Betty i am betty liu in new york, where it is just past 7 00 p. M. On this labor day holiday. We will be looking at chinas role in the crisis. How sanctions may target its oil lifeline to kim jonguns regime. Writing into bitcoin. The cryptocurrency tumbled at the pboc declares coin offerings illegal. Anchor let us get straight to some breaking Economic News coming across the bloomberg involving south korea for the month of july. The balance of payments for south korea, taking up ticking up a bit to 7. 26 billion. The good balance coming in a bit. Igher at 1. 07 billion yvonne, these numbers traditionally may not be that significant, but certainly, a lot more attention is being paid to south korea on the fiscal side and also on the trade side as it looks as if south korea is going to be ramping up defense spending as well as looking towards further trade tensions with the United States, and in particular, given these rising tensions. The good balance coming in at 1. 07 billion, yvonne. I know you are out there in south korea, in seoul. You have been reporting over the last several days on the ratcheting pensions with north korea. With north korea. This morning, what are the headlines saying in seoul, particularly at the after the conversation between President Trump and present moon president moon . Yvonne is this the shift in tone from president moon jaein in the last 48 hours or so ever since we saw this nuclear test sunday . Ngyang on it seems there are slight tweaks on the margin when it comes to the rhetoric from the president in particular, but it seems like this call with President Trump overnight, at least leading concerns we have seen over the last couple of days, what came to trade tensions in the u. S. President trump i guess considering pulling out from this free trade deal with south korea. Maximum pressure on north korea is what they agreed upon on this call, 40 minutes overnight, using all at their disposal. The two agreed for a joint strengthening of military capabilities, allowing south korea to put have your weapons on their Ballistic Missile heavier weapons on their Ballistic Missile than giving the nod to moon jaein to buy military equipment from the u. S. As well. Betty just a correction. 10. 7 billion is the good balance. I read that wrong. 10. 7 billion is a good balance for south korea for the month of july. You know, you mentioned with these ratcheting tensions we of course had the Un Security Council meeting and the u. S. Ambassador to the u. N. , nikki haley, coming out with very sharp words, saying that north korea is begging for war. Let us hear quickly what she said today. Nuclear Powers understand their responsibility. Kim jongun shows no such understanding. His abusive use of missiles and his Nuclear Threats show that he is begging for war. Betty and you know, you could hear the exasperation, yvonne, in her voice, just exhausting all possibilities and saying that they are going to be drafting up some sanctions to be voted on on september 11. There are doubts about what can be done in such a short period of time. One of the folks and analysts you are talking to what are they saying about these tougher measures . Think that it seems the case that people are saying they are running out of options diplomatically, and perhaps economic sanctions are the way to go, at least as we can see more tensions coming in from pyongyang. President moon is in favor of cutting the oil supply as well. He spoke with vladimir putin, urging for that as well. We will see how china plays into this as well. The comments from nikki haley were harsh. We heard this before coming out from her in the u. N. Security consummatings. We will see if that plays into the markets here today as well. We have seen the riskoff moves. Have not been to riskoff when it comes to the selloff as well. Betty let us take a look at how the markets are trading in reaction. We saw across the board selling on the back of these tensions. And you continue to see the drive into the safe haven. Right now, futures trading, hovering near the lows of the session, down. 2 . Lots of money going into the swiss franc and the japanese yen. You see the big continue for the safe haven currency. Over in new zealand right now, which started trade, you can see the markets are just slightly lower, down. 1 . The kiwi trading there, just about stable against the dollar. We are counting down to the open in australia, japan, and south korea. In sydney, futures up about. 2 after the asx 200 and trade yesterday fell along with the rest of the market in asia, but not china, interestingly enough. The aussie dollar, that has been rising. ,ver in the nikkei futures chicago nikkei futures also lower. And we continue to see that drive into the japanese yen. Where is where trade we are trading. Yvonne. Wenne yeah, those lines heard from the nikkei this morning about japan preparing for possible evacuations if we see these tensions escalate with south korea. We see some type of military strikes. That is going to weigh on investors minds in tokyo this running to a let us get the first word news with haslinda amin. Yvonne, bitcoin tumbled the most in 2. 5 years after china said the initial coin offerings are illegal. The pboc has asked for fundraising activity to be halted immediately and says there will be harsh punishment for any offerings in the future as well as for ones already completed. Bitcoin fell by more than 14 on monday, the most since getting worried 2015, before recovering slightly in early trade tuesday. The u. S. House of representatives will vote wednesday on Hurricane Harvey relief that will not contain language at saving up a default on government debt. Leaders are bound to the demand of their most conservative lenders. The harvey bill would provide for almost 8 billion in aid. A european lawmaker has hinted that september 21 may be the day theresa may gives a muchanticipated brexit speech, but a u. K. Official has told bloomberg that the coordinator is wrong. She will give a followup to her ,anuary speech on brexit negotiations stalling, and