Coming to you live from bloombergs u. S. And asian headquarters. Im betty liu in new york. It is just after 7 00 p. M. Shery just after 7 00 a. M. In hong kong. Im shery ahn. It is great to see you, and exciting week. We do have north korean tensions continuing to rise. Top u. S. Officials speaking out a nuclear war is not imminent , but also we have americas top general making the rounds in china, south korea, japan. Also in the u. S. , so much to digest. Everything happening in charlottesville, but also the weaker than expected cpi numbers. Betty thats right. There are vigils right now being held as we speak to essentially talk about and also show emotion from that charlottesville tragedy that we saw over the weekend. There are being held all across the country. We will see how much they will affect the agenda this week, or if those headlines are going to fade. That is a live shot right now of the vigil being held at the scene of the attack by the car, the car attack in charlottesville. As you can see, hundreds, thousands of people gathered there to essentially give sympathy to the victims. One person died in that car attack. Several two state troopers also died in a Helicopter Crash around this rally. Moving on from that onto business, as you mentioned, we saw cpi numbers coming in on friday, pretty tame, pushing out the expectations of a fed rate hike to december. That jews to the markets a little bit. Thes pull up that juiced markets a little bit. Lets pull up the numbers on friday, a choppy session. The s p also eking out a gain. The volatility levels are still quite elevated given everything that is going on right now in washington. Shery not surprising that we saw some dollars selling, the yen rising on the news coming out of the u. S. Market trading in asia at the moment, new zealand the only one. We are seeing a little upside,. 1 , that after losses last week. A little upside for the kiwi dollar, up. 1 as well. This coming under significant pressure after the rbnz took a tougher stance on the currency, a step toward possible intervention. We saw the kiwi stocks falling yesterday. The aussie dollar looking like this, not really doing much, but the aussie was also pressured against the u. S. Dollar. Two weeks of losses, in fact. When it comes to the asx 200, it falls to the lowest level in two weeks. Unchanged,ht now 5638. Japan is also coming back from holiday. Dodgingway on holiday, that weakness we saw in the last session. Futures are pointing up. We are seeing a little bit of strength for the japanese yen, but still below that 109 or below the 110 level. We will see how the markets continue to perform in the rest of the session as we see them coming back from their first weekly loss in five. Lets get the first word news with Haslinda Amin in singapore. President trump is preparing to turn up the heat in the u. S. R what perceives as the theft of intellectual property. Anis expected to sign executive memo on monday directing u. S. Trade representatives to consider launching an investigation. Officials say it with focus on u. S. Companies operating in to trustng forced technological expertise. Mexican trade negotiated but trying to keep tariffs off the agenda as they prepare for nafta talks this week. Mexico is approaching wednesdays meeting as an opportunity to modernize the deal and block any attempt three introduce tariffs. The most contentious issues are expected to be rules of origin, issues related to labor and intellectual property. Commonwealth bank of australia ceo will retire by the end of the 2018 fiscal year. A spot it is part of the fallout of a moneylaundering scandal. The chairman said the announcement is being made to provide certainty. Cbi is accused of more than 50,000 breaches of Terrorism Financing laws involving deposits at adms. The timing of his departure depends on the search for a successor. Three over investors three uber investors say a lawsuit against the former ceo is designed to hold the company hostage. They also asked benchmark to quit the board. The investors do not have seats themselves but say they want other shareholders to add their support. Benchmark alleges Travis Kalanick withheld information before asking the board for additional seats last year. Chancellor merkel and her leading challenger have attacked the german Auto Industry as they campaign for next months election, seeking to avoid any political fallout from the diesel emissions scandal. The two leaders put the blame squarely on volkswagen and daimler. Decisionmakers had swept the issue under the carpet, while schulz describes management as a responsible. We are going to be keeping a close eye on germany and the runup to the election. Dont miss our 30 minute special every monday at 3 30 hong kong time. We will have the latest political and Market Analysis ahead. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Im Haslinda Amin. This is bloomberg. President trump attempting to ward off critics by calling for hate and division inside america to stop. He has been under fire for his response to violence at a White Nationalist rally in virginia. He failed to denounce the right, neonazis, and weiser premises who held the event it failed to condemn them quickly enough which ended with one person being killed by a car, apparently driven deliberately into the car and the crowd. The president is now appealing for calm on all sides. Pres. Trump the hate and Division Must stop and must stop right now. We have to come together as americans with love for our nation and true really, i say this so strongly through affection for each other. Betty our washington editor joining us now with more. The white house is clearly in damage control mode now. How are they going to put this how is trump going to put this behind him . I think one of the things that trumps critics would like to see is for the president to really come out and speak in measured tones and address the issue of White Supremacy in the United States very clearly. The criticism we saw last night and again this morning was that he kind of left it to the surrogates. This morning, the white house put out a statement saying the president condemns, but they would like to hear it from his own mouth. That is something that trump has seemed reluctant to do overtime. The white house has possibly various reasons why he may want to do this. We have one of his Homeland Security advisers saying today he does not want to glorify the white supremacist groups by calling them out by name. But i think he probably would be the minority in feeling that way. For trump to make a definitive statement i think what calm a lot of people down. Betty he has not spoken so fourthly, but general mcmaster really came out with forceful words earlier today. I want to play a snippet of that for our viewers. Any time that you commit an attack against people to incite fear, it is terrorism. It meets the definition of terrorism. What this is, what you see here, is you see someone who is a criminal, who is committing a criminal act against fellow americans, a criminal act that may have been motivated we will see what is turned up in this investigation by this hatred and bigotry, which i mentioned we have to distinguish extinguish in our nation. Betty for those viewers who dont know exactly the history of drop and the right wing history of trump and the right wing groups, give us some context. Groupslot of rightwing were very supportive of donald trump early in his campaign. ,e had backing from david duke who is one of the most wellknown White Supremacists in the country. A lot of people in that kind of very sort of off the charts political spectrum. ,e also has some top aides including his senior