I am betty liu in new york. It is just after 7 00 p. M. Yvonne it is just after 7 00 a. M. Here in hong kong. I am yvonne man. On southeaking news korea, their current account balance for the month of may, coming and higher than what it was previously, at 5. 9 billion. That is quite arise from the month before, 3. 9 billion. Going to help in terms of economic relations between south korea and the u. S. . It is continuing to be a rising account surplus, a thorn in the which has caused to say that the South Koreans are manipulating their currency, suckingexports out, that out of the United States, so to speak. Inse numbers, not goods terms of economic relations between south korea and the u. S. We have seen with headlines and north korea, they will have to work closer to contain what seems to be enough collating crisis in north korea. Korea t seems south i guess they have to deal with much more now, geopolitically, then politically. Comments from kim jongun, saying an icbm capable of reaching the u. S. By this year. Market jitters that we saw as soon as they got the news late yesterday in the afternoon. Looks like we are set for another jittery session in asia. Lets take a look at how new zealand is trading so far. Slow going when it comes to that nz. Australia, we did see that asx 200 bounceback, today slump, probably the only market that was rising yesterday, up 1. 75 . Oil up for a 90 day. 08 for the aussie. Also, the aussie yen had a pretty good run. That rba decision. We did not hear hawkish comments, as expected. That is seeing weakness there. Pointing toes, losses here. Slight gains, we are seeing futures down 0. 7 . 113. 11 for the dollaryen. Escalating tensions in north asia with the latest developments coming out of north korea. Also, bank of thailand decision later. The Hong Kong Open is one to watch every to the hang seng now 1. 5 from yesterday. Tencent. Y in betty certainly an interesting oped they came out on tencent. We will dig further to that story. Our top story, the stakes have been raised dramatically in korea, with the u. S. Confirming the north the did indeed test an Intercontinental Ballistic Missile on the fourth of july. Rex tillerson tsonga represents a new escalation of the threat to the United States, our allies, and partners in the region, and the world. He said the u. S. Will never accept a Nuclear Armed north intends to hold them accountable. Koreas News Agency Says the u. S. Will not like its gift on Independence Day. He intends to create an icbm capable of reaching the u. S. This year. Lets bring in our seoul bureau reporter. It is moving quite quickly. How will seoul respond to this . Peter moon has announced there antiBallistic Missile test drills with the u. S. They have considered other options, including increasing sanctions. Asterday, they convened National Security council, likely to have another meeting today, considering the missile has been confirmed as an icbm by the u. S. A lot of reaction happening today. We expect the markets to move on this news. Whenrday in the afternoon north korea said they had , thessfully tested in icbm korean stock market declines. We expect that to happen today, as well. Betty we did see the korean stock market, the kospi, fall a little over 0. 5 . Is it surprising it did not fall further, given the pretty significant change in events here, peter . Initially, most folks probably thought it was in intermediate missile test. That has happened friesen frequently. Markets have not reacted to those because they have often happened, they have been frequent. Later in the afternoon yesterday, when news broke out this was likely an icbm, a significant step forward for north korea, that is on the market reacted. But it was late in the afternoon. We will probably see the residual affected that today continue. Anticipate some market movements in about an hour. Yvonne we continue to see the yuan weakening this morning. Thank you so much. North korea will surely dominate pings as president xi jin meets leaders in hamburg for them g20. Vladimir putin, as well. We are following those developments. Steve, what do you make of it so far . Especially the timing, where we are supposed to see so many leaders meet with president xi, putin, and trump . Steve forget the north korea stuff right now, china is russias biggest trading partner. They signed a number of agreements for oil and gas distribution, as well as height the rail. Highspeed rail. Let me talk about some of the things they are likely to conclude before the joint statement on north korea. They will likely set up another big fund, a development fund, of 10 billion for joint projects. That is on top of another fund they previously set up with of the Sovereign Wealth Fund of china. That is the china russia investment fund. They will be doing a number of other things, including space exploration, exploration of the moon, but it is all secondary. It is way down the list, compared to what is happening with north korea. Did a joint statement, saying kim must halt missile launches and military exercises. Theia and china saying, statement, the claims of violate unn icbm Security Council resolutions. A call from the u. S. Ambassador of the united nations, nikki haley, for a closeddoor session of the Security Council. Russia and china are permanent members on the Security Council. Two of five. Have veto rights and sway in resolutions. They are major participants in the previous Six Party Talks for north korea. Key players, Vladimir Putin and xi jinping. Tell me how north korea is going to be in the backdrop or hanging over many of those discussions . Stephen it is going to be hanging there, sticking out like a sore thumb. Betty the elephant in the room. Stephen absolutely. Xi jinping is the man right now. He is having talks with Vladimir Putin, as we speak. He will be speaking with Angela Merkel, part of his pivot to europe. If the u. S. Is indeed retreating as its role as a global leader, identifiedhas germany and and Angela Merkel as a similar voice for globalization. Ater in the week for them g20, xi and trump will me, as well. Trouble be talking about north korea. Xi will be saying, we are doing our part. Xi andcoming from beijing. Trump said they have not done enough, and that is where the friction is line. The escalating tension between china and the United States, especially after the 1. 