Refiners are facing a renewed threat to their production. Good morning to you, yvonne. Ye on japan e and korea. Trade was focused on Hurricane Harvey. I want to bring up a function. Are hurr you at the red dot, showing some of the refineries that have been closed. You can see that there are more red than blues. The reds meaning the refineries that have been shut down. That has left the markets uncertain today, particularly as this destruction is only going to get worse. The flooding is supposed to peak on wednesday and thursday, so this is not over yet. This is going to be the entire week the houston area will be dealing with the devastation. It seems like it has reignited the storm and flooding , moving over to the louisiana side. Definitely, our hearts go out to everybody in the u. S. We had to take a look at the headlines. In the last 90 minutes or so, north korea, firing this missile. Up and over japan, a little bit more serious given the fact that it has flown over japanese airspace and seems to be in a direct attempt to directly target japan. We are seeing a little bit of response according to local media agencies from the u. S. , south korea, as well as japan. We are seeing riskoff moves in the market being resulted and escalated. Betty speaking about riskoff, that provocative move causing some jitters in the market. Let us quickly pull up where we were in the u. S. And how jittery we were as well. Pretty rainsbound. Rangebound. No one wanted to take any big position in the wake of Hurricane Harvey. Risk off, as you mentioned. That is spot on. Likely going to be the trade in asia. It is early in the asian session. European traders are asleep. We could see more of these riskaverse moves. New zealand is playing out with stocks as well as the kiwi down by. 3 on the index for the the nzx 50. We are seeing gold futures as well. A bit for bullion here. We are up. 6 for gold futures. Retail sales coming out this hour. That data could be overshadowed by these riskoff moves we do see. 108. 65. En, we will see if we actually break the 108 handle. This could be a painful day in tokyo here today. Betty before we get to that, let us get to first word news with emma chandra. Tropical storm harvey has gathered new strength and is set to revisit drenched parts of texas and neighboring states. The full extent of the damage will not be known for weeks. The volume of rain measured in feet inside of inches. It has tripled the energy hub. A quarter of production in the gulf of mexico. 10 of Refining Capacity shut down. The chief brexit negotiator has u. K. Of not being serious. He called for britain to be more clear about its position. Michel barner spoke in brussels. He expressed his wanting frustration up a slow progress made so far with the key you e. U. Leaders summit. Worth 18 billion. A review says western world contribute. Toshiba was under pressure to settle the deal by the end of the month. The consortium includes kkr. Ofna has approved the merger two major companies. It is seen as an attempt to slim down chinas bloated state owned sector. Gigawattsity of 225 puts it ahead of france and italy. 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. Betty. Betty thank you. Tough three in military raising its alert now, according to that north korea fired missile, an unprecedented move. The japanese Prime Minister speaking shortly after that missile was detected. It appears a north Korean Missile has flown over japan. We have begun to gather andrmation and analysis well do our best to ensure the safety of our people. Yvonne we saw an immediate spike in the japanese yen after these headlines came out. I want to bring in our asia top live editor. Colin, what more do we know about this missile that was launched . Colin what we know so far is that around 6 00 a. M. Local time here, north korea launched an unidentified Ballistic Missile and it flew, oakland to reports, over hokkaido, the north island of japan, and landed something about 1000 kilometers off look hokkaidoe seat off in the sea. This has been described as an unprecedented move by north korea by japans chief cabinet secretary. As of now, there are more investigations being made to try to discover the capital kind of missile was fired and will kind of threat it posed. The leaders of south korea, japan, and the u. S. , have spoken. Do we know if they have spoken out about this and what is likely the reaction going to be . Colin details of that sort are still coming out. Where not clear exactly we are at. There has been a ratcheting up of tension between north korea and the neighboring countries in andu. S. In recent weeks months. As you have already said, japans Prime Minister, shinzo abe, has been on national tv to try and reassure japanese people , and in all the surrounding companies, south korea, japan, there will be the usual source of efforts underway to try and establish what is the sensible response. One country that all parties will be interesting to hear from will be china. Yvonne we heard from the chief cabinet secretary, talking about how this has not happened before. Give us a sense of the feeling on the ground right now. Are people more concerned about this . Is this Something Different this time around . A little bit more serious . Colin just to say that i would need to double check. Possible that there has been a missile that has traveled at joomla close to japan. Years, over the decades, japan has gotten used to the belligerent north and south korea, too. To some degree, if both in both countries, there is a degree of phlegmatic response. People go about their lives as usual. On the other hand, recently, there has been an increase in pensions at any kind of additional move by north korea at the moment, given the warnings from President Trump. The u. N. Actions, any kind of increased threat from north korea. It does clearly pose logistical issues. It was the first time i had and i am sure these have been theed previously this is first time i had a direct alert to my phone saying a muscle has been launched, which is obviously kind of exciting to see. On national broadcast, they were showing a black panel with a direct explanation of what was going on with the Missile Launch. I appreciate you telling us what is going on japan. Fromop live editor coming asia. Talking about the pentagon, they have issued a statement on the north korea Missile Launch. Let us bring in gregg sullivan. He joins us now. We heard from the pentagon saying this is not posing a direct threat to north america in general, but i guess the response is going to be the key question and whether the u. S. Is going to actually talk of the talk belowut bit more about open negotiations with pyongyang. Thats right. They said they can confirm the missile flew over japan. Stillaid they were assessing the situation, but it did not appear to pose any threat to north america. We can look to the u. S. Response days ago, when they launched three Ballistic Missiles. Secretary of state Rex Tillerson called at launch provocative. He also said the u. S. Would push for dialogue. Thought that the u. S. Might be pursuing dialogue even with these provocative Missile Launches. Yvonne we are monitoring Donald Trumps twitter page to see what statement he might have on this for operative this provocative act. What kind of aid is going to be sent over to those in houston . And what kind of