councilor steve bannon, who is an executive with a right wing news website, breitbart. Andeems like he has ties just by his silence, it really makes people wonder how close does he feel to the movement and what is the issue with not just coming out and announcing and denouncing. Shery washington has been a little ambiguous when it comes to its treatment of north korea. President trump had come out earlier a few months ago, said he was open to sitting down with the north korean leader. Now he is upping the rhetoric. What do we expect to see when we see the chairman of the joint chiefs of staff do his rounds in south korea, china, and japan . Ros some really important meetings coming up this week. What i think the chairman of the joint chiefs is going to do is give the u. S. Allies some sense daylight between what President Trump says publicly, what he says on twitter, and what the u. S. Position may really be. There have been a number of officials in and out of the administration who said, that is his public pronouncements, but privately things are different. I think that is what general dunford may be doing. He will speak to south koreas president million president moon tomorrow or today, and on thursday we will have a high level meeting in washington with rex tillerson, the defense minister, and japanese counterparts. That is also going to be focused squarely on Nuclear Deterrence and giving assurances to u. S. Allies. Shery thank you so much for that update. Those rounds will be very quickly very tricky, trying to get everybody on the same page. We will continue to discuss the outlook for the Korean Peninsula next. The former south Korean Ambassador to the United Nations joins us live with his insight. Later on, japanese game developer ceo joining us exclusively on the companys latest earnings. This is bloomberg. Shery we are counting down to asias first major market open. Sort of a foggy day in tokyo. We are seeing futures pointing down 1. 8 at the moment, after japan dodged that market selloff that we saw friday as they were away on holiday. They will come back, we will see what they do while the japanese yen holds below 110. This is daybreak asia. Im shery ahn in hong kong. Betty im betty liu in new york. We are waiting those japan secondquarter gdp numbers in about 35 minutes. Lets get back to our top story, which is north korea. To top u. S. National Security Officials trying to calm fears of eminent nuclear war with north korea as the chairman of the joint chiefs of staff, general joseph dunford, prepares to meet with south koreas president moon on monday. Joining us now from singapore is oh joon, a professor and former south Korean Ambassador to the United Nations and a longtime expert on u. S. South korea and north korea relations. Thanks so much for joining us. First off, lets get to some of the news. On monday, you have got this meeting between the top general and the president of south korea. What do you think they need to say or do during this really contentious time . Good morning. I think that is a very timely meeting to take place in korea. Under the circumstances, i think all of the countrys concerns, including the United States and south korea, should base our policies on the recognition that there is an extremely tense situation on the peninsula, probably the most dangerous one in recent years. Betty absolutely. People talking about a possible military conflict or even nuclear war. Do you think we are anywhere close to that . I hope not. Know, a war breaks out not because it is intended, but a lot of times just because of an escalation. We should be really paying attention to this situation and take every caution. Shery the last time we spoke was about a decade ago in seoul. Since then, so many things have happened with north korea. Since we have been talking about this for the longest time, since the korean war, what time with the collapse of the north korean regime become less of a threat to china than allowing north korea to carry on this way . Also doesknow, china not want north korea to go nuclear. It is not in the interest of china. But at the same time, china does not want to see north korea going down. So chinas difficulty is that they need to pursue denuclearization of north korea while they are keeping it alive. But this is time for china to be more proactive, because they are the one who can prevent north koreas miscalculation about what is going to really happen if they go for further provocations. China becoming proactive, that seems to be being done in the trade front. This chart on the bloomberg showing that the customs comments that china is in fact importing less from north korea and committing to the u. N. Sanctions. However, i wonder if this is enough. What actual concrete measures can china bring to the table that would actually help in reining in north korea . We all know that china has leverage on north korea. Not they are verytant about using tactics, like an oil embargo, because that would risk the collapse of the north korean regime. So i think china can find somewhere in between. This is the time for them to place such an oar. Betty are those sanctions going to work . Know they are reducing they are reducing goods, essentially, to north korea by about 1 billion. But doesnt the country have other ways of getting those same goods . Backdoor channels . North koreas trade with china accounts for over 90 , as of last year. I dont think any other countries, under the circumstances, will open any backdoor to north korea. I think if china is effective enough on its sanctions on north korea, i think they will take tolls. Betty professor, back on President Trump and his relationship with south korea but also what he is doing with north korea, sort of fighting fire with fire, it is almost like he is trying to call the bluff of kim jongun. Do you think that is going to work with someone like him . President trump has been denouncing the policy of patients strategic patientce. A egic pages been strategic patience means not engaging korea. I think we are left with two possibilities a confrontation with north korea or a dialogue. Dialogue is better than confrontation. I think President Trump himself is also keeping the door open for talks, and he is going for a very strong rhetoric right now, but i think they will be they in the sense that he will be able to force or induce north korea to get back to denuclearization talks. Shery professor, just quickly, talking about dialogue, south korean president moon jaein has been pushing for that now, but that same time has boosted its Defense System with an antimissile system from the u. S. Can these two friends be carried out at the same time, just quickly if you can can these two fronts be carried out at the same time . Any president in south korea under the circumstances dont have much leeway, conservative or liberal. I think the korean president needs to take a firm stance in alliance with the United States. But at the same time, while you are trying to avoid military conflict on the peninsula. Shery professor, great catching up with you. Professorniversity and former south Korean Ambassador to the United Nations. Next, another big week of earnings in the u. S. We will see what is on the agenda. This is bloomberg. Betty shery this is daybreak asia. Im shery ahn in hong kong. Betty im betty liu in new york. Wall street kicking off with a fresh round of highprofile earnings. The latest data on retail sales and Major Political conflicts involving the white house, both at home and internationally. We have more on what investors are going to be focusing on. This is a big earnings week, a big report, in terms of economic reports, and it could be the shadow, not only the conflict with korea but public reaction to President Trumps handling of the unfolding events in charlottesville. Lets go into the close on friday. That raises a question, what direction with the market the . 