3 billion arms sale trump announced with taiwan, will ruffle xis feathers. So much geopolitics going on behind the scenes, and already tense trade ties between china and the United States. Betty i know you will stay on top of this. No shortage of tends topics for leaders when they meet. Lets get to first word news of paul allen in sydney. Paul russia is said to be pushing back at any proposal to widen Oil Production cuts and will oppose the idea of the opec meeting later this month. Forking anonymously government officials, they told us further curbs would send the wrong message to the market and suggest the cartel and russia, they are not sure the current agreement will work. Russia plans to host opec ministers and nonmembers on july 24. Russia and china used president xi jinpings trip to moscow to discuss a yuandominated investment fund, worth 10 billion. They cited the kremlinbacked investment fund. The new arrangement intended for joint projects in the China Development bank would represent beijings interest. To doah d doha had demand for kuwait. They wanted to and ties with iran and close out to zero aljazeera. They said the doha could not be expected to back down. We discuss the crisis in detail and i want to reiterate, that when there is one side it leveling accusations against another, that side cannot say, yes, i accept everything you say. Qatar is fighting hard to keep its crown as a leading lng producers. They see australia eventually becoming number one. Qatar is expected to keep the title for at least seven years after they said it would raise output by 30 . That tops australias plans and reinforces qatars role as a major global supplier. Banks next ceo, incoming chairman mark tucker, considering candidates to lead operations. They have contacted him. Before the appointment of all of hsbc had chosen its leaders from its own ranks, for 150 years. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. We will have much more ahead on bloomberg television. I so much, paul. Geopolitical futures found her and chairman George Friedman joining us from austin. Just after midday if you are watching in sydney. Yvonne well continue our discussion on north korea with jasper kim. This is bloomberg. Yvonne we are counting you down to asias first major market open. Japan futures heading higher, but dollaryen sees its strength with more comments out of north korea. A threatening Independence Day gift to the u. S. 13. Dollaryen at 112. Betty yen and gold writing on these tensions. I am betty liu here in new york. We did get new headlines a few moments ago on this north korean icbm that was fired yesterday in asia. The stakes have risen dramatically, the u. S. Confirming this missile test was missile,ontinental which escalates the longrunning crisis. We want to discuss this with an expert on conflict management. Lets cut right to it. Want . Oes kim jongun jasper kim jongun sees all of this as just a negotiation game. He wants to sit in a room, facetoface, alpha male to alpha male, with donald trump. All this flamboyance, military technology displaying to the world during the holiday is just a negotiation game. He sees it as just a bargaining chip. Heard by the way, we have President Trump entertainment possibility of a facetoface meeting with the leader. Once he gets that, if he gets that, what does he want after that . He wants a meeting, but ultimately, what does he want . Jasper trump and kim jongun want the same thing they want to display power and create a legacy. They want to be distinguishable from those leaders before them. Kim jongun and father, and President Trump and obama. They want to package a deal were both go down in history books together. Self interests are shared. What i envision, if i had to advise donald trump is that, please package this in a trade agreement framework between the u. S. And north korea, or just korea, north and south. Within this, you can talk about security issues. That would be the strategic approach. Betty lets dig further into that. What do you mean package this into a trade package . What are we talking about . Jasper in terms of u. S. Foreignpolicy, it has been hesitant in terms of dealing directly with people like kim desperate despots. He is a business to go sheeter. Why not package this within the framework of a trade agreement between the u. S. And north korea . That would go down in the history books and be something that would follow donald trump past 2016 or 2020. Yvonne what do you think chinas response to that would be . We are seeing reluctance when it comes to reining in north korea. What are they willing to do at this moment . Jasper xi jinping of china, their approach has been the calm and steady approach. They want to deescalate the situation. They do not want it to spiral out of control. They want deescalation, which is not too different from the u. S. But how to reach that is a huge difference between the prc and them. They will have they will need a competence of solution during this g20 meeting. My prediction is that it will be more of the same. Both sides need to because is, moving forward. Do you thinkt