The chances of a rate hike this week are almost 100 . Haidi big u. S. Banks, preparing you regulations. New regulations. Rishaad how innovative is hong kong 20 years after the handover . Has the city slipped off the pace . We are looking at chinese shares. We have aged shares. Lets bring up this chart. All we have isou a situation that they are cheap, but this is something going on for a wild. Looking back to 2006, seeing how cheap they are in terms of valuation and a share counterparts. Betteralso have is value, something people are counting on for a while. That margin or divergence between the two has always been per point the would narrow, but is seemingly remaining at the same level. Its amazing how many people the alignment never really seems to happen. Haidi people are always talking about the convergence eating inevitable, but it has not happened, continuing to confound analysts. Size signssee of evening signs of easing when it comes to this tech tantrum. After watching tencent that fella yesterday. We are 30 minutes away from now been in china and hong kong. We are getting kind of the sense that value trading could be emerging in asia following what we see in the u. S. Some of these sectors that have drive so far this year picking up nice gains. Sophie we seem to be having a shift of attention as the tech is shaken off. You can see when it comes to asian markets. We have other sectors leading the story other than the tech rep. As koreas finance minister flag economic difficulties, that is not derailing the rise in consumer stocks insult. In seoul. Up 2 10ook at taipei, of a percent. Stocks in japan easing the drop. The nikkei 225 just around the 19,900 level. The yenctuations as holds gains below 110 a dollar. Aussie investors seemingly refreshed after the break. Climbing for a third day. The aussie dollar, that is sticking to a tight rage above 75 u. S. Cents, despite the drop in iron or and other base metals. We do have chinese Economic Data due this week that could help underpin the aussie as well. Ahead of the fed policy decision , we have the korean won following falling for a third day. And ringgithe peso managing to eat out some gains eke out somet gains. We have crude holding at 46 a barrel. Rishaad thank you. Lets get first word news headlines. Kicking things off with a look as britainpens next attempts to leave the European Union heres Tom Mackenzie. Reporter thank you. The new british cabinet has met for the first time as u. K. And european officials failed to agree on a start date for brexit talks. Sources say a meeting in brussels broke up without any Firm Commitment on when to begin the process. Eu Officials Say they are still unclear about whether you pay what the of brexit u. K. Wants out of brexit, and they are frustrated at ground around delays. The chairman of general election down. Pping it has been a tumultuous 16 year tenure in which he dramatically reshaped the Country Company but failed to win over wall street. He will be replaced. The stoxx or the most in more than 18 months after the announcement. Weve got a track record we can be proud of. Please got a window on the future where we will be even better. Weve got a build on our strengths. We have to make sure we are known as an Execution Company and deliver for all constituents, including customers, employees, and shareholders. Employees, we are the vehicle to get there. Reporter the treasury much anticipated rp on banking regulations is to include proposals for revising rules, indicating the Trump Administration is more interested in scaling back the trashing it. T than sources say the targets on the Consumer Financial protection bureau, and the role that stops banks making speculative bets with their own capital. The ecb says euros on inflation is becoming less reliant on stimulus and policymakers are moving toward an exit from the program. Forecastsmber says continued to show progress, although it is still too early to discuss tapering. The risks of growth are balanced and no longer expects Interest Rates to be cut. We see Downside Risks mostly coming from the outside. The u. S. Sk surrounding economic policies and in emerging market economies. These are the risks we want to focus on. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 100 20 countries. Im Tom Mackenzie. This is bloomberg. Thank you. The only way the fed could surprise this week is by deciding not to raise its rate for the second time this year. Bloombergs global editor Kathleen Hays is here. The rate hike is considered so much of a done deal. Investors are looking for more. We are looking at future plans and how the Balance Sheet unwinding could work. Reporter absolutely. The fed will wrap up a two day read meeting wednesday afternoon about 2 00. Janet yellen will start her press conference around 2 30 and talked for about an hour, plenty of time for reporters to cover her with questions about a hike today, what are you looking for next, when are you going to reduce the Balance Sheet . Presumably we will get a lot of good information. Hike bakedsis point in the cake after we have seen fed Officials Saying we see an appropriate high three times this year. Interesting the fed is doing this inside it in spite of a soft patch. The new york fed has a survey of Inflation Expectations. That number tumbled one as people where inflation will be three years out. In april, the average was 2. 91 . Now in may, it is down to 2. 