9370,into bloomberg, btv what the volatility will be. If we look at this chart, go into the bloomberg chart, what you will see is a big fiveday spike in fact, the biggest on the far righthand side since the election. That is a sea of calm for many weeks in summer suddenly ended, in what is typically the summer doldrums, the high vacation period of august. Lets also talk about their earnings ahead, cisco, home depot, walmart. We also have two huge online retailers we will get to in a minute. In terms of bigbox retailers, we have got july retail sales, which likely rose. Industrial production, housing, business inventories, a slew of Economic Data which could give a hint on gdp, expected to be stronger in the second half in the first. Lets go into the video because alibaba and tencent will also be reported, two giant chinese retailers. They are outperforming the bank stocks, which is facebook, netflix, amazon, which get a lot of attention in the u. S. , but these stocks, alibaba of 70 plus year to date, tencent up 65 year to date. The expectation is you will see a 36 Profit Growth for alibaba, 25 growth for tencent. As we discussed earlier in the prior our, there is land the expectation that these stocks that are so heavily valued will purport will report perfection, is what is expected. Have their multibilliondollar acquisitions paid off . That will be a big question. Shery there has been a lot of questions about where tencent goes from here. Su keenan in new york, thank you. Another company thats reporting earnings, Cathay Pacific, which is scheduled to announce another lost this weekend. Analysts saying it needs an urgent chains of course as we are told to forget being asias top choice for premium flyers and make a higher effort to attract chinese travelers. A Bloomberg Survey sees Cathay Pacific announcing a loss on wednesday of more than 150 million u. S. We put in for the first backtoback annual loss in its 70 year history. Betty up next, missing the knockout blow. Why analysts say the latest u. N. Sanctions on north korea let cam off the hook. Got you outnumbered. The dinosaurs extinction. Dont listen to them. Not appropriate. Now im mashing these potatoes with my stick of butter. Why dont you sit over here. Find your awesome with the Xfinity Stream app. Included with xfinity tv. More to stream to every screen. Shery it is 7 30 a. M. In hong kong. The market saw its biggest weekly loss this year. Futures pointing up your we are 30 minutes away from the first major market open. Betty sunday evening, new york is beautiful as well. Nice late summers day. The markets closed sunnier on friday after the cpi numbers came in, pushing out expectations of the fed rate hike until december. I am betty liu in new york. Shery im shery ahn in hong kong. Lets get to first word news with Haslinda Amin in singapore. Haslinda senior u. S. Officials have tried to lower the chance of war with north korea after days of rhetoric aiming to support him but not raise the alarm. The National Security adviser h. R. Mcmaster said there was no indication hostilities will break out. The chairman of the joint chiefs of staff will meet with president moon on monday. President trump is attempting to ward off criticism after the violence at charlottesville. He came under fire for his reaction at the scene that left one dead and dozens injured. Kind to we must be more each other. Donald trump the hate and the Division Must stop and must stop right now. We have to come together as americans with love or our this sond i say strongly, true affection for each other. Haslinda the white house has released a statement saying the president condemns all sorts of violence, bigotry and hatred, that includes White Supremacists , the kkk, neonazis, and more. Thecratic leaders recalling investigation for Deutsche Bank loans with President Trump and moving money to the west. Californias Maxine Waters once the Financial Committee to force the bank to disclose the internal review of 300 million of loans to President Trump years before he ran for office. The aims to rejuvenate the sluggish brexit negotiations the u. K. Aims to rejuvenate sluggish brexit negotiations. The talks are on august 28, set up with Northern Ireland and the border with the republic. This has left the chief e. U. Negotiator to warn eight outline agreement may not be possible at the next an outline agreement may not be possible at the next meeting in october. 600 million will go to the system and Republican Guards to improve capabilities. American adventurism is claimed as a reason for the venture. New sanctions since President Trump took office. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Amin. Aslinda this is bloomberg. Betty thank you so much. Hour,just saw in the last the chief executive of australias largest bank is set to retire. Soon as the down as end of 2018. This story coming out of sydney. Has he falling on his sword in the wake of the Money Laundering scandal . Paul the statement from the bank, the chairwoman, makes no direct reference to that particular elephant in the room. So i will add up for you, this is the deal. They are investigating 50,000 pounds of Money Laundering. There are antiterrorism laws as well. They are accused of depositing half of u. S. Dollars into the banks. The police say the Commonwealth Bank did not do anything about it. The Commonwealth Bank now planning a software error, but we have others investigating. And that australia governor and treasurer have weighed in on what is going on with Commonwealth Bank. They say it is not mentioned in the statement. It is difficult to axa to escape the inference he has fallen on his sword. He has been with Commonwealth Bank for six years and very successful over a series of consecutively ever larger profits. There have been scandals, not just this one but some with insurance claims and Financial Advice that did not live up to expectations. And those scandals did hit the stock. They fell to the lowest level in the last several months. Could we see a release rally . Paul that is quite possible because there is nothing else if nothing else, this does provide uncertainty. Really head had to roll in the wake of this. They have, even if it wasnt directly address by the statement. Look at the stock price, you see the tip to the end when the scandal broke. This is what the Commonwealth Bank did say. The ongoing process at all levels of the bank, they will agree to the business, that we deal with these questions and speculations about the future and todays statement provides that clarity. We will continue to focus the ceo on managing the business until he does go, sometime fiscal year 2018. The exact date to be determined, but it will be a close watch on the commonwealth shares at the open. Asx, making up 10 of the index by weight, so it could shift the index as a whole. Shery we will keep a close eye on that. Thank you. Tensions over north Koreas Nuclear and Missile Program have rattled markets and prompted the u. N. To impose new sanctions. They do not affect the norths access to oil and fuel which is a vital ingredient. Lets bring in the chief asian economic correspondent. This is crucial. Are based on cuts from land to fish exports but not what makes a backbone of north korea, which is electricity supply, oil and fuel. There is no doubt these will have an impact. We are talking about an impoverished economy. Strategic drove there is a severe drought. It makes the money manufacturers, you mentioned