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. President trump spoke i phone with his south korean counterpart, moon jaein, agreeing to pressure the north with all mean that it disposal. The stakes could not be higher. The urgency is now. 24 years of half measures and failed talks is enough. Haslinda the chinese and mexican president s have pledged to defend a multilateral free trade after meeting on the sidelines of the summit. Ximake it pena nieto told jinping that bloomberg is being told the latest round of nafta talks without major breakthroughs or new agreements. Taiwans premier has quit ahead of local elections next year. Seen as the policy architects said he is stepping down to give his successor time to prepare for the polls. The resignation sets the stage for a broader cabinet reshuffle. The successor is expected to be the city mayor. Norways Sovereign Wealth Fund proposing sweeping changes to its 333 billion bond portfolio, including dropping the yen, emerging market, and corporate bonds. Its bond index to include only dollar, euro, and denominated securities. Longterm it is only moderate for bonds. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Betty think you so much. Let us get more on what we should be watching as trading is getting underway in asia. We have got seoul, tokyo, open at the top of the hour. Sophie kamaruddin has more. It seems like these political tensions have yet to cool, however this riskoff momentum seems to be stabilizing right now. Sophie yeah, betty, even as nikki haley is begging for more investors, they may not see the chance pulling up the futures or to show you how contracts are faring so far in asia, we are seeing that mostly higher. We do have the asx 200 also looking at a positive start a head of the rba decision. I want to pull up the risk radar. We are seeing safe havens like the yen and frank studying after mondays performance while gold pared some of mondays gains. That has been the big elephant andhe room as mizuho novartis put it. Btv 6157 shows you that when it comes to hedging against korean risks, the swiss is gaining popularity. That is the line of white on this chart climbing above the yen. The line in blue. This can be seen as appetite for a hedge out of the firing line of pyongyang. And now, i want to turn to gold, climbs 16 this year, gaining 10 in the past two months alone. Technicals are indicating that this rally could be overdone. Strengthe the relative index. The bottom panel indicating gold has entered overbought territory. This was back in april, followed by a drop of 5. 5 in the month to follow. This week, there could be headwinds for gold. We have a fairly busy lineup when it comes to fed speakers, central bank decisions, as well as Economic Data that may turn its attention to Global Growth and could be supportive for the dollar. Interesting twist. We are talking about the remedy traded renminbi being like a safe haven. Has seen a yuan sharp turnaround after three years of losses. With beijings seeing favorable stability, it is putting both at home and overseas. 6136, you canbtv see the offshore rates 14 day rise through monday. That has given it the longest rally on record. In this for a block, it has gained about 2. 5 . That is the biggest advance in asia. And ocbc points out that is the and couldan risk widen the yield differential between 10 and u. S. Bonds. Last week, the premium extends the whitest since 2015, which makes holding you on assets more yuan assets more attractive. Yuan do hedge against yo weakness, helping spur those inflows. Sophie, thank you very Sophie Kamaruddin joining us from hong kong. More on north korea now. Our top story. Riskil lifeline may be at through the Trump Administration is calling for the toughest possible sanctions, which are likely to target oil in particular. For more, let us get to our chief asia economics correspondent, enda. China is north koreas most important ally. Why do you think it has been active so far . There is a lot of discussion around the oil supply from china to north korea, the biggest source of energy, which is vital to their nuclear program. The reason china has not acted on the oil side of things is because they do not want to trigger instability in pyongyang. It is not beijings interest. They do not want to have refugees to the border with china coming out of korea and they dont want to have the or have u. S. Over troops on the border with china. There is an argument that china can be more on the energy side of things and china has indicated a willingness to support sanctions up to now. Embrace anlling to outright oil ban because they dont want to topple their beijing. Anchor they dont want to completely destroy the regime or the country with that. How much impact can we expect an oil embargo to have exactly . Even this one is interesting. Economic sanctions goes to the heart of it, but when you speak to different people, you get different views. There is a partial or temporary ban which would not have any impact because north korea has enough thought how to continue for some months. How much is hard to say but it could continue with a nuclear program. An outright oil ban would not stop the missile tests anyway, given the level of determination pyongyang seems to be signaling. The third point is the outright a couplingld cause of a regime. There is a feeling that an oil ban would disrupt the nuclear program, but it may not necessarily stop them. It is not the tonic that people think it is. Byty it is not the endall any means. If they were to agree on the strongest