This is daybreak asia. I am betty liu in new york, where it is just after 7 00 p. M. Charlie it is just after 7 00 a. M. In hong kong. It feels like summer. Quiet in the markets. We have the trade figures of china and the trade balance in japan. Betty those are the big numbers to watch. Big market moving event. In terms of here in the u. S. , it mergers of a focus on that may or may not happen and specifically a look at Berkshire Hathaway and what they may be eyeing out on the horizon. Oil Prices Energy prices in particular in focus. Despite the drag, the market still managed to get out the gain. We will go through that in a moment, but that is setting up for a slightly bullish tilt for you in asia. Yvonne let us look at how things are playing out here. Cpi figures out of the u. S. New zealand, we are seeing the stock with weakness. 7356. Wi, the traders are worried about the dollar edging up. The worst currency in the g10 space, ahead of the decision this week as well. We are seeing australia, the 7909, far away from 80. Oil is slipping as attention shifts to compliance among opec members. 4927 for wti. Japan, the trade balance expected to swing back to a surplus in the month of june. We are seeing dollaryen. 110. 76. We are seeing equity futures not doing awful lot either as well. Ish. Ty slumber we did see record profits coming out of taiwan and vietnam as well. Allave seen the g20 nations kind of expanding at the same time, so big question is, is that going to be sustainable . Betty absolutely. We will be analyzing that as we head towards those numbers in china. In the meantime, back in the u. S. , wall street remaining at those record levels. Mergers. F potential su keenan has more on the wall street action today. Su we saw stocks modestly higher. The s p and dow extending their gains. Some of thet standout stocks, clearly, m a was at play. Avionics, fiveyear high. Withare said to hold talks the company. Shares rose as much as 8 , closing with 7 gain. Netflix making its first acquisition, miller world, appearing to focus on superhero stories, and nvidia, reporting on the 10th, hitting a high for the year. A lot of investors looking forward to that report. Let us go to the bloomberg 5900, quick at g btv because there is a lot of talk about what the twoyear is doing to inflation and Interest Rate hikes. The outlook rolling up his what we can see in this chart. The white sort of bending forward where the red is outlined. You have two titans in the market saying there could be higher inflation. The market appears to be complacent about this. They think traders again are too complacent and the tips are cheap. The economy has improved, but the inflation level, not at the level that would be consistent with improvement. Let us go also to the oil chart, because oil has stayed below 50 since the close one week ago today, above 50 for the first time. A lot of concern about whether glut can be reduced and what happens in abu dhabi with all these opec and nonopec producers. That will be very telling. Betty let us talk about Warren Buffett because a lot of people are starting to talk about how much money he has. He has almost too much money and need to do something about it. Su he did have a bit of a disappointing earnings announcement, but the take away people focused on look at all that cash. Let us go into the bloomberg one more time because if we look at this chart, it shows they are nearing 100 billion in cash on hand. It is unusual for them to have quite that much. They are a bit behind in their company, and there are about eight Companies Analysts say that are on the table to be targets for buffett, and the money is there to do it. In terms of how the company performs, if we look at the chart, you can see it has not been a great year for Berkshire Hathaway. They did have a bit of an earnings operating earnings fell another quarter. Manufacturing did rebound. We did see a little bit of strength in insurance. There we are yeartodate. It is not about performance, but not one of the better cortisone the company. Yvonne we are starting to see positive Hedge Fund Performance is after the chart with all this year. Several mega fund are reporting big gains. Anythinghe standouts, from biking to renaissance. The large funds coming in with 9 to 11 year to date gains, at. H are nothing to sneeze these hedge funds, the member funds, under great pressure earlier in the year. Many are flat if not negative. We saw the large Commodity Fund that was 30 year to date and had to shut down. The market had some concern there. When you look at the offshore fund, it reported 11. 7 gain. According to the firms website, the main wellington fund, 7 . Hedge funds, do not count them out yet. They are coming back in the second half of the year. Anchor all right, thank you, su keenan from new york. First word news with ramy inocencio. And good morning. Softbank Beat Estimates in the first quarter, reflecting his transition to a company that makes deals. Operating profit was 4. 3 billion, lifted by sprints return for the first time in three years. His dealmaking is said to continue with sprint said to be in merger talks with tmobile. Softbank has been up and down this year, but shares remain in the positive, up by 13 year to date. To severalalking Different Companies about sprints business tieups. I can say the final announcement will come very soon, but i cannot give you a time frame at the moment. Sprint is now in a much ialthier financial state, and have become much more confident this deal will be successful. Ramy chinas foreign reserves thought a sixth straight game. The pboc says the stockpile to 3. 0 8 trillion according to the Bloomberg Survey expecting 3. 