• European bourses have begun the session with modest losses, which have picked up as US participants enter the fray, amid a lack of fundamental updates
• Tesla (TSLA) is to join S&P 500 prior to the open on December 21st, +12% in pre-market; Co. they are replacing will be announced prior to this
• Brexit Negotiators are reportedly zeroing in on a trade deal as early as next week, sparking upside in Cable; note, such commentary is in-fitting with prior updates
• FX features a rangebound, but subdued USD weighed on by recent GBP & EUR upside as the USD generally suffers against peers thus-far
• OPEC JMMC to commence from 13:00GMT/08:00EST today
• Looking ahead highlights include US retail sales, industrial production, OPEC JMMC, ECB’s de Guindos, Lagarde, BoE’s Ramsden, Fed’s Daly, Williams, Rosengren

US ELECTION UPDATE

US President Trump tweeted that there was a big victory in Nevada with the all Democrat County Commissioner race, on the same ballot as President, was thrown out because of large scale voter discrepancy, while he added that the Clark County officials do not have confidence in their own election security. (Twitter) Three attorneys representing the Trump campaign in the federal lawsuit in Pennsylvania withdrew from the campaign, according to a motion which added that attorney Marc Scaringi in Harrisburg will represent the campaign. (Newswires)

Georgia Secretary of State Raffensperger said fellow Republicans have been increasing pressure for him to question the validity and exclude legal absentee votes. (Washington Post)

CORONAVIRUS UPDATE

Pfizer (PFE) announced a US immunization pilot program in Rhode Island, Texas, New Mexico and Tennessee, while it added that the program is to better support the states' planning, deployment and administration of the vaccine but added the states included in the pilot will not receive vaccine doses earlier than other states. (Newswires)

United Airlines (UAL) said passengers on Flight 14 from Newark to London were the first to experience its transatlantic COVID-19 testing pilot programme in which rapid tests were provided to all over the age of two and all crew members free of charge. (Newswires)

UK COVID-19 cases +21,363 (prev. +24,962) and deaths +213 (prev. +168), while France cases +9,406 (prev. +27,228) and deaths +506 (prev. +302). (Newswires)

Scottish First Minister Sturgeon is reportedly to meet with the cabinet in the morning before addressing parliament this afternoon and is expected to decide on imposing the highest level of COVID-19 restrictions to parts of Scotland. (Twitter)

Russian President Putin says India & China could commence production of the Russian COVID-19 Sputnik V vaccine, Ria. (Ria)

Many EU governments are reportedly not ready for common testing procedures, according to a document. (Newswires)

ASIA

Asian equity markets were somewhat indecisive and only mildly benefitted from the performance on Wall St where both the S&P 500 and DJIA posted record levels and cyclicals outperformed on vaccine optimism following the encouraging update regarding Moderna's Phase 3 vaccine trial. ASX 200 (+0.2%) and Nikkei 225 (+0.4%) were both lifted at the open as energy and financials resumed the cyclical-led surge in Australia, while the Japanese benchmark rallied to above the 26k level to print its highest since May 1991 but then reversed course and briefly gave back all its gains as risk appetite waned. Elsewhere, the Hang Seng (+0.1%) and Shanghai Comp. (-0.2%) were mixed with underperformance in the mainland following a liquidity drain by the PBoC and as US-China tensions lingered with China’s Global Times Editor recently warning that China will ignore some of the Trump administration's political stunts but will resolutely hit back for attacks that might cause real harm, while it was also reported that Huawei is to sell its Honor brand to ensure its survival amid the US crackdown. Finally, 10yr JGBs were flat amid the tentative gains in stocks but with downside stemmed after recently finding support at the 152.00 level, while the BoJ’s presence in the market for over JPY 1.3tln of JGBs with 1yr-10yr maturities did little to spur prices.

PBoC injected CNY 50bln via 7-day reverse repos at a rate of 2.20% for a net daily drain of CNY 70bln. (Newswires) PBoC set USD/CNY mid-point at 6.5762 vs. Exp. 6.5803 (Prev. 6.6048); strongest fix since June 27th, 2018.

China is reportedly prepared for US President Trump's final madness and hysteria regarding China policy, according to state media. (Xinhua)

Huawei is to sell its Honor brand to a consortium of more than 30 agents and dealers, while it will not hold any shares in the new Honor company after the sale and the value of the deal was not disclosed. Huawei commented that its consumer business is under tremendous pressure due to unavailability of technical elements for mobile phone unit, while it added the Honor sale is to ensure its survival and that the brand ships more than 70mln smartphone units per year. (Newswires)

US

US Senate will hold a procedural vote today for Judy Shelton's nomination to the Fed. There were earlier comments from a White House spokesperson that the nomination of Judy Shelton to the Fed has the full backing of the White House and her confirmation is expected, while it was also reported that GOP Senator Alexander joined GOP Senators Romney and Collins in opposing Shelton’s nomination but he won't be in Washington DC to vote no and the nomination is on track to pass 50 to 49 at this point. (Newswires)

US Chamber of Commerce said it welcomes trade-liberalizing benefits of the RCEP agreement and worries the US is being left behind, but it would not recommend the US to join RCEP given the agreement’s shortcomings. (Newswires)