the fish, it will hurt the economy. But the key ingredient left off the table, which is vital for north korea, is oil. While these sanctions may hurt the ordinary labor and fishermen on the ground and impact north korea, it will not be a game changer with the geopolitical situation. They will have to come back, put oil on. Shery doesnt north korea get most of its oil from china . What do you have to do to get the north korean economy to hurt where it is actually vital . Enda yes, china is north koreas biggest trading partner, supplier of energy and oil. A view that if they tap into the energy supply, it would have an impact on the military program. China does not monitor how much oil it sends in. The feeling that it is doing enough to you will be Nuclear Program to fuel the Nuclear Program. Crisisnt a humanitarian under order. You could be talking about significant risk of military and disaster without the oil. So for sure oil is the key ingredient going forward. Betty absolutely. Even putting oil in sanctions, we have risk of seeing north korea at risk of a session . A recession . Enda this is what analysts are looking at. Last year we had the growth of all since 1999. It is very meager growth, very low levels per capita income composed compared to the south. This year we already have it strong. There is a ban on coal exports that china is north korea. When you compare the mining and manufacturing that make up a third of the economy even though oil is not in the mix of sanctions, there has got to be Significant Impact growth. The north korean economy will be a certainly a little bit low. It is not the surly going to be felt in the regime or put them off their quest nuclear missiles. Some analysts might make other decisions. Shery our reporter on north korea and china. Staying on china, President Trump may find taking on china over trade is harder than it looks. The property investigation takes the spotlight. John for win for trump on china trade. Tom like many issues trump has looked at, trade is more complicated then you may have thought. The case in point is this dismissed then he may have thought. The case in point is this look to asvestigation is , whichllectual property could take a year and involve tariffs. The u. S. And chinese economies are very interlinked in terms of Global Supply chain. If there are tariffs, the tech sector, that is not going to just hit china. They will hit u. S. Consumers, u. S. Dismisses and u. S. Allies on japan were South Carolina u. S. Dismisses, u. S. Allies, and south korea and japan. The other is the u. S. Putting tariffs on aluminum foil from china. Alumina and steel alumina and steel count 3 of all shipments, the relatively small. The u. S. Is faced with small targeted tariffs on chinese products that have a small effect or larger, bolder measures that risk impacting wider parts. That could result in a retaliatory measure from china itself. They have a list of stuff up their sleeve they are ready to activate titfortat trade measures. U. S. Ter approach from the would focus on the Consumer Market in china, which continues to grow. U. S. Exports to china have doubled the number of imports in terms of the growth levels. That would be a better area of focus to rebalance the picture. Shery focusing on that Consumer Market is facebook, which has found a new way to enter china. What do we know . Tom he has been focus on the Chinese Market for quite some time it has been focused on the Chinese Market for quite some time. They released an app secretly called colorful balloons under a Chinese Software developer they are working with. They have not addressed the release of this act, but facebook this app, but facebook wants to learn about the Chinese Market and consumer. We know china is a big part of their focus, particularly the 700 million Internet Users are at Mark Zuckerberg has been learning users. Mark zuckerberg has been learning chinese, he has touted business leaders. They want a feel of the market, but it is interesting. There is a step up in terms of censorship on the social media. Crack down on vpns to get around the great firewall even the crackdown a few weeks ago on whatsapp, owned by facebook. Many users finding it harder to use. The crackdown on social media continues to ramp up in china. Facebook trying to fit its way into the market with this app. Shery 700 million users, it is tempting. Thank you so much from beijing. Game developer next and is not just playing when it comes to expansion, we speak to the ceo next. This is bloomberg. Betty this is daybreak asia. I am betty lou in new york. Liu in new york. Nexon released high estimates, thanks to a Strong Performance in china. It is looking to enter new markets through m a and partnership. We are joined with the president. Thank you for coming to the studio. We have to address your results. They were great surpassing top estimates your what was the key driver . Top estimates. What was the key driver . Longevity. When you shift a game, it is not the and at the beginning. A game can last and grow for a long time. The relationship with our customer can and should be last for years or if not decades. The results reflect decisions we have made for a long time in making that happen. It is hard to do, but we could have consistent growth. Shery you are reliant in foreign currency area 10 comes domestically. Given the volatility lately, the strengthening of the dan, the fed tightening the yen, the fed tightening, how will that affect results . Owen it is difficult with the currency markets, but our approach is to make sure we keep doing what we have been doing, provide stable growth as a result of this longterm relationship with customers that can build up over time. We track how we are doing in each local market. Japan, so theom currency helped us a lot in the Second Quarter. What we really do is track the current basis in the chinese, southeast asian, and in other markets that have done well for us. Shery talking about other markets, you are pursuing that with the partnerships. This is a function on the bloomberg. You can see the major deals from the past including the 2012 acquisition of 468 million. Within the timeline now . Are you looking for partners . Owen definitely. We think a lot about how to grow a business, but what happens with the games businesses, we are in the entertainment business. Games are an art form. You have to have cultural compatibility between your company and the company you are thinking about joining us with. Joining up with. It takes a lot of time, effort. You have to have a similar viewpoint how to grow your company and the individual game. We take a prudent approach. When we keep the cash around, if the opportunity presents itself, we move quickly. I know you were the head , anda with Electronic Arts i cannot help but note we will see tencent out with the results. The gaming behemoth is going from desktop to mobile. I am curious what you think about tencent . Owen i cant speak for what tencents strategy is. They are a great partner for us. They have been wonderful to work with. They believe strongly in terms of longevity in games and how to build over time. Inhave one of the largest china, dungeon fighter, and they publish it for us. They would be the ones to ask. We have breaking news out of japan. Let me break this quickly because we have the annualized growth figures for japan. Look at that, growing 4 , beating estimates of 2. 5 . Also a big acceleration from 1 growth in the first quarter. These are preliminary for the first quarter, and relies annualized. We see one person 1 quarter on quarter. Japanese growth seems to be accelerating. These are phenomenal numbers. 