the government having lost its parliamentary majority. Bloomberg has been told the Hong Kong Authority our sources say the lenders were asked to report on outstanding the two inquisitive companies. Chinese regulators have been stepping up the scrutiny of the companies behind last years unprecedented global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am haslinda amin. This is bloomberg. Anchor thank you so much. Geopolitical tensions are back, front and center. Futures ar retreating. Werenow, the markets closed this monday for the labor day holiday. Su keenan here with what is ahead. Maybe, in a way, it was a blessing the markets were closed given these headlines. Su we often see a kneejerk reaction and then the second reaction, more reasoned. Reals go into the chart quick and get a market snapshot. We see gold moving higher. Dropped, although we are seeing bouncing around at this hour. Gasoline futures selling off in extended trading or electronic trading, which is interesting because of the huge runup we are seeing post harvey. We will get to more on that in a minute. S p the trend here. Is this goodrent, that monday, the market was closed. Thesehere in this chart, red circles, you will see what happened in the prior week where the missile firing happened. Gastown and than the market rose, and then you saw here the market gapping down. We are not sure how the market is going to open. One more chart i have got for you is the emini futures. They are traded like a stock. You can see the gap as we get ready for the tuesday session. Very interesting to watch how the u. S. Response. Betty we have seen gold demand is strong. It has been strong in august, closing 1300 an ounce for the first time. What are strategists saying about the future for gold . Storm forve a perfect the gold bugs. Inflation not meeting fed targets. You have got party. You have got the korea thread ratcheting higher. Btv 5506, if youre are following at home. What you can see is that this has been the best month for gold since january on the missiles, on the inflation, on harvey. Does it go higher from here . Strategists say this is classic what you are seeing play out between that u. S. And north korea. There are other issue countries involved. Let us talk about the harvey im sorry the gold issue alone. Is going onat what with gold, it is an 11 month high. Citigroup is seeing shortterm risk aversion that is going to favor gold. Many professional investors out with opinions, giving similar views on how most investors are probably going to position for heightened volatility at least shortterm. We are seeing inflows into the gold etfs. Already based on north korea, and let us go into the chart on the gold etf itself. You can see it has had an incredible rise for the year. And that is reflecting what we have seen with gold, up almost 16 yeartodate, and it has risen just 1 . Betty you mentioned about the impact of harvey. We are starting to see the u. S. Gulf coast refiners. Piling intoep gasoline, and yet, we are facing another hurricane in that area . Su that is what is really difficult to quantify. We have Hurricane Irma out by kumar. Will that bring a second run of damage to the area . Gasoline 30 day chart, you really get a picture of how it just shot up and came off as a big run. As you have seen in the future start, it is starting to come off in electronic trading. Very interesting to see how that plays off in the session. Let us look at the headlines. Harvey does have the refiners starting to recover, and they are also having to prepare. Meteorologists say in the next 24 hours, we will see the path for Hurricane Irma. It would be statistically incredible if it came anywhere near the refiners. 17 billion is typically what you see as the catastrophic damage in a year worldwide, but they are estimating the storm alone could come close to that. In terms of the vote, it will happen on tuesday. It will not be tied to the debt ceiling. Behind that, you could try to tie it to the debt ceiling limit and that could complicate things politically. Valera, exxon, allstate, these will be in the spotlight a along with related stocks. Betty thank you. Plenty ahead on daybreak asia. Next hour, we look at how chinese rockets are reacting to the north korean fallout. Seeing a bit of a bid when it comes to chinese equities. China. That with equities, head of blackrock, helen zhu, at 8 10 hong kong time and 10 10 in sydney. Max baucus is joining us. This is bloomberg. Betty yvonne this is daybreak asia. I am yvonne man in seoul. Betty i am betty liu. Those are the words according to nikki haley today. For harsher sanctions against kim jonguns regime, shutting down chinas oil exports in north korea. That is among the sanctions in focus. For more, let us get to ambassador max baucus, joining us. He was the ambassador to china from 2014 to just earlier this year. For thank you so much joining us on this labor day holiday. Look, i know you talked quite a bit about the u. S. Position here on north korea, and hearing nikki haley say we pretty much exhausted all options and kicked the can down the road long enough for a quarter of a century. What does the u. S. Need to do now, or what can the u. S. Do now . What are the other options . Max i thinkink we have run our string on bluster and namecalling. That is frankly not working. It may be counterproductive great for his home consumption and the country of north korea. The question is what is the solution here . I think we have to start as a country in the United States to think a lot more about working with china. I think the road to a solution to kim jonguns denuclearizing to a degree, or maybe freezing, is through china. China is very transactional. They are very cool. They have been looking at all of this, and i will bet dollars to donuts, given my experience over there in how they operate, if they are looking for an opportunity here, china could very well save our bacon. China could very well anchor how . Yvonne max china could very well say that this has got max pretty far, and here is an