0 7 trillion. New data on exports are due. Ater the consensus is shipments rose 11 in dollar terms. North korea has condemned new yorks sanctions, saying it will not negotiate over its nuclear plans. State tv denounced america for what it calls its hostile strategy, and said it would pay dearly for his crimes. In a separate statement in manila, north korea said president America First program is dangerous and pyongyang need weapons to avoid the fate of iraq, afghanistan, and libya. Prosecutors in koreas wideranging corruption inquiry are demanding 12 years in jail for jay y. Lee. He is accused of authorizing the payment of millions of dollars to a confidant of toppled President Park geunhye in return for political favors. Park is also in detention, accused of abuse of power. She has refused to testify. Venezuelas opposition dominated legislature the National Assembly has rebuffed Nicolas Maduro by refusing to recognize the trees from his new constitutional assembly. Lawmakers voted to ignore the decision to face the prosecutor with a loyalist and create a truth commission. Been givenamily has virtually unlimited authority. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am ramy inocencio. This is bloomberg. Betty thank you. For more on the fed and the officials dovish comments on inflation, i want to bring in kathleen hays,. Bring in kathleen hays. Kathleen bullard made it clear that inflation is too weak. Here is what he said earlier today. Recent inflation data has called into question the idea that u. S. Inflation is reliably returning to target. The current level will remain appropriate over the nearterm. Jim bullard went on to say that he sees little relationship between inflation and on employment, so even if unemployment falls and the economy is going along, he does not see that boosting inflation much. He does think it is time to look at the balance sheet. Able toe going to be get going on this process. It is going to be very slow. I do not think there will be a lot of impact on markets, but i think it is the right thing to do and i would support getting going on this process. Kathleen he says it should start in september. The president of the minneapolis voter, basically agreed that inflation is still weak. It matters because it has to do with fed credibility. He said if it should boost inflation, it should do it. Hour, japanr this is releasing its account balance. Kathleen let us take a quick look. The current account surplus on 1. 3sively adjusted basis is ¥9 trillion. Btv 9194. You can see the main number was about 1. 40. You can see how the yen was weaker. This is the yen dollar rate on this chart. It has gone stronger, so maybe the peak you got will disappear a little bit. Bloomberg intelligence pointing out that one of the biggest risks here, besides the reversal, is good old u. S. Protectionism, yvonne. Yvonne hang on for a moment because i want to talk a little bit more about this. Not just japan, but what we talked about with the fed. Us now. Ent is joining david, where do you stand on this inflation . Betty is it gone . Guest it looks like it is tame for the time being. We had a lot of conversation about this over the weekend in maine, and there was a lot of discussion about why should the target be 2 . What is wrong with 1 . What is wrong with 1. 25 inflation . You heard that from folks like my colleague, bob. I dont think anything is wrong with it. It is an arbitrary number. The interesting thing was, in the group, in maine, the conversation was below two. There was no one talking about inflation risk. That was different from prior meetings or gatherings up there. Guys, take my chart here, my bloomberg, g btv 8924, which is showing just how treasury yields usually follow along with where cpi is headed. You have seen that pretty much throughout 2017. A little bit of a change here. It looks like we are resuming that path for yields. There is a debate right now. I know you are aware of this. You have some of the asset firms like blackrock, who say it is just a matter of time. Look at the jobless rate. It is a matter of time before we go up and you are going to see inflation back up. Then there is the other study which we just talked about here. David what is the direction of causality . Does a rising wage cause inflation . Or does inflation caused pressure that therefore triggers the rising wage . And that is a very, very difficult debate. There is a lot of evidence betty you some a qr with the latter. You sound like you are with the latter. David i think so. Anchor a lot of people argue the world has changed and there is technology and fierce global kotok, you, but camp were talking about a fed debate. How many people are saying do not raise rates . And how many are saying there will not be another rate hike . David they divide between dont and one. We take surveys up there. We have surveys about future fed funds rate and when will the peak take place . And the kind of numbers that are two and maybee three, and when is 2019 . It is a very subdued group this year. Anchor can you tell us who was the one and who were the four . David i will cut you this, there was a public debate. We suspended the rule. Megan greene,en, ianco, and the distribution of opinions was the entire spectrum. Anchor what about the ecb . Is mario draghi going to signal he wants to drop the policy by ias, or is it too early . David Banking System problems, and he will signal that he is eventually going to signal. 