• Asian equity markets were mostly positive amid several bullish factors including ongoing vaccine hopes, strong US PMI data and reports that President-elect Biden is to pick former Fed Chair Yellen for Treasury Secretary
• Additionally, the General Services Administration informed President-elect Biden’s team that the transition can formally begin
• The DXY trades sub-92.50, EUR/USD hovers around 1.1850 and GBP/USD reclaimed 1.33 status
• Further reports note that the EU and UK are on the cusp of a Brexit deal, with Barnier set to return to London on Friday, should he test negative for COVID
• Looking ahead, highlights include German IFO, US Consumer Confidence, BoE's Haskel, Fed's Bullard, Williams, ECB's Schnabel, Lagarde, Lane, supply from the UK and US

CORONAVIRUS UPDATE

US COVID-19 cases +147,840 (prev. +184,591) and deaths: +882 (prev. +1,476). New York COVID-19 cases +5,906 (prev. +5,391) and deaths +33 (prev. +30), while LA County reported 6124 new COVID-19 cases which is a record one-day increase of infections. (Newswires)

US HHS said it will distribute roughly 30k doses of Regeneron's (REGN) antibody therapy for COVID-19 tomorrow with more to come in the ensuing weeks. There were also separate comments from the US HHS Operation Warp Speed chief adviser Slaoui that more analysis is needed on the AstraZeneca vaccine efficacy, while WHO Chief Scientist that AstraZeneca was already talking with WHO regarding pre-qualification programme on the vaccine. (Newswires)

UK COVID-19 cases +15,450 (prev. 18,662) and deaths +206 (prev. 398), while France cases +4,452 (prev. +13,157) and deaths +501 (prev. +214). (Newswires)

England is to introduce new COVID-19 testing scheme for passengers arriving from high-risk countries that could reduce self-isolation by a week or more and passengers will not need to self isolate if they test negative. (Newswires)

ASIA

Asian equity markets were mostly positive as the region digested several bullish factors including ongoing vaccine hopes, strong US PMI data and reports that President-elect Biden is to pick former Fed Chair Yellen for Treasury Secretary. In addition, the General Services Administration informed Biden’s team that the transition can formally begin and President Trump’s recommendation for the GSA and his team to adhere to initial protocols, despite his continued legal challenge to the election, also stoked risk appetite. ASX 200 (+1.3%) was led higher by outperformance in energy and its largest-weighted financials sector, with sentiment also helped by preliminary trade data which mostly showed an improvement, as well as the reduced restrictions with Queensland set to reopen its border with New South Wales from December 1st. Nikkei 225 (+2.4%) surged at the open to print its best levels since May 1991 as it played catch up from yesterday’s holiday closure and with exporters cheering a weaker currency, while KOSPI (+0.8%) notched a fresh record high after stronger Consumer Confidence added to the recent encouraging trade data. Hang Seng (Unch.) and Shanghai Comp. (-0.4%) were less decisive after reports the White House was mulling new actions against China and a new alliance to retaliate against Chinese economic coercion, with the mood in Hong Kong also hindered by the announcement to further tighten social distancing rules and close more indoor entertainment venues. Finally, 10yr JGBs were lower with prices subdued by the outperformance in Japanese stocks and after the bear steepening in USTs, although the downside was cushioned by the BoJ’s presence in the market for over JPY 1.3tln of JGBs with 1yr-10yr maturities.