47 . Expectations, are they following weakening inflation or leading it . Lets take a look at the bloomberg chart. The feds target is 2 , the yellow horizontal line. 2 briefly, but now its heading lower. See theeresting to Inflation Expectation decline. Having said that, a Bloomberg Survey conducted from june 5 to june 8 found the following prediction from economists on average. Two more hikes this year. They are in line with the fed one hike this week. , and the next one coming in september. The Balance Sheet unwinding starting early in september. In the upper lefthand corner, the odds are up to nearly 98 . Two thirds of the way across, you get to the second column. From the righthand side, though down to september hikes. Traders are not on board with more than one hike. Some say one in june and that is it. A fed governor spoke in new york, saying that economies are picking up, Global Economy is picking up, and i might have to think where we are heading on Interest Rates. The hawks pushing on rate hikes say if we dont move now, we could fall behind the curve on inflation. They are adamant. We will see what the policy statement says. Janet yellens press conference is going to be so interesting this week. With this market rally from bonds, essentially not something we can consign to the history books. Some people have been predicting it for quite some time. Reporter four or five years now. Every year, it seems like the bears are proven wrong. But a great story today on Bloomberg News about doomsayers saying it could finally have. Happen. Someone at Deutsche Bank sees it at 3. 25 by the end of the year. Even higher in 2018. Tom said to Bloomberg News that wages are already trying to rise. Always do. That will put an end to the Interest Rate rally. Lets look at this chart. We are going back to the early 1990s and the blue line is the 10 year yield for the u. S. It was around 11 then. Follow that line all the way down. Actually, the u. S. The u. K. Guilt was so high. Around 10 ne was 8 for the u. S. We have had a massive Global Market rally. The bonde reason why bears say at some point it has to turnaround, and when it does, it could be costly. Strategists saying by the end of the year, a big move in bonds. Maybe janet yellen will Say Something this year take get it started. Rishaad thank you. Incentivese on the in movements and whether the fed could start of a chain reaction. We have a look at the complete intelligence with tony nash. Haidi dreams take flight. We speak to the drugmaker for his ambitions for chinas tech sector. This is bloomberg. Rishaad you are black you are back with Bloomberg Markets asia. Im Rishaad Salamat in hong kong. Haidi im haidi lun in sydney. A quick check of is this headlines business headlines. In china, charged with promotion of gambling. Says the cases have been referred to the district court. That 14 employees held in china after one was released. 18 were initially detained last year. Rishaad honeywells shareholder resisting calls to buy activist investor clients. Sayingcutive chairman shareholders dont want to miss out on the fruits of recent investments. He says honeywell continues to see china as a growth market. We continue to invest in china. It grows at 6 a year for a long time. It looks like maybe not that rate in the future, but even at 5 , its a good place to be. Ber inquires into workplace harassment and culture. He was involved in at least two incidents of alleged misbehavior investigated by a former attorney general. Uber directors met for more than six hours and approved all of eric holders recommendations here it recommendations. Fashion house Christian Dior says it remains optimistic about how markets in europe and asia. The future looks bright following the election of president. The french president. The French Market is important. We have a new president. I think this will be a very positive thing for the economy in france. Reforms. Tart some i am positive about that. In the u. K. , we see how they were will do the new government. The only concern we have made be maybe in europe is the terrorist problem, security for the population, security for the tourists. Regarding our industry, i know people come when they feel confident. Reporter what is your outlook for the chinese economy and Chinese Market right now . The broader luxury sector is seeing a rebound from the difficulty years of the anticorruption campaign. That Global Statistics were showing a slowdown, but for we did not have the situation. We had been constantly growing. We have position in terms of innovation, quality, and quality of service. Dr dior willfully become a part of the lvmh family. Christiansense of how diors strategy and outlook will change after the deal is completed. The vision and strategy will not change, but i think being will give my staff to information, and to Work Together without competing information. It will be a kind of synergy. Synergylike the word which means reducing staff. I think we will hire more people , and worked in a closer way with our lvmh colleagues in a few weeks. Exclusivet was our interview with the Christian Dior ceo. Coming up, we will be keeping a keen watch when it comes to tech a second asia, after day of less hefty losses with premarket action. This is bloomberg. Haidi this is Bloomberg Markets asia. Im haidi lun in sydney. Rishaad im Rishaad Salamat in hong kong. China is set to open the door to its 10 trillion debt market, but analysts think investors should be wary. Tom mackenzie should joins us. Is it the usual story, a lack of transparency, if you will . What is holding back investors . Reporter lack of