opportunity for us to help the United States. How, do you ask . Put a lot more pressure on kim. Oil, stopm get any the oil exports into north korea. There are a lot of things china can do. Tenant has been willing to deal with the status quo, but we are getting to the point where i think china is starting to see that their opportunities are for china, too. I think we should work as best we can. Anchor we heard from the theyury secretary saying are the few at these options of putting more sanctions on chinese banks. Are we hitting closer to a breaking point in the u. S. And china relationship right now . It seems like the message is that it is either us or them. Max it is true. Our messaging is very unclear. President trump lows hot and cold. That is not helping. To muchalking publicly to china. Usually, major problems like this, solutions are found privately. Diplomacy, but private diplomacy. Unfortunately, we americans have been to public. Second, our bench is thin. The state Department Personnel have not yet been appointed by the president to fill these top jobs. Our knowledge of china, i think, is very limited. It is what it is. We have to work at it to develop an accommodation i think with china. China is going to want to know what the endgame is. China is going to want to say ok, we will squeeze kim more, but we want to know what the solution will be in the peninsula. A lot of factors like that, but we had to Start Talking to china and explain these different options with china. Anchor i know a lot of this is going to be hammered out eyetoeye between President Trump and president xi. I want to take your position as a former ambassador to china and give me what you think about the current ambassador, what role he might play. He had a three decadelong relationship with president xi. Is there any role for him to play in this . Max there is a great role for all of us to play. The entire administration beginning with trump and the National Security team. We had to china much more than we had in the past. In past years, when we would talk to china about north korea, i was there. They were drivebys, check in the box. It was embarrassingly superficial, in my judgment. We have got to get past that. Now, the chickens are coming home to roost, the rubber is meeting the road, we have got to get real. The bluster is not working. Let us sit down to do the hard work. Negotiation and developing contacts with lots of appropriate folks in china so we concert finding some solutions. Max, taking a look at the events that happened on sunday with the nuclear test, the strongest one we have seen, what was the motive behind this and what was the message being sent . Was it sent to the u. S. Or was it sent to china . Max both. That he can keep shooting off missiles and conducting tests. He knows the United States response is bluster we are going to blow you off the map. He also knows that is highly unlikely that the United States is going to conduct a Strong Military option here because the consequences are so dire. He is trying to build himself up to as strong a point as he can get at so that when he does reach a negotiation here, he is in a better and stronger position. Very clever. Very clever. Betty it certainly seems that way. Max, you need some cleverness in washington to try to get through tax reform. I want to take a moment just quickly on the domestic front. We have got congress reconvening now, tax reform top of the agenda, and how do you think trump will play this . What has he learned from trying to get obamacare threw that he is going to be able to apply to get had to form through by the end of the year . It allankly, i think comes down to the degree to which he works in a bipartisan basis. She approached Health Care Reform tony on a partisan basis, and that tends not to work in washington. He takes the same yo approach on tax reform, if a structure. Same thing. And the president Political Party in the majority tries to ram something down the throat of the minority, it tends not to work because the country gets very polarized. Betty so you do not think it is going to go . Max i think it will be something minor, a modest tax cut. In the end, not tax reform. Unfortunately. Unfortunately. Betty unfortunately indeed. Max baucus, thank you so much for joining us. Former senator and u. S. Ambassador to china. And we have got much more ahead on daybreak asia. You can get around above that story and many more you need to go to get your day going in todays edition of daybreak. Go to daybubscribers on your terminals. It is available on bloomberg in the bloomberg anywhere app. Only get the news on the industries and assets you care about. This is bloomberg. Betty get a quick check of the latest business flash headlines. Crosse the wiresd a few minutes ago. The deal is 140 a share in cash. United Technology Says it is funding the cash portion through debt issuance is of cash on hand. It is expected to close by the First Quarter of 2018. Blackstone selling off part or all of its retail interests. Blackstone had received bids on its pen shopping centers, including some for individual properties and others for groups of assets. Of the total portfolio includes centers in sydney and melbourne and worth about 2. 4 million. We will have much more. This is bloomberg. Anchor 7 30 a. M. Tuesday in hong kong. A pretty cloudy look outside the city. We see another day of thunderstorms it seems. 30 minutes with from asias first major market opens, betty. Weather not looking that great. Beautiful. Almost fell like some are in new york. Labor day holiday in new york. S p futures down. 1 . A little bit off of the lows of the session on this labor day holiday. Well see the Market Reaction when the markets open tomorrow. I am betty liu in new york. Man in and i am yvonne seoul. Youre watching daybreak asia. Haslinda amin. The u. S. Ambassador to the u. N. Says north korea is begging for war with the latest nuclear test. Nikki haley calls for the strongest possible sanctions in kim jonguns regime, telling wants a september 11 road on new measures.