4 , more thaning expected. Betty pretty good numbers. Growth for japan and gdp. Let me show you where the japanese yen has been trading. You can see it is weakening ahead of the numbers. Pretty stable right now given the really quite attractive numbers from japan. At this point when you have six quarters of growth, it seems like some of that news is based in to the market baked in to the market. Shery it leaves enough for Prime Minister abe. He will love that. Lets go back to our guest. Talk a little bit about your results. We have seen of course mobile being big, not only for your company but for everybody else. Your percentage of revenue as you can see on the bloomberg is around 24 . Do you have a specific target to growth . Owen we dont because we think the mobile devices and pcs are going to converge. Pcthink in a few years the is your mobile device, your mobile device is the pc. They have an incredible amount of capability. We can deliver a good game on the mobile. It has a lot of accessibility. It is about a quarter of the total revenue. We expected those businesses to basically merge in five years or so. We will not see a difference. Betty before we go, i know you are expanding in europe but also in the u. S. You are going out west with nexon. You dont want to be chasing hollywood hits with your company. How are you going to expand in the u. S. . Owen we have been working with good Game Development partners. Ouraunched a program with partner, and that is getting phenomenal reviews. You can check that on steam and other places. Another we launched last weekend, tighten fall titan fall, that is getting good reviews. We like partners with the same approach to longevity that we have. Betty thank you so much. Owen mahoney of. You can get around of that story and more in daybreak. You can go to dayb on the terminal. Also available in the terminal. You can customize your settings so you only get news on the industries and assets that you care about. Gdp numbersapanese at 4 , much better. This is bloomberg. Shery this is daybreak asia. I am shery ahn in hong kong. Betty abenomics might finally be working. We are seeing the fastest growth in the Second Quarter in two years, japan breaking at 4 , much better than what economists estimated at 2. 5 . Private construction also higher than what economists expected. We will likely see reaction in japan. Plenty more to come in the first major market open. We are watching japan closely. Shery futures pointing upwards, but the japanese yen has not reacted to these numbers. Sophie kamaruddin is watching this. The japanese futures swinging to the upside, following this information of the gdp numbers. As well, api futures higher open despite the war of words with the United States and north korea. The question is if markets can keep calm and carry on given the last weeks jitters. But this will be a key driver for asset sectors, the yen. And what stocks we are watching the open, looking at korean shares. We have president moon meeting with the chairman of the u. N. Chiefs of staff. And also regional tech shares after they led the drop. The key thing this week, we have earnings from alibaba and tencent. Over in tokyo, keep an eye on toshiba. We had j. P. Morgan bringing the stock to overweight from neutral , and reactions to the commonwealth inc. Shares after the lender announced the ceo will be retiring by the end of the 2018 financial year. The bank will take off the external and internal hunt. That is what we are watching when treating gets underway. This is bloomberg. U. S. Tries to cool the rhetoric on north korea. Officials say war is not imminent. President betty President Trump tries to ward off the critics. Yvonne secondquarter gdp smashed estimates all business and private spending is also on the rise. Betty the Commonwealth Bank ceo is a high profile victim of the Money Laundering scandal. He is set to retire next year. Yvonne this is the second hour of daybreak asia. It is just after 8 00 p. M. Here in new york created really unfocused are those blowouts. A sixth straight quarterly fornce from the japan the japan economy. Almost doubling what economists had estimated. The economy is on firm footing. When is thatis, wage growth and inflation growth going to happen in japan . Shery we have not seen this pace of growth in japan since march of 2015. That is when they grew. These numbers are phenomenal. When i was breaking them, my first reaction was wow, they are pretty good. Doesll see what the yen throughout the rest of the session. We have geopolitical tensions continuing. That could be a little bit of anxiety for the market. Betty we will be watching that. Japanese markets are opening right now. Lets get to the first word news. President trump is attempting to ward off criticism by calling for calm. He came under fire for his tepid incident inan charlottesville. Hate and trump the Division Must stop and must stop right now. We have to come together as americans with love for our nation and i say this so strongly true affection for each other. The white house has released a statement saying the president condemned all forms of violence, bigotry, and hatred. That includes whites the cists. Es supreme trying to prepare for nafta talks this week or yet approaching wednesdays meeting as an opportunity to modernize the deal. Most contention issues are expected to be rules of origin. Chancellor merkel and have attacked the german Auto Industry. Seeking to avoid any political fallout from the diesel omissions handle. The blame is squarely on volkswagen. They swept the issue under the carpet while describing the management as a responsible. We are going to be keeping a close eye on germany during the runup of the election. Do not miss the special every monday. Well have the latest analysis ahead. Investors say loss of capital against former ceo is designed to hold the company hostage. Say they want other shareholders to add their support. They withheld information before asking the board global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Japan coming back from holiday on friday, coming back to a phenomenal secondquarter gdp. Lets see if this is translating into the markets as they open. Sophie, i we seeing that optimism in the market . Sophie japanese markets have a lot of catching up to do. A fourth day of loss this year. 1 in tokyo. Ver this is the yens one to losses. Just marginally. 25 against the dollar. We have the clean back study. Een back study. Check out the korean won, adding dropsnapping a threeday with cost fees rising 710 of 1 . 7 10 of 1 . Check out the offshore yuan. Sense of howe us a chinese factories and consumer there. We have the aussie dollar rising for a second day ahead of that. Kiwi is rising for a second day, although its earlier drop earlier rise of 2 10 of 1 in the wake of a surprise beat when it came to retail sales for the Second Quarter is looking study in thewake steady wake of that data. The yen is looking softer this morning. Still a high against the dollar. It is holding on to its gains. We are seeing a little bit. Last check of technicals for the cost three. We have that benchmark sitting above the moving average. That is the line in yellow on this chart. Check out the bottom panel. This is relative strength index. Were just over and that overbought territory. Bargain hunters may be looking beyond the country risk. Still looking fairly cheap. At 90 9. 8ing times more. We have the governor warning north korean risk is no longer transitory. Betty thank you so much. Were going to talk about that right now. Joining us from tokyo, the strategist nicholas smith. Next, you thought these numbers did you think these numbers would be this much . There was a lot of volatility. Gdp is a little bit of a lacking indicator. If you look at the earnings numbers that just came out of tokyo, they have absolute earnings season. Up 26 . You know how incredibly timid Japanese Companies are. The managers really do not have any equities. 