Entertainment. This is daybreak asia i am in new york where it is just after 7 00. It was an extraordinary jolt for u. S. Markets. 10 days of record gains when it comes to the dow. S p also seeing record high. It shouldnt have taken very much for that jump to happen for volatility to jump. Withrprising it came strong rhetoric from President Trump. It is hard to discern what that rhetoric means. Does fire and fury from President Trump, what does it translate into in washington . It jolted the markets and caused us to fall to session lows. But we seem to have come back a bit, closing lower still. It was the initial fall that rattled the markets. Going to be focused on china Inflation Numbers here. Haidi thats right. Not to much overreaction when it comes to the aussie dollar. Look how it is setting up given a fairly volatile session. Lower sessions today. The kiwi dollar for a second day was the worst performer of the g10 currencies. No expectations of a rate change but certainly some weakness on the inflation outlook. Up just about four points. Earnings beating expectations. Headlines over Money Laundering and terrorist financing. The allegations are overshadowing that. This is how we are looking at of the tokyo open. The bestperforming g10 overnight. That is looking to more on the get first word news. Raimi Australias Commonwealth Bank reported an eighth Straight Record fullyear cash profit. Of 36llion on revenue billion with a Net Interest Margin of 2. 11 . Is not only earnings that will be on investors minds today. The bank is facing allegations breaching Money Laundering and terrorist financing laws more than 50,000 times. Disney is dumping its deal with netflix to begin streaming its own entertainment and espn sports concent directed consumers. Shares tumbled after hours following a rare drop in revenue and profit. Estimate analysts. Ceo bob iger said disneys Online Service will begin in 2019, calling it an incredible opportunity. My guess is they will look at this more as a threat than anything else. It is not intended to be that. We are reacting to marketplace conditions and we are taking advantage of the quality of our brand, the passion for the product we create, antitechnology that enables us to reach consumers directly. Imi jacob zuma survived a motion of noconfidence with critics saying they missed a chance to stake a stand on corruption. Lawmakers voted against him but he won comfortably, 198177. His time in office has seen scandals that have weighed on Investor Confidence in said the economy into recession. Opec says three leading members are now committed to production limits after talks in abu dhabi. Russia and kuwait say iraq coming uae come and kazakhstan after failing to comply with a deal earlier have now come on board. Malaysia it was also at the meeting and maybe same pledge. Oil prices have declined more than 10 this year on concerns curves will fail to drain the global glut. A new reports is Chinese Companies will spend at least 1. 5 trillion overseas in the next decade, a rise of 70 over 10 years. And it says official policies are encouraging firms to take a stake in advance tech. National concert he global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Betty lets get more on the s p. Stocks dropping the most in a month after President Trump threatened fire and theory against north korea on reports that kim jonguns regime now has the technology to deliver Nuclear Warheads. We have more details on the markets that were rattled by these comments. We should point out the market was on a path to yet another record high. You see there was a lot of red. It doesnt take much when the volume is this low going into the summer doldrums to move the market. We talked so much about how s moved the market. This jolted the market but i think the market assed it as rhetoric. Up 21 and change. They push back on the discounters which investors have been waiting to hear. They have been undercut by heavy discounts. Ralph lauren a perfect example. You will another see another ralph lauren in the months discount in the months to come. Hurts also reversing his trend. But it was down ahead of its earnings as was avis because the rentacar industry is under some much pressure for a number of Different Reasons and you see that reflected in the trade. Lets go quickly to the bloomberg. We talk about volatility we had an intraday spike on trump comments but we also have a trend. Topline is longterm vix index trend from 1990 to 2016. A lot of the big moves were on the righthand side. If you look below, the vix or 2017 is just starting to come off a low. If there is more rhetoric you will see that come off in a good way. This morning, the response from the north korean media. Lets get back to earnings. This is the Online Travel service priceline, and disney extended trading for Different Reasons. Where you seeing with disney . Su we heard the crux of what disney is saying. They disappointed in revenue for the first time and made major changes. You can see the stock is down after hours. Really interesting to see how this plays out wednesday because it is a mix of news. They are clearly revamping in terms of ending the pact with netflix and creating their own rival service where they will now have movie streaming and espn streaming on their own service. That will start in about 2018. They did have a decline in cable and come. Espn was a big come cable income. Espn was a big contributor. Also netflix has been down as much as 2. 