• PBoC injected CNY 70bln via 7-day reverse repos at rate of 2.20% for a net daily injection of CNY 20bln. (Newswires)
• PBoC set USD/CNY mid-point at 6.5809 vs. Exp. 6.5800 (Prev. 6.5719)

UK is reportedly considering whether to remove its judges from Hong Kong's highest court following Beijing's crackdown. (Newswires)

China's Foreign Minister Wang told EU foreign policy chief Borrell that China is ready to maintain close communication with EU on issues including stepping up efforts to push forward and conclude the bilateral investment treaty. (Global Times)

UK/EU

BoE Governor Bailey said QE will need to be partially unwound over time and balance sheet will be larger than pre-crisis levels on a sustained basis, but lower than it is now. (Newswires)

BoE's Chief Economist Haldane said it is hard to know for sure if he'd have supported GBP 150bln of QE expansion if he had known the progress the vaccine would make and that his motivation was to prevent premature rise in borrowing costs. Furthermore, he stated that the November decision was finely balanced for him and he supported a larger QE package as COVID was gathering pace. (Newswires)

BoE's Tenreyro said with Gilt yields so low, boost from more QE would be limited and that the aim of doing more is to keep yields low. (Newswires)

British and EU negotiators are reportedly on the cusp of trade deal, but Brussels is reportedly considering asking for a 10 to 15-year review clause in the trade deal and fishing agreement. (The Telegraph)

UK lawmakers are reportedly considering a ban on the installation of 5G equipment from Huawei as early as 2021 in an attempt to appeal to lawmakers who wish for tighter restrictions on the Co. (Newswires)

ECB's Rehn said current financing conditions must be maintained for as long as necessary and may need to consider recalibration of TLTROs, while he added PEPP and bank loans are the top tools for stimulus. (Newswires)

FX

In FX markets, DXY traded near the 92.50 level as it held on to most of the prior session’s gains after the better than expected PMI data stateside although price action in the greenback has since plateaued amid mild reprieve in its major counterparts and the mostly constructive risk tone. EUR/USD was flat around 1.1850 level after yesterday’s pullback was stemmed by a floor at 1.1800, while GBP/USD also recovered from its lows and reclaimed the 1.3300 status amid some Brexit related optimism after reports that negotiators are said to be on the cusp of a trade deal and with the sides setting up a phone call or even a face to face meeting between PM Johnson and European Commission President von Der Leyen for later in the week. Elsewhere, USD/JPY remained near 104.50 after recent USD strength coupled with the lack of haven demand for the JPY and antipodeans are firmer due to their high beta statuses, with NZD/USD also bolstered following a lower operating budget deficit revision for 2019/2020 and after New Zealand Finance Minister Robertson announced they were mulling whether to include house price stability as a factor in RBNZ's remit, which could influence the RBNZ decision on macroprudential tools such as when it consults next month on reinstating LVR restrictions.

New Zealand Finance Minister Robertson said they are seeking advice on whether to include stability in house prices as a factor in RBNZ's remit while formulating monetary policy and wrote to Governor Orr seeking advice, while he added that he expects to receive advice by year-end and was not proposing any changes to the RBNZ mandate or independence. (Newswires)

RBNZ Governor Orr said the MPC already gives consideration to asset prices and that monetary and financial policies alone cannot solve property issues, while he added that long term structural issues are at play in the housing market. Governor Orr also stated he welcomes the opportunity to contribute to the affordability of housing and will consider the suggestion of how MPC could take into account house prices, as well as respond to the Finance Minister with considered feedback in due course. (Newswires)

New Zealand FY19/20 operating deficit before gains and losses at NZD 23.1bln vs. budget forecast of deficit at NZD 28.3bln and it sees net debt of GDP at 27% vs. Budget forecast 30.2%. (Newswires)

RBA Deputy Governor Debelle said policy action has lowered borrowing costs and the bond purchase program means AUD is lower than it would otherwise would be, while he added they must be careful not to remove stimulus too early and reiterated that board does not expect to increase the Cash Rate for at least 3 years. Furthermore, Debelle also stated he does not see risk of inflation rising too high in next 3 years and is not convinced negative rates would work. (Newswires)

• Australian Preliminary Trade Balance (AUD)(Oct) AUD 4.8bln (Prev. 5.6B). (Newswires)
• Australian Preliminary Exports (Oct) M/M 6% (Prev. 4%)
• Australian Preliminary Imports (Oct) M/M 8% (Prev. -6%)