110 companies rose up. That has to tell you something betty when is that to tell you something. Betty when is that Wage Inflation going to happen . Reporter we have some the tightest labor market, stronger than anything ive seen over 30 years. To an extent, youre looking at the wrong numbers. Those numbers that come out of the Labor Ministry really should not be called statistics area the best thing about looking for like at like for like out of the unions. Humans are giving 1. 90 growth in wages. Cpi at nothing at all that compares with cpi at nothing at all. Those wages are coming in soso. Betty are these Growth Numbers shery is this because the domestic demand is picking up . Reporter that is a funny one. Gdp numbers are actually correlating best with the previous quarter of earnings. , thee quarter we just had toength was really coming in the international side. Were getting upgrades and be from steel and chemical. Numbers look very much about the domestic side. Consumption being good. Corporate investment is being good. That is a pretty broad basis of improvement. Does this mean we can Start Playing into japans consumptions lori story . Reporter you look at that Performance Today and retail has been pretty horrible. Year for theble stock market, i think it is worth looking at some of those underperformance. Retail is one of those interesting areas. Betty do you think this will change the support numbers for Prime Minister shinzo abe . Have beenthose incredible. One of the things that surprised me, i would look to support time innd length of office postwar. There were only two japanese Prime Ministers that have been in office for longer n Prime Minister abe Prime Minister abadi of even going back Prime Minister abe. Those two both had real problems. There are only two things you can do. You can either call an election or you have to do a cabinet reshuffle. He is really chasing his tail changing cabinet. It is a struggle at this age. What they will have to do is call an election. I think the chances are it will be voted back in. More you do not see any then palace measures coming out of abe . Reporter that is the problem. When your support is down, it is hard to take a lot of risk. Why im hearing him stick out his neck a bit on labor reform. What japan does, it has horribly low labor productivity. It is a move to make people seem to be very nervous about being paid for what they produce other than turning up for work. They feel it will result in pay going down. Tight, itmarket is so would have to be something seriously wrong with management. Upt they want to do is build an inventory. It is only going to get worse next year and five years out. What about geopolitical tensions . Are they going to get worse . Is it going to make a Significant Impact on the market . Reporter you have to remember japan is in a bad neighborhood. If you are investing in japan, you half have to find a way of getting to sleep at night amid rumors of war, earthquakes, and volcanoes, and so on. You have seen these things before. Are thathe chances these things are being blown out of proportion by a couple of World Leaders that want to show boat on twitter. Comforting to hear that you think this time is no different. Cynosures good not gaining revenue. Trump teamdonald tries to calm fears. This is bloomberg. Shery this is daybreak asia. Nationalo senior Security Officials trying to tamp down fears. They spoke at america our chief asia correspondent has that story. What is being said and what needs to be accomplished here . Reporter a lot is being said. Donaldd last week from trump saying that the u. S. Military was locked and loaded in the event of provocation from north korea. I spent the last few weeks in seattle and the United States. I got countless texts from friends saying what have i heard. A lot of that coming from the guam would be in the crosshairs. Donald trump tweeting about fire and fury would be the United States response to any such guam. On we are getting comments from the trump administration, including director. Going back the rhetoric on the sunday talk show. Mike pompeo saying he has heard folks talking about we are on the cusp of nuclear war. I see no intelligence that would indicate that we are in that place today. Weheard from mcmaster saying are not closer to war than a week ago. We are closer to war than we were a decade ago. The fear is that increased rhetoric would prompt some sort of miscalculation militarily as as youorth koreas begin joint drills with south korea and japan. August 15 is the anniversary in korea of the end of the Japanese Occupation of the korean and peninsula. It is interesting that you hear those messages coming from your friends and in g uam. These ongoing negotiations and trying to bring back north korea to the table. China plays a key role. What have they been saying . Reporter the South Koreans may be desensitized because you and i have both experienced this sort of rhetoric coming. The difference is their icbm capability. That is why this is amped up. And a very precarious situation being the biggest supporter of north korea all these years you were getting signs that perhaps aging their patience is wearing thin. , their patience is wearing thin. As north korea strikes first, china will remain neutral. However, donald trump had a conversation late Night Saturday saying that time all sides should avoid inflammatory comments. This has long proposed suspension proposal. They said that exercises will begin this year. Shery next week week. We have to keep an eye on how tensions develop. Usnk you so much for joining with the breakdown on what is happening with north korea. Over in australia, Commonwealth Bank shares are up some attempt of 1 . 7 10 of 1 . Comes as the lenders to contain the fallout from the Money Laundering scandal. Our finance reporter has the story. Are wend of issues expected to address with this announcement . Reporter hyder this position has been under intense scrutiny everpoliticians and media since the news broke. It dominated the news conference. Have been lots of people calling for him to retire. He is nearing six years on the job, when you might expect a ceo to step down. Trying to get clarity and security to the market. Shery betty lets talk about those regulations. Is there any indications that other executives will be involved . Reporter i think they already have. The board announced it was cutting shortterm bonuses. That apply to all the executives as well. Takes the limelight. Everyone will be looking at the senior executives. They have a handle on who has sponsored ability. Betty the question is, who will succeed him . What kind of person is the board looking for in a ceo. 15orter it was literally minutes ago we got up a conference call. She said she was looking for someone with aseven moral compass. Off a moral compass. We do not have any names in the frame. Be awill probably only matter of a few hours before we start hearing about potential candidates. She was very clear they are looking at internal and ask colonel names. Betty thank you so much. And external names. Betty if you so much. Subscribers can go on their terminal. It is also available on mobile. You can customize your settings so you only get the news on the industry and outfit that you care about. This is bloomberg. Shery this is daybreak asia. Bigbox retail remains in the spotlight this week in the u. S. Earningstarget leasing releasing earnings. There is a retail sale. Three bloomberg charts that you need to know. Reporter i want to talk about those july retail sales coming up on the 15th. We have gotten a lot of volatility over the past few months in terms of retail sales ever since january. E have seen an up and down it goes back and forth. We might be getting a little bit of positivity. This, possibly could be the highest that we have everest seeing ever since january. We might actually see some impact on this rising as well. The fed target is 2 there. This is the general retail environment. I want to show you what is happening in terms of the difference in retail. Not all retailers are the same. You cannot not look at the line here. That is amazon shares. Take a look at where Everything Else is not going. It is not going up. Department stores and blue in blue. They are all headed the opposite way. Lets put the board. Lets see what some of these are. Amazon in the past year up 25 . 