what is going on there. Some say the Nuclear Program was five years away. At least three years away. Then we get one. We do not know, duly . Do we . Richard behind the scenes within the u. S. Administration, i think there is a much more sober assessment of what north korea is potentially able to do. This is a shift, not quite a game changer, but it is definitely a shift in the seriousness with which whether it is china, south korea, the u. S. , japan, russia all the involved powers, now looking at the crisis somewhat differently than they did a few days ago. Absolutely, a shift among shifting relationships as well between world powers, the u. S. And china. Richard, stay with us. We will take a look at the crisis in the gulf. And that qatar deadline. This is bloomberg. Rishaad you are back with Bloomberg Markets, i am a shot salon that. Angie i am angie lau. Lets bring back richard fanning and talk about qatar. According to a saudi dress agency, theess saudi block did get qatars response, and they are to apply at the right time. Where does this leave the gcc . Richard it leaves them in a real mess. It is a much harder geopolitical drama to understand the north korea. North korea places in its view, annexes that existential threat. Its Nuclear Program is the one thing it believes keeps it safe. What is going on between qatar and saudi arabia come up party to understand. Wealthy countries, similar economies, monarchies. But for whatever reason, have gone off on divergent paths. Saudi arabia, with support of the uae, prosecuting a more aggressive agenda toward qatar. It revolves around allegations of backing of terrorism. They both back different groups in the region. But really, qatar has tried to carve out for itself a separate, very distinct identity. Aljazeera, hosting the news agency, taking a more independent neutral view in the area. And a more open relationship with iran. Saudi arabias more traditional rival in the region. It is hard to understand where this is going to end up. One assumes it will end up in a messy, negotiated, temporary settlement, and that this issue will keep on coming back around in various forms in the months and years to come. It is hard to imagine that it will end up in some kind of military confrontation between these two states. That is not impossible, but remains unlikely. It undermines a sense of these countries being the stable, regional hubs were International Business can be conducted. Rishaad how much is down to saudi arabia thinking qatar is above its station . You mentioned independent Foreign Policy and Close Relationships with tehran. Qatar does not have a lot of choice, they share the Worlds LargestNatural Gas Oil fields, dont bang . The largesty do is shared, it sits in the sea and iran. Tar it. A lot of oil fields crossed borders between iraq and saudi arabia. That in itself is not necessarily unusual. Does have an independent sense of its own identity. Why this is antagonistic to saudi arabia is hard for outsiders to understand. The uae andemember, saudi arabia are involved in a war in yemen, with iran backing the other side of that civil war. It is not as if the region does not already have its fair share of immediate military and Security Issues to deal with, let alone what is going on up the road in syria. Angie as they say, it is a rough neighborhood. Richard fanning, thank you for that. Rishaad looking forward to this afternoons business inside. We have japans reopening. The yen under a little pressure. This is bloomberg. It is 7 29 in hong kong. I am Rosalind Chin, with the latest news. The french Prime Minister says they need to cut public spending. He promised Government Spending would fall by three Percentage Points of gdp by 2022, along with 23 billion of tax cuts. Unemployment is twice that of the u. K. And germany. With alds oldest bank 6 billion bank out bailout. A preliminary reinstatement of schi, which needs Government Support to survive. New zealand, soaring Property Market with the weakest numbers in years. 8. 1 , year on year. The slowest increase since march, 2015. Also, the slowest rates since november 2012. The average home price is four 466,000. 66,000 global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am Rosalind Chin. This is bloomberg. I am Sophie Kamaruddin with a check on the markets. A slight shift in the sentiment. Chinese stocks adding 0. 3 . 0. 3 . Ng seng swinging up 225 downe the nikkei 0. 3 . Still unable to shake off the drag from the dollaryen. The yen strengthening 0. 25 . We are seeing aussie shares falling down about 0. 2 . Is up 0. 1 in the face of complications from the north. The korean won headed for its first day of gains. The yuan onshore and offshore rates both climbing, up 0. 2 . This as the flows start. The aussie, up 0. 2 , snapping a twoday drop. Tencent, the stock that shoulders the fortunes of the hang seng. Reversing the days losses, it fell as much as 3. 3 today as we see in the circle. It is now adding 1. 8 there. Stock had fallen to 4. 