• Most major Asian equity markets traded positively as the region took impetus from the record-setting session in the US where the S&P 500 notched a record close
• In FX markets, the DXY remained subdued and moved closer towards 92.00, EUR/USD briefly reclaimed 1.1900 status, while GBP/USD hovered around 1.3350
• Gold was little changed and languished around the prior day's lows near the USD 1800/oz level
• US Treasury Secretary Mnuchin said he will place the USD 455bln of unspent CARES Act money in a general fund, which would need congressional approval to be utilised
• Looking ahead, highlights include US Durable Goods, GDP (2nd), Core PCE Prelim, IJC, University of Michigan Survey, ECB Financial Stability Review, UK Chancellor Sunak November Update, FOMC Minutes, Deere earnings

CORONAVIRUS UPDATE

US COVID-19 cases +157,531 (prev. +147,840) and deaths: +1,058 (prev. +882), while a major newswire tally stated US cases rose by at least 170,846 to a total of 12.59mln and deaths rose by at least 2,157 to a total of 259.8k. New York COVID-19 cases 4,881 (prev. +5,906) and deaths +47 (prev. +33). (Newswires)

US CDC may soon shorten the length of time it recommends that a person self-quarantine after potential exposure to the coronavirus, hoping that such a step will encourage more people to comply, according to reports citing an official. (WSJ)

US President Trump said coronavirus vaccines will "be coming probably starting next week, or shortly thereafter", according to a reporter. (Twitter)

China's Global Times stated China is likely to approve a COVID-19 vaccine by year-end to meet the need of epidemic-stricken countries, citing experts. It was separately reported that Sinopharm (1099 HK) submitted COVID-19 vaccine application to National Medical Products Administration. (Newswires)

German Chancellor Merkel said she wants further restrictions for the Christmas shopping season and tougher restrictions than what the German states are calling for. (Newswires)

Three households in the UK will be able to meet together over Christmas under plans being discussed by the UK and travel restrictions will be lifted between December 23rd-27th, according to Sky citing a government source. (Sky)

Canada's Alberta province Premier Kenney declared a public health emergency and announced to limit retail outlets to 25% of in-store capacity. (Newswires)

ASIA

Most major Asian equity markets traded positively as the region took impetus from the record-setting session in US where the DJIA broke above 30k for the first time ever and S&P 500 notched a record close after sentiment was bolstered by the start of the transition process and amid a resumption of the rotation into value. ASX 200 (+0.6%) was higher in which energy and financials spearheaded the advances in cyclicals and with sentiment also underpinned by further easing of restrictions after Australia registered another ‘donut day’ of zero new infections and deaths, while Nikkei 225 (+0.9%) continued to outperform in early trade as exporters benefitted from the recent currency weakness and with Kawasaki Heavy among the notable gainers after reports it is to sell its nuclear business to Atox. Hang Seng (+0.5%) and Shanghai Comp. (-0.7%) were mixed with an initial upbeat mood after recent comments from Premier Li that he sees GDP returning to a reasonable range next year and amid anticipation of supportive measures from Hong Kong Chief Executive Carrie Lam’s policy address where she noted support for expanding eligible securities for the connect program and announced to relax investment limits on REITs, as well as relief spending for the tourism sector. However, the mainland later failed to sustain the gains amid lingering tensions with US and concerns regarding recent defaults and crackdown by authorities. Finally, 10yr JGBs were flat following a similar humdrum picture in T-notes as the rally in stocks sapped demand for paper, while mixed results at the 40yr JGB auction also kept price action contained.

• PBoC injected CNY 120bln via 7-day reverse repos at a rate of 2.20% for a net daily injection of CNY 20bln. (Newswires)
• PBoC set USD/CNY mid-point at 6.5749 vs. Exp. 6.5742 (Prev. 6.5809)

Hong Kong Chief Executive Carrie Lam said the aim of policy address is to restore confidence and that urgent priorities are to restore constitutional order and political system from chaos, while she added foreign governments and legislatures have intensified interference in HK affairs which are squarely China's internal affairs. Lam also stated that the government supports expansion of eligible securities under mutual access with eligible biotech companies will be added to the stock connect with China and the central government supports gradual resumption of travel between Hong Kong and Guangdong without need to quarantine. Furthermore, she announced to relax investment limits on REITs, will remove double stamp duty for non-residential property and announced that HKD 600mln is budgeted to launch extra relief measures for the tourism industry. (Newswires)

UK/EU

UK Chancellor Sunak is to unveil a GBP 4.3bln "New Deal-style package to get one million people back into work at the upcoming spending review. (Telegraph)

On Brexit, US President-elect Biden said