of sanctions as nikki about earlier today, what exactly would that look like . Max this is where we are going to end up putting a total ban on all north korean exports and blocking off on the avenues to securing hard currency overseas. There are a number of north korean guestworkers in china and north korea who send money back. Textiles coming out of north korea seems to be a significant source of income for them. Ofple underground in terms it raises questions about whether it would be stopping them. Wants to do the sanctions, it would involve a total blanket ban on all north korean exports. Anchor thank you so much for gaming out what this would be. Let us move on to bitcoin. That is the other piece of news or headline making the news today. Channel centralbank saying initial point offerings, icos, asking all related fundraising activities are be halted. Bitcoin tumbled on the news, although it is leveling off from that decline. For more, here is our reporter in tokyo. What does this been exactly exactly cover,n and why is it happening now . Comprehensive ban on my toes on icos. Cannot exchange them anymore. You cannot trade them anymore. Banks are prohibited from Offering Services related to them. It is a pretty comprehensive ban. Not only that, if you have already raised money and do not need the qualifications, you are supposed to refund the money, liquidate your ico and give the money back. China is home to some of the profiteers in the world. There have been a lot of shady icos in china over the last couple of months. About 1 5 of all the worlds icos have been raised in china, almost . 5 billion in china alone. A lot of these ended up eating scams. Has agulatory body protective measure for investors, regular investors, mostly. People losing their savings and stuff. That is the immediate kind of yvonne it seems that way. We spoke with mark mobius yesterday, who weighed in on the regulation, saying it is pretty much inevitable, all of this before the pboc made their announcement. Let us listen to what he said. Was the u. S. Treasury trying terroristwn drugcing, the terrorists, lords, and others, are now moving in other directions in order to have some liquidity and ways of moving money around. Cryptocurrencies are ideal for that purpose because there is no traceability, so i think the governments are definitely going to crack down on these. Betty crackdown on that various activity. There is talk about it at the u. S. , the sec looking at the market. What are the indications shortterm . We saw this price crash. Is that directly related to regulations . Max completely related. There are two announcements. One from the pboc yesterday. There was an earlier one. Ethereum crashed over the weekend 10 and yesterday crashed another 10 . Definitely directly related to the directives from china. What does it mean in the shortterm . I would imagine there are struggled quite a bit. If the worlds secondlargest economy says we do not want to hear him etherium. To get into a blockchain, you etherium. Y i would imagine the price struggled quite a bit over the longterm. We have heard china wants to create its own coin, something that has more control over it, more visibility. It does recognize the value brought on by crypto currencies and having a completely digital economy. Moveterm might be small took lamp down on the risks for now and set the path for it to come out with its own coin later, the official china coin, so shortterm, ethereum looks a little tough. You saw it rebound from 290, now trading 330. Whether it can get over 400, its record, alltime record, i mean, i dont know. If the worlds secondlargest economy makes these moves, it might be difficult in the short term. Yvonne it is a question of regulation as well. We have seen the likes of u. S. Canada, the countries that have taken a more lenient stance on that. Does that likely impact globally when it comes to other regulators . Max yeah, you know, compared yuji you, compared to canada and singapore, this was a massive moves. These guys said we think some of this stuff might be covered under our regulators, but they did not go to say that this would be legal. China just skipped a couple of steps and said banned, boom. They will not take as part of a stance. It is all about how much fraudulent activity is happening company. E they have to protect the consumers and investors. Another countries, that exists to the same skill, probably. Probably other countries will not be as severe. So you know, this could give hope. You could see a country come out with very favorable regulations. For i goes. For icos. The country could become a hub price years. The regulations only apply to local fundraising within china. It does not apply to global projects. It does not apply to global investors. You will have to see. You will see such a big and important economy. The Financial Market is digitalized and comfortable using money digitally. Economy to come out and say no, we do not want this, we do not like this. It definitely does not look good. Yeah. Anchor all right. Nakamura joining us from tokyo. What is ahead for the worlds biggest travel agency and where she sees growth opportunities. This is bloomberg. Yvonne this is daybreak asia. I am yvonne man in seoul. Betty i am betty liu in new york. Business leaders and investors joining the brics heads of states in china. Among them is the secondlargest Online Travel agency, see trip. James spoke to Tom Mackenzie about opportunities in the brics. Brics represent the Fastest Growing gdp growth around the world, so the buying power for are veryntry significant. For example, this year, in russia, we send 1. 