More rate hikes might be upon us. David, the selloff in treasuries continues an asian markets are taking its cue, singapore the most correlated market to u. S. Treasuries. When we will get there and maybe 4 is the new three so lets get to first word news with all allen in sydney aaron. Paul leaving with an immediate effect into inappropriate behavior. An external inquiry found that there was inconsistent product conduct with the companys code of conduct. Controlled isreal being overwhelmed by casualties of a Bombing Campaign by progovernment forces. Hundreds of people have been killed in recent days and almost half a million are being forced to live rough in makeshift shelters. One hospital says they have 17 beds for 80 items. Russia has overtaken china as the fifth largest sovereign holder of gold. The central bank raised its. Oldings to 1857 tons russia has increased its holdings every month since march 2015 while china left reported buying gold in october 2016. The u. S. Remains the leading owner with more than 8000 tons. The Trump Administration says the dramatic advances in space travel require a new set of rules. Overly regulations are burdensome and were written in a different time, when the u. S. Was a major player. They want to give private operators more leeway. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im paul allen. This is bloomberg. Haslinda paul, thank you so much for that. Asian stocks are falling with index futures. They digest the latest comments on the economy. Chief Investment Officer and head of discretionary Portfolio Management at Deutsche Bank. Good to have you with us. It looks like the equity market is taking its cue from rates. Usually, of course you would say rising rates would be negative for equity markets, but this time its different because we are coming from a relatively low level and of course we also dont expect the head to be overly too aggressive. Rising rates is also a reflection of stronger growth, which then in turn should be positive for equities and corporate earnings. Level would itat be bad for equity markets . You cant say per se what kind of level, but at the moment we are seeing it rising a bit too fast, pricing into much of rate hike implication. We would be concerned if it was moving over the next few weeks or months toward three or three and a quarter or three and a half. As long as it stays around 3 , were comfortable. Haslinda people are saying maybe its up three anymore, for is the new three. We have them saying it wont exceed 4 . Expect 4 for this your. Thats would be a surprise. Inflation expectation has to be extremely high. But also have our 10 year treasury forecast adjusted now. But we are trading close. Yearnk a four for this would be a real surprise to us. David i have always wondered where this is a relative value tried when you look at treasuries. See it being possible and not a lot of people seeing it being possible. Within the conversation the greater Deutsche Bank community where bond yields go from here . Of course we are expecting bond yields moving up. Weve adjusted now closer to 1 . With the ecb tapering now and buying less and towards yearend they might finish with the program, we are expecting bond yields to gradually increase here as well. We think it is more in a moderate way and shouldnt be hurting investors too much. But we have been advising they should be staying away from developed markets and bonds like treasury or moons. David back to the equity space here, im sure someone was disrupted like you. That selloff was a blessing in disguise. Everything is cheaper. What is a nobrainer at this point to pick up . For us we are still quite constructive on european and asian equities. I wouldnt say it is a blessing, but it is clearly a healthy and overdue correction. With been telling our clients, just a week before that the markets hadnt experienced this in more than a year. Markets are overly complacent and got caught on the wrong foot. We have been advising our clients now to use this opportunity to build risk exposure using the cash they have built over the last few andhs and we are advising then in terms of sectors, we still Like Technology and with rising Interest Rates, we think financials should also do extremely well in this market. Haslinda so the market was complacent, but with the route several banks seem to be quite comfortable with what transpired despite the 5 trillion loss. Thatard from the fed say theyre quite comfortable with the volatility in the market. They seem to be in quite a comfortable and confident spot. Fair to say that . Fair to say. If you look at the reason behind the correction, it is a function of higher Growth Expectation and that is why we are saying it is positive for corporate earnings. Makes are also rising and easier for companies to raise their prices. We think this is a Good Environment for corporate earnings to continue with a positive trend. Weve seen since last year and even with stretch valuation which has come down a little bit. We think it is quite an attractive entry point compared to the beginning of the year or end of january where markets continue to rally after a 10 correction, we think its quite attractive entry point. Haslinda so reasonable valuations, growth momentum, inflation pretty much in tech. What is the biggest risk to the markets right now . I think it is that inflation might overshoot and the fed might have to be a bit more aggressive, which is not in the cards. Three rate hikes this year is more or less a given. About two, we talked now the risk is for rate hikes come up the markets can digest but everything beyond a for rate hikes this year, might be concerns for the market. David how big of a probability should we consider that to be . Theres also the fiscal part of the equation and i expect that will kick in and 12 months. When weputting that in are basically at full employment and the u. S. It seems as if inflation