BoC Deputy Governor Gravelle said we have not seen broad stress across its financial system due to its resiliency and targeted responses by public authorities, while he added that the BoC can and will restart some asset purchase programs and liquidity facilities if market-wide stresses reappear and we need to do more. (Newswires)

COMMODITIES

WTI crude futures were supported by the mostly positive risk tone and ongoing vaccine hopes to lift US oil prices to around USD 43.50/bbl, with focus for the complex now turning to the latest stockpile reports beginning with the private inventory data due today. Gold remained pressured after recent USD strength and as the upside in stocks sapped haven demand, while copper gained overnight as prices benefitted from the overall constructive mood.

Saudi official source at Ministry of Energy said a fire broke out in a fuel tank at a petroleum products distribution station in North Jeddah as a result of a projectile terrorist attack but there were no injuries and Aramco's supply of fuel to customers was not affected. (SPA)

US

Risk-on conditions gave a bear-steepening impetus to the Treasury complex, as vaccine updates and macro data (US PMI, SK trade, while Eurozone PMIs were soft but not as bad as seen earlier in the year) left a heavy feel. It is worth noting, however, that bonds were far more circumspect than the equity and FX complex after solid November flash PMIs out of the US. The Treasury sold USD 56bln of 2s in a mixed auction, with solid bidding metrics, although less participation left dealers with an above-average takedown. The auction of 5s was softer, seeing a tail of 0.7bps (six auction avergae is a stop-through of 0.2bps); cover was in line with recent averages, but the indirect bid was soft, leaving dealers with an above-average takedown. In terms of the technicals, desks note that the roll from December into March contracts continues, with some analysis suggesting it is only 25% complete ahead of first intention on Friday, and first notice next Monday. In terms of positioning, the latest CFTC commitments of traders report showed longs continued to add positions in the 10-year, although shorts continued to add in 2s, bucking the trend seen elsewhere across the curve. In terms of the bias, it is worth noting that it is a holiday-shortened week (effectively three days), which will leave the prevailing trends in Treasuries well intact, with a return to the early pandemic theme of monitoring case counts and lockdown restrictions will dictate the price action in US rates. And BMO also notes that the rapidly approaching month-end duration needs would otherwise offer a flattening skew, but in the current environment it looks instead to greater vaccine information and further restrictions on in person commerce to set the tone in financial markets. "Thus, we are apprehensive the 82-97bps zone in 10-year yields will be recast, and instead will look an extension of the process of consolidation into and out of Thursday’s holiday”. T-note (Z0) futures settled 6 ticks lower at 138-10.

Fed's Evans (non-voter) said he would be surprised if Fed hikes rates before 2023 even if recovery is stronger than expected and that the Fed should not try to fine-tune inflation overshoot. Fed's Evans also stated that the US economy needs more fiscal support and has the view we should go big, while he added that the Fed would be willing to do more if economy further deteriorates. (Newswires)

Former Fed Chair Yellen has reportedly "leapfrogged" Fed's Brainard and Roger Ferguson to likely run President elect Biden's Treasury, according to FBN's Gasparino citing a Biden advisor. (Twitter)

ELECTION UPDATE

US General Services Administration informed President-elect Biden that the transition can formally begin, while Biden's transition team said he will begin meeting with Federal officials on the pandemic response and national security issues. (Newswires/CNN)

US President Trump tweeted that the case strongly continues and believes he will prevail, but in the best interest of the country, he recommends the GSA do what needs to be done with regards to initial protocols and instructed his team to do the same. Furthermore, President Trump later suggested the GSA being allowed to do preliminarily work has nothing to do with continuing various cases on the corrupt election, while he added we are moving full speed ahead and will never concede to fake ballots and Dominion. (Twitter)

Michigan Board of State Canvassers certified the results of November 3rd election for President-elect Biden, while the Trump campaign's legal team stated that vote certification is simply a procedural step and it will continue its legal battle. (Newswires)