9 , not bad if you are an investor. Down 20 in gap. Take a look at what is happening in terms of samestore sales. Macys, kohls are seeing sales for the past six quarters and they are down. Thank you. Plenty more to come on daybreak asia. This is bloomberg. Shery we are half an hour away from opening day in singapore. There could be a little bit of escher as we are seeing the regional benchmark at the lowest level in a month. You are watching daybreak asia. A clear day in the city. Japans economy grew for a second straight quarter. It is standing the longest expansion in more than a decade. Boosting gdp by and analyzed 4 in the Second Quarter. Private consumption jump 9 10 of 1 . President g 2 trump is preparing to turn up the heat on china over what the u. S. Perceived as the fact of intellectual property. Memorandumo sign a to consider launching an investigation. It would focus on u. S. Companies operating in china. Democratic lawmakers are. Eviewing for an investigation once the committee to force the bank to disclose its internal review of more than 300 million in loans that President Trump had before he ran for office. The government will issue discussion papers ahead of talks on august 28. Talks has ledof them to morning and outline agreement may not be possible in october. Defense against new sanctions. Improving deterrent capabilities. Policies against iran and what it calls american adventurism in the region are selling division. Washington has imposed new sanctions. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Japan catching up to the losses of last week as they come back from holiday on friday. The markets seem to be doing better. Lets bring in sophie for a check on the market. Sophie we do have japanese markets catching up. Check out what is going on with korean coffee with the cost be kospi. We are seeing a gauge and pricing decline about 11 . The backe the yen on foot slipping today. Gold is falling 1 10 of 1 . With the yen looking weaker for the first session of five, that is not helping the nikkei falling 1 . The outlier train trading the lowest. We take a look at the break down by segment, we are seeing lots of over 1 for most of the sectors in tokyo. Health care at 1. 4 lower there. Volatility is staying elevated for japanese stock. Lets show you some of the movers in tokyo. That is a bright spot, rising the highest in over a year after registering record sales in the first half. We have holdings sliding. It is one of japans three biggest dealmakers. Kosmos energy is jumping. T was raised trading about 11 higher this morning. Lets take a look at what is going on with the coin. Bitcoin. It is continuing to soar, adding twits rise. 20 since wednesday. Betty think is a much. Thank you so much. Trying to cool that rhetoric around north korea, but the war there hasords been a war of words. We cannot really think about it and it affecting the financial world. How might this tension have a broader impact on the market . Reporter north korea itself is whend when it come ant it comes to the financial world. It is surrounded by elephants. Three of biggest Commodity Traders in the world. China is the worlds Biggest Energy user. The three combined to import more than one third of the worlds waterborne oil. If you look particularly at china, its northern provinces, the ones close to north korea, they account for a large proportion of the countrys oil and coal import. While north korea itself may not really be a big player in the market congress rising countries really are the heart of the global commodity trade. How would they materialize into the real Market Impact . Industry the shipping is where it will really start to happen. For instance, if shippers start requiring these vessels to carry more insurance to travel to near north korea, that adds extra cost. All of a sudden, that puts extra on steel rates going around the world. You can have barricades, ports shutting down, that would require ships to get rerouted to other ports. Called et shipping cost escalations just from having to reroute these rings and move them around. These things and move them around. Oily we have seen crude Holding Around 52 per barrel. What sort of impact on prices can we expect this week . Reporter this week, we have been stuck in this holding zone in oil where it has been trading 45 to 50 range. Disruptions in libya and nigeria. Crude production in places like brazil. It has been balancing out the market. It is tough to see, looking back over the last couple quarters that there will be a whole lot of deception in the way oil prices have been moving. More stability is what more people are expecting. Thank you so much for that. Coming up on the program, mgm ceo telling us why his betting on the market. This is bloomberg. Shery welcome back. This is daybreak asia. Remains onno revenue the rise in macau. Giddings in july increased for a top straight month with revenue of 35 from a year ago. An exclusive interview says it is all about the mass market. Out of that is mostly en masse. Resort ina beautiful macau. This is a highend, luxurious property. It has benefited from the surprising recovery. Our Business Model is not predicated on the vip business. It is predicated on growing the mass market is this, which we will do in code tie which we will do. I do not view that as a way to build a Strategic Plan. Our Strategic Plan is built on catering to this tremendously emerging, fluent chinese customer looking for more experimental experiences, not just a selfie moment or a gaming table. Are you concerned about the comeback of the vip that you might be caught wrongfooted . I think we were certainly surprised about the recovery of the vip business when it did come back riskier. We have not benefited as much our competitors have because we do not have a product. Be say when it opens, it has been delayed. It is over one year late. The thing about that is, when are you going to open . , but theoing to open Fourth Quarter is it penciled in . In for the Fourth Quarter. We wanted to open earlier. This is a challenging project. Why was it delayed . Mostly technology. We are building a theater. Screen. Re meter led that is the largest indoor screen in the world. We have a theater that has more technology, more innovative than other any other theater that we have done or anyone else has done before. If we were going to build another resort, we would be open to that. If we are going to build a resort with hotel rooms and a few restaurants were very adamant. Entrant. T in early we have to while people. People. Es time wow that takes time. At the end of the day, i think it is right. When will gaming and not gaming revenue account the same money for you . Yearsould bet within 10 our nongaming revenue will