impact is this going to have . Greg that is the question here. All eyes are on what congress can do. Tom today, during a press conference with finland president , said he expected congress to simply deliver a package. All to the be at fact that no congressional leader has provided the timetable for such aid and Congress Faces a very daunting september schedule already. In september, they have to raise the debt ceiling and fund the government has september 30, otherwise, there will be a government shutdown. There has been no timetable put forward. While many, lawmakers, especially from texas, are calling for federal House Democrat nancy pelosi said it should not be connected to any offset elsewhere. That could pose a threat. Conservative lawmakers are not going to accept blanket aid without budget cuts elsewhere. Some of the same texas lawmakers soughtling for aid previous aid packages because there were not those kind of offense. That will come up as well. Reg, what are the numbers we are talking about . How about compared to other Disaster Relief funds that have been approved by congress . Greg that will have to be hashed out by congress. Some analysts said the damage could be as high as 100 billion, but that would be pretty high for congress to pass. It is unclear what kind they have to get through whether they would be offsetting what spending or not amid all these other fights, including the shutdown. Announcer thank you, greg sullivan, joining us from d. C. Wee later on this hour when count the cost for u. S. Insurers. We are going to have plenty of analysis from our team at bloomberg intelligence. How ubers new ceo made dabbled never get the difficult road in asia. This is bloomberg. Announcer monetary reaction as stock futures fly. The yen strengthens. Su keenan has more on how this may impact wall street as well as the impact from harvey. Safe to say it will remain riskoff for some time . It certainly looks like it. We saw s p 500 futures immediately drop as well as some reaction in the International Currencies on the news of the missile firing. It is the first since july 28. We know the secretary of state Rex Tillerson had praised north korea for its nonaggressive action only, and here we are again on august 10. South korea and japan warned north korea it would face a strong response if it carried out another missile firing. There is a lot baked in the cake for there to be an increase in tension. That is going to a chart of the most commonly used trades. It tracks the s p 500. It is showing a drop of about. 5 in reaction to the news that has crossed. It is the most heavily used Exchange Traded fund tied to the index that retreated within five minutes of the report, so the reaction has been swift. Very interesting to see how this plays out in the heavier volume of the regular session of wall street on tuesday. Announcer breaking news coming out from the bank of korea. They will be holding a meeting after the north korea launched missile. On advancing. The w talking about harvey in particular, we have the Market Impact which really hit the Energy Related assets as well as the insurers today. Su harvey was really the main theme in the market and stocks, which search for direction. The market was mixed, but close to unchanged. We go into some of the big movers, and you will see chesapeake, range resources. Underof their stocks are pressure because demand is going to go down. A lot of the resources are not available right now. We go into the bloomberg at g btv 417, and the storm surge, in terms of how it impacted commodities, namely caused gasoline to surge. Tothought an immediate jump almost 8 in the hours after the. Urricane hit harvey, now a Tropical Storm. In the see the surge current contract for gasoline, the immediate take away. If you look at the snapshot of how the Energy Commodities close, it was oil lower, gasoline higher, and gold reaching the 1300 mark for the first time this year. Much more to the bloomberg at g btv 9450, and you will notice that the insurance stocks are sometimes suffering catastrophic losses. The purple line is hurricane ike back in 2008. A huge storm. 12 billion. This one expected to have losses of twice that amount, which will clearly play out in the days to come. Announcer thank you, su keenan, joining us live from new york. Our interactive tv function, tv on your terminal. You will be of to watch us live and see some of the previous interviews, dive into the bloomberg functions. You can become part of the conversation. Send anybody an instant message. This is for bloomberg subscribers only. Check it out at tv. This is bloomberg. Yvonne this is daybreak is a. I am yvonne daybreak asia i am yvonne man in hong kong. Betty i am betty liu. They have struggled to gain traction. Adam joining us from minneapolis. You wrote a piece about a month ago about uber struggles in Southeast Asia and you mentioned that if you measure popularity in monthly active users, uber does not lead in a single country, whereas grab in singapore leads in all of them but one. They launched badly is what it comes down to. They were under the impression that their model would work internationally. It did not. The two big markets in Southeast Asia are singapore and malaysia, and when uber entered, they made a few key mistakes. Number one, they came in more expensive. Two, they took credit. More than half of the folks in Southeast Asia do not have credit cards. Number three, they did not focus safety, on marketing and that is a big issue in singapore and malaysia. In indonesia, the biggest market, they completely missed what the market wanted altogether, where because of is aic, ridesharing phenomenon. Uber has never caught up. Betty sounds like the new ceo will have a lot to do in terms of reducing the key mistakes, adam. Key area for these ridesharing companys is recruiting drivers. Hasnow here at home, uber succeeded in your recruiting drivers and giving them jobs. What about overseas . What have we seen there . Adam the whole issue, so many of the drivers in southeast they dont even own smartphones, so the competitors sought to putave that into divers hands and pay back over time. Same as in indonesia. Hadingapore, somewhere uber targeted aggressively, they had a bunch of cars for their drivers, but it turns out the cars had serious safety problems with them. Just last month, the wall street journal reported 1000 of the cars leased for drivers were in danger of basically combusting. Few of them had dashboards which caught on fire. It is a poor message where you have grab and go, and even the ceos to help recruit drivers. Uber offering drivers will became an embarrassing story, cars that are unsafe. It has not worked that well for uber. If you use the app in singapore and malaysia, grab is three times as many cars. Grab,cer we talk about you know, and they recently got back. Aside from these injections of capital, how are they widening their lead with uber, and can uber catch up . Adam it will be very tough for uber. A lot of that money is being marked earmarked to expand and already, there is millions of people who use grab pay, making sexy transactions. Can leverage that into a fullblown ecommerce platform. Grab and go they happen to offer ride sharing. To compete inan that space, so it is going to be hard because the payments are going to be something that grab really emphasize