1 anchor [laughter] anchor ok. But he mentioned how this is tracking were inflation goes. Can yield is still go that much higher from here . David i think it is slow and it stays low. We may be in this environment for a while. If you look at the savings rate in the United States, it is higher than it needs to be to finance the demands of the country. Pressure on a Interest Rates. There is a question if the fed ofgorges a lot government paper into a market, can it absorb it . But if it doesnt, in we are going to proceed at a very slow p ace. It is being priced in lowInterest Rates. Anchor david, stay with us. We are going to continue the conversation in a moment. Looking ahead on a break into, daybreak asia, we will discuss the results. Betty the diggers and dealers conference. Goldfield ceo nick joining us at 10 10 00 p. M. Sydney time 10 10 sydney time. This is bloomberg. Anchor this is daybreak asia. I am betty liu in new york. Yvonne i am yvonne man in hong kong. Washington is in favor of a clean increase in the debt ceiling. The treasury market is not buying it. Take a look at my bloomberg. You will see disruption in the market that shows the yield expiring in october, which is in red, and that, you are seeing traders willing to pay more for debt expiring in that month versus the october the november 1, i should say, in white. You will see the yield. We do get closer to more debate about this potential debt ceiling. Let us bring back david kotok. Do you think the market is paying enough attention to this debate . The ceiling debate . David the market is starting to, yvonne. Question is, can we look at places like you just did in that chart . Can we look at the credit default swap on the u. S. . The trades in europe, up five or six basis points . That does not seem like a lot, but when there is 150 trillion in u. S. Dollar denominated debt worldwide, and that google the derivatives, a basis point billion at an annualized rate, 6 billion per month. And that is what this congressional charade is imposing on the u. S. And the rest of the world. So the market is worrying about it. It is politics at its worst. Just seeing the house of representatives. They are already in recess. The senate, unlikely to talk about this next week. 12 legislative sessions to resolve this issue when they return. Do you think the impact of this will be limited to the short end of the curve or could this spread further down . David i hope so, if it is not protracted purity secretary of the treasury has said here is what i am going to run out of here is when i am going to run out of money. It is a narrow target, but it is narrowing. At what point does the brinkmanship end . The United States is going to is not going to default. [laughter] anchor are we back to that again . Are we getting back to that, david . Steve was on with us earlier. This is what he said about washington and the appetite for more debt. The problem is, Everyone Wants to do tax reform, but no one can find a remedy to pay for it, and i do not think there is that much appetite on the hill for any real increase in the deficit. Is notgiven that, it saying anything new. We have been here so many times, over and over again. How do we get past the issue . How do we impact this . David do you remember the childrens story the neverending story . This is our way how america governed itself. It is absurd and we pay a price for it. Betty are you surprised we have not paid a bigger price for it . I guess we are all used to it now. We do not expect the country to default. Ask people and they will say no. You see changes in pricing and a marketbased price and you wonder, the market is saying the risk is rising slightly. Why . Someone in the Freedom Caucus worked and they are caucus burped and they are afraid. Betty what will we get for not defaulting . David the u. S. Interest rates will still remain low. When we get beyond the hole that ceiling debate, we will go on to debt ceiling debate, we will go on to other issues, i hope. There is a rumor about that. To see you. , good david kotok of cumberland advisors, chairman and cio. That story and many more you need to know in todays edition of daybreak. Bloomberg subscribers can go to mobile, or the bloomberg anywhere app. You can customize your settings so you only get the news on the industries and assets that you care about. This is bloomberg. Anchor a quick check on the latest business flash headlines. Tesla is making its debut in the bond market as elon musk bolsters his bets on more Affordable Electric cars. Money onnning to offer unsecured notes. The proceeds will help tesla rollout the model three, its cheapest car yet. It will test teslas fervent following among investors. Alibaba is beefing up its travel service by heating up with marriott, creating a joint venture with marriotts entire lineup. The companies will link their Loyalty Programs and offer promotions for travelers. China is the largest source of tourists in the world. Entertainment has sold the distributor of oscarwinner spotlight to a Media Company backed by investors that include tencent. They confirmed they bought open road films. They said the deal is part of a larger halfbillion dollar expansion plan. Chinas continued interest in hollywood despite beijings recent crackdown on overseas investment. Netflix announced its first acquisition, picking up a comic book publisher and moving into the ever popular world of superheroes. It is by miller world for an undisclosed amount to reduce films, theory, and shows based on comic book characters. Netflix is hedging against the possibility that disney will not renew its deal with marvel. Coming up next, softbank transitions into deals. Better run through the numbers, coming up next. This is bloomberg. We check our phones 85 times a day. 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Monday evening in new york. We are pretty miserable. Markets close a little bit higher. Im betty liu in new york. In hongi am yvonne man kong. Lets goes ramy inocencio. Ramy comments from two officials make it more likely that the fed will keep on hold next month and only edge toward an unwanted of the balance sheet. James woolard says any movement will be slow in ord