5 million people. In south africa, the writing number, the curiosity of continental is increasing. For brazil, because we hosted the olympic games, so lots of people are going there as well. India, it represents the secondlargest population. All these countries represent their very attractive travel destinations for chinese tourists. Tom domestically, you are focused on secondtier, third tier cities. They only make up 10 of all travel bookings in china. Whered you see that growth and that what pace . It is very strong in the first tier cities. Now, we have put concerted efforts and penetrating into the second tier and third tier cities. Branding. Es the secondly, we also are targeting open the 6005 hundred offline sources to couple with our online efforts. We also developed comprehensive products to serve the customers in these areas such as not only hotel and tickets, train, bus, ferry, restaurant, etc. Anything they need for their travel, we are offering to the customers. With that strategy, i hope we can boost the travel volume for the second tier and third tier cities. Tom is it becoming a more competitive space . As long as you keep up with your focus on customer and make ai,right investment into the data, cloud computing, you are extending your leadership in this area. Tom but you are keen to make for the acquisitions . Is that fair to say . We hold three criterium. The first is that it has to be coreely related to our business, travel. The second is the verticals we are looking in, we always invest materials. Ne the third criteria is that valuations need to be reasonable. Tom you are still looking for future deals if they fit those criteria . Exactly. Very defined. Very definitely. That was the future ceo talking with Tom Mackenzie on the sidelines of the brics summit. Coming up, next, taking a look at taiwan. The resignation of the premier could provide the president with an opportunity ahead of next years elections. We are live at taipei, next. This is bloomberg. Yvonne this is daybreak asia. I am yvonne man in seoul. Betty i am betty liu in new york. Volkswagen is reportedly halting efforts to sell his ducati motorcycle its ducati motorcycle unit, according to reuters. Gw has received five bids valuing ducati at 520 billion dollars. Vwo purchased the italian brand for just over 1 billion. Betty Fiat Chrysler says the company will push ahead with the separation of its unit after it bloomberg some aspects do not belong and the group must be purified from those assets. The plan before leaving in 2019. Boeing won the backing of the World Trade Organization longrunning trade dispute over tax incentives to develop its jetliner. It overruled an earlier finding. Restrictions. Dy the e. U. , which backed airbus, has been claiming unfair competition. Two other cases are still pending. President wills hold a briefing later this morning after approving the resignation of premier. Let us get the latest from our bureau chief. Good to see you. Tell us about the significance of this reshuffle. That theuld say marksure of the premier they have been in power for one year now and have pushed through a number of major reforms from. Abor tax reform the last of those was tax reform. He thought this was a good time for him to go. Were notorms universally popular. They face a lot of opposition from other main political. Arties and civic groups the main thing to consider with how do they reset the regional. Lections the electorate will go to the poll to elect the mayors and county heads for all of taiwans counties and major cities. In the face of, you know, opposition today, policy initiatives so far, the government has decided they need to maybe get rid of the premier andprotect the presidency build on that and try to build up support ahead of those elections next year. Reshuffle giveis him the option to change policies and taiwan . It absolutely does. Not all of these reforms are incredibly popular. The end of last year, the government implemented reforms, implementing a sixday workweek. It is not possible for anyone to work more than six days in a row in taiwan. And while this was obviously not very popular with operations in taiwan, it has actually proved to not be very popular with employees in taiwan either, many of whom work in the economy or are paid by the hour. Occasionally, they want to earn more money by working longer hours or many days in a row. This proved not very popular among them. If that is in fact one of the many things that could be changed with a new administration coming into power. Anchor samson, thank you so much for joining us. Much more ahead in the next hour of daybreak asia. Well take a look at how Market Reactions are over north korea with our guests in 15 minutes time. Later in the hour, blackrocks talk zhu joining us to about the resilience of the Chinese Market at 8 40 hong kong time. 10 40 in sydney. The korean markets are about to open in a few moments. 9 00 a. M. Here, i am yvonne man. Welcome to daybreak asia. These are the top stories. Cause for the strongest possible sanctions on north korea as japan prepares an evacuation plan for citizens here in the south. There have been games on the latest tensions. Stock investors may be less riskaverse. Globaloombergs headquarters, i am betty live betty liu, in new york. One of the biggest deals in aviation history, a cryptocurrency crotch. At this point, humbling after china declares initial point offerings illegal. Yvonne, these headlines are spooking the markets. After the nuclear test by north korea, the fact that the left last one for hours, not much has happened. Maybe you are seeing this stabilization of the markets. Preparing tos launch another icbm. I thought it would be interesting to pull up this chart again. 