simply can just pick up or pick up further. If you look at the last there may beures, the first indication pointing to a stronger one. As you rightly said this is also the missing link from Wage Inflation if the tax reform would place her now, the of the Structure Program which will then raise even more labor and now you have almost full employment markets, this can bring Wage Inflation to go higher and this will be inflected. At the moment it is too early to say if this is a new trend. We might need to see two or three more of this data to come through. Then the fed will have to price this in and based on their communication, the tone will be more hawkish going forward. David we will continue the conversation with you after a few minutes. He is sticking around. We d crept cryptocurrency. All in on digital money. But next, the pain in u. S. Treasuries have china bond treasuries licking their wounds. Well tell you why. This is bloomberg. Haslinda this is Bloomberg Markets asia. David lets continue the conversation here. 2009. Are up since chinese bonds are holding their own here. The result is yield premium rapidly shrinking. Sinceon the smallest april. Lets check more about this contrast for the shrinking contrast between the two. We have a chart. Treasury yields went up a lot. But the cg be yields barely moved. They have moved last year. Gap to leading to the shrink to the narrows. The reason behind it is cg be moved violently last year up 87 basis points. I think to levels unseen in three years. That means the yield has already absorbed the reality in chinese economy which is the leveraging as well as higher inflation, but for treasury yield or developed market bonds, they have have betterd economic data. Maybe tighter expectations. Yieldda well chinas continued to narrow . According to our reporting, it seems that the answer is yes. Yield will go up, gb there quite hawkish about the Monetary Policy. More people are saying maybe for rate hikes this year president three. Also, Goldman Sachs has said last week that they expect the u. S. Treasury yields to hit 3. 5 in the next six months. Thanis quite a bit higher what the consensus is showing right now. David and if it does happen in china doesnt move were looking at 40 tips. Joining us to talk about this narrowing spread lets bring the twan Investment Officer, queen. There that the spread is narrowing. Im guessing with the pboc hikes it will be wider. Aesthetic possibility . There is a possibility but at this point we dont expect the bbo see two act. This d already priced in registering. Bboc is not expected to act here. Of course we have to see over the next six to nine months how growth and inflation will affect china. David but you expect a tightening by this. If so, what does that mean for portfolios . Tuan when you look at equity markets, we still the like chinese equities. Especially in the sectors i mentioned before. We still expect come a quite often out of performance this year. The still quite attractive valuation and finally now we are seeing Earnings Growth coming through in with lots of policy isearnings, we think that the place to be this year for asian market. Haslinda one of the few people in the markets still believing in the u. S. Dollar why is that . Tuan i have to admit we were wrong last year with our strong u. S. Dollar call. With reasons to believe why the dollar should be stronger. Even with a stronger conviction. Weve been talking a lot about higher Interest Rates and more rate hikes from the fed. The markets are currently pricing in three rate hikes and the possibility of four. If you look for example at the b to do dont expect them anything here in terms of Interest Rate hikes at least for this year. The differential between the u. S. Dollar and the euro or the and should widen further there has been a break in correlation last year. If you look at the longer correlation between Interest Rates versus how the dollar would move, we think this would favor the dollar. And repatriation as part of the tax reform would play to our stronger u. S. Dollar. Companies are moving a majority of their cash held back outside of the u. S. Act to the u. S. Haslinda so you see that dollar bond correlation returning. Tuan we expect this to come back because we see the high correlation. It was just broken last year. We think the market should return. Haslinda all right we have to leave it there. Thank you for your insights today. If you are a bloomberg subscriber you can catch up with all of our interviews using our interactive function that is tv. You can join the conversation by sending instant messages to our team. Check it out at tv this is bloomberg. This is Bloomberg Markets asia. Haslinda lets do a quick check of the business lash headlines. A surge after First Quarter profits beat expectations. A shared buyback of up to 300 million u. S. Dollars. Co alan joyce also rejected the recent report from s p Global Rating saying it was fundamentally flawed. Theyhad in a quitted had inadequate information. They went after headlines and getting the analysts promotion pair they should have waited for the results and seen what was in the results. I think that is what moody has done and the moodys have taken a more professional approach on this. Shares of eric new zealand up. Expectsier says it earnings to talk last years by local demand and strong inbound tourism. Slightly down of from a year due to higher yield costs. Eight temporary fix that will keep airbus planes flying until a permanent solution is found. They are scrapping production that causes dangerous vibration. We are told an earlier version will be used instead. It functions property, but doesnt last as long. David for chinese markets, coming online after the long Lunar New Year slumber. Sophie is standing by. Sophie it looks like chinese investors enjoyed that break. They came back refreshed. Large caps gaining 2 . Other indices joining us. Ex. Breakdown for china adding 2 this thursday. I want to show you what the breakdown is looking like in shanghai. Itt leading the charge. Financials getting a nice lift. We have had of course banks leading chinese offshore stocks. It looks like the mood is still optimistic. Recently we have had the likes of Goldman Sachs and morgan price on ccb. Heir draggingemical players on the material segment down nearly 4 . Mining stocks are among the steel players. Certainly ares much in focus as folks open up their wallets during the weeklong holiday, enjoying the movies and taking time to travel. Stocks jumping in shanghai today as the latest data show the tourism revenue grew 12. 