The spectrum. We look at Asset Classes and gold and yen and, looking, of course, the geopolitics. In the meantime, this is what the data is telling us. A reminder for all of you americans, it is Independence Day. The markets in the u. S. Are closed, which means we are seeing a little bit thin trading, a selloff in risky assets globally as north korea claimed a successful Intercontinental Missile launch. Havens both advancing. You can see the vix a touch up at 11. 22. We will have plenty more on the markets but lets get to the first word news. Nejra speaking of risky assets, oil has halted gains after the longest winning streak after rude shows that opecs c production rose to its highest level in june. The increase came from libya and nigeria which are exempt from making cuts under the deal agreed between opec and its allies. Janet yellen was hospitalized over the weekend and luncheon for treatment of a Minor Infection and is heading home. Yellen was admitted on friday and released yesterday from the king edward vii hospital and is returning to washington and expressed to resume her schedule as planned this week. Nasdaqrica, some mastec have been distributed after wall street closed early. The Exchange Operator was conducting a test that led to some providers, including bloomberg lp, showing exaggerating moves in shares, including apple and microsoft that never occurred. Its working with providers to resolve the issue. Chancellor has told Business Leaders they must help the government make the case to europe for a smooth brexit. Hammond also said britain must hold its nerve and key public spending under control, even if members of the government signal that austerity politics may be coming to an end. Global news 24 hours a day powered by 2700 journalists and analysts in 120 countries. This is bloomberg. U so much. Thank yo donald trump has turned up the heat on beijing after north koreas latest Missile Launch. Successfully fired an Intercontinental Ballistic Missile bringing it closer to building a device capable of hitting the u. S. With a Nuclear Warhead. Trump responded by sweeting perhaps china will put a heavy move on north korea and end this nonsense. All of this comes ahead of this weeks summit. Lets get more from our seoul bureau chief. Guest have two esteemed s also joining us. First, what do we know about this launch . Was far more significant than earlier thought. The Missile Launch this morning, the u. S. And south korean officials thought it was an intermediate Ballistic Missile. Later on the corrected it and said they migh thought it might have been an icbm. And later on, an hour and a half ago, north korea had a televised announcement, a major announcement saying that, or claims they had actually launched a newly developed Intercontinental Ballistic Missile, which is a significant announcement that both south korea and the u. S. Are trying to confirm at this point. There is a press conference going on right now at the blue house. And we will know more at that time. Francine ok, very quickly, and that i want to go to john, how is the media treating on the ground . Do people believe it . So. R yes, here i think mainly because a north korean announcement correlates to what the military officials saw. They did later correct the apogee, or the height of the missile, which seemed higher than originally thought. Initially it was 2300 kilometers, 1400 miles up. That it said it was more than that. Then they said it was 2800 kilometers. If it was in a regular trajectory, this is a missile that could reach at least parts of alaska, not the main man. But as significant step towards developing a missile that could reach the continental u. S. Francine john, how much, first, fantastic coverage on bloomberg, all social media and ofomberg. Com, but how much the coverage will be trying to ascertain whether this connection we reach the u. S. , or is it something the u. S. Government is working on . Japanese andean, u. S. Officials are working on it. It seems reasonable to assume if this test it does seem like this test was a significant test. And it seems reasonable to assume that if it did it got pretty close. Now, we are a long way away. It seems like we are a long way with from north korea being able to hit the lower 48 states are even hawaii, but nevertheless, it is very symbolic, jluly the fourth. There is clearly a message to america, and the messages we, the North Koreans, are making significant advances and we are not going to stop. Francine the message from donald trump was basically to china to intervene here. John they will be meeting this week in hamburg. The risk there is that the temperature rises on that meeting. And of the endless him talking to saying that the u. S. And china need to make sure their relationship, the u. S. Chinese relationship, is not being dictated by the North Koreans. Certainly they have a huge potential, certainly donald inmp in his tweets and public statements is getting quite uppity, probably not the right word, but certainly irate about this, and you can see the tone getting more and more annoyed about what he sees as their ability to rein in the North Koreans. Thecine but then, chinese do not react well to those kinds of tweets. John they do not like being pushed into a corner, its true. Need to bericans very careful about how they approach this, how they approach xi. Trump has been going on and on about this for a long time. Xi, his temptation will be to turn around and say, i get it. Dont push me around on this. The choreography is important, but it is also important to bear in mind that china is stepping up onto the world stage and trade on Climate Change. Cannot resent