go forward and uber has no solution in the United States or anywhere else to compete against it. Need towhere does it shift the focus, and does it need to enter into these less competitive markets and possibly to consolidate their leadership to cut their losses . Adam i think that is exactly what they have to do. There are markets within in Southeast Asia, myanmar, somedia, which offer opportunity, but those are very small markets compared to malaysia, singapore, and indonesia. Their best about this point is to see if they can get some traction in this companies to see if maybe they can use that to gain some market share against the leaders elsewhere. But that is going to be hard because the leaders in Southeast Asia and ridesharing have become so good at mobilizing their services, it is going to be very difficult. Yvonne adam, think to have you. Joining us live from minneapolis. Thank you. Coming up next, the latest check on japan. Job numbers for july, coming up next. This is bloomberg. Yvonne it is 7 30 a. M. Tuesday in hong kong, 30 minutes away from asias first major market open. Taking a live look at victoria harbor. Picturesque, beautiful. Take a look at japan in general. Data coming through tokyo as well. Headlines out of north korea. Betty. Betty a lot happening in japan with the jobless rate out right now. The 7 30 p. M. In new york. I want to get straight to Kathleen Hays here, who has the latest job numbers crossing the bloomberg on japan. Kathleen. Kathleen all these numbers are for the month of july. Jobless rates coming in at forecast. Afghan ratio, which has been rising again, comes in spot on with the forecast, up from 1. 51. There are 1. 5 opening for everyone worker in japan. What is weaker than forecast by a longshot is overall Household Spending. The yearoveryear number coming in at 0. 2 . That is down sharply from up to. 3 in june. The survey was looking for 0. 7 yearoveryear, and we do know that one thing that has been going on with spending is auto sales. They slipped in june and broke a fivemonth record of increases. On the layer market and one on spending. People have been wondering if this tighter labor market we are starting to see some increase in wages even. There was a sub and services. The Producer Price data increase in july. 0. 5 yearoveryear in the latest reading when you look at the core number. Rise in inflation eating into peoples pocketbooks and making them cautious on spending . That is what we have so far. In nice, tight labor market in the month of july. Spending slipping. Six straight quarters of gdp growth come on track for another 1, 1 of the largest postwar expansions in japans history. If consumers do not keep spending, like other positive growth spurts, cannot be sustained . Yvonne thank you. Market reaction right now. Dollaryen, kind of cutting the gains we saw in half given north korea. A kickoff of what is going on with nikkei futures, Holding Steady following that data dump out of japan. We have futures pointing in negative territory here. Pointing to losses in the chicago session, falling 2 . This is the japanese government anwhat it is calling unprecedented even. U. S. Futures are weaker after that. Isnka, let us check on what going on with the dollaryen. We have been trading at 108. 92. Gaining a little bit of ground after the drop we saw this morning, following breaking below 109 degrees. Earlier, it fell to a session low of 108. 34. Well have the news out of north korea overshadowing the latest data from japan. We have the head of japans markets research at jpmorgan may touch its april high and could even touch 108. 13. This as we see an unwinding. 9458. Was more caution in the air, we have seen investors largely favoring yen as well as gold amid dollar weakness, sending the 120 day correlation between the havens in august to the highest on record. Continuing to climb above 1300 after reaching the level for the first time that year. If you check out correlation, you can see btv 9454. Taking a look at gold, it is tested. Level tested the 1300 three times since april. There is more than technical that play. The dollar has been falling all year, but gold has not yet been able to really put up a decisive rally. Keep in mind, we have the latest positioning data showing Money Managers are the most bullish on gold. The bearish positions on the smallest in the nearly five years. Get on board with gold. 1400 announced by early next year. Keep an eye on the haven today. We might be having the risk overshadow other catalysts in the early session this morning in asia, betty. Betty thank you so much. Certainly will be watching many of those safe haven assets. First word news with emma chandra. Wilbur ross has postponed a final decision on canadian softwood imports after investigations into alleged dumping. His departments as a final determination will come no later than november 14. He remains hopeful of a negotiated solution that satisfies the concerns of all parties. Theda has said it was sue u. S. Of trade talks failed. Officials from countries are meeting in sydney to define the tpp. The threeday talks, aimed to reach an overall agreement to be signed in vietnam. President trump hold the u. S. Out of the pact soon after taking office. He says his America First policy meanwhile, President Trump is preparing for one of the most important sales pitches, getting voters fired up about rewriting the tax code. There is precious little to sell at the moment. They sit questions about changes, tax brackets, and business level, have yet to be addressed. Steven mnuchin has predicted the bill would be passed by august. Now, he will not commit to completing it this year. Benchmark is suing them, duping uber into letting him control three seats on the board. He wants to prove he was boarded to nominate members. Powered by more than 2700 journalists and analysts in 120 countries, i have ever charger. This is bloomberg. Announcer thank you. Betty, we are following the developments out of north korea firing a missile over japan. What the chief cabinet secretary has called on unprecedented. s military is raising the alert after this missile coming out from pyongyang. The question is the response we are going to get from the allies of the u. S. , south korea, as well as japan. The bank of korea is holding a meeting over these developments as well. Betty one of the storylines we have been talking about, yvonne, has been a really hardy nature of south korea. We have seen the kospi outperform many of the benchmarks despite these geopolitical tensions, but it is a little bit of a different when youre talking about Foreign Investors in korea. Atant to pull up this chart, 7041. It just shows you portfolio flows, net outflows, when you look at Foreign Investors in the kospi. You can see it really ratcheted up in the month of august. In fact, it has been a bias levels as you can see so far since the beginning of this year. While it seems like the markets are resilient in the face of these geopolitical tensions, outside investors are certainly nervous when they look at these headlines. Let us us us assess more of the impact of these headlines that just came across a. 5 hours ago on north korea firing that issue, with buffalo reynolds. With garfield reynolds. Muche likely to see reaction in the asian markets, any unprecedented reaction . Is a lot ofere precedent for markets