Live from bloombergs u. S. And asian headquarters. I am live in new york, where it is just after 7 00 p. M. Yvonne it is 7 00 a. M. Here in hong kong. I am yvonne man. There is something about the month of august where crazy things just happen. Two years ago it was china, the devaluation. The jury is still out to see whether geopolitics will be the trigger this year in triggering the volatility. Betty who knew a year ago we would be talking about north korea and the possibility of military conflict between the u. S. And north korea . But here we are in august. Volume is still relatively thin. Any movement will be exaggerated by the thin volume. That is exactly what we saw. Despite all these headlines, the markets remains relatively resilient. Which is confusing to some investors who say, we should be moving more on these headlines. Right now it looks like the markets are focused on earnings and the fed. Yvonne those are still some likely catalysts. From a comments Little Movement from yen. Not much in gold. Pretty muted with the safe haven plays. In new zealand, no change in policy after the rbnz. Inflation slow. Perhaps a little less dovish than expected, the kiwi at a pop. Did buck the trend, led by financials and tech. Looks like we could be continuing that. Quite moderate in those gains, equity futures pointing to eight points for the benchmark. Well. For the aussie, as japan, we mentioned the yen. We are back below 110 territory right now. That is back to the twoyear highs we have seen for the currency. The nikkei, one of the biggest losers yesterday. Forould see a little upside the market this thursday morning. That is the pulse we get from asia. Rex tillerson, secretary of state, tried to calm nerves out there after trumps rhetoric around it north korea. Trying to calm investors overall. Earnings,are getting investors still focused on earnings. They are coming out with secondquarter adjusted earnings. Slightly 3. 86. Slightly less than what wall street had estimated. 1. 94 billion dollars for the tech company that develops apps and other software in china. We will watch for more of those headlines coming out on netease. Overall on wall street, they are looking at not just a earnings come a but other numbers that were moving the market. I want to bring in su keenan, who has more on what investors are focused on. One eye on north korea. Su earnings are still a driver. Ease a bit. Ngst at the government tried to calm things down. At the close, it was close to unchanged. We have that lighter volume. Big moves. Seeing stocks did flip from the big rise. Lets going to the big movers if we can. Disney and the loss after hours. We will take a look at priceline, which has big drops. They had a negative outlook, even though china is an area for growth. And a fossil, which makes 29 , continuing erosion in demand for watches besides fitbits. Lets going to the bloomberg. 9015. When we talk about reaction to korea in terms of the vix rising, you can see in the overall scheme of things, it is slow and steady is the way the s p was talked about. Long periods without more than a 1 move one way or another. There was a tiny move yesterday. The market is digesting the tensions between north korea and trump, and writing it off for the moment as rhetoric. Says the players are new, mostly referring to trump. We are not used to him being in this situation, as it comes to a head. Yvonne turning to commodities, the subplot that surprise jump. Su it was the biggest gain since january. That was a surprise. If we going to the chart in take a look at how oil has performed, it is not been able to budget above the 50 since a week ago, monday. U. S. Crude stocks falling 6. 5 million barrels. The focus was on the gas supply gain. If we listen to Goldman Sachss head of commodities, he points out how difficult it is for Commodity Traders to trade longerterm, particularly when you have data showing the uptick in shale production in the u. S. Lets listen. It means you cannot be trading oil three to six months out. When we put those together, you cannot be trading long anymore. Su that makes it difficult to project the direction of the oil markets, beyond shortterm. Yvonne su keenan, thank you for joining us live from new york. Jumped as thellar bank of new zealand kept its official cash rate on hold at 1. 75 . Governor Graeme Wheeler says worries about inflation and gdp growth, was lower than expected in the fourth quarter. They see declines in coming quarters, saying Monetary Policy will remain accommodative. Inflation is likely to decline in the coming quarters, as a fuel and food prices dissipate. Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain, and policy may need to adjust accordingly. Australia reported a loss of 220 million aussie dollars. However, it is forecasting in the first quarter, saying a Better Business program is ahead of schedule. However, it isthe airline is pay hna. They want to tap into the record flow of chinese visitors heading to australia. Considering a shakeup of hotel units as part of a wideranging overhaul of the falling group. An entirel name buy trouble group, in a deal worth 940 million. They are reorganizing. To sellth, they agrees their hotel and theme park efforts for almost 10 billion. The recent headlines about Sexual Harassment at google and the gender diversity have put behavior on the first page. Google has struggled with a string of incidents, and worked swiftly to fire an engineer who questioned womens ability to work in tech. Sandbergcoo sheryl said companies and employees must step up to the plate. Sexualharassment has been around for a long time in every industry. It is abominable that it still exists in this day and age. People know better. It is great when people lose their jobs when it happens because that will get people it is a leadership challenge. There needs to be no tolerance for it. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Yvonne thank you. Betweening tensions u. S. And north korea, Rex Tillerson hard at work reducing the rhetoric. Pyongyang still to the flames again with a new threat against guam. Lets bring in our editor from d. C. Say americans can sleep soundly, but you hear about north korea talking about an attack. Is the ball back in the u. S. s court. The ball may be back in chinas court. China was one of the audiences of trumps remarks yesterday. It puts into a pattern that is more familiar with the blunt talk from the president , followed by soothing words from a cabinet official. The u. S. Is leaning heavily on china to put the pressure on pyongyang. That will be stopping, short of any military confrontation. It remains to be seen whether kim jongun is able to follow through on his latest threat. Yvonne what has been the reaction from asia in particular . I think a lot of the asian countries, allies like south korea and japan, were caught offguard by comments from trump. Did tillerson do enough to calm parts of this region . A bit ofeems to be discounting of the president s rhetoric. South korean officials were trying to put a calm face on it. In japan, a senior official told Bloomberg News they did not take seriously the threat the u. S. Made. Whether or not the threat from kim jongun is more serious remains to be seen as well. Betty it does. We will see how this plays out. I imagine the next few days, few weeks. What is next in these tensions . What is next to watch out for . Joe the next step will be whether north korea fires off a missile, whether they do something provocative, short of a strike on guam. There are a number of things they have done in the past, attacks off the coast of the korean peninsula. To formld sneak across a kidnapping. But something far less than a military strike. They know that escalation will end badly for them, even though it will cause quite a bit of pain for u. S. Allies. Betty joe, thank you. We will continue to monitor this with you. Su had mentioned, stocks, very little change. U. S. Officials are trying to ease concerns around our conflict with north korea. Ramy inocencio has a different perspective. He has three charts you need to know today about this conflict. Ramy i want to ask whether youre in the market for risk if you are losing your appetite . If you are not in that market, taking a look at g btv 5232, you are not alone. This is the risk on, risk off index, a bloomberg exclusive index. Come to the right. We are at the marker 35. 46. This is its lowest in a month and a half. Because of the war of words with u. S. And north korea. What is involved in this index . It involves six stock indices and five sovereign bonds, two currency indicators and two commodities. Most are correlated positively to risk and risk appetite. If there is less risk appetite, these will be falling. Negative correlation means there is interest in safe havens. We have not seen a moving. Lets go into g btv 7722. It says investors are flocking to safe havens. In the past few days we have seen interest in gold. It was in the yen, both traditional safe havens rise. Over the course of the last month, gold has jumped 77. The yen is at a twomonth high. What could this be, moving ahead . The price and Fund Managers saying they are looking to get out of risk in order to get into some safety. These are some of the charts. I will send it back to you. Yvonne we will continue our conversations throughout the morning on north korea. Working with director john park. He joins us next hour. Ahead, we speak to the blackberry ceo, john chen. Joiningbe in indonesia, us at 8 30 eastern time. This is bloomberg. Betty this is daybreak asia, i am betty lou in new york. Man in and i am yvonne hong kong. Central banks making headlines. Held for the fifth meeting in a row. In the philippines, the new governor. The odds are increasingly against the fed hiking next month. Said, steady as she goes. We havewe are pretty good rates right now. Weekend that leave them how they are in see how the data develops. Betty pretty dovish. They will start a gradual process to shrink the 4. 5 trillion Balance Sheet. Lets talk about this with a strategist. Christina, lets start with you on the market view of this. If we get a more dovish fed, they will start shrinking their Balance Sheet. How will that affect the markets . What are they pricing in right now . There is still a huge question mark how the market prices. That may change as the reality of Balance Sheet normalization prevent present itself. Is there denial going on . Onthere is assumption based what chair yellen has said that this could operate in the background. While the fed focuses on rate hikes. In fact, it may not just operate in the background it might be a Disruptive Force for markets. Betty what would be disruptive . They have been talking about this so long. They have been talking so long about it. They basically think that Everybody Knows what we are doing, we released a schedule. But nobody knows what is actually going to happen. It is uncharted territory. Will do this tapering off. Betty what could go wrong . Yelena the markets couldnt react abruptly if something happens to the dollar. It makes a reaction. Interest rates react to that. Anything could happen. Kristina i harken back to the taper tantrum of 2013. The start ofent of normalization could disrupt markets in some ways and send a shockwave. Betty so far, do you think the fed has done a good job managing expectations . Kristina absolutely. But there are great unknowns when it comes to the fed. Theave a few open seats and potential of a new fed chair in february. So much of the confidence around what the fed is doing is centered around the current members. That could change. Et yellen is yvonne it all comes down to inflation. He is one of the inflation doves. We have seen breakeven rates signaling Inflation Expectations are rising, and a bump up in commodity prices. How important is it when it comes to cpi . Yelena the data on cpi is crucial, obviously. So far, we saw deceleration in inflation data. Says inflation is not going to rise, even if the Unemployment Rate declined significantly further. He spoke earlier this week and presented this table. It shows even if the Unemployment Rate goes down to 3 , you wont see much of a pickup in inflation. Only be 1. 