6 . China International Travel shares are jumping. A fresh alltime high on the back of those numbers. China film, rising the most since august 2015. 43 . Ox Office Revenue rose february 16 that a single day record. We have been talking about carriers throughout the session. You have new zealand, and qantas. Not standing out alone when it comes to the regional push for asian carriers. It looks like folks are enjoying their travel so far. David for those of you just to make things clear. For equities, lets have a look at the bond markets. At some. 10 year treasury yield will be surpassing new zealand. We are already above the aussie tenure. Down about two basis points. I do Bloomberg Radio before i come on tv. Dont forget, you can tune into indepth analysis there. Daybreak asia at 7 a. M. Hong kong time. This is bloomberg. Haslinda new york, new york, its almost 10 30 p. M. In new york city. Markets pretty much focused on the prospects of the pace of rate increases, but some jitters out there, possibly for greater rate increases. David here in hong kong, the all of session, so for you lord of the rings fans out there, that is our version of the twin towers. It appears the clouds of mordor loom large. Any sort of gains you would hope for being capped at the moment. Haslinda youre watching Bloomberg Markets asia. Lets get a check on first word headlines. as the minutes of janet yellen cost last fed meeting showed policymakers more positive on the economy and increasingly optimistic they will reach their inflation target, officials said they expect their rate of growth to exceed initial estimates and that the labor market will continue to strengthen. Minutes show several members have raised their forecasts from december. Fords head of north american operations is leading, following an investigation into inappropriate behavior. An external inquiry found an executive Vice President engaged in conduct that was inconsistent with the company code of conduct. He says he regrets not showing the leadership quality that ford has always espouse. The u. K. Prime minister has been inflaming tensions within the conservative party by asking brussels to be flexible on the length of the proposed transition period postbrexit. May cost new proposal asks for a longer transition that will last until it is no longer needed. Quirks whatever the new election will be, it will be inferior to being a member of the markets and the Customs Union and exactly what you gain is up to theresa may to tell you. Paul president trumps top and tight trust watchdog has split with european leaders over enforcement over you tech companys saying a tough approach threatens innovation. The eu says dominant players have a responsibility not to hinder competition, but the Justice Department says there has been no demonstrable harm to consumers and the eu could stifle the very dynamism that has helped users. Global news 24 hours a day powered by more than 2700 journalists and analysts from more than 120 countries. I am paul allen. This is bloomberg. Haslinda thank you for that. Volatility is set to continue just with investors are recovering from the route we saw recently. Lets bring in the chart. You can see the white line, pretty much the 30 day volatility and bitcoin is the turquoise line and you can see it has been volatile in recent weeks. Havee way, bitcoin prices fluctuated 15 , now 47 below a high of just under 27, so it is really for those who can stomach the volatility. I cannot imagine being paid in bitcoin, right . You can not yet, right david not yet. 100,000y you are paid u. S. Dollars a year, would you take 10 bitcoin a year . Anyway, to your point, it is not for the faint of heart. Bitwise Asset Management vp joins us live. On the program. My first question, really, and a lot of people touching right now, a handful of them, are out there on the fence. What made you switch . Matt sure. I was lucky enough to be involved in the etf industry when it was new. I was looking around for a new potentially generationally significant opportunity with interesting challenges. Crypto is exactly it. The problems that crypto is addressablelve have markets in the trillions of dollars. That is hugely interesting and exciting, and yet the frameworks stillaluating crypto are extremely volatile, so it is an exciting space within a normas amount of potential. I could not wait to get my hands on it and im excited to be part of it. David it is clearly still in divisive issue. You look at the extreme of where people think the price will go. All the way from zero to about one million. You have been on both sides of this. Who do you say to people look at this and cannot see Intrinsic Value . Cryptoeople forget that is at its core a technology. Bitcoin cross primary use is either as a store of value you start to see it and money transfer, but it is among early adopters, but that is true of every technology. When digital cameras came out, they were not very effective. When cell phones came out, they were not very useful. People who cannot imagine bitcoin as a payment mechanism, cannot imagine it competing with old are forgetting the technology increases at an exponential rate, and they are unable to look forward to it of, 3, 5 years and imagine what it can do at that point.