1 on tuesday amid criticism from chinese social media of its biggest gain. Analysts say the selloff has been overdone and investors have seen the share pullback is a buying opportunity. Morgan stanley sees limited earnings impact for new roles to curb. Tencent is on the up in the later session. Weve been talking about what is going on with of the oil price. A big comeback. One country that does not seem to be benefiting in its currency, looking at the russian ruble. If itnister saying today, werent for the opec cuts, they were not willing to be part. As a result of the sanctions on the country, the ruble having its worst month since 2015. Halfil prices, 50 what it was a few years ago. That is a problem, isnt it . It is a new environment for oil producers, especially opec. Russia wants to keep the line there at the current production cuts. What they have not factored in is all the u. S. Shale producers who are faster bringing oil to the market. Off and onrn the tap quicker and the marginal production costs have also decreased. Prices of bounced back from those lows we saw a little over a week ago. 1 to both brent and wti. For brent, the longest stretch of gains since 2012. Profits now are taking a breather. You mentioned russia, not really supporting or looking to support deeper cuts, which is not surprising given less than two months ago they decided to extend those cuts. Theyeasoning behind this, want to show the market they are not confident about those cuts. They want to see those worked through and see evidence to see if they are working. It is a common theme a lot of people have been talking about, be patient, see how the cuts take effect. The second half, people are talking about rebalancing and tightening of the market. Angie 1. 8 billion euros cut per day. The market, Goldman Sachs saying, it is not enough. That is right. One of the focuses seems to be, the u. S. The u. S. Is much more nimble, able to turn the cap on a quicker or off quicker than what most traditional producers can. They are finding ways to produce oil at lower prices. They have the swing factor in all of this. What the market needs to see is consistent declines. We saw production fall by 100,000 a day, largely because of the cyclone or hurricane and maintenance in alaska. If the trend continues there, prices should be able to hold around these levels. Rishaad what are people saying about opec . They have a realization that perhaps the agreement they made a little over two years ago was a no go . Seems to have lost the ability to be the swing producer, to dictate what is going into the market. Specifically, because of the u. S. And shale. Opec really have to stick to its guns here. Through and to work anddrain that global glut has to hope the prices will take some of the u. S. Production it is the key factor in the market that holds the markets what is happening. Atie still making a profit 38 to 43 . That is interesting. Ben some producers could make profits in the low 20s. Angie thank you for that. Are weanings themselves off shortterm debt with little help from authorities. Tos expect negotiable drop this quarter. Emma in were joined by beijing. Why is this important . You said, we are talking about negotiable certificates of deposit, these were introduced in 2013 as a lifeline for Smaller Banks here in china. We surveyed traders and analysts, and the majority say , coming due in this quarter, for the first time ever. This is largely being put down to the deleveraging drive. This has been a focus of the regulators. Thanks a been told to report how much of this debt they hold, helping some speculation they may have to start including it on the Balance Sheet, which would be a deterrent. I guess this sounds pretty good, but the problem is, we have a record amount of these ncds coming due this year. Thanks have to find cash somewhere to refinance it. That is inherently where the problem is. Angie what is it about these negotiable cds that is on radargs and bloombergs when it comes to deleveraging . Emma they are interesting, a unique facet of the chinese leveraging landscape. They were introduced as a lifeline to Smaller Banks, which tend to miss out on retail deposit opportunities the bigger banks want to hold. It is a way for them to get cash. Given the low yield environment we have in china and globally, they have used the Smaller Banks have used ncd proceeds to invest in each others Wealth Management products. Proceeds are reinvested in the bond market, leading to things like mismatching maturations a lot of complicated stuff i do not want to go into. It has raised red flags for debt watchers here in china. That is why they have become a bit of a target. Thank youmma obrien, for that. We are looking for clues. Will the fed reveal more about their plans for the Balance Sheet . Angie we will discuss that next. This is bloomberg. Angie this is Bloomberg Markets asia, i am angie lau. Rishaad i am rishaad salamat. Volkswagen wanting to sell cars in iran for the first time in 17 years. They will be taking advantage of the easing of sanctions and perhaps as we have growth stalling in europe and asia, the government