transparency is definitely part of the issue. Analysts say holding back investors is lovely likely. They will have cold feet because of a number of big factors. There are capital controls, so they will get money back. They are concerned about Credit Rating agencies. Low trading a very volume traditionally in the chinese bond market here. Less than 10 of what you would see in the u. S. Then, theres the current market environment, as you push ahead, the authorities push ahead with a deleveraging campaign. To look at whats going on in terms of issuance. Chart shows corporate issuance in china from 2015. In the last few months, you have seen generally Corporate Bond issuance is have fallen off. In fact, we have seen a record 29 billion worth of issuance sales scrapped because of the current market environment. That, combined with other longerterm factors giving Foreign Investors cold feet when it comes to the bond connect. Haidi its also about credibility when it comes to chinese regulators, right . And how much Foreign Investors actually trust in them . Reporter absolutely. They are going to have to win back trust, both the government, regulators, and ratings agencies themselves. We have seen moves recently to open up the market to foreign agencies. Maybe that will improve conditions to extra competition. In terms of capital controls, Authorities Say they are not aimed at Foreign Investors, but clearly more transparency is needed. Also in terms of currency, there are counts of cyclical factors that the pboc is putting into play. It seems it is exerting extra control on the fixing, and that makes it harder in terms of valuation, at least according to pimco. You have low trading volumes as well dominating trade of bonds by the banks, and they dont incentivize selling as much as markets. The idea of our skepticism whether or not they are inflating ratings to please clients. The likesh mentioning of Goldman Sachs sees longterm potential. Clearly, theres a lot that needs to be worked out before they can jump on board. Currently, pouring Money Managers own less than 2 of onshore chinese bonds. It is the Third Largest bond market in the world. They are getting closer to opening this bond connect between hong kong and china, but more work needs to be done, clearly. Rishaad Tom Mackenzie in beijing. We count you down to the start of the trading day in hong kong. Minutes away from the open proper. Premarket of half of 1 . Looks like we will be on the way, despite some of the tension. One company we are watching today because of trades in the u. S. And here in china, we are talking imax. The widescreen cinemas here. Looking at whats been going on, the company has had a sagging share price. It is down so far this year, 24 year to date. I made these comments after the closing bell that they will be laying off 14 of their staff. That should may be saved company about 20 million every year. The action is aimed at increasing the companys value. It has been a tough stretch for them at the global box office. Haidi you mentioned the selloff , how it played out across asia and european stocks. Take a look at this chart. 8782 on the terminal shows you how reliant the broader hong kong hang seng index is in terms of how correlated it is to the fortunes of tencent. Tencent is about 16 of market cap at the moment. They retreated the most in yesterday. Months watching tech stocks, not just hong kong, but also taiwan and soul. Next, qatar starts a drastic turn. Rishaad a warning here in hong kong. It is raining cats and dogs. Counting down town to the start of the trading day. I am Rishaad Salamat coming from bloombergs asia headquarters. Looking at what was going on in terms of the these are the moments on everyones minds. A 100 chance of a rate increase. We are looking to the bank of england as well. Will there be any hands with what happens with Monetary Policy there . Bank of japan, any signs of tapering . That is what people will be looking at. Swiss looking at the National Bank as well. We are looking at technologies after recent falls. Last but not least, overriding concerns over the u. K. And political instability. Haidi thats right. Just days before they are meant to go into brexit negotiations, we are looking at an Unstable Coalition in the u. K. In the u. S. , never forget the continues,heater with the attorney general set to testify before the Senate Intelligence committee about russia and the election. Breaking numbers coming through from australia. The National AustraliaBank Business conditions numbers for the month of may coming in at 12, falling from 14 when it comes to business confidence, falling to seven from 13 in april. Very much above the longterm average when it comes to these gauges. Again, the upbeat business sector indicating a disconnect with the household sector. We have seen it play out across retail sales and consumer confidence. Retail is the only sector remaining neutral. About the 26th street years without a recession or it this indicator suggests Business Investment conditions remain pretty upbeat. Right. lets get to the reaction and a market check with sophie. Sophie we are checking whats going on in sydney following Business Condition updates. For a thirdl rising day, adding 6 10 of a percent this tuesday. Elsewhere, gains when it comes kospi. The cost be the nikkei is marginally lower. In shanghai, the shanghai, extending a drop for a third day. There are signs u. S. Investors are turning more bearish on china. Perhaps that is weighing on mainland markets. The h