Launched an icbm for the first time. President trump tweeted that perhaps china would end this nonsense once and for all. And china willia be meeting. Chinas official news agency, trade between 33 inand china raised the first five months of the year. Further questions about Donald Trumps travel ban. The state of hawaii is challenging the enforcement of the order. They asked a federal judge to deny. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am emma chandra. This is bloomberg. Thank you very much. Those are the headlines. Lets look at the markets to show you where we are on the European Equity session. The fourth of july is celebrating in the u. S. This is the picture right now. 0. 2 at the moment. We have seen north korea digesting the carried out that icbm launch. Some strengthening. We have the dollaryen strengthening. Yields are weaker. Is a little weaker now. Stories, north korea claimed they successfully launched an icbm earlier. Are building a device capable of hitting the u. S. With a nuclear worlwarhead. Joining me now are adam cole and gilles moec. Lets go to our guests. You hereood to see with me in london. This news out of north korea, does it surprise you that we have not seen more reaction . It is the fourth of july, and the souring of the relationship between north korea and the rest of the world is not really news. There is an element of habit. My guess is the market will not concentrate so much on how the u. S. Will handle north korea what is themore relationship between china and the u. S. This is likely to be part of the conversation when we get to the g20. This is central. As usual, proper geopolitical threats are immensely difficult to price. On the other hand, the souring of trade between china and the u. S. , which is more in the realm of market pricing. Price geoPolitical Risk right now. Absolutely, and particularly hard in an environment of relatively low volatility where most investors are looking for yields. We have seen so many ballistic tests from north korea before. The main question is what this means for the u. S. Chinese relationship particularly with the g20 later this week. Let me bring up this chart, Financial Market stress in the market before today. StressFinancial Market 2014ght 2014 low at a low. The Biggest Issue we had is that even though it is unclear where this north korean story goes, there is not a high level of massive tension at this stage. There is more a lack of willingness to cooperate and move forward on a globalized management of the world economy. This is not the sort of thing that is directly easy to price into the market, especially in a situation where we probably have slightly more visibility on where the Major Economies are going. They might not all go in the right direction. We know china continues to soften. There is a good sense of where it is going, why it is happening, what Economic Policy is doing in china. In the u. S. , even if we have hesitation on fiscal policy, on Monetary Policy there is a strong sense that the fed wants to give. Europe. Thing in the central bank is increasingly transparent of where things want to go. On one end, we have our usual geopolitical tension. The world is probably easier to read right now than it was in 2015 or at the beginning of 2016. Elsa, would you go along with that . The world is easier to read in terms of the road story we have to the moment growth story we moment . T the there is still a number of uncertainties out there. The problem from the investment perspective is it is difficult to take those two seriously tradesiously when carry have been doing well, and generally highyield instruments outperforming. We all know those risks are there. Markets are reluctant to price those in until we see some clearer sign of those materializing. There are many things we will need to focus on when we get to hamburg and the g20. The trade story is crucial. This shows the extent of global trade growth. U. S. Ed bars are the recessions. This has been the backdrop for the Global Economy in general for the last few years german by this. Fairly synchronized Global Economy in a few markets. That has not happened for quite a while. Given where we are in a number of areas, we would expect global trade to be higher than where we are. One issue is even though the recovery is there almost everywhere, investment remains lacking in many countries. The les moonves, it has a disproportionate impact on curbing the growth in trade. You consume more, whether it is public or private consumption. A lot of it is produced locally. Thisis still missing from ination is a proper rebound capex. For more on the north Korean Missile launch, we have david joining us from hong kong. Does this change the conversation around north korea . In terms of north koreas advanced technology and their ability to deliver a Nuclear Missile to the u. S. , we can see north korea is making progress as it fired this icbm that it says it can reach anywhere in the world. It could potentially reach the u. S. Whether it can actually put a miniaturized Nuclear Warhead on the tip and deliver that to the u. S. Is an open question the moment. I dont think you will find any missile expert ready to say they can do that. In the context of what we have been talking about, the geopolitics, the g20, the meeting between donald trump and hamburg, here we s2e july 4, donald trump thatook has to face up north korea could turn itself into a geopolitical threat to the u. S. Put asays china will heavy move on north korea and end this nonsense once and for all. How do we interpret this . What can china do . They have been nervous about migrant flows into china out of north korea. There you have it. You have answered the question. China donald trump has said he wants china to do more. But what can china do . The u. S. Wants to see china squeezing sanctions on north korea. 