5 in extended trading in reaction to the news. Priceline also a disappointment terms of outlook numbers. Back to you. Haidi as we have been reporting , we saw that spike in volatility overnight. That was likely due to comments from President Trump who is adopted some of the linguistic style of north korea saying the country will face fire and fury the world has never seen. These comments coming after japan and the Washington Post said pyongyang had made Nuclear Weapons small enough to fit on an icbm. Imateofficials est north korea has 60 viable nukes. North korea best not make any more threats to the u. S. They will we met with fire and fury like the world has never seen. Threateningvery beyond a normal statement. Betty pretty dramatic and forceful comments. For more on north korea and the response, rob levin steam is joining us. Joining us from washington. What you think the president meant by fire and fury against north korea . Rob that sort of the Million Dollar question. Conventionala military attack or to see me a Nuclear Attack . Was he saying just if he threatens he will do something, or if they actually do something . I think we have seen a lot from President Trump, a statement that is not quite clear. It is very emotional and not clear exactly what he did mean. Betty it is very unclear. Does it box the u. S. Into a optionshere diplomatic are not on the table or minimized in favor of military action . Rob i think there is a real danger of that. That is why president s engaging in this kind of rhetoric is pretty rare. You president obama got a lot of trouble with the socalled red line on syria the net boxed in and what he didnt do it he was criticized. If you do this, im going to do this. If you do not do it you you wrote the credibility of the president. Erode theroad credibility of the president. China has done this in the past to get what it wants. Does actually have leverage it can use in what more can do . Rob it does have some leverage economically. Thats the real pressure point. I have to say, i was in the Intelligence Community for a long time in one thing we said we never understood without north korea makes decisions. How they are receiving information and out decisions are being made decisions at the top. Is not clear how much leverage the chinese actually have. Whether or not the north korean regime will respond to pressure they are prepared to starve and murder its own people doubt thinking twice. Im not sure how much leverage that gives china. Haidi we were talking earlier about the latest rhetoric from north korea this morning talking about a preemptive attack, saying this will end miserably. Does this take us one step closer to a military option . To say thatuctant because everyone in the u. S. And all the senior generals around President Trump know what the consequences of a military option could be. We could get fullscale war on the korean peninsula. No matter what happens that would be so devastating to south korea. I think they will look for off ramps and ways to get beyond this but it certainly does increase the tension. We dont really understand how the North Koreans will react to this. Haidi thats right. Its that uncertainty that really creates a difficult situation when it comes to what we are watching with the story. Thank you so much for that. We will continue to bring you more on this story no doubt. We have plenty ahead on bloomberg. Alibaba looking at looking to tap into the tourism boom in china. Chris smith will be joining us. Later u. S. What is going on at disney at the todays earnings report. A Media Consultant will be joining us and about half an hour. This is bloomberg. Haidi this is daybreak asia. 87 of companies in the s p have reported but we are not done yet. Has been onis week media and retail as we saw with cbs and disney. Fox leads 20th century tomorrow followed by macy and kohls and jcpenney. Before we get to the specific sector, talk about north korea. Tanked onis market the news but it wasnt like a was a 300 point drop. What did you make of this spike in the vix . Has beenst, the market setting up for something of a nearterm correction for a while. We had been accumulating this body of evidence suggesting we are running on fumes. Things like not confirming the rise and large caps. Dow doing better than the s p. Lookingrunning on fumes for an excuse to correct and this seems to have provided us with a good excuse. The question is how long does it indoor. The market does it endure. The market has been conditioned to take a shortterm gut check than thein a negative next day come in and basically perceive it is all past. Confounded at the markets drop on north korea but they do not really drop on the failure of health care reform. Why . What are they picking and choosing . Gina there is so much uncertainty with respect to north korea. Is a shock because it is unexpected and we dont know how to price it. With health care that has been so much backandforth and frankly, whether or not we repeal health care, consumers will still demand healthcare services. Its a matter of whether or not they will demand it through medicare and medicaid into the ultimate payer is. When you have this big geopolitical conflict potential, its much more difficult to price. Haidi it is fascinating because looking into the domestic policy agenda all the uncertainties related to that from outside from asia, i think that looks a lot more uncertain. You see more lurkers it is interesting the perception. We have been talking a lot about how a lot of the vix rally being pushed higher by a robust earnings season. But you pointed out they had been beaten, but only on the back of low expectations. Gina that is with respect to mediate and retail specifically. When you look at this week, this is the weakest part of earnings season. Immediate and Retail Company expectations has an lowered over the last several months that they are now beating those expectations. When you look at the entire s p 500 the story is actually analysts held expectations and companies beadles expectations. When you look at beat those expectations. Its been a very good