signed a contract with a local importer to offer compact suvs and the passat sedans, mostly around tehran. It is been struggling to rebuild operations in the United States after the diesel cheating scandal there. Angie more carriers expect the u. S. Ban on laptops in the cabin flights in the u. S. To be lifted. Emirates is counting on the measures being rescinded on dubai soon. 10 middle eastern and african airports are affected by the ban. They and local carriers are talking to washington about introducing Stronger Security arrangements. Rishaad claims the United States government is involved in apples tax disputes with the european union. Washington has filed an application with of the e. U. Court over what they call retroactive state aid. Last year, the European Commission wanted to recoup 14. 5 billion in unpaid taxes from the company. Central bank watchers are waiting tomorrows minutes from the fed and the ecb for guidance for what they are planning next. Lets get to our guest, mark mcfarlane. He is a chief economist. I love that accent. Good morning, mark. Lets dive into the bloomberg. No lets go to a function. To our bloomberg subscribers, this looks rishaad we are not talking north korea . Angie we have moved on. That is probably still top of mind for a lot of people. That what is not top of mind for most markets in terms of anticipating a rate hike is that it is probably not going to happen until not next year, maybe even the year after that. Mark it has it happening sometime the middle of next year, probably not until 2019. Our view is, if we get one more rate hike this year and the second one in the first half of next year, around march, that is it for a while. At 1. 5term policy rate to 1. 75. Rishaad you are saying no market is getting it right. I think the shortterm money market rates are wrong. You will see it rising higher than that. What is interesting is the way the bond market is. Angie lets take a look at that. I got the wrong one. This is what we wanted to pull up. Because we really saw those excuse the spelling becauset has risen there is this growing of the voices from canada. You had about five Central Banks talking about tightening. You have had the bank of canada and england recently. It has been about taking away the punch bowl, not necessarily ramping up Interest Rate, but trying to normalize policy. Rishaad the punch bowl, to continue with that analogy, they are tired of drinking from it . Qe3 has done nothing to spur growth, it is have an impact on asset prices. Qe1 had an impact. Qe2, a little bit. With an economic recovery that is eight years mature now, we should be expecting recessions in the next couple years. Haad the japanese have a may be the yield curve is steep and, normally the consequences for the economy looking pretty good, right . Mark it is. Rishaad if you manipulated to look good, is the idea that it becomes good . Mark to some degree, yes. What happenedbout in january of last year with the negative Interest Rate policies, it had a negative impact on the banks. The banks and major lenders tend to drive economic growth. If you have a steeper yield curve, it is better for banks and interest margins and longterm economic potentials. Therefore, a steeper yield curve is better for everyone. Angie when it comes to normalization of the fed, the minutes released wednesday at 2 00 p. M. In the u. S. , it will be interesting. Or, will be get a clue as to when exactly it will execute this normalization . Mark they have made it clear that they want to start sometime towards the end of this year. Whether it is october or december is not entirely clear. The real issue is two things two issues. One is, the size of the reductions in overall expansion. More importantly, the sequencing. Will it be a sequential reduction as with tapering in 2015 . That makes it much more predictable and less disruptive. That is the key thing to watch. Rishaad in a rising rate environment, what does that do with the amount of dollar assets held in the u. S. How does that impact the Janet Yellens thinking, and how does it impact not just central bankers, but people wanting to issue corporate debt . Mark you mean a reduction in holdings . Will lead tot higher Interest Rates and higher longterm bond yields. Pressure onthe yields around the world to the upside. Rishaad is there a tendency toward corporate debt being issued in local currency terms rather than the dollar . Mark you are starting to see that in china, for example. At portugals debt in china and local currency, you can see there is more of an emphasis on local issuance now because of the Interest Rates. Angie mark mcfarland, thank you for joining us. Priorities. Ussie the treasurer on why economic discussions wont be overshadowed by north korea at the g20 summit. This is bloomberg. There are a number of options open to the saudiled group. One is being pushed, more sanctions. That will cause more problems for qatar. It could move toward turkey and possibly iran. Instead of defeating the saudis and their allies. The questions having everyone a