90 of north koreas International Trade goes through china. China has taken steps, but we still have a north korean economy that some say is actually growing because of reforms taking place. Offa could perhaps squeeze the consumption of oil to north korea. You have the risk of an economic collapse, regime collapse, refugees over the border. You could have potentially reunification in korea and the u. S. Looking over at asian from the north korean border. That is a risk china does not want. Elsa, lets come to you on this. Preparee xi and merkel for the g20, filling the void left by the u. S. On the Global Leadership stage, at least in the eyes of some. Is there something you can. 2, better eurozone growth from germany on the global stage . These political issues have been fairly priced in at the moment. It is difficult to turn that into a trade. It is not really a currency a six at least not for month or 12 month horizon. When it comes to international growth, it is positive. But perhaps pressing into much normalization, it is going to be a slow process of normalization. If you think about fair value of the euro which might be 1. 25 or 1. 27, it is hard to argue we will get closer to fair value until we see an increase in rates from the ecb. Thank you very much. You are staying with us. Thank you over in hong kong, dated. Now a quick programming no. It is july 4. Tune in tonight where alix steel and matt miller will cohost the boston pops fireworks spectacular. If you are watching globally and wants a little fourth of july at home, that is when it will start. This is bloomberg. Back to bloomberg markets. I am anna edwards. As germany gears up to host the g20. The german car industry, home to the Worlds Largest carmakers, could germany suffer from a follower of our international over fallout International Trade . Can you give us your assessment of how the relationship between President Trump and europe is going to impact your industry . What are your worst fears . Our hope is that everyone understands open markets are the precondition for mutual success. More we argue that we are selling cars in u. S. And producing more and more cars there, the more people understand in the senate and house that any kind of restrictions would not be wise. To give you a figure, in 2009, the german Automotive Industry produced 200,000 cars in the u. S. Than we will produce more 850,000 cars in the u. S. , and most of them are exported. That means we are contributing to a better trade balance to the u. S. German carmakers clearly delivering that message. I was in the u. S. Last week. I witnessed at least one german automaker putting forward that message. How are you urging the americans to open up trade policy dialogue between the new u. S. Administration and your country, your industry in the eu . Someat we heard with satisfaction was the american trade secretary, wilbur ross, said publicly a few days ago that he would be open to trade negotiations with the European Union. If we would do that and concentrate on trying to get away with nontarriff and tariff barriers, that would Car Manufacturers on both sides of the atlantic. I think both sides would have a winwin situation, and that would be much better than any kind of interference with markets. Do you think it is still possible to craft an agreement that is acceptable to the u. S. . It, howeveryou call the headline is, if we would get into talks which are serious, which have the intention to stimulate markets and not to protect markets, that would be withy helpful, and i think the value chain of the automotive industries, which are so complex, it would always be a serious mistake if anyone in the world would start with section is on with protectionism. Protectionism helps no one, neither the u. S. Nor the europeans. We are for open markets and serious freetrade negotiations. Do you expect to hear any of those messages from the u. S. Trade delegation in hamburg . It sounds as if the u. S. Administration is on very different pages on this issue. We hope so. We know we still have to convince one of the other members of the american political scene that the Automotive Market is a very open market. The market share of American Companies on the european continent is higher than the market share of the german car industry in the United States. Germanas production of Car Manufacturers in the u. S. Is more and more important for the export of cars out of the u. S. If these facts are known, everyone of substance try to avoid any sort of protectionism in the car sector. Can i ask you about the diesel market in europe . Is your industry planning for cities to ban diesel cars anytime soon . Is that your expectation . Towe are trying the utmost avoid any kinds of restrictions because we think in the modern world there are much more intelligent instruments to reduce emissions. At the moment where you have avoid anyans, you can traffic inrching with the flow of legal traffic system. Trying to avoid stop and go, youll also avoided emissions. We are also offering some improvement of the existing diesel car fleet with software to reduce emissions. With all that package, we think we have much more convincing arguments that any kind of restrictions in the cities. We will see how those take all, matthias. On brexit, we have talked about the importance of trade flows and investments, what is your expectation for how much the german industry will cut back on investments in the u. K. As we listen to the latest news around brexit . S we have real interest a the german Automotive Industry that the end of negotiations between Great Britain and the panoramaunion, we have without any kind of terror and nontariffand barriers. Theope britain stays in