Live from bloombergs u. S. And asian headquarters. I am betty liu in new york, it is after 7 00 p. M. Shery it is after 7 00 a. M. In hong kong. I am shery ahn. Injured aftermore a van hit pedestrians in one of barcelonas most popular streets. Two have been arrested in Los Angeles Las ramblas. Spain has a history of terrorism. Passengers were killed by bombers in madrid in 2004. There are rumors gary cohn would be resigning as President Trumps top advisor and not to mention the political scandal going on. That is leading the markets. They took a big hit overnight. Betty they absolutely did, as you point out. It was interesting to see the terror attack rattled investors. But it was gary cohn and his possible departure that hit the markets. I want to pull up a chart g btv 360. It really tells the story. We saw the second worst day in terms of the drop of the s p, down 1. 5 today. The second time it has dropped more than 1 since last thursday. We thought north korea would continue to dominate the headlines. Little did we know charlottesville would become the big news of the week. And now we end with a terrorist attack. Vix indexe fix the with a spike here. Still below what we saw back in april. I want to remind our viewers, despite the declines we have seen, we are 2 below the high so far this year in the markets. At least that puts a little perspective. To show you on the board where we close today, all that nervousness coming in and a selloff. The s p down over 1. 5 . The nasdaq also lower, by almost 2 . Setting up for a dismal session in asia. If wall street is any indication what is to come in asia, we could see a bad day. In new zealand also already losing 6 10 of 1 . The kiwi dollar holding at. 7 287. Was slowly pulling back the losses we saw in last weeks selloff, but in the last trading day of the week we could see some pressure. The asx 200 finished lower in the last session and futures are pointing to a lower open, down 9 10 of 1 . While the aussie dollar is holding steady. Japan, a little strength for the yen, holding below 110. We saw the japanese stock market fall 1 10 of 1 . Nikkei futures unchanged at the moment. Outo get a lot of ecodata of asia, Property Prices out of china, malaysia, taiwan coming out with their Economic Growth numbers. All of that is what investors will be waking up to. Betty lets get the first word news with Haslinda Amin in singapore. Secretary of state Rex Tillerson and defense secretary james mattis say military action against north korea remain an option, despite claims by colleagues to the contrary. Tillerson said a potential strike against the kim jongun regime has been endorsed by President Trump. Aephen bannon said it was nonstarter because millions would die in seoul. President trump has jumped back into the charlottesville controversy, decrying the foolish removal of confederate monuments and attacking republican critics. In tweets he said his is it sad to see American Culture ripped apart. He accused one gop senator of dying. The president s defiance to speak to paul defiance have caused paul ryan to not speak to him. Gary cohn said to be staying on despite reports he was deeply upset at President Trumps reaction to charlottesville. Markets were concerned he might quit, with the s p 500 falling to its lowest level this week. After the controversial Trump Press Conference tuesday, the president had been expected to discuss infrastructure. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am Haslinda Amin. This is bloomberg. Lets get more on the s p 500, second worst drop of the year. Su keenan has been watching the markets. We are seeing the best gainers this year take a big hit. Su tech stock cisco was part of the drop. We were talking about cisco earnings yesterday. Lets talk about the big earners. The close across the board was lower. The nasdaq down almost 2 . Tech was a big part of it. Lets go with the delta, we had Morgan Stanley say they were under pressure. That hit all the airlines. Then you have International Incident in spain. Typically when there is a terrorist Issue Airlines get hit. Delta, three incidents in three days in jfk where they had other planes or trucks. Nobody got hurt, but that is investigated. L brands that own the victorias secret are having trouble getting sexy back. Cisco reported weaker earnings and a decline in sales. Another one, not too worried. Our software business, 50 is from the subscription. We have made a great deal of progress. The strategy we laid out is working. With whereomfortable we are and what our teams have accomplished. Su not that clear on whether the strategy is working. Lets go to the bloomberg, g btv 108. What you see here is the rising ratio of bearish the bullish s p 500 options. You notice in december when you have the rally on trumps election, the bearish options were at a low. Over here they are at the highest since, we have to go back a year ago. What isa reflection of going on and concerns the market could [indiscernible] we will get to jobless claims in a minute. Lets get the pictures and headlines from the data that hit the market. We are at the lowest level since february in jobless claims. That goes back to the 1970s. To see jobless claims that low. If you go to the bloomberg, 26, young to g btv 17 see a graph of initial claims continuing to drop. Continuing claims also lower. This is providing a strong of a stable labor market which supports the case to raise rates sooner than later. Betty it does, thank you. Su keenan, those pesky wages keep preventing that. Despite a week that has seen the threat of war with north korea, outrage over President Trumps response to the violence in virginia, and a terrorist attack in spain. Here to explain is equity strategist. Just is a great chart su showed. It looks like the economy is on track. Is that keeping armor around the markets . Yes, you have a couple and i wouldlloffs, argue this one is more of a sentiment valuationbased selloff. It is pretty stable. Is improving,et earnings expectations have not changed at all. We are still expecting doubledigit growth to continue. That said, we had a market running on fumes going into july. Few purchases in the market rally. The result was, we were vulnerable to news. Last week we had north korea more turmoilek, from policy and terrorist attacks and negative earnings numbers. The result has been, the market is continuing to selloff. It began several weeks ago. Betty running on fumes the past few months or so. I want to pull up this chart g shows youich are talking the last hour about the moving average. It shows we are far from that technical point, as are presented by them rede line. But we have moved past the 50 Day Moving Average, represented by the green. Gina if we moved decisively below the 50 Day Moving Average it will be the first time in several. What you can see from this chart is that the 200 Day Moving Average has underpinned the market. Selloffs have been about 5 . Dip, they saw support in the 200 Day Moving Average. That is now 3. 5 below moving levels. To put this all into markettive, back to them that started the last leg of the bull market an extended 2011 to 2015, that leg included six corrections up 5 to 10 . Think about the last year and a half, we have had an extraordinary market of low volatility, almost no corrections. We had a correction right before we made the bottom in february with brexit last summer. It is a low volatility environment. A 2 correction seems like a lot. Amidst a strong bull trend, you have corrections pretty frequently. Shery does that mean we will get financial conditionings tightening soon . Chart number 40 showing financial concerns ease. Selloff we saws tighten the most since may. Should we worry financial conditions will continue to be this easy . The s p 500 is a significant portion of that index, which is why you saw financial conditions tightening bit. Tighten a bit. August is historically a difficult month, low participation in the markets, with vacations until labor day. We continue to see this turning in the market, the most likely scenario is that financial conditions will tighten a little bit, which counteracts what is happening in the labor market. The labor market is continuing to move, and if financial conditions ease and deflates, that makes the feds job in the fall tougher. I would not be surprised to see more Monetary Policy chatter. And you have jackson hole coming jackson hall coming up. Shery lots of chatter coming up. For martin adams, thank you what is happening in the u. S. Market. Looking ahead, do not miss our exclusive interview with squier ceo. We will talk earnings and what is ahead for latest Property Prices in china. Alibaba is beating amazon on growth. We look at your shopping basket. This is bloomberg. This is shery daybreak asia, i am shery ahn in hong kong. Betty and i am betty liu in new york. Sales and earnings topped analyst estimates, revenue jumping 56 . Profit nearly doubling in the june quarter. Selina wang has more on this. To shine aack ma light on his core business. Even at mass scale they are growing quickly. It was a good reminder we have distractions like Digital Entertainment and cloud coverage. But they are driving margins to the platform, and user engagement. Increasing the average they get per customer. Betty you mentioned their grocery business and how they were ahead of the game in terms of amazon on buying a supermarket and building that out. Selina people like to see alibaba as an amazon copycat. We saw them enter cloud and original content and even buy a highprofile newspaper. But they have been investing in Offline Retail for some time. They rolled out a new Concept Retail store. You download an app and pay with your wallet. You can get it delivered fresh from that place, the warehouse to your home, in 30 minutes. It is an interesting window into what alibaba, what amazon might be trying to do with whole foods. Shery that is a very interesting concept. Hema, groceries, dining, delivery put together. Lets discuss their core businesses like cloud computing. Revenue grew 36 but is down from double digits. We also saw Digital Entertainment only growing 30 after triple digit growth. It is a sign of things to come . Selina you made good points. They have been expecting triple digit growth for cloud computing. It is impressive, 90 , for cloud computing. But there is competition in china. They have to spend heavily on data centers, acquiring users. They did reach a milestone that was promising of one million paying customers. The situation in Digital Entertainment is a little less promising. Growth decreases from triple digit growth to only 30 growth. A lot of increasing cost has to do with acquiring traditional content. There is a tight race waged between alibaba, tencent and baidu and they are chasing for the best content. It will only get more and more expensive. Shery selina wang joining us from new york. Also joining us here in hong kong is a consumer expert, larry, great to see you. Hemaa just mentioned stores. How important are brickandmortar stores for alibaba . This is probably the next big thing for alibaba. Years, onlinew sales had reached record growth. Upever, online cannot pick other shares. Offline retail is still a big chunk of the overall Retail Market. Alibabas ambitions occupy a much Wider Customer point. It is natural for them to pilot and expand this concept from online. Tier are we talking about four cities in china . Tier one,a is only at mostly in shanghai. They are testing this concept and prototypes. Alibabas ambition is not limited to these tier one cities. They are real challenge is about how to scale up from the current, to hundreds of thousands in the