scratch their heads right now is, how will the saudi and uaeled block deal with qatar, when it is clear that officials in doha will not surrender to these demands . One of the risks is on the longerterm. Qatar is showing its muscles and wanting to increase [indiscernible] risk that they produce more post2020, it remains in the supply for longer. Angie differing views on the qatar crisis from our guests on bloomberg today. Rishaad we will be looking at what is coming up on the bloomberg middle east markets at the top of the hour. No doubt, that will be front and center, isnt it . Yousef we have plenty to get to today, will pick up on them qatar conversation. We have more from brookings, the think tank. At ae have a Ceo Securities company. We did have a selloff in saudi stocks. Not entirely related to the deadline. It is a relief for the rally after the gains we saw the back of the msci decision, days ago. We will carve out a strategy on equities front. He will talk us through what is happening in qatar in terms of asset classes, as well. What we are seeing at the moment, the market is telling us, relative resilience and relatively a calm her outlook, a resolution, reconciliation. The oil story is an integral component, as our previous for the fed minutes. Guys . , thanks for that. We are looking at political leaders headed to hamburg for the g20 summit. North korea almost certain to dominate. We heard while security is an issue, the economy is still top of the agenda. G20 willow is take the opportunity to address very serious issues like this, around interNational Security, terrorism, the cooperation that needs to take place between countries on those issues and Major International threat that have emerged in recent days. It is a Good Opportunity for World Leaders to get around the table and talk through these issues. At the same time, the real structure and focus of the g20 has always been about, how do we drive the economy forward, drive growth, investment . For treasurers and finance ministers, it is been a key tool to ensure the tax base of the world is keeping uptodate with new technologies for why markets work. It has been an effective up for him from that perspective. Intoyou link that back terrorism issues, how the Banking System works, following the money, there is been cooperation in new programs. It will be a very busy weekend for Prime Minister turnbull. He will be sad to leave what is a Beautiful Day here in sydney. A lot to do. Beinger than geopolitics a distraction from issues of trade and trade cooperation, do you believe that the global trade environment has improved . Since the last time we spoke, concerns over protectionism, whether at the u. S. Is retreating from globalization . Scott we have seen an improvement in australia. Tot is why it is important reassert the importance of trade, reassert the importance of economic cooperation, and keeping on with the Economic Reforms that are necessary. In australia, we are getting on with our job of our enterprise tax plan, taking tax plans down for medium and small businesses. We are getting ahead with our infrastructure programs, some 75 billion over the next 10 years. That is a very similar plan to what the United States has outlined. Last time i was at the g20, that is one of it issues secretary mnuchin and i discussed. We are seeing progress on that front, there is well is here. There was a record hold at 1. 5 . There was a lack of a hawkish tilt in the guidance. Environment, even potentially the boj talking about normalization policy the facts of us trillion bank is not talking about it, what does it say about the strength of our economy and the position were at we are in . We never had the right course as much as other banks. They have held of their mark over many months. I have had a very optimistic view about where things are heading. Recently, our employment numbers have been very strong. We had a fouryear lowering of unemployment. The wage growth needs to follow the improvement in profits. We have had two reasonable quarters on the National Accounts on profit. We need to see that it continues. Haidi lowwage growth and tighter labor marks markets is a global phenomenon at the moment. Is this too optimistic . Scott i do not think so. Our forecast agrees with where the imf is. They are saying similar things about the australian economy. We will review it again in december. We do want to figure out a way for growth in australia. That us come from greater investment and a consistent improvement in performance. Rishaad Scott Morrison talking to us a bit earlier on. Quite a turnaround when it comes to these equity markets. Who knew . The green,ping into especially after north korean pressures sitting on equity markets, where it was risk off. This is bloomberg. Announcer the following is a paid program. The opinions and views expressed do not reflect those of bloomberg lp, its affiliates or its employees. They are out there, driving recklessly, causing accidents and driving up your insurance rates. 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