32. 15. Bg this is how many missiles have been launched in just the last few months. Stick look at this hockey rise right on this bar chart of multiple tests being launched here in the markets. As you were mentioning, over in seoul, despite these headlines coming out, it still seems like business as usual in seoul and the markets. Yes, looking around me, having to work, the morning traffic, as you can see, things look about the same. You do feel a bit of tension as well. We did say one protester on the againstolding one sign the invitation of these said missile symptom systems that the resident said he will be deploying. This is a 180 from what we have seen on his president ial campaign. Agreed to strengthen their military capabilities as well. I think in terms of the market impact, barring any type of strike, it will be much the same, in need of reactions, it will be pretty shortlived. They i am looking at where trading is. We are seeing a rebound in the trade. It is up. 3 . Bitcoin tumbled the most into dr. Years in two years. They have asked for all fundraising activity to be halted immediately and says there will be harsh punishment for any offerings in the future. 14 on fell by more than monday, the most since january, 2015. The u. S. House of representatives will vote on Hurricane Harvey relief bills that wont contain language setting up a default under meant that. Republican leaders are borrowing from the demands of their members and will combine legislation. That would raise the debt ceiling. It would provide almost 8 billion in aid. A european moneymaker lawmaker has hinted that theresa may the told bloomberg that brexit coordinator is wrong. Theresa may will give a followup to a january speech on brings it, the negotiations stalling and the government having lost his policy majority. That the has been told hong kong authorities has our banks in the cities, for details of the delly wonder. The lenders were asked to report loans,l outstanding chinese regulators have been stepping up scrutiny of the anies behind lobbyists latvia. I am haslinda, this is numbered. Bloomberg. Back to the markets now. Betty we are seeing a little bit of recovery on the benchmark in seoul this morning. If youre getting ready she take a look at the markets opening for us, the u. S. Has probably closed for the labor day holiday. It seems we are faring fairly well. We are seeing a relative calm at the start of this training day. We are seeing investors taking the response. Asian demand has weakened somewhat. Sophie the dollar is looking steady. We have a lineup of fed speakers, also, centralbank decisions due out this week. The features are still in the red as you pointed out. There is still that holiday. This is now climbing the most since around august 24. This morning we did have data out of seoul indicating the current count has narrowed. Perhaps there could be other drivers when it comes to trading in korea today. We do have the nikkei studying their. Watch retailers in tokyo in particular after a mixed performance in august. Past retailers are domestic and equal sales. Those fell about 3. 4 . We did have the shares in sydney just unchanged ahead of the rba decision. We do have them falling while the aussie dollar is looking fairly steady at 7947. The nearest bullish trend could be compromised if they if iron ore pause back. Pauls back. Copper is extending gains and we do have oil picking up slightly well gasoline futures are on the back. Before i go, i want to take one last look. This is getting about 2 10 of 1 . This is after the gyrations that we saw on monday. It is still set for a week of losses falling the last three weeks that we saw. Betty stabilizing seems to be the word of the day. Thank you so much sophie. Now the u. S. Has called for the strongest possible sanctions on pyongyang. They say that kim jonguns regime is backing for law. War. They have been tracking all of these events from hong kong. South korea says they are detecting these preparations by north korea for another icbm launch. Even though we keep hearing about exhausting more diplomatic channels, it sounds like we are heading down the path to conflicts, military conflict. It is a war of words. It is heating up. We heard from the residence a delayed response. Now we have heard from nikki , the u. S. Ambassador to the u. N. Has said the same thing, calling on the toughest sanctions possible, wrapping them up ramping them up. Others, including china should take steps to impose further sanctions. Oil has not been on the table is pushing the u. S. China and russia to do that. We had the former ambassador to china. I want to remind our viewers what he said about chinas actions so far. Of china isst embarrassingly superficial. We have to get past that. Now the chicken is coming on to wrist. We have to get real. The bluster is not working. Lets sit down and do the hard. Ork we have develop contacts with the appropriate people in china to get some financial solutions. They had some harsh words on chinas response. What you think of how china has responded to all of this . China has come out against the publication. China is in this interesting position. They have strategic reasons for allowing north korea to continue to be an ally to some degree. They dont want to give an. They have