when it comes to reacting to north Korean Missiles. Havens, thehave had yen, the frank, gold, rallying this morning, and risk assets like the aussie dollar and the mexican peso dropping. However, those moves have started to fade. So i think we will get a nervous open for asian equity markets this morning. There is a lot of reason to be nervous. We want to see what trump and co. Are going to do in their response. What is the bank of korea going to say . We have the looming difficulties with what harvey is going to do. We have an auction later on today in washington of debt that falls due right around the debt deadline. That will add excitement and to today trading. The story was korea and with a lot of these gloom and doom bits and pieces of news has been some initial selloffs and the general rally, because the feeling is that the Global Economy is gaining momentum. Earnings growth is strong in all the parts of the economy, and those underlying fundamentals are tending to come through in the mediumterm, even amid shortterm hiccups like missiles flying over japan. Announcer that is the fundamental story which seems to offset tensions we are seeing geopolitically and scandals at home. I have a chart here. G btv 8274. Continue to see this rally, the korea discount, which i am sure you are familiar with. We are seeing it much lower compared to the likes of the shanghai composite in yellow are the Asian Pacific benchmark overall, as well as the white, which is the tokyo benchmark. Cannot itself lead to more gains on the kospi . Has been a big part of what has been driving the rally we have had in the kospi over the past year, and south korean shares and assets in general have been held it down a bit, you know, back when brexit was boiling, emerging markets, back when the dollar was strong and everybody was getting excited about the american economy. Now, we have a situation where south korean analysts are seeing double the growth in korean earnings. They are seeing the best that is since 2010, so why even with the missiles flying, it is very hard to hedge toinst the missiles starting land. There is a lot of optimism in korea, and that is why over the past year, if we look, we have g btv 9457, which shows that even it is stillent job, doing better than the Global Benchmark over the past year. Announcer garfield, thank you. Garfield reynolds joining us from sydney. Our editor. Eigh the investors w Economic Impact of Tropical Storm harvey, next. This is bloomberg. Yvonne this is daybreak asia. I am yvonne in hong kong. Betty let us get a check on business flash headlines. Sullivan rating cut. Its these little progress towards ending the saudiled in vargo. Negative watch in june after egypt cut transport ties. International mediation efforts have not shown significant progress. Yvonne Gilead Sciences is buying kite pharma. It will visit gilead away from the treatments that have been the backbone of the business. John mulligan halle bloomberg the Company Wants to be a leader, not a follower, in cancer technology. Betty they have received a taxable from india. It relates the 2007 sale of its mobilephone business to a unit of vodafone. They continue to dispute the valid any of the tax charges. Alice see it analysts see it as a test case. Announcer oil and gas prices on the rise as a result of the devastation wreaked on texas. Gas prices are the ones that have been rising. That is because the quarter of all u. S. Oil and Natural Gas Technology new is based in the region. Is hurr , standing for hurricane. The can see the predictive storm track of party. You can see that after the first landfall, if this is going to be correct, it will make a second landfall, possibly as a Tropical Storm. 2 00 a. M. P. M. Eastern time, it could be hitting houston once again. I want you to focus on the red here, because these are unplanned incidents. What does that mean . Possible closures or something where Oil Refineries are not operating at maximum efficiency . These are operational right now. If we look at the storm track, you can see it takes it through at least a dozen oil refiners. That is hurr. Check that out. Our second terminal function, g btv 9446. The title is hardy hits home hits home. The last time this happened, all the way back here, was in the middle of 2013, 2 years ago, and this is happening because there is a glut of oil that cannot be taken care of. It is hanging out in the pipelines. There is no movement, and that is pushing the price down. Gas is on theing, rise. It is up as much as 7 in monday trading here, and we can see the bump in the white line happened in the past day or so. Some of the Interesting Data points according to goldman gass, harvey could cut the supplies by as much as 700,000 barrels per day. With that said, this price bump we are seeing here could be shortlived. The end of august, start of september, and the end of the u. S. Summer driving season. We have days to go with what Tropical Storm harvey is the intensive i, could be coming back. We will have to watch this over the next few days. These are the three bloomberg terminal turkey need to know as we continue our coverage of harvey. Announcer thank you so much. It will be intensifying in fact. This is not the end of it. Let us get a picture of the Financial Impact of harvey on the Insurance Companies that were hit today. Bloomberg intelligence insurance reporter Jonathan Adams is on princeton. Th us from jonathan, so far, i am sure the Insurance Companies are right now calculate and the payout and losses here. What are the initial estimate ations . Jonathan the initial estimates dollars ofion insured losses and 30 billion of economic losses, including much damage that would not be insurable and covered by a private insurers such as infrastructure and other elements like that. Betty how big of an event is this for the Insurance Industry . Is this considered a major event for them . Jonathan it is certainly a major event, probably in the top 10 worst storms, but the industry is very wellcapitalized these days. It has over 730 billion of statutory capital. This is not an event that is likely to really in pinch their ability to do business or to expand or frankly to pay all claims that are due, and that is a good thing, because they really help their insurance. Betty we have had a years full of rain in just this past week with party in that area. Harvey in that area. Just a primary lost here in the damage. How is that going to affect the National FloodInsurance Program . Jonathan unfortunately, the National Flood insurance in the, nfip, is not same condition as the Insurance Industry. It is a federal program, 25 billion in debt today. The rates that it charges are inadequate, and this is only going to set them back more so. So unfortunately, this is a blow to that program, although it may encourage them to act a little bit more aggressively to bring their rates up to market levels and what would be acceptable for them to break even, but this certainly will be low. Yvonne in that program, jonathan, is going to be expiring at the end of next month, too . Jonathan thats right, and congress is looking to renew that program for the next years. Up until now, the Reforms Congress has envisioned with regard to pricing changes in the aslity to really assess risk the program should, have been pretty modest, and honestly, it may seem strange, but