these relations and what were seeing, that he is dictating the terms of the relationship between the u. S. And china . Jasper donald trump should know was a negotiator, there is nothing of the oil as two parties together in a negotiating process. As someone could have the upper hand, but that is not the point. The point is, can both get what they want . A situation, if negotiated strategically, about the donald trump and kim jongun can both get what they want. It does not mean one is delegitimizing the other, but if it is pivoted and calibrated in a way that both see some upside in it. Betty jasper, do you think the north korean leader, kim jongun , is serious about hitting the u. S. With a missile, much less a nucleararmed missile . Jasper i think he is serious about the perception of that potential. Betty that is not the same thing. Is he serious about actually getting continental United States . Jasper i do not think so. Unknowns,some unknown things would have to spiral out of control. That is an unknown unknown variable. What he wants right now, in my view, the perception of being on the brink of war on the korean peninsula. That will translate into getting things you want. So far, it has worked exceptionally well. Meeting they should be talking about stability in that sense, he did. Betty this is why i am still puzzled. I hear you saying, that he wants legitimacy and that would be sitting there in a state meeting, facetoface with the president. They are already getting aid from china. What could the u. S. Give to him that he actually desperately needs . Or, are you saying that he just wants that legitimacy, and if he gets that, then he will stop these missile test . Jasper i think he will stop, if he gets what he wants. The question is, what does he want . Deconstructing kim jongun is a rubiks cubes endeavor. Short, i think he would stop if he gets security from his vantage point, trade and aid, from his vantage point. The question is, what is the quid pro quo for the u. S. . Yvonne what options does donald trump have at the moment . Is it just threats through tweets . Is that what it has come down to . We have been talking about the redlined u. S. Might have, now that we have confirmed they did some type of icbm. Has the redlined been crossed . Will this force donald trump to rethink his approach . Jasper you raise an excellent point. There is no pure red line. That is the problem. North korea has done all kinds of provocative acts, leading to the death of civilians. And there has not been a backlash from the u. S. Or south korea. Perspective,uns youre thinking, how far can a push the envelope . The answer is, i do not know. But i will keep trying until i get pushed back. But that pushback to be harder and more severe and unexpected than anyone would expect. With emotion, patriotism, emotional and rational factors. A canhey come into play, be cool and collected or chaotic at the same time. Yvonne jasper, great to get your perspective on all this. The director for conflict management joining us from seoul. You can get a roundup of stories from daybreak. Subscribers, go to dayb on your terminal. Settings,stomize your get news and industries and assets you care about. This is bloomberg. Yvonne a quick check of the business flash headlines. The writer says the u. S. Government is getting involved in apple dispute with the e. U. An Anonymous Sources said washington has found applications with the e. U. General court over the Retroactive Application of state rules to apple. Last year, the European Commission ordered ireland to recoup money in unpaid taxes from the company. Plans to sellgen cars in iran for the first time in 17 years, taking advantage of easing sanctions. They signed a contract to offer compact suvs and the passat, mainly in the tehran area. They are struggling to rebuild operations in the u. S. After the diesel cheating scandal. Yvonne more airlines expect the u. S. Ban of laptops on flights to america could be lifted. Turkish expects and announcement wednesday. It could be rescinded on dubai soon. Middle eastern and african airports are affected by the ban. They are talking to washington about introducing Stronger Security arrangements. Yvonne 7 30 a. M. Here and when in hong kong on wednesday. Minutes away from that market open. Betty it is 7 30 p. M. Tuesday. We are getting ready from fireworks in new york. Not far from the offices, 10 blocks away. Some markets have closed for the july 4 holiday. I am betty liu in new york. Yvonne i am yvonne man in hong kong. Now, first word news with paul allen in sydney. Paul secretary of state Rex Tillerson says north korea did test an Intercontinental Ballistic Missile, describing it as a new escalation of the threat. He says the u. S. Will never accept a Nuclear Armed north korea and intends to take stronger measures to hold accountable. South korean president moon jaein has ordered joint Ballistic Missile drills with the u. S. In response. We agreed to develop our initiatives based on russias stepbystep plan for a settlement in korea. As well as ideas from china. At the same time, freezing the Nuclear Capabilities from north korea on the military exercises by the United States and south korea. Paul french Prime MinisterEdward Philippe says the country must break its addiction to public spending and made a speech promising Government Spending would fall by three Percentage Points of gdp through to 2022, along with 23 billion of tax cuts. France underperformed in the eurozone, with unemployment the world oldest bank has one e. U. Backing for a bailout. The European Commission clear the preliminary recapitalization hi, whichf monte pasc means Government Support to survive. Is struggling to fix the crisisera legacy of 350