been they dont want to give in. They have been against the Missile Program in south korea. They had some harsh words with south korea and the u. S. About that. It is complicating. The provocation from the north came on a day when china was hosting a conference. It was an embarrassment to president xi. They were quite concerned about the timing of it. There is a lot of tension in the region. The u. S. Is continuing to push for more sanctions and to push the u. N. To support them. Trumpsso learned of decision on immigrants. That means that one million peoples status will be put in limbo. The president appears to be wanting to end the Doctor Program the d. A. C. A program. That prevented the deportation of children brought to the u. S. As children. A lot of these people are working in jobs in the u. S. They would be hard to replace overnight. What does this mean . Where would they be sent back to . To their very few ties home country. They view themselves as american. Said that congress should do something. Lot on its plate and it is hard to see them doing this quickly. Thank you so much for always giving your angle to this important story. Bloomberg newss asia editor. We had a big announcement in the last hour. United technologies has agreed to buy Rockwell Collins. Keenan joining us now. Finally, we got the confirmation about the sale. Su it is a major deal. It is a merger money deal. It will draw some of the conflict. When you add in some of the valuation, but go into the chart for United Technologies. This is a major bet on aerospace. It was a strong performer this year. Each shareholder will get about 93, 33 per share in cash, 46 and . 67. That is about an 18 premium. Lets go right to the Rockwell Collins chart, you can see right at the beginning of the summer is where the shares shot up. They were up 40 . It will be interesting to see how they move when the market opens. We talk about the aerospace industry, you have boeing dominating and these are major giants that Rockwell Collins and United Technologies together in a combined Aerospace Unit will be calling College Aerospace system it will compete with them in a very big way. Will offerd company a broad product. It runs the whole gamut of commercial aircraft. Cockpit displays, communication systems. You have the prattwhitney division. From cradle to grave they can really create Major Products here. You mentioned it was a game changer. United technologies going big on aerospace right now. What is at risk right now . Theirfollows up on purchase of goodrich. They had a major investment in an engine that altered this year. This will be a test of how committed and how successful they are in effectuating these major acquisitions. When we go into the video, we can see that what we have in terms of the competitors boeing and airbus it is a real challenge. Alreadyl collins is making its largest acquisition in its history. You have seen Warren Buffett himself making Major Aerospace deals. This is one of the strong performers this year in the market and it will be very interesting to see how this tracks on tuesday. Betty thank you for joining us live from new york. Ahead, cracking down on cryptocurrencies, the initial point offering. Coin offering. We will have more analysis later on in the show. Ramping upc navy between washington and pyongyang. They are betting against the concept of conflict. This is bloomberg. This is daybreak asia, i am betty lou in new york. Yvonne i am yvonne man in seoul. Investors are not going to long. In singapore. Vishnu, thinking for joining us. They call this a massive show off. Take a look at what we see today. Does it make you change the whole mentality . Are think markets bifurcated in a sense. They are not what prepared for an adverse outcome. There are two reasons for this, one is a little bit of historical perspective. Whenever we have seen geopolitical tensions due to north korea, they ratchet up. There is a bit of experience from that. Equally, they also realized that even as World Leaders get more alarmed with the nuclear tests, they are not aligned, there are many falsehoods within the stakeholders who do not want direct conflict. Markets are honing in on the bottomline almost a little crude they. That is what theyre looking at, the fact that there will be no conflict. They are getting on with the traits that will earn them some money rather than incur some costs. Right, it seems to be the common we are hearing overall is that nothing has completely changed at all in the last 24 hours. Thehat continues to be case, we will go back to trading as normal. Japaneseous about the yen. You pointed out that yes, we see this snap into the japanese yen as a safe haven currency, japan is in the middle of all this conflict. We had the headlines out about the japanese saying they will of that q8 their citizens out of south korea if this conflict escalates. It is that bifurcation you are talking about. Japann into the yen when might be right directly in the middle of all of that . Vishnu that is a good question. We are all struggling with this. Some of these traits are hotwired. That sayyour traits they go opposite ways. When the k goes down, the yen goes up. For those reasons, when you get a bit of risk, those hardwired they will require that the yen goes up. However, one risk that we are aware of is that some kind of flict, place comes about you could see the yen selloff in a southern realization. It is contextual. There are a lot of offshore assets that japan has, repatriation of these assets will boost the yen again, it would be