this better could see much clarity in terms of coming face to face with the kinds of losses that are likely in the future, and if that is the case, a Silver Lining on this cloud could be that congress could be more realistic and be a little bit more aggressive in allowing nfip to make the changes that it needs to for the long run. We will see more of events similar to this and that there will be surprises and they will be unfortunately negative and surprising us in terms of where flooding can occur. Toouncer yeah, do not want stray away from the human aspect of this. The reality check, moving forward. In terms of the insurers you cover, which are going to be particularly hit hardest the most . Jonathan it is a little bit difficult to say. Commercializebe insurers relative to where they would ordinarily stand with this type of event would be a little bit worse because there will be tremendous Business Interruption that is associated with the flooding, and there are more commercial policies that tend to cover the payroll of flood eril of flood. Companies like all state probably will not see the same degree of loss as they would if win damage were the primarily problem we were looking at. Dthat is not the case. Other auto insurers do include progressive and gekko, which is owned by berkshire hathaway. All of those companies will see significant losses from this again, once they can work through. Announcer jonathan, thank you so much for helping us assess the impact on the Insurance Industry. Jonathan adams, reporter talking to us about the impact of harvey. New headlines coming out of japan. Chief cabinet secretary giving more details about this Missile Launch in north korea, saying no japansell on territory. No reports of damage or injury from the Missile Launch from north korea. Reiterating some strong, strong words against north korea, saying the Missile Launch was incredibly problematic and unacceptable, and japan is going to continue to urge restraint from north korea. The details that the missile flew 2700, mistreated we will continue to monitor japan. And the comments from north korea. This is bloomberg. Betty plenty more still to come with asias first major market open just moments away, watching north korean headlines. Yvonne we are getting lines coming out from the chief cabinet secretary, talking about japan strongly backing the u. S. View that all options are on the table. They are still examining which types are responsible. I want to focus here today. Watch for a 10th open in asia. U. S. Features have taken a hit. Watch for the bank of america to meet this morning. We are keeping an eye on defense stocks in south korea as well as in japan here. Mitsubishi electric, at the radar for the japanese air force. Watch for reaction to toshiba shares as well given the latest news. What that might mean for the session in asia. That is a brief look at what we will be watching when trade gets underway in asia. This is bloomberg. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. Yvonne we are live. Welcome to daybreak asia. Japan still stuck in neutral. Helpful spending plunged. 8 00 ont is just after this monday evening. Andey is gathering strength flooding is continuing. Giant in the a power game. Merging with the leading generator. Billion. Yvonne watching the north korea headlines very closely. About strongly backing the u. S. That all options are on the table. There have been military efforts that President Trump has mentioned before. We are seeing this rush. Pushing correlation this month to the highest ever. Look at the blue lines there, which is the gold. Is overseeing that correlation at its highest on record. With have benefited from the weaker dollar, given some of these doubts about when the fed is going to raise rates or not. They remain nervous about the Political Climate in d. C. And north korea as well. The costu are seeing index fall kospi about. 5 . Firinged to this missile , this is all decided ahead of time. This is their budget. They are planning to increase their Government Spending by 7. 1 in 2018. They are planning for the 29 trillion four to 29 429 trillion. How much spending on that defense is that going to be an allocation. Tropical storm harvey has gathered strength. It is said to revisit already drenched parts of texas. The full extent of the damage will not be known it for weeks. The rainfall total is measured in feet, not inches. More than 10 of u. S. Refining capacity is shut down. The European Union exit negotiator brexit negotiator has accused u. K. Of not being serious and has called on britain to be more clear on its position. They opened a third round of talks in brussels and voiced his frustration about the slow product progress. Toshiba and Western Digital have reached an agreement on the sale of their joint venture. It is worth about 18 billion. Weston will contribute almost 1. 4 billion. Toshiba was under pressure to settle the deal by the end of the month. China has created the biggest Power Company on earth, proving witherger of coal mining it is worth 270 billion. The company will be called National Energy investment corp. T puts it ahead of electricity global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Betty thank you. Dramatically stepping up tensions by firing that Ballistic Missile over japan. They say opposed no threat to north america and no attempt was made to shoot the missile down. Reaction from japan has been very strong words. As we mentioned a moment ago, not shooting down the missile. What do we read into that . Shooting down the missile would be a step up. If they assess right away that the missile will not hit the territory of japan, they will not shoot it down. We heard that from u. S. Commanders after north korea m aeatened to strike gua couple weeks ago. Wey said we will not wait are not going to try to shoot it down. We want to see where it goes, where it lands, because we could learn more about north koreas capabilities. Betty a lot of this is speculation. Why now . Deciding to korea go into this uncharted territory . They have been threatening to step things up. Things have been escalating all year. In july. D two icbms tensions appeared to cool in the last couple weeks. Rex tillerson was saying that the u. S. Wants talks to bring things to the table. There are also military exercises ongoing, and that ses thees the incen regime. Yvonne we are already hearing comments coming out of suga saying they are backing the west and all options are on the table. Mix forina be in the the united front . The main benefactor of north korea. They have interest in keeping north korea from collapsing. These provocations will certainly unite south korea, japan, and the u. S. Everyone still wants talks, but they are also stepping up their defense capabilities. South korea, moon had a meeting saying we need to invest more in our own defense to make sure that we are safe from these provocations that are happening more frequently. Yvonne thank you. Tom sure we will come back you to monitor the developments coming out of japan and north korea. Ets take a look at the open read across the board when it comes to equity. We have red across the board. 2 for u. S. 10 year yields, treasury yields. That may not be too far fetched. Still looking at a second day of losses in seoul. 1 . 