itself is a world leader when it has got a renegade nuclear rogue state in its backyard. Francine i want to talk about markets by president xi is also meeting with Vladimir Putin. Will they discuss north korea and trump . John they will be talking about it for sure. Francine lets bring and derek halpenny. And our guest from j. P. Morgan chase. This is a Significant Development but also traders are now starting to take note. Yes. If you look back historically at these events, dollaryen tends to drop. Wherepretty much back to it was and everybody forgets about it and moves on. As we have been hearing, this looks like it is something a lot more significant. And there is, therefore, a much greater risk the markets will pay more attention to this and it could have legs in terms of bringing some risk aversion to the markets. Aversion that could actually stay, that could last . A newfound trend were markets have to sit up and take notice or what will it be a shortlived event . Seen we get a kneejerk reaction and then the dust settles and people come down and look at the bigger fundamental on the global backcheck. John, it isrom Independence Day, it is light trading. All of that needs to be taken into account. Francine what will be the main message of g 20 . This was going to be a very fractious g20. Deep divisions over tray. Reports that trump will begin looking at a trade war and Climate Change continues to be a thorn in the side of everybody. Of disagreement. But it is just possible that this missile test coming on the eve of the g20 could actually unite the g20, and we could see a much more common purpose. On this particular issue, then we have on Climate Change and on trade. Again, we come back to the big sticking point. What is china going to do about it . Francine again, do we see yen rallying on the back of every little blitp like this . Or is there a trend because this looks more serious, it is different. We are movingis, towards something has to be done about this. Whereas in the past, the Financial Markets have taken the view, another missile from north korea. It is a bit of an irrelevance on the global stage. But now with the ante upped on this Missile Launch, markets will Pay Attention to something that has to be done. The question is what is that . I would not understate the this. Ism of the very fact that today north korea, on Independence Day, can potentially hit mainland america with a missile, for any american president that is a big deal. Their conclusion will be, i do not care what happens [ indiscernible] francine we will be back with our guests. Lets get to the Bloomberg Business flash. Santander says his deal to take over failing Banco Popular will have a minimal effect on earnings. And expects to report a profit of 3. 6 billion euros. It set the sites of its 7 billion Capital Raising says it will sell 1. 46 billion shares. Four former barclays executives have told a london court they will plead not guilty to charges they conspired to commit fraud over a 2008 fundraising with qatar. The former ceo and Roger Jenkins and two others are the most Senior Executives facing criminal charges since the financial crisis. The case relates to loans barclays made available to qatar in a deal that race 12 billion pounds. The head of the Italian Bankers Association told bloomberg the liquidation of two banks was a turning point. Sabatini also discuss consolidation among its lead ba nks. By the end of this year, we probably end up with less than 140 banking groups active in italy. So, progress in the consolidation of the sector is already in place. We cannot exclude additional consolidation, but i think that, also, consolidation at the european level could be welcomed. Nejra and that is the Bloomberg Business flash. Francine we have had great decisions rate decisions out of australia and sweden today. In australia as it waits to see if wages were respond. The riksbank became the latest central bank to make a hawkish shift. Still with us is derek h alpenny. Do you believe that may be Central Banks gave each other a call and said that we have to be more hawkish. At leaxt st its repriced. To sayuld not go so far that there was complete coordination, but there is something in amisss. Weather with her was an acknowledgment that people got lulled into a false sense of security. When you look on the world, youre probably still need accommodation but you do not need emergency levels. That is what Central Banks are trying to take people away from. Derek i think today, based on market expectation, i would say the riksbank did the bare minimum, based on the statement from april. Whenve removed the bias you consider what the ecb did on june 8. They replicated that. But the other for guidance and term of the timing of the first rate increase has been left unchanged. Year yield jumped up by six or seven basis points. I think the markets were anticipating, at the bare minimum they would do what they have done. But they did not do anything more than that. In that sense, perhaps the markets will be somewhat disappointed based on the type of rhetoric we were getting last week francine what are you expecting this week . The markets do not believe the fed. What would take for them to believe that fed . It is pure inflation and wage growth . Derek we have dollar bearish forecast over 12 months. Ollar bygot 1. 20 eurod the middle of next year but our message is nuanced now. We have had a 6. 