a very confusing trade. In particular, i think one of the risks that comes about and create a lot of tensions is that the Nuclear Development and the it has comement, across the alignment between south korea and the u. S. , the missile alignment that has increased dramatically. It creates a lot more attention. Right now, conflict is avoided, markets are resting easy but the tension is growing. We have heard increasing calls that it is time to hedge your bets. 10 of your portfolio has to be goal. Vishnu says that although the risk assets are not that deep, we are seeing that maybe some possible buildup and incremental volatility could possibly translate to some type of market correction. Vishnu absolutely, one of the things to realize that we dont know is that even know it is us not systemic on higher, the riskreverse suggest that markets are increasingly riskaverse. That is the risk positioning that we are seeing markets get on with her daily traits. They are getting into the lowercost options of putting in safety backstops. Just before we go, i want to talk about the chinese currency. Boy have we seen an acceleration and strengthening of the yen. I want to pull up this chart. The is 6136, this shows you offshore yuan price and how much has risen. That only that but the the oneday percentage change has gone, it has accelerated. I am curious, what you think is going on. Why have they not done anything or have they not said anything about this acceleration in the yuan . There are several reasons behind it. That therecognizes is a general dollar softening trend. They are not going to go against a dollar tie. They want to go against perceptions of one dollar being created. It is still lagging behind the currencies, it could take a slightly longer term view. In terms of the geopolitical up. , you see one going there seems to be a little bit of shift in mentality. Thank you so much. But he more to come on daybreak asia, this is bloomberg. Plenty more to come on daybreak asia, this is bloomberg. A quick check of the latest business flash headlines. Shall plans to sell of all or part of its Australian Retail interests. They received 10 bids on the shopping center. Some for individual properties and groups of assets. The total portfolio includes centers in sydney and melbourne. It is said to be worth about 2. 4 million. That this maned was involved in his conduct related to the running of the former solid giant. Directors were banned from between three and four years. Lee briefly became chinas in 2014. An the departure of joseph gimenez. A will be replaced by 41yearold harvard trained doctor who was the companys chief mentor medical officer. They secured u. S. Rigo tory clearance for a seven 5,000 Breakthrough Cancer therapy. Much more ahead on daybreak asia, this is bloomberg. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. The start of trade in asia, it is a 30 a. M. In singapore. From thehalfhour away open of trading. It is 27 degrees over in singapore. Still quite summary there. I am betty liu in new york. You are watching daybreak asia. Thats get to the first word news. Linda north korea is begging for war with this latest nuclear test. Nikki haley called for the strongest possible sanctions on kim jonguns regime, touting the security council, the u. S. Once a september 11 about on new measures. President trump has spoken with his south korean counterpart, agreeing to pressure the north with all means at their disposal. The stakes could not be higher. The urgency is now. Of half measures and failed talks is enough. The chinese and mexican president s have pledged to defend multilateral free trade after meeting on the sidelines of the break summit. Promoted growth, competition and prosperity in north america. Bloomberg has been told that the latest round of talks is near conclusion without any major breakthroughs or new agreements. Has quit ahead of local elections next year. He was seen as the chief Economic Policy architect and is to get hiswn successor time to prepare for the polls. This sets the stage for a broader we cabinet shuffle. How the successor is expected to be paystub and wealth fund is proposing sweeping changes to its 333 billion portfolio, including dropping the yen in emerging markets and corporate bonds. This is the bond index that could only have the dollar and the pound and the euro. Longterm gains from International Diversification while considerable for equities, the only moderated. Local 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. Take you so much. Had to see how the asian markets are shaping up so far. They are so down about it, we are seeing them in decline. After a positive stuff, we are seeing a more negative tone take hold in the session so far today. They do remain steady, we have japanese stocks. And the job for the asx 200, that is deepening. That benchmark is set for a second day of losses. Lookingreign debt is like this in asia while treasuries are catching up. They are seeing a bit of a bounce back. Around thectuating 1130 markup. This is the only major benchmark in the green. They are set to snap a threeday drop. This morning we have traditionally defensive segments leading gains so far. Up, theyre so trading below 2350 points, below which, it makes sense to slowly accumulate korean equities. Checking in on the nikkei 225. Is on course for a second day of losses. This have softbank leading space, it is falling about half a percent. When it comes to index points, fast retailing, that is moving the most ground. In august. R 3 that is the heaviest weighted stock on the benchmark. The nikkei 225 is set for the biggest twoday drop since august 21st. Thank you so much. Sophie cameron. It might affect the markets over in japan. Is said to that this be announcing or planning a asre sale by the government early as september 11 going to people with knowledge of the matter. Trillionto offer one yen for domestic and overseas investors. That would take place by the end of september. What is interesting here is that the process could be delayed as business could be delayed if the situation in north korea deteriorates further. Justin asterisk on the share sales. This might get delayed. According to people with knowledge of the matter, japan a 1. 