Them. Nordstrom all lower. At to a clock p. M. Eastern, we get the fomc at 2 00 p. M. Eastern, we get the fomc minutes as well. Guy stocks in europe a little softer than they are in the United States, which is interesting. The trade story certainly front and center for most people. We are also watching whats happening with the hound with the pound. Dropped first thing this morning, still north of 1. 29. A little bit of a bid for the bond market. We are moving, as you can see, down by two basis points on the german tenyear. Prices rising just a touch. We are now joined by viktor hjort, bnp paribas global head of credit strategy and desks analyst. Good afternoon. Credit markets and equity markets seem to be taking a different view about what is happening when it comes to the trade narrative. Credit markets, particularly when it comes to primary issuance, continued for k very optimistic view of the world. Why does credit stand out as having a much better view of what is happening . Viktor i think credit is supported by centralbank factors much more so than any other market. Right now, said policy is generally fairly easy, and here debate as we have the to the last couple of weeks. Buying bonds and Corporate Bonds is clearly supportive. Also, when you look at with companies are actually doing with the debt they are borrowing , it is not particularly boring in the way that they are boarding to lever a Balance Sheets, by stuff. They are boring mainly for fairly defensive purposes, replacing expensive debt with some cheaper debt. Thats not credit negative at all. I think those factors really suggest that theres fairly strong support for the debt market here in europe. Guy you are expecting better growth in 2020. You think we are heading for a better year than some people are expecting. Some people are talking about recession in 2020. Is that predicated on the trade situation being sorted out . Viktor a little bit, but i think people are way too bearish on the growth outlook, and you see it everywhere. If you look at the credit market, the risk premium for cyclical assets is almost as high as it what back as it was back in january. You see it in all the conversations ive had. We had a year where the fed has cut three times, the ecb has cut and they are now doing qe. We had cut from australia, from new zealand, from china. A whole bunch of emerging central banks. The ecb is growing its Balance Sheet. We may not have a hard brexit. We may have a u. S. China trade deal. All of this should reduce uncertainty a little bit. Growth fork supports next year. Certainly you would think the Recession Risk for next year is very low. Vonnie what are the questions that you particularly are getting from clients right now . Outlook, theession risk for recession is a key issue. I think that most Credit Investors are far too defensively positioned. Seeing that you have to own assets, this is an environment which lends itself very well for but piling and mostly to defensive assets, everyone assumes that growth next year will be as bad as its been this year or possibly worse. I dont think thats right. Vonnie where are the opportunities, if that is the case . People are worried about certain levels of credit and whether there might be a bubble in certain areas. Is there anywhere you can take advantage of that kind of thinking . Viktor highyield bonds are very attractive. For anyone who doesnt think we are going to have a recession next year, this is an asset class that is under own, and where risk premiums are far too high and will really benefit. We only start seeing some stability in the growth data. In another part of the market that looks quite attractive, the low end of the triple be rated space in Investment Grade. This is where you see most Balance Sheet improvement. If you recall last year, there is the big scare of corporates being worried about losing their Investment Grade ratings, becoming fallen angels. As a result, they are doing as best they can to create a buffer between themselves and risk, which means paying down debt, cutting dividends, cutting share backs, and doing less m a. That i think is very supportive for lower rated bbbs. Guy do you look at a group, or go single credit by single credit . Viktor this i think is a ratings theme. You see co. s like at t, youve seenc, Companies Like at t, General Electric and so forth have it become a strategic objective. I think they are supported not to buy Corporate Bond investors, but i think the equity market has also been willing to pay a higher multiple for companies with clean Balance Sheets. This is because most investors today would say in the next two years, theres a decent chance we have recession. If thats the case, i know im going to have to go through severe volatility, and with levered Balance Sheets, there may be a default. I think thats why also equity markets are paying a premium for better Balance Sheets. Guy lets talk about the defaults. You are more positive on growth then a lot of people i am talking to right now. Most people assume that defaults are going to rise. That is not saying they are going to rise a lot next year, but theres a general assumption that defaults rise as the situation get the low more crunchy. Do you think defaults rise next year, or go in exactly the opposite direction . Viktor i do think default rates rise next year, but not by enough to make it anything other , at an idiosyncratic event event which is bad for the company, but not necessarily a market event. If you think about default rates, on average they are 2. 5 every year. In recession, the go to 10 or 12 . But i think is happening next years we go from 2. 5 , maybe 4. 5 ispically around where because a market event. But at 3 , youre just below that threshold where i think it really matters. I dont think it is a market event for 2020. Guy stick around. , bnp paribas global head of credit strategy and desk analysis, will stick with us. Vonnie lets get a check of markets now. Heres kailey leinz. Kailey we are off the lows of the session. Nonetheless, a risk off day shaping up. Aboutw is lagging i 0. 25 , and stocks in europe by about 0. 4 percent. Concerns about flaring tensions between the u. S. And china really overhanging, weighing on Risk Appetite today. Youre seeing that reflected in the bid for safe havens like u. S. Treasuries, with the 10 year yield moving lower by about three basis points. As we have seen yields move lower, we have seen the curve flattening. Between 10 year yields narrowing by 11 basis points in the past six days. Prize with the moves we are seeing today. Financials lag in a big way, the biggest sector laggards today. ,n the opposite end, utilities another rate sensitive sector, and the opposite direction. Up for today is the Consumer Discretionary stocks, led higher by the likes of lows and target, which both of boths and target, which posted earnings. A closer look at target and its performance relative to peers and other retailers. Its risen the better part of 80 in the past year, outperforming a discount, walmart, that purple line, by a pretty wide margin. Blue,p retail index in and drastically outperforming to partner in stores, down by about 0. 4 . We are seeing that narrative continue with Department Store weakness. Vonnie thank you, kailey leinz, for that update. A quick headline now. The house is planning a vote wednesday on the bill backing the hong kong protesters. Last night, the Senate Passed that bill backing the democracy demonstrators in hong kong. Response,a swift which was to the effect that if you take this action, or any kind of action, legislative or otherwise, you may be sorry. It turns out the house is going to vote wednesday, and that would mean both chambers are voting on behalf of the protesters, which would put into question the continuing trade relationship between the u. S. And hong kong, and hong kong and the rest of the world. We will analyze what it means next. This is bloomberg. Guy welcome back. We are in Campaign Season here in the u. K. The conservative party over the last few minutes pledging a 500 pound tax cut for working people. Let me give you a few details as said. Is being 31 million people, according to the conservative party, will benefit from this. The National Insurance cut that is going to be taken here in the united kingdom, the tory ambition for a threshold that will rise to around 12,500 pounds over time. It is going to be interesting to see exactly what comes out of the next few days, but i suspect we will be hearing more about this kind of thing from both sides of the political divide, both labour and conservative party. Rumors surrounding what will happen with student loans, etc. When it comes to the labour party. Vonnie in the u. S. , we are hearing that the house plans to vote wednesday on a bill backing hong kong, which would be an underlining of the senate vote last night to back the demonstrators, and with potential he escalate the conflict with china. It would force President Donald Trump to decide whether to side with the demonstrators or react to the threat of retaliation from beijing, which came overnight. The phrase was, dont say i didnt warn you any Statement Issued by the Foreign Ministry of hong kong. It uses a phrase that china has apparently used in rare cases before this. Like before the 19 622 war with india, so china isnt the 1962 war with india, so china isnt messing around here. There was first word news is courtney donohoe. Eu ambassador said that rudy giuliani, working at the direction of President Trump, demanded a quid pro quo from ukraine. Giuliani demanded that ukraine announce a politically motivated investigation to help the president. In return, the ukraine leader would be invited to the white house. The European Central bank is warning of potential side effects from its own loose monetary policy. In a report, it highlighted how years of unprecedented stimulus could lead to financial instability. The ecb said no Interest Rates have encouraged excessive risktaking by investment friends and insurers. Shares of target reaching a record high after the discounter raised its fullyear outlook. Target also reported Quarterly Sales beat estimates. The company avoided the fate of a lot of other to partner in stores, such as kohls. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im courtney donohoe. This is bloomberg. Vonnie thank you. We are back now with viktor hjort, bnp paribas global head of credit strategy and desk analyst. Curious as to where you would automatically look in order to try and figure out what is going kong the markets rehong any markets in the kong. S re hong one way or another, theres bound to be ramifications. Viktor as you said earlier, the issue was whether this has any impact on chinas and the u. S. s ability to negotiate phase one of their trade agreement, so far , one thing thats pretty clear china have aand huge incentive to going ahead with this deal. China gdp growth is clearly below 6 , and i think the most recent rate cut from china is a also acknowledgment they are finally starting to feel the pressure from slowing growth. In the u. S. , if you look at various forecasts suggesting gdp 1 ,th may be running below that may be why the white house has been very quiet around this issue for now. Reflects much more stronger incentives to actually get this deal done. Get this deal done at the president had been letting on earlier. Vonnie youre looking for supply to contract over the next six months. I am curious as to what that does to Federal Reserve thinking, how that tightens monetary conditions and so on. Viktor its a bit of a problem for the economy. Now, as a result of the sort of backlash against over the leverage, corporate sector the last year, theres a strong aversion mooring. In the past, you cut rates, and animal spirits kick in, and you see companies willing to build factories, start doing m a, so on and so forth. We may not have that to the same extent this time around, which may mean that the effectiveness of Interest Rate policy, monetary policy, may not be as strong as its been in the past. I think that is true also for the ecb. For instance, it may not get the same kind of bang for their buck for its current qe policy. Vonnie lets talk about the ecb guy lets talk about the ecb. Christine lagarde delivers her first major policy speech friday. Your view into the credit market looks pretty solid because the ecb is buying a ton of credit. Does it continue to make those purchases germany decides to do fiscal policy . Viktor yes, certainly for the time being. In at least until that fiscal stimulus would be pushing inflation towards their target. What draghi said when he left was this policy is in place until it is time to start hiking Interest Rates, so at the moment, that looks like 2023 or maybe 2024. Stimulus wouldl probably have a pretty good chance of changing that goal post a little bit, and get them thehe target sooner than market is currently anticipating. We the time being, i think have to assume that they will be in the market for quite some time. Guy any opportunities in the u. K. . Actually, i think u. K. Credit looks surprisingly cheap. Weve been dealing with brexit is a risk factor that weve not really known how to quantify, and weve not quite figured out what the actual impact of it would be for more than two or three years now. As a result of that, it is fair to say that Global Investors are very under ella gail are very under allocated towards u. K. , and in particular, u. K. Corporate bonds. But weve seen over the last couple of months when that no deal brexit risk has gone from , theo less than 10 now sort of tentative steps towards reallocating back towards u. K. Assets. , in late december or early january, we have some stability on the political outlook, that but could that could become more of a trend. Vonnie have you been satisfied with fed speak recently . [laughter] viktor yes, in the sense that theyve been very clear that from here on, we need to see a Material Change to the economy and the inflation outlook in either direction for them to do anything. Change fromty big how things have been this year, you know. This has been a year where the fed and other central bank have been on the move, so in some ways, the Market Action function was bad Economic News is good market news because it means that you bring forward easy monetary policy. That game may be over. We are probably now back in a situation where good news from the economy is good for the market, and vice versa. From that perspective, it is satisfying that they are so clear on where they stand. Policy is in a good place, which powell and several others are using at the moment. Guy despite the president s protestations. Nice to see you. Thank you for coming this afternoon. Viktor hjort, bnp paribas global head of credit strategy and desk analyst. Set their santander sights on expansion in the United States. Thats coming up. This is bloomberg. Vonnie checking u. S. Markets, the s p has picked up some ground. Still negative, but almost back at zero. The dow down about 0. 25 percent. The nasdaq unchanged. Retailers in the spotlight today. Lowesup more than 12 , right behind. On the other side, l brands, altra, the list goes on and on. Guy when it comes to european equities, the ftse 100 is underperforming. Bp biggest points drag the biggest points drag. The oil markets are not necessarily transferring into equity markets today because the Big Oil Stocks are certainly lower. European market close coming up next. This is bloomberg. Whether youre out here on lte. Or here on a wifi hotspot. Xfinity mobile has more coverage to keep you connected to what matters most. Thats because its the only Wireless Network that automatically connects you to millions of secure wifi hotspots and the best lte everywhere else. And now get 250 off when you buy a new Samsung Phone during Xfinity Mobile beyond black friday. Plus, you can save up to 400 a year. Click, call or visit a store today. Guy 30 seconds until the end of regular trading in europe. London down the most. Moved lower first thing this morning. Inclination on the upside, we are down. 3 . European markets underperforming u. S. Markets today in percentage terms. Lets look at the individual markets around europe. London underperforming. It is names like bp and shell that are adding to the downside. Ftse down. 8 . The dax not down by as much. The cac 40 only down. 2 . The cac 40 underperformed yesterday relative to its european peer group. I am not sure theres anything conclusive out of what we have today. The Airline Stocks are down. Oil prices are lower. On the upside, only two stocks. Everything else is negative territory. Utilities and telecom both rising. A slight negative bias in the stock sectors. The bottom end of the market looks like this. Travel and leisure trading lower. These are not heavyweight sectors so it the picture in reality. Real estate is off. I am not sure you can take anything conclusive away from the kind of dispersion of stocks today, the rotation we are seeing. What trying to figure out the tray narrative is likely to look out. Some names for you. Italy, ana story in Italian Company up today. It is more of a bricolage problem rather than an io why problem for kingfisher, this is our stock of the hour. Roblem in france and wirecard up 4. 4 despite concerns around it singapore accounting