be greater than our gaming revenue. I will hold you to that. Lets move on to elsewhere in asia. Where else are you looking . For instance, japan has a proposal that you are interested in. Is quite onerous with the conditions they put on that. The opportunity in japan is unclear at this moment because the government is working on what they call the implementation act. They are writing legislation at the bureaucratic level. Periodically, they release information on the direction of the law, should it be even introduced by the diet and passed. The way it currently looks is they are going to limit integrated resorts and a handful of places, two or three initially, at the most. Within that there are going to be they are going to restrict the gaming floor space and may restrict the amount of time these proposals may change. You are committed. Absolutely. Market potential is tremendous. It will boil down to one guidance they have not given, which is tax rate. We have learned about a lot of this. If they adopt a singapore like model, which is one of the models the world admires. With other constraints, you will see a very competitive fitting for japan. Speaking exclusively to rishaad. We just heard the ceo talking about the mass market. Actually, focusing on them instead of highrollers. Would you say that is the right strategy . Reporter for mgm, it is a new game for them. It is all about the mass market. It is very profitable. Headlining like the vips. It is a lucrative business to be in. They are setting themselves up for the very long term. There are still challenges when it comes to getting a group of people into the strip. Theyre trying to set this up with the new property which is 1400ng hundred rooms rooms. Shery he talked about one of those components, will the biggest indoor screen in the world. How much of a Competitive Edge will this give them . It is very different. We have not seen that product in the market. We have seen shows here and there. They also have the dancing water, a longstanding show. It has never taken off for that market. It could be very different. It is not so much the show that brings the revenue, it is about bringing people to stay at the property. People will likely go there and stay and eat at the venues they will see the show. That is actually the critical aspect of that product. Betty what about the hurdles for getting to the mass market for mgm . It is mostly about infrastructure. Had a coupleas orders that when it comes down to massmarket business has been instructed due to all the construction surrounding the property. Mgm sits across from that property, which will likely face similar challenges. Its other neighbor will open into next year and they will start to see construction and all that get removed. People to walk across all these properties. There is the potential where they could get connectivity across these resorts, which is very important for mass. It is one of the biggest advantages over the years. Betty what about the vip market . We cannot ignore the recent pickup we have seen. He mentioned it earlier on. Mgm was actually at a disadvantage because they do not have that property. Highend, the vip or it is critical to have two things. You have to have premium. Acilities on your resort you have to have the highend service that caters exclusively to these premium gamblers. Secondly, you have to have relationships. There were hundreds in the past, but in we a few now. Mgm needs to address that aspect of the business because you do not want to miss out. Never leave the money on the table. One feature on bloomberg we would like to bring to your attention is our interactive tv function. It at tv. You can watch us live and see previous interviews. You can become part of the conversation by sending us an that messages during the show. This is for bloomberg subscribers only. Check it out at tv. This is bloomberg. Shery this is daybreak asia. Betty a quick check of the headlines. The last of the crown resort staff has been released. They were illegally promoting gambling. The highroller revenue cut in half. Head of the highroller operations was the last of three employees to be freed after serving jail sentences. Points. Own one third it snapped during the Second Quarter. 200atory findings show million positions. Jpmorgan holding was worth more million. Told bloomberg has been the company may ask canada pension Investment Board and londonbased partners to find a potential bid for charter communications. Can make it communications are at a early stage. There are said to be among the group of possible suitors for charters that include softbank. President trump may find out that taking on china is harder than it looks. The intellectual property investigation takes the spotlight. Tom mackenzie back with us with all the details. Not easy to win on the issue of china trade. This is about action and reaction. You cannot easily pinpoint one area of the china trade environment that will only hurt china and not impact the u. S. We are talking about the fact that the Donald Trump Administration is considering an investigation into what they say are potential intellectual property violations by china. If it goes ahead, it will take a year. Experts, thetrade intellectual property violations itigation would impact relies on a hugely complex supply chain. Justuld well impact not chinese firms that u. S. Consumers and companies. Allies of the u. S. That send part of their component into china to be made up to these products. The other area of the trade is looking being looked at in washington. Attempt. N they are not made a call on this. It is supposed to be a minimal impact. They account for just 3. 5 of their total export. Have found a new way to reenter the Chinese Market. What do we know so far. Tom they blocked facebook in 2009. He may have found out they have calledd an out app colorful balloons. Facebook did not release a market that is home to 700 million Internet Users. Facebook wants to get a chunk of that somehow. Mark zuckerberg has been trying to get in. He has made a number of trips to china to lay foundations. It is happening at an interesting time because social media has been cracked down upon or heavily in terms of censorship by the chinese authorities. They are trying to take out some of the Virtual Private Networks that have made it more difficult. It is a difficult time for this book to be testing the waters. Shery thank you so much. That is almost it for us here at daybreak asia. Time for a look at what is Bloomberg Markets asia. We have chinese Economic Data. Sales, certain idea of this rebalancing taking place. Sales might reflect that when it comes to the chinese economy. Looking at investment as well. An investment slowdown taking place. Does that signify that we will have a second half showing some slow growth for china . Shery i wonder if that will help in china. Growth, andking of we have depends depend chief strategist there. Japans chief strategist there. We will be talking to her. Is shinzo abe under pressure. Great interview. That is it for daybreak asia. This is bloomberg. Track your pack. Set a curfew, or two. Make dinnertime device free. [ music stops ] [ music plays again ] a smarter way to wifi is awesome. Introducing xfinity xfi. Amazing speed, coverage and control. Change the way you wifi. Xfinity. The future of awesome. 9 00 a. M. In hong kong. 9 00 sunday evening in new york city. Bloomberg is daybreak asia. Rishaad the violence in virginia, 20yearold white man is charged with murder. The president deflected criticism. Haidi u. S. Moves to core the rhetoric on north korea. Senior Officials Say war is not im
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