4ost one trying to trillion sale of shares. Korea,g about north north koreas oil lifeline may be at risk. The trumpet ministration calling for the toughest possible test and sanctions that will likely target oil. For more, here is our chief fusion asian economics correspondents. Chinas most important how life ally, why has it not acted so far . The core reason is that relations are tight. A is offering china doesnt want to do anything that would topple their regime in pyongyang. They dont want to have a humanitarian country on their border. They dont want to trigger any opportunity that would extend american influence on the korean peninsula. Are taking they steps to cut up on supplies to north korea. If they were to take that step, the view in beijing is that it would be quite a dramatic one. It which are the consequences we mentioned earlier. Absolute even be necessarily effective in holding the nuclear program. For china . Ld take it has resisted Oil Sanctions and oil embargoes. What would it take for china to come on board with its allies in the u. N. . They are coming under increasing pressure. That this view nuclear test crossed something of a redline. Japan has to be moved in terms of attacking the oil supply to north korea. Arhaps china could embrace partial or a temporary ban. Even then, you get pushback on the idea. Analysts will say that north korea will have enough supplies for some time. Even with a powerful flight a. It would hinder the nuclear program, of course, if they would go for the upright oil ban. There is a problem that we would have early. On china as the field they it may bea total only a partial ban. Some people think it will be neither. In terms of how much oil is exported to north korea, what kind of consumption are we talking about us and mark we are not talking about a whole lot of oil here. Talking about smaller volumes. We are talking about estimates for thousands of barrels per day. We dont have published data on these chinese customs. Volumes are close to consumption of the u. S. Itself. It is a vital source of energy. It is a vital, intrusive power. It which really negative or difficult. That you so much, this was a possible oil embargo. China central bank is pretty busy these days. Synchronous aucoin offerings are illegal, asking for all related fundraising activities to be halted. Bitcoin tumbles on this news. It has also leveled off, for more, here is our Asia Technology reporter in tokyo. Exactly, what does this ban cover . What you make of the timing of this announcement . It is pretty copper heads up on all initial quite offerings. You can no longer raise money through them. You cannot trade them. Thanks also are prohibited from Offering Services related. It is a pretty copperheads of dan. If you have already raised money, there is a good chance youll have to refund that money and liquidate. It is a pretty big step. This is why the theory has crashed over the last 24crashed8 hours. As far as the time, it has been one of the biggest places. This is in china. A lot of those have been very dodgy. Not a real business behind them. Basically, a lot of hype. Of money. Raise a lot they have stepped in to protect investors, this is why the timing is happening right now. Thising that there is just one announcement that it has such a devastating impact on bitcoin, is expected to continue to fall . The impact of bitcoin might be relatively small compared to syria. Almost all i close are built on this technology. Part of the eye coat is that you depositeden you have that into the ipo to get your ipo tokens. This is inflated. Everybody is buying to participate. Now that they are banned in china, if we do see a lot of liquidation, it may have happened already. We will see people selling. The impact is that it already has been much bigger than bitcoin. The shortterm does not look pretty. You might start to see lots of others bailing out. That is these regulations are pretty wide and wide reaching. Is that going to affect how regulators in the u. S. , canada and elsewhere regulate these icons . They have also put out official statements but it has been very tentative. Thistook one step and said might fall under our regulations. China with three steps ahead and said we dont even have regulations but it is banned. It is a very aggressive move. I personally dont think they will take us aggressive stance. Some countries see a lot of andfit cryptocurrencies theyre taking a very lax approach. The key part is how much fraud is happening in the country. I think fraudulent activity in china was very high. That is why was i may be the strongest reaction, other countries might not have something as strong. If china is not participating, that is a big blow. That is a big blow, that is a big part of the market. Much more ahead, stocks in china are shrugging off the north Korean Nuclear test so far. How long will it