4 drop in the dxy in first half of this year. That is the worst half calendar your performance for dyx since the second half of 2010. We have a big dollar weakness already priced in. And i think in that sense, we see the dollar kind of stabilizing more in the second half of the year before we see further dollar weakness in the first half of next year. The level of pessimism in relation to the u. S. Economy we think has become overdone. If the data comes out confirming that we have real gdp growth around two percent, that will be enough for the fed to continue on its track that it is that should support the dollar. Francine do you agree . Completely. Now its come to a level where it is a bit more two way. We had First Quarter gdp revised spec up. Back up. The Second Quarter looks like it is going to be better. Surprising, typically the means reverting. It does feel like the whole isket thinks that the u. S. Not going to do particularly well, and action the risk is that it reaches improving in the second half of the year. I personally do not think friday is about the number. Continuing to get good job growth but we are not getting the wage growth. If you get the final box ticked, that will give the green light to the markets. Francine the psychology from the fed that theyre itching to hike because they want to give themselves enough ammunition to deal with the next downturn. Derek i think they want to hike because they have a great opportunity now. Down. Complete reversal of what tantrum. Post taper they now have an opportunity to start to move rates up. Again, the Economic Data just about justify this. Weve still got accommodative policy over there. Is that wanted . And not think janet yellen the fed think that. They want to stop the asset Price Inflation and get the two way back into the market. Francine they both stay with us. Next, as chancellor Philip Hammond calls for Business Leaders to make a case for a smoother brexit, well analyze the more conciliatory language coming from the u. K. Government. This is bloomberg. Francine this is bloomberg surveillance. For our american viewers, happy fourth of july. The u. K. Chancellor Philip Hammond is calling on Business Leaders to help the government make the case for a smooth brexit. In a speech at the consideration of british industry, Philip Hammond said that Business Concerns will be heard as negotiations get underway. His is a yard being seen as more evidence mays government is softening its rhetoric on brexit. Halpennyh us is derek and ian from j. P. Morgan chase. Are they softening, or we dont know what is going on and we assume they are softening . Ian Philip Hammond before the election, there was not a peep out of him. We did not hear about brexit from Philip Hammond. It is very clear he sees the reality of the Election Results which is essentially parliament, dont have the numbers to go straight on with the strategy they had before the election. Is a real there change potentially emergent. Towards something in terms of transition. We talk about soft, talk about hard. It is all about the transition phse. Phase. We can certainly move toward something that is longer what markets are expecting an something where, initially, not much changes. You have dial down this march 2019 date. It was ridiculous in the was been treating. On treaty. It just intensify the negotiations needlessly. We need to remove that cliff edge date in order to get a favorable climate for negotiations. Francine do you believe we need to remove that hard out of march do, do we needwe to do it in the next three months, but at the end of the day, the ceos have to make decisions not . Probablyink that would be best. They are going to make forwardlooking decisions and they are not going to make a move, they are uncertain about the outcomes. We need to get more clarity and maybe a hard and fast sai the deadline where everything has to , that maythis date not be the right way to negotiate. That said, the europeans are going to push back hurt and make sure they get their say in the matter. It is not remember about just how britain leaves, but from the european standpoint, what the deal is in the end. Francine back to inflation. Depending on what kind of brexit we get, we need to look up there is inflation or not. This goes back to mark carneys conundrum. You look at, if some of the pipeline pressures, there is our the evidence that the impudence from it is and impetus from fx, input prices have peaked at the beginning of the year and have dropped back. As you look at the strength of , crude oil prices will not have the inflation of the second half of the year. Reason to believe he will to start to see some diminishing inflation pressures. In terms of the bank of englands target, it is likely will be about that target in 20818 but even if we just see the emergence of signs about reversing, i think that is good news. Francine actually, this is something we are seeing a little bit here in the chart. Let me talk you through it. This is the u. K. One year inflation swap. We title this, it shows the u. K. Inflation expectations are fading from 2017 and that overshadows the retail price pick up. Are we worrying too much about inflation . Iaian i have been very surprised of what the bank of and what has been saying. Yes, nearterm inflation has risen. But it is the wrong sort of inflation and we now have negative real wages in the u. K. And i think the bank of england will look through this and it will definitely be looking through this as they did other times post the financial crisis. They were still doing quantitative easing, extended it when inflation was above their targets and back in 20112012. I will be very surprised because i do think you have to look at the overall Economic Data. Its starting on the margin to roll over and you have to be concerned about the output and the Economic Growth in the u. K. And maybe the wrong sort of inflation