future. Betty how expensive is that going to be and how can alibaba, like amazon, mine it data to get that scalability . Larry it is a difficult question. Lets take amazon as an example. Potentialazons position with whole foods. They had a different idea in terms of the physical stores. Fresh,pick up, amazon they have also been testing amazon book. Prototypeepts and shops look beautiful. The challenges about the scaling up. Amazonot as ideal as that they originally think of. There wouldor guess be similar challenges for alibaba, as well. It is not about the concept. The concept is beautiful. It is about the organizational issues they will be facing in their expansions age. Betty that is a risk for investors. I want to pull up a chart here, i know you are not a stock analyst, but i want to put up a check that shows how much investors are paying to own shares in some of these companies. You can see, alibaba is more expensive than facebook, which is represented by the yellow chart when you look at priceearnings ratios. Way, way behind amazon. That is the business when it comes to expensive stocks. This stock of alibaba, along with tencent and others have boomed a higher. Higher. D how big of that risk or headwind is it, and investors betting for higher multiples, should they be worried . Larry great question. In termse is this risk of operational, organizational expansion. The room for imagination is also huge. Lets look at the whole business at this moment. Indicates there is abundance of room for you to grow, for ecommerce to grow. No matter if it is from lower tiers or other categories, there is room to grow. These are new retail concepts at the early stages. That itur hypotheses is is a premium position only for highend customers. Alibaba has already invested in many of these traditional retailers. It will not be a big surprise. Later on, when they have tested good results, they could copy and paste some recipes for those big players. That will bring huge value to the brickandmortar business. Betty larry, thank you so much on this. Story,ly a fascinating the bain and Company Partner on alibaba. You can get a roundup of that story and many more to get your day going in todays edition of daybreak. You can go to your terminals and it is available on mobile. You can customize your settings only get news on industries and assets you care about. This is bloomberg. Betty breaking news on the energy front. Energy capital has agreed to buy u. S. Power generator in a deal valued at more than 17 billion. This is been rumored for quite some time. It looks like itll be happening. Has been struggling with cheap gas and has been looked upon as on the market for quite some time. Shery this deal could be announced as early as friday. S stock rose 11 . No holds. This is a story we will continue to watch for the next few days. Coming up, we will tell you why august is the cruelest month for the aussie dollar. We will look at how the currency is expected to fare for the rest of the year. This is bloomberg. Got you outnumbered. The dinosaurs extinction. Dont listen to them. Not appropriate. Now im mashing these potatoes with my stick of butter. Why dont you sit over here. Find your awesome with the Xfinity Stream app. Included with xfinity tv. More to stream to every screen. Shery it is 7 30 a. M. Friday in hong kong. , everyone. We are now 30 minutes away from asias first major market open. Betty it is 7 30 p. M. Here in new york. Overan see the s p off 1. 5 , rattled by more News Headlines out of washington. I am betty liu in new york. Shery and i am shery ahn in hong kong. Youre watching daybreak asia. Lets get to the first word news with Haslinda Amin. At least 13 People Killed and more injured when a van hit pedestrians on a famous barcelona street. Two suspects have been arrested in what police call a terrorist incident. It echoes similar events in france, germany and the u. K. Spain has a history of terrorism. Passengers on a plane were killed in madrid. Our neighbors in madrid, nice, brussels, berlin or london have experienced of the same or the people of barcelona have. I want to convey the affection, solidarity, and affinity of the whole of spain and the world. President trump is said to have abandoned plans for a infrastructure counsel with which wouldve advised on his 1 trillion program to fix bridges and roads. He signed an executive order on the panel in july but failed to make any formal appointment. It follows the cancellation of two other Advisory Councils after leading business figures quit. Japan has begun a public debate over casinos as big players to also for position. Thehearings on legally gambling industry to boost the economy. Recent polls suggest of the majority of japanese people are opposed to the idea of casinos in their area. The three men who became the face of hong kongs democracy protest three years ago have been jailed for their actions. They had been sentenced to Community Service for the occupied demonstration that shut down Central Hong Kong for weeks. The court of appeals reviewed gave them a six, and eight months instead. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am Haslinda Amin. This is bloomberg. Seen thegust has aussie dollar retreat after sent the. 80 u. S. Cent threshold. It is ignoring some reasonable fundamentals, isnt it . Does. I figured there must be something in the air. But they pushed on something that rba said about the neutral castrate being at 3. 5 . The aussie has been pulling back ever since. The dollar strengthening retail sales, Business Confidence has been climbing, as well. Thursdays read on the jobless figures, encouraging trend there. There have been factors weighing on it. There is a perennial concern about week wages. The pullback in the aussie dollar will warm the hearts of the rba board. Betty there is still a reasonable case for