take to be of concern for chinese investors in the market . This is bloomberg. Really in any parties interest to behave in an irrational manner. These markets are simple he betting that nothing will exit, the we terms of actual have to watch for. Energy of clinical attention really happens on the terms in terms of trade pressure. This happened late last year. Helen, are you still in the camp . That eight shares will outperform . We have been more positive on the eight shares, basically since late 2015. They have done better. We do see something probably more Supportive Fund flows and valuations. Within going into the second half of this year, if we do look these as compelling, particularly for those were quite concerned over global feel zhou put risks geopolitical risks, that will have more of a negative impact. If you are more negative on the markets, the shares are more defensive with our current base. Backflows continue right to emerging markets in asia. That probably is still more supportive than shares overall. A shares have lagged. We spoke to some guests who said this is a ride that we saw on the shanghai composite. How closely are you watching this next month . It seems like growth has become a . Or 2018, do think that will dampen what we have seen here in these markets question ma . I think people are tried to see what kind of rhetoric comes out of the parties. What returns will be provoked year. Tized next how much will the markets were about corporate deleveraging. Those were the positives and negatives that people will be paying the most attention to. They have meaningfully benefited. This is from does this particular going into the winter months. It is a little expensive for your taste. Do expect that money might blowout of these other sectors that you just mentioned . From a sentimental perspective, we think the riskreward for other sectors is better. However, in terms of a lot of the text, some of it does follow what is happening in the u. S. As well. As we have seen, u. S. Yields have come down tremendously burress what our expectations were at the end of last year and versus where they were at the beginning of this year. That has actually helped to drive a significant amount of capital out of u. S. Financials and cyclicals into the u. S. Tech and overall internet space. Had to continue to watch what happens on that front as well, not just what happens in terms of stock earnings or overall market evaluations. Take is a much for joining us today. Ofs is the blackrock head china equities joining us here in hong kong. This is in todays edition of daybreak, will describe this as on their terminals. It is available on the bloomberg anywhere app. You can customize your settings so you only get news on the industries and the ones you care about, this is bloomberg. There is a quick check of the latest business flash headlines. Volkswagen is halting efforts to sell its ducati motorcycle unit. Vw has received five beds valuing at as much as 1. 8 billion. Vw purchased the italian brand in 2012 for just over a billion. The chrysler ceo says the cup and he will push ahead with the separation of its parts unit after it failed to secure another carmaker. That somebloomberg aspects of the component business do not belong and that the group must purify some of those assets. He is apparent his final fiveyear Business Plan before leaving the company in 2019. Boeing has the backing of one of the wtos. They developed a triple seven x jetliner. They ruled an earlier finding of a . 7 billion of tax incentives awarded by Washington State broke subsidy restriction. The eu which backed airbus has been claiming unfair competition , two other cases are still pending. Here onall from us daybreak asia. Here is what is coming up in the next two hours on Bloomberg Markets, north korea at the top of the agenda for you, rish . Rishaad i dont know he came up with that. It is ok. On the peninsula . Why is kim jongun upping the ante . It is all that security for north korea. At the doubtoking the delta securities and what it means out there or investment as well. He is saying that it is a good time to go out fishing. He is also talking about tencent and some of these enterprise reform stocks and domestic consumption stocks in china. Looking at those, also, we will look at Different Exchange implications of this. For tradet as a haven in light of the tensions on the korean peninsula. The yen inhat, it is this part of the world, certainly gold, too. Just seeing how strategy has involved in light of what has been happening with this great strategic problem we have had with the geopolitical problems facing in this part of the world. Just looking at the biggest risks we see at the moment, it is perhaps Donald Trumps russia gate investigation going on. It is suggesting that it could be worth looking at. We have data. We do. The u. S. Will be back to business in washington. Expect more volatility as there will be a lot more conversations revolving tax reform in the weeks coming up. That is if im daybreak asia, our market coverage continues with rish and haidi, standby for Bloomberg Markets, this is bloomberg. Rishaad 9 00 a. M. In hong kong and singapore. 9 00 monday evening on the eastern seaboard of the u. S. I am rishaad salamat. Stability returning. But President Trump agreeing billions in new weapon sales to south korean. The u. S. Accuses kim jongun of begging for war. Sydney. m haidi lun in also coming up, a giant in the skies. 23 billionology, in one of the biggest deals in aviation history. This is Bloomberg Markets asia