Tesla (TSLA) is to join S&P 500 prior to the open on December 21st. The Co. that it will replace will be named at a separate press release prior to the rejig. (Newswires)

UK/EU

UK Chief Brexit Negotiator Frost told UK PM Johnson to expect a Brussels trade agreement early next week. (The Sun) Subsequently, Brexit Negotiators are reportedly zeroing in on a trade deal as early as next week. (Newswires)

European Parliament sources said the latest MEPs can get a finalised deal for scrutiny is December 10th if the agreement is to be ratified this year. Furthermore, EU sources recognise that MEPs will bridle at being forced to approve the deal at short notice but expect them to fall into line because the alternative is an economically damaging no deal. (Telegraph) Separate reports suggested that under emergency plans an EU Parliament vote on a Brexit trade deal could be delayed until December 28th, rather than the currently scheduled December 16th. (Guardian) Additionally, the EU is said to be looking into a way to fast-track any Brexit deal with senior sources stating it is now very likely to be an "EU-only" rather than a "mixed" deal and therefore would not need ratification by all the member states. (Sky/Twitter)

UK PM Johnson is mulling a temporary reduction to foreign aid spending to help repair the nation's public finances that have been ravaged by the pandemic, while reports added that ministers have drawn up plans to lower the proportion of gross national income to 0.5% from 0.7%. (Times)

ECB's Lane pledged that credit credit will remain cheap for as long as the pandemic lasts. (Newswires)

Basel Committee Secretary General Carolyn Rogers said it is too early for banks to take a victory lap regarding their pandemic responses and called for dividends to remain on hold. (FT)

GEOPOLITICAL

US President Trump reportedly sought options last week regarding striking Iran to stop its increasing nuclear program but was dissuaded by advisers that warned it could escalate into a wider conflict in his last weeks in office (NYT)

US Secretary of State Pompeo said US and Europe need to work together in addressing recent actions by Turkey, while he added that there is still work to do to ensure that Iran does not torment the Middle East. (Newswires/Le Figaro)

German Chancellor Merkel says Europeans need to bring more to the trans-Atlantic partnership, which includes NATO contributions. (Newswires)

EQUITIES

European equities have kicked the session off with marginal losses (Eurostoxx 50 -0.5%) as markets take a breather from yesterday’s Moderna-inspired gains with little in the way of incremental newsflow since Monday’s close. Sectors are mostly lower on the session with cyclicals such as oil & gas, banks and travel & leisure lagging peers. The latter has been dragged lower easyJet (-2.4%) after the Co. posted a FY loss of GBP 1.27bln and noted that it is expecting to fly no more than 20% of planned capacity in Q1 2021. For banking names, besides the broader thematic moves at play this morning, BBVA (-4.6%) are a standout underperformer after noting it is in merger talks with Sabadell (+6.4%), accordingly, the IBEX 35 (-1.3%), of which BBVA accounts for 7.6% in weighting terms, is trailing its peers. Elsewhere, early strength in European tech names has somewhat abated with the sector roughly unchanged on the session, however, stateside the e-mini Nasdaq 100 (+0.2%) outperforms peers (e-mini S&P -0.5%, e-mini Russell 2000 -0.7%) as the ongoing rotation into cyclical/value companies pauses for breath. Tesla (+12% pre-market) are likely exerting some influence on this front with shares set to open firmer amid news that the Co. is set to join the S&P 500 prior to the open on December 21st. Corporate updates from Europe have been on the lighter side this morning as earnings season draws to a close with the one of the main standouts for the session being Imperial Brands (+6.1%) with shares higher post FY earnings and outlining a more upbeat outlook for 2021.

Home Depot Inc (HD) Q3 20 (USD): EPS 3.18 (exp. 3.05), Revenue 33.5bln (exp. 32.04bln).

-        SSS Home Depot: +24.1% (exp. +14.8%)

-        SSS Home Depot (US): +24.6% (exp. +14.75%)

Amazon (AMZN) is introducing Amazon Pharmacy which will allow customers to purchase prescription medicines through the online store. (Newswires)

FX

JPY/CHF/EUR/AUD/GBP - The Yen is leading the G10 charge against the Buck and having another look at offers ahead of the 104.00 level after tripping stops around 104.34 according to market contacts, but YUAN gains are even more pronounced as the Cnh and Cny extend their rallies towards 6.5450 and 6.5500 respectively from another solid PBoC platform overnight. Elsewhere, the Franc has rebounded further to retest 0.9100 despite further physical and verbal intervention from the SNB and Euro has also shrugged off latest ECB qualms about moves vs the Greenback to clear 1.1850 on the way to circa 1.1875. However, Eur/Usd may yet be drawn to a hefty option expiry at the half round number (2.1 bn) if not decent interest at 1.1830 (1 bn) and a more concerted attempt to reach 1.1900 could be repelled by expiries at the strike (1.1 bn). Meanwhile, the Aussie appears to have taken RBA minutes in stride given no additional policy guidance from last week’s post-meeting statement, but Aud/Usd has piggy-backed the Renminbi and gleaned traction on the 0.7300 handle from closer ties between Japan and Australia to compensate for ongoing strains with China. Similarly, Sterling is deriving momentum above 1.3200 and through 0.9000 in Eur/Gbp terms on positive sounding Brexit reports in the UK media, with chief negotiator Frost briefing PM Johnson about a potential deal by next Tuesday and an EU diplomat suggesting a willingness to be creative in finding a deal to avoid an accidental no deal scenario.