open market for the transition. Inhave a lot of investments britain. We have over 100 production sites in britain. Britain exports so many of its cars and components to the continent that there should be interest on both sides. If britain would stay in the Customs Union and perhaps even in the internal market, price would be clear, and britain would have to accept the European Court of justice rules and would have to accept migration. That is the critical thing that we know the present British Government does not accept all of the preconditions. Therein lies the rub. Thankas wissman, you for joining us. This is bloomberg. Anna welcome back to bloomberg markets. Live from bloomberg World Headquarters in london, i am anna edwards. We me tell you where are this fourth of july. Pretty flat start the weakest performer of the major markets in asia is the hang seng. Thats in contrast with the ftse 100 and the dax, who find themselves underwater today. We have seen a slight move toward the safer haven assets because of what we have seen coming out of north korea. I think we have some other data to show you around where we are in currency markets. The Australian Dollar down by seven tenths of a percent. No change decision from the rba as well. We see some movement into the boon the markets as what we have seen from north korea. Lets check in with bloomberg first word news with emma chandra. A long time, north korea has threatened to develop a missile that could hit the u. S. With a nuclear weapon. Now to be one step closer. Korea says it has launched an intercontinental Ballistic Missile. It flew for 500 miles before landing in the sea of japan. President trump tweeted that china should put a heavy move on north korea and end this nonsense want to draw. The government must hold its nerve and key public spending under control according to the k chancellor. Not all members of the conservative party agree though. An unpopular pay freeze on public jobs is under active discussion. In the u. S. , the federal Appeals Court says the epa cannot defend obama era standards. The court says the epa can reconsider a rule that limits emissions from oil and gas wells, but the rule has to remain in place in the meantime. Global news 24 hours a day powered by 2700 journalists and analysts in more than 120 countries, im emma chandra. This is bloomberg. Philiphe k chancellor hammonds column on Business Leaders to help the government make the case to europe for a smooth brexit. Says thech, hammond Business Concerns will be heard as negotiations get underway. From the rbc is Capital Markets strategist. As the debate rumbles on on how hard or soft the brexit is going to be or clean or dirty or whichever description you like, does any of it change your view on what happens with the pound . If we handed over, guidance on currency markets to Central Banks . Quite clearly the very latest on sterling were driven by no expectations surrounding what the bank of england could do, which is given a surprise andted by the mpc recently connie last week. I think the issue for the impact of brexit on sterling is that we do not know where we are going to lend. It seems the market has some level of confidence in the idea that theres going to be a transition. There is increasing talk about a transition, which to me is a way to try to push things and lets not try to think about the lets not to test think about it too quickly. Its reading what the europeans are saying and its fairly plain. It is no transition if we do not know where we are transitioning to. On a bit nervous at the markets tend to find some of confidence or seem to that so much on a when noon deal transition deal can actually be granted unless we know or the europeans know was some level of certainty what the final relationship between the u. K. And europe is going to be. The further point of the is that we are still in lot. Anna does the existence or not of a transition deal is that shaping your thoughts on u. K. Assets at the moment . Not really. The key thing is where we end up. If you look at cable, it is very difficult to argue that it is pricing and material risk of a breakdown in negotiations or Single Market exit with without anything to follow it. If you look at the balance of risk, it is still saying downside. For investors with a much longer term horizon, its not a bad level to stand at. Anna interesting that we are getting comments coming through from the u. K. Government spokesman in london, saying that ,he brexit related repeal act bring it into the u. K. Legislation will head to the u. K. Parliament next week. Another test of theresa mays government coming next week. This will be the focus with political conversation next week. With the central bank story, the markets have reacted. If you are the bloomberg, you can pull this chart up. 2017 is live for the bank of england. Given this uncertainty on where the u. K. Economy goes from here, do you think that rate hikes should be on the table . Gilles no. Very clearly no. I think what we have is a fairly simple case actually of transitory shock. Important inflation goes up and it creates an inflation hump. Monetary policy should react to this only if there is a clear that for rounds are hearing. You would need to see wages accelerate. Wages are not accelerating in the u. K. They are decelerating. I do not exactly see the reason why we should get into a rate afxcept for two things the bank of england is really sectors and there are signs of that, but for this normally you have macro potential. Anna they enacted some of that last week. Gilles that should not alter Monetary Policy. For if they think it is time to pay all the investors with a premium to make sure they continue to invest in the u. K. That might become an issue at some point if the market