5 10 of given the risk of the environment, we are seeing the yen catch a bit. A little bit weaker than what we saw initially with the early when it dropped. We are still seeing it below that 109 level. Note, there is continuing pressure. We are seeing new york crude switching places here. Take a look at what is going on. Checking the currencies against the yen. They are all losing ground against the japanese currency. The aussie dollar leading there. Checking on the korean won, it is on the back foot this morning. The bank of korea is meeting policy on august 31. It remains to be seen. They could nudge the central bank half of a given that it has identified it uncertainty. Checking on what is moving for the kospi. E have Energy Financials are leading the drag and discretionary shares. The korean stock pulls will be deterred at this latest event. Analysts are expecting them to jump in 2017. That would be the hot a investors have been buying into that optimism. Today we are seeing losses for korean stocks. Pulling up the board to show you south Korean Defense stocks, starting with the maker of Electronic Warfare systems. Stock jumping over 10 . Korean aerospace, we have that stock on the back foot down about 1 . Japanese carriers, Japanese Airlines have now been affected by the Missile Launch. A little bit of nervousness, given the latest from south korea. We are going to keep you uptodate on the program. Joining us to discuss about the reaction to the yen and the Foreign Exchange market. The latest jobs and spending numbers out of japan. This is bloomberg. Yvonne this is daybreak asia. Japans labor market is getting tighter and tighter. Wage indices have started to rise. I did consumers put that break on spending in july why did consumers put that break on spending in july . Kathleen hays breaking down the numbers for us. Consumer spending was up. We knew coming into this that auto sales had slipped. Instead, spending, which was forecast to slip in july actually fell minus 0. 2 . But this against the backdrop of the yen getting stronger. The job to applicant ratio from 1. 51. Se to 1. 52 one and a half job openings for every worker looking. 1974. S a high since job offers rose by more than 6 . , puttingtake a look all this together, we know that gdp has grown for six straight quarters in japan. People are looking for it to be on track for another positive quarter. One of the strongest recoveries and expansions in the postwar period. The problem is, what if Consumer Spending keeps going . What does it mean for the bank of japan . Driven not only by exports, but also by consumers who are seeing this. Maybe the wages start to rise of it. A bit. Stay with us. We want to bring in our next guest. Data, i bring out the have to get your take on the big story today, which is north korea. This Missile Launch flying over japan. It is not a new story for the country, obviously, but we already see a little bit of Market Reaction and yen and stocks are you how vulnerable, economically, is japan stocks. How vulnerable, economically, is japan . Yen definitely hinders the bank of japan to raise inflation. The impact through the yen is real. The consumer confidence, i am sure there is some concern. In the big picture, i do not europe has been doing with terrorism for the last two years. All we hear when it comes to the numbers is growth. I do not think there is much from north koreas missile. It might be temporary, if there is any. I want to get to the job rate and tight labor market. I want to get to the wage impact and pressures. He were starting to see that in more the parttime workers. How soon before we start to really see that feature the Larger Population . That is the answer the bank of japan is scrambling to find out. , it can be that far away. It seems the numbers are counting. By the end of the year, it will reach 2. 5 . Down continues, it will go 2 . Along this path, i am confident that the wage growth will take place, even among regular workers in japan. I want to bring up a chart to illustrate your point. What it shows is a white line of an employment with unemployment down. We have the real cash earnings. Underneath, what is so interesting is the Household Spending. The bars are red. For 15 straight months, we get a nice increase. Now another decline. Why is Consumer Spending having a hard time picking up . There are two ways to answer it. One way, as cynical way, is the Household Spending could be slowed. Focusd say they tend to on area households. One way to put it, perhaps the Household Spending data is not great data to look at. We should take a look at the retail sales. I think that should be flipped. Yvonne i have some coming through from south korea. The country strongly condemning north koreas provocation. We have heard from japan as well, voicing the same concerns. The bank of korea is also meeting to discuss these latest developments. Japan, we heard that interview from Kathleen Hays talking about 4 growth. Brings the question, how sustainable is the recovery . As far as japanese domestic japan hasthe bank of everybodys back. To fund is very happy capital investment, very happy to buy houses at the superlow mortgage rate. On the domestic front, i would say there is a concern about slowdown. It is more likely that japan will keep growing and enjoying the positive growth streak. Betty when i spoke to governor kuroda, i asked him about what it meant. Even with inflation low target, leading in the direction of normalization, it really does not matter for how he is looking at things. Ratesing as how inflation are still below the target, do in the coming months, we have to address the situation. Do you agree with governor kuroda that this is the right policy for japan . With inflation below target, yes to stay the course he has to keep stay the course. With governor kuroda. I think this is a great opportunity for the bank of japan to go in the opposite direction to other central banks. Bank should the continue. What happens if inflation stalls out . What can they do aside from what they have already done . I think so. I think the bank of japan has done pretty much all it could. Keeping longterm Interest Rate close to zero would actually work. Rises, it will. Iden and it would help i do not think the bank of japan needs to do anything more drastic. If there is going to be another shock to the economy, that is a different story. That is a different story. As far as the Current Situation is concerned, i do not think any additional monetary easing is warranted. Betty before we go, we had a board member on who was warning against the market. And break aial player the bank of japan is in that market and how destructive it will be, once it leaves. Where do you like that as a risk to your macroeconomic outlook in japan . It is actually one of the biggest risks. It is very concerned that the pricing mechanism is now rigged. Perhaps they do not want to buy into the japanese equity market because they feel the price can be overestimated. We also have to think about what needs topen if boj exit. That would crash the equity market. They should try to find a way to gradually reduce the size from the market. Yvonne thank you so much betty thank you so much for joining us. One feature that we would like to bring to your attention is our interactive tv function. You can see previous interviews, dive into any of the actions that we talk about. This is for bloomberg