DXY/CAD/NZD - Given all the advances noted above, the Dollar index is holding up relatively well, albeit in a lower 92.614-372 range compared to Monday awaiting some top tier US data in the form of retail sales and ip before another raft of Fed speakers. Moreover, the Greenback has clawed back some lost ground against the Loonie and Kiwi amidst a dip in broad risk sentiment following yesterday’s Moderna vaccine boost, with Usd/Cad straddling 1.3075 and Nzd/Usd pivoting 0.6900 in the run up to Canadian housing starts and wholesale trade and NZ PPI.

SCANDI/EM - The Norwegian Korona is keeping pace with the Euro in wake of encouraging GDP updates rather than a deterioration in consumer sentiment, but other oil and commodity currencies are not coping with crude prices retreating from recent highs or the aforementioned waning risk appetite, as the Turkish Lira and SA Rand look forward to CBRT and SARB rate decisions on Thursday.

RBA minutes from November 3rd meeting stated the board is prepared to do more if required and policy is focused on bond buying, while it added it is not sensible to lower rates further and that negative rates are extraordinarily unlikely. The minutes also noted the outlook depends on successful containment of the virus and the board does not expect to increase rates for at least 3 years and until inflation is sustainably within the 2%-3% target band. Furthermore, it stated that they need wage growth to be materially higher, as well as significant gains in jobs and that both monetary and fiscal support are required for some time. (Newswires)

Notable FX Expiries, NY Cut:

-       EUR/USD: 1.1830 (1BLN), 1.1850 (2.1BLN), 1.1900 (1.1BLN)

FIXED INCOME

In contrast to the more stop and headline driven price action in currency markets, trade in bonds has been rather dull and measured. However, Bunds have probed beyond 175.00 to post a minor new Eurex high at 175.07 (+14 ticks vs -8 ticks at one stage) and the 2 year contract is holding just above par in spite of a tepid looking Schatz auction in contrast to solid demand for the 2024 UK tap that may have helped Gilts extend their Liffe peak by 10 ticks to 134.77 (+13 ticks on the day vs -9 ticks at the early low) awaiting the 30 year offering that could prove less appetising. Meanwhile, US Treasuries are nudging the tops of overnight ranges with the curve fractionally flatter in advance of retail sales data, ip and another blast from an array of Fed speakers.

Italy has begun the sale of its 5-yr USD bond; initial demand in excess of USD 4.5bln, lead manager. (Newswires)

COMMODITIES

WTI and Brent have experienced a choppy European morning as participants prepare for today’s JMMC meeting in otherwise relatively quiet price action thus far. Currently, WTI and Brent are pivoting around the U/C mark with a range of USD ~0.50/bbl thus far. The OPEC JMMC gathering is scheduled to commence from around 13:00GMT/08:00EST today. Yesterday’s JTC event concluded that most countries support a 3-month extension of the current cuts according to sources; such a decision would imply a production reduction level of 7.7mln BPD throughout the Q1 and as such would be relatively in-line with the source reports prior to the COVID-19 vaccine updates. Subsequently, Energy Intel has reports that JMMC delegates are said to be looking to recommend an extension of 3-6 months at current quotas. Given these updates attention throughout the session will be on how closely the final JMMC recommendation adheres to these reports and how the Committee intends to address the likely mid-term improvements on the demand front given COVID-19 vaccine updates. While on the supply side Libya’s increasing output is a possible concern particularly as they have intimated they will not comply with OPEC+ quotas until production hits 1.6mln BPD. As a reminder, the JMMC can only make policy recommendations and cannot implement policy changes themselves – with attention on the end-of-month OPEC/OPEC+ gatherings for any such alteration which would require unanimous consent to be passed. Moving to metals, spot gold is relatively unchanged on the session with the metal following and as such exhibiting similar action to the range-bound USD this morning. Currently, the yellow metal is just shy of the USD 1890/oz mark and towards the lower-end of the day’s range. Elsewhere, UBS believes palladium prices will rise to USD 2600/oz in 2021 given vaccine updates, strong China auto sales and a general recovery in global economic activity assisting the metal.

OPEC JMMC delegates reportedly said that extension of current cuts for 3-6 months will be recommended, according to energyintel's Amena Bakr. (Newswires)

Russia's Surgut is selling ESPO crude loading in late December/early January at about USD 2.70/bbl above Dubai quotes which is the highest premium in 5 months. (Newswires)

China’s NDRC stated the nation’s coal and natural gas prices are not expected to increase significantly this winter although prices have gained a bit ahead of the peak season, while it noted that China October power consumption rose 6.6% Y/Y and October YTD power consumption rose 1.8% Y/Y. (Newswires)