earnings season and it will continue to be. But this week specifically, retail and media are weak spots and you have to take the shortterm with a grain of salt. Haidi staying with that, what did you make of disney . This latest shakeup. Gina frankly, this is a consequence of what is happening throughout the entire can we near what is happening with retail and the competition with retailers, media and tech providers, what is happening with advertisers as they look for sources of revenue growth. Will be traditional tv consumer or is it going to be the internet . I think there is this very big shakeup across Consumer Discretionary whether it is goods or Service Companies and competition with Technology Providers who are nibbling at the consumer space at a faster pace than i think most people had expected. Haidi thank you so much. Were not done yet with earnings season, so perhaps some surprises around the corner again. Next, speaking of possible surprises, widely expected to show stability but the trade numbers yesterday, we were expecting them to come through a lot more positive than they did. We be speaking to the chief asian economist to see if anything can upset apple. Is bloomberg. I am betty lou in new york. Haidi and i am haidi lun. Seeingrg estimates are uptick. A slight lets go back to yesterday we had the miss. Is a suggestion if we get a weaker inflation reading today that these kinds of robust recovery in china study as she goes resilient going into the Party Congress likely some kinks in the armor . Guest i think the chinese economy is too resilient. Some kind of moderation. To policy stance because now they are implementing a monetary policy. Policy will kind of entice buyers in the second half of the year. Betty what visibility do you have into what exactly is happening with the Deleveraging Campaign . As of the a lot of things in china the policy has coming down hard. Pushing through quickly. You see the violent reaction in the system in the markets the nickel back. At what point are we in the crackdown in the camp and campaign to deliver . Xia their careful in implementing the crackdown in the financial market. Because they dont want to cause further financial turmoil in the financial market. They dont want to cause financial troubles. Finetuningbeen their case of pace. They are going to continue to do these sort of things to facilitate the financial leveraging. They will control the pace. They will follow the strategy of two steps forward and one step back. Betty one thing that has been quite confounding is the chinese currency. What has been hard about keeping control of that. Not just the outflows but also the weaker dollar has been really causing confounded not just with the chinese but with a buzz of currencies including the japanese yen. Have you think the weaker dollar is going to play into this inflation and economic story for china . Xia thats a very good question. I think the very good performance of the chinese yuan dollarto the u. S. If you look at u. S. Dollars performance against other currencies they have been weakening again. Easier forits chinese authorities to retain the ability of the chinese yen. Looking forward i think maybe if the u. S. Dollar can rebound in the second half of the year that could bring additional downward pressure on the Chinese Exchange rates. Certainly thats a longerterm. Shorterterm, keeping things stable. You mentioned a few risks on the horizon for china, at least a bigger risks. By housing bubble burst, shadow banking, local Government Debt overhang. And currency and what we are seeing against the weakening dollar. Think out of those factors will be the biggest risk for chinas outlook . Would like to say the shadow banking activities. Authorities have taken matters to tackle this issue. Size of thist the shadow Banking Sector in china, it is quite big. I think it will take time for china to diffuse this shadow banking risk. It will take time. Along the way there will be other financial turmoil, other financial uncertainties. Chinese authorities need to watch out. Betty thank you so much for joining us. Asian chief economist in hong kong. Much more ahead. Profit by theord bank could be facing hefty fines, qs of financing reaching who knew that phones would start doing everything . Entertaining us, getting us back on track and finding us dates. Phones really have changed. So why hasnt the way we pay for them . Introducing xfinity mobile. You only pay for data and can easily switch between pay per gig and unlimited. No one else lets you do that. See how much you can save when you choose by the gig or unlimited. Call or go to xfinitymobile. Com. Xfinity mobile. Its a new kind of network, designed to save you money. Sydney. Ts 9 30 a. M. In that is not sydney. What a beautiful evening it is in new york. Not long now until we get the first major market open in asia. Betty thats right. It was a pretty crappy rain yesterday that gave way to nicer weather today. Not so nice and the markets. At the endt surprise of the session from President Trump on north korea. Watchingu are daybreak asia. Lets get you caught up with first word news. Aimi a draft report from 13 federal u. S. Agencies directly contradicts President Trumps own dismissal of Climate Change and says the country is already feeling the negative effects with a stark increased of heat waves, torrential storms and other extreme weather over the past four decades. President has publicly expressed doubt that Global Warming is manmade and has no consequences. It seems to be literally taking the place of the current parliament. Delegates met in the Legislature Buildings to begin the drop of rewriting the constitution, intensifying a campaign that sent Opposition Leaders into hiding. President nicolas maduros of the body supersedes a