8 , which is below the feds target. There is something wrong with this model. We need to go down to 2 on the Unemployment Rate, to get to the feds target. I think we will probably not get 282 Unemployment Rate. Yvonne doesnt seem like the case. It is interesting, our equity analysts are talking about how we have not seen the four horsemen when it comes to corrections. What would likely lead to the said deposit . At the moment, volatility is low, high yield spreads tighten, unemployment still falling. Can we still rest easy . Kristina i do not think so. There is the potential for a perfect storm or imperfect storm. We could have a few event seconds buyer to shake confidence. I am thinking of a debt ceiling crisis or government shut down this fall, as well as geopolitical risks growing regarding north korea. There is a lot that could potentially derail the stock market. Betty there absolutely is a lot for investors to digest. Before we go i want to bring in a chart of my bloomberg, g btv 240. We are talking about inflation and the fed mandate with the jobs market. The low Unemployment Rate has as low as it is going, not inflating wages. Here are the average Hourly Earnings in blue. It is almost like they are going to intersect at some point, right . What is the level we will get . Not think the relation between Unemployment Rate and inflation is broken. It is just that the phillips curve is really flat at this point, but not broken. In this business cycle, we see in wages. We look at employment to population ratio. It seems like a better indicator in the cycle. [indiscernible] it has been only very slow improvement. Betty thank you so much. Plenty more to come on daybreak asia. This is bloomberg. Yvonne a quick check of the latest business headlines. Assembling a team of dealmakers to refocus the groups broad range of interest. 1 3 of their 100 plus groups could rebound. Consumer and Retail Businesses bring infrastructure together to pull units under one umbrella and combine tatas interest in tech. Betty they continue to offer incentives to win buyers as sales growth slows. Rover postednd profits. That includes a oneoff credit related to retention plans. Deliveries rose at 4 last quarter, due to weaker demand for suvs. Yvonne volkswagen facing resistance. A short list of fivea short lise due to submit amounts next month. But other things may derail the process. It is valued at 1. 8 billion. Yvonne 7 30 a. M. This morning in hong kong. Minutes away from asias first major market open. Betty quite cloudy there. It is 7 30 p. M. Wednesday in new york, where markets close slightly lower, based on those tensions. In particular, the geopolitical tensions with north korea. A beautiful summer day in new york. Strange to think it is almost over this summer. I am betty lou in new york. Yvonne i am yvonne man in hong kong. You are watching daybreak asia. North korea has called President Trump bereft of reason and threatened guam. The secretary of state Rex Tillerson visited the island, attempting to ease concerns that they are headed toward military confrontation. I think what the president was reaffirming is, the United States has the capability to fully defend itself from any attack and defend its allies, and we will do so. The American People should sleep well tonight. President trump has unleashed a twitter attack on majority leader Mitch Mcconnell, suggesting he is a political novice. President has said the has excessive expectations and set early deadlines. Trump wrote, after hearing seven years of repeal and replace, why not done . Mcconnell declined to comment on the tweets. Invaded of the fbi the home of paul manafort. We are told investigators collected and took away certain items. It happened under the weighting investigation as to whether the Trump Campaign colluded with russia during the election. Manafort matt forte cooperated with the fbi. The surprise announcement affecting the recommendation from the regulator staff to give the deal the green light. It drew opposition from congress and criticism from President Trump on the campaign trail last year. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Yvonne we are counting down to major market opens in the asiapacific. Lets get to our Global Markets editor, adam haigh, live from sydney. Kept it steady. We do see a bounce in the kiwi dollar. What is the main message we got from Graeme Wheeler and co . Adam they kicked off fx trade in asia this morning. Largely keeping the picture the same as before. Just a slightly less dovish tone, giving pop to the kiwi. Some went into the meeting expecting they may use the opportunity to give a little bit of a talk at down to the kiwi dollar. That did not happen and just flushed out, just up 2 10 of 1 . Were looking at the same position from the rbnz, and the next rate hike, they think it will occur in the Third Quarter of 2019. Some ways off from where we are today. That is helping support the kiwi. Betty i am sure the biggest Fund Managers are warning investors it is time to reduce the risk. What are there specific concerns . Adam this feels like a common refrain from big managers. In position,ies they are paring them back. Lets start with pimco. They want to pull back pair back u. S. Stocks and that. Debt. They still have a tilt to risk assets better paring that back a bit. Another large manager in the we