subscribers only. Check it out at tv. This is bloomberg. Betty new headline coming out after the aftermath of this missile firing. Shinzo abe will be speaking with donald trump over the phone shortly this shortly. Tv asahi. Cording to the surprise firing of the missile from north korea over japanese airspace. Reporter we have not heard a from the of president. Lets see what the response will be, moving forward. We have lines coming up from south korea talking about how they are maintaining readiness when it comes to any threat from north korea. Talks andd come to not restless provocations. Reckless provocations. Coming up next, south koreas bigbudget plans. A look at the details in light of the latest missile. This is bloomberg. Yvonne a look outside singapore. We are a half hour away from open of trading there. Markets are just as dark. Missile launch over japans airspace sending jitters across asia markets. Between what we have seen with Hurricane Harvey and now these headlines out of north korea. You are watching daybreak asia. Lets get to the first word news. Asked to they have convene an Emergency Council meeting. Officials in tokyo say the project i was fired over northern japan and landed 1200 kilometers off the island of hokkaido. It appears in north Korean Missile has flown over japan. We have begun to gather information and analysis, and we will do our best to ensure the safety of our people. 11orter officials from pacific rim countries the threeday talks will attempt an agreement. The America First policy favors oneonone deals rather than national agreements. President trump is preparing for one of his most important sale pitches, getting voters fired up about we writing the tech tax code. Changes,stions about tax brackets, and business levels have not been addressed. Steve mnuchin had predicted the bill would be passed by august come and now he will not commit to completing it anytime this year. Aer boss is contesting lawsuit. It would expose him to fabricated allegations. Allegedlyuing him for letting him control three seats on the board. He says he was entitled to menominee nominate board members. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Take a look at markets right now. Especially in the equity market, seeing most of the pain. Lets get the latest with sophie cameron. Sophie stocks are sliding across major markets in asia. Bonds. Look at korean spike seeing volatility in tokyo, seoul, and sydney. Volatility index has risen as much as 12 . Sinces as the most august 18. Jumping, trading at 108 spot. Going back to what is going on with the yen, we saw that across the 109 level as the news hit the wires. We saw a steady fall in japan. Touch adoes look set to high. Seeing morgan touching 10 touching 113 today. It last check on what is going kospi sliding 1 . I. T. And financial stocks losing over 1 . It is really being put to the test today. I want to draw your attention to this sliver of green when it comes to industrial. This is the difference subsector. It is rising over 3 . Nippon gaining as much as 7. 2 . Read will be the color today given this news out on will be the red color today given this news as north korea. Korea economy editor joins us now from seoul. Continuing toea threaten the region, fresh new headlines about the Missile Launch. Budget was decided before the events today. The budget was decided before the event today. To government does plan decrease defense spending. The governor plans to invest the preparing for threats. There will be a lot of watch on those areas. What about some of the other highlights for next year . Even from the Election Campaign come he wants a bigger role in fiscal policy. The government plans to increase spending by seven point 1 for next year, which is the biggest increase since 2009. We are going to increase spending. That the they have to propose this budget by september 1. What are the chances the president will get this approved . Judging from past cases, getting the Budget Approved has never been an easy issue because of the troubles between different parties. We are expecting a repeat of that this year because the president s party only holds about 40 . We are expecting to see some i just adjustment. Joining us live from seoul, also looking to the headlines coming out from seoul as well. South koreas saying they have discussed the missile with Rex Tillerson over the phone. We are also hearing from the defense minister from japan. The missile flying are about 14 minutes they say. It may have been similar to the midrange missile from may 14. Dimension todays they mention it was likely midrange. Are the latest headlines coming out. Lets talk more about this. Harvardus from the kennedy school. Thank you for joining us. Tell us more about this latest launch and how much more significant this is been the ones we have seen in the past. We have to see this in the context. It is not designed to send a single political message. It is their efforts to get a Nuclear Missile in range. The message we see right now is approximately looking at 550 and 2700 kilometers in terms of distance. North korea is making forward movements. It is an unconstrained program at this stage. Are you surprised we have not heard too much come out from the u. S. Administration . Pattern is usually when there is a lag. With therrelated gravity of the situation. If you look at previous statements, the effort and emphasis on sanctions, the bulk of it this summer was focused on giving diplomacy a shot. Is lookingcent round to lop off a third of north koreas exports. Those clearly are not working. Efforts to increase expenditure will lag in terms of the gravity of the situation is leading to the leaders scrambling to form some kind of response. Is ironic. Couple days ago we heard from Rex Tillerson praising korea for their restraint. This turn of events. Do you think that is a redline . Are they still open to negotiations . We will see that talking point again. An emphasis on north korea to come back to the negotiation table. The reality is that north korea is acting like this is at a Nuclear Weapon stage. You could draw any number of redline. In their mind, they are on the cusp of the capability of great powers. 3d three 33 that is the depth that we have to manage right now. Hat is the area the technical data will come out. One of the Amazing Things is that there are a lot of nimble researchers have access to open source information. There is a lot of comparing of notes over twitter and social media. They are able to ballpark some of the achievements of the north korean program. If you look at the north korean on the to put a warhead delivery system, we will be looking very closely at the technical data to see if they are trying to test the reentry. To going to go into the pacific where it is really deep, those things become very difficult. Reentrythe range and vehicle. Betty do you think this will renew focus on defensive capabilities, on preemptive strikes against these missile attacks . Will there be a for new in japan and south korea, and elsewhere . There will be a heavy focus. Who we have a number of systems. We have the egypt systems and now the japanese have declared they are going to do egypt for sure on base. We will see more of the networking efforts to do that. Practice makes perfect. The allies have to practice more. This is still a system that is fairly far along in technology. It will be a priority. Yvonne how will china view that . , nothave been quite tolerant of any type of Missile Systems there. , willms of their role they have to exert more on the economic leverage . A colleague and i like to joke about remaining calm. It will see that from the chinese side. There is a strong concern about escalation. They want to resolve these issues through peaceful dialogue. In terms of defensive urgency, this is a psychological barrier. We are looking at north korea actions. The gap is growing. Yvonne we appreciate your insight. We have much more analysis on koreas latest Missile Launch and how it is moving the currency market. This is bloomberg. Betty this is daybreak asia. A quick check of the defense stock and south korea after the north fired a missile. This is what we seeing here. A big spike. Shares up 11 . Betty we will certainly be watching how those trade throughout the session. A yen gained earlier on that passncement as the missile over japan from north korea. Prime minister shinzo abe saying the government is urgently collecting intelligence on the incident. We now know that japan and u. S. Officials have been in touch. We have not heard anything yet from President Trump. Running as now for more is matilda. When you see Something Like this, more headlines coming out, that will further the japanese yen rise. What do you expect, if anything with these headlines . Will there continue to be this bid upwards for safe haven . It has fulfilled its traditional safe haven prospects. It has given back some of its gain. We will see a little bit more of measured trading on the yen. It will not continue to strengthen. Clearly, it always reacts in these kinds of events. We will see the korean won selloff as well. As these things become more regular, markets, after initial negative reaction, or safe haven reaction, we see some calming down, given the lack of followup. That is what we will see in todays session in the near term. This i want to bring up chart here. You in tandem, what we have seen particularly of late. Gaining. Prices and yen this is the function of the dollar slipping. The in tandem correlation, that safe haven correlation between the two. Will that only strengthen as we get more headlines like this . I think you are right. Gold continues to exhibit safe haven qualities. The end has a cleaner safe haven trade. Yen is a cleaner safe haven trade. Trade inhe cleaner terms of safe haven is the yen. Alwayss that it will have this safe haven bid. Mediumterm, the it is a cheap currency which helps that gain in use environments where we see risk aversion and 10 to five. Intensified. Yvonne you have been watching the korean won as well. There is geopolitical risks with the currency. Here which shows early signal warning risks. It shows it is below average when it comes to any risks to the currency, which we continue to see throughout the last couple of months. Is there an upside for the korean won, especially if we hear more from centralbank . There are risks. Thatere is hawkish nest, might get some shortterm support to the korean won. I think we continue to see a wide range. As you start approaching towards 20e 11th 20 levels 11 levels. You can see a selling of the dollar. Overall, we are stuck in a broad range. It is a currency with a significant surplus. The authorities continue to recycle that surplus. We see outflows and the National Pension fund. It is a mediumterm, negative view that we have on the korean won. It is benefiting from the Semiconductor Electronics exports strength. That will keep it supported, along with its strong surplus. Significant gains. If the dollar keeps on weakening , that does not just benefit korean won, it benefits number of asian currencies. The korean won has quite a high bid for dollar moves. That means the korean won versus dollar continues. Yvonne what particular crosses are you looking at when you take a look at euro, yen, aussie, yen also seeing some interesting price action. What will you be watching for the next three months . As they say, some of the crosses on the yen is a good safe haven cross. Eurodollar has become particularly interesting. It has come a long way. Marksare now question about how much momentum we will see going forward. A lot seems to be in the price in terms of positioning. From our perspective, we are looking at signs of exhaustion and looking for more moves lower. See any more signs of hawkishness. In september, we might see something significant in the change of stance. I think this will be a key month for centralbank meetings. Betty i want to talk about the dollar. The outlook there, we know the weakening of the dollar has been quite precipitous. There are questions about how much the fed is going to raise for the rest of the year. , even aese expectations tempting down of how much we will see in terms of Interest Rate increases, do expect the dollar to be as sensitive as it has been to the Monetary Policy outlook by the fed . Or is it coming out with a little more resilience or impervious to what is going on with the fed . The reality is the markets have not priced in a great deal from the fed. If we look at a december hike potential, there is close to a 40 potential for that. There is little priced in for next year. That goes against our expectations were we look for a december hike. Economists expect three hikes next year. If the market moves in that direction, and a more hawkish direction, back could get the dollar a more tactical bounce. I think the dollar will continue to weaken. In terms of the fed hikes on what is priced in, there could be a little bit of a bounce in the dollar the markets become more hawkish in terms of federal rate hike expectations. That new round coming through in the u. K. As well. There is a lot of call on this eurosterling parity. Is that overdone . It is overdone. It has been a oneway street for the last several weeks. Election, more uncertainty around sterling. If you look at the negotiations, there are a few things the u. K. Wants to move forward with, such as the irish border, the brexit, but clearly trade is an important factor. U. K. Officials want to look at trade and how that will also be moving forward. The next few weeks will be particularly important. Until then, sterling will be wded in some uncertainty clouded in some uncertainty. Yvonne joining us live from singapore. You can follow this story on markets live. Betty you can get a market run down in one click. You can find out what the investments are. The big news has been on north korea. This is bloomberg. Yvonne wrapping up on daybreak asia, but a lot to cover. Contingency headlines coming out of japan, south korea, and waiting for a response from the u. S. Betty as we heard from our guest, the longer it takes, the more serious this event is being taken. We saw that yen jump sharply on the back of that news, but we seem to be stabilizing at this moment. That is it from daybreak asia. Market coverage continues. Stand by for bloomberg markets. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Announcer mom 00 a. M. In hong kong on a monday evening 9 00 a. M. In hong kong on a monday evening. This is bloomberg markets, asia. Rishaad a dramatic escalation in the north Korean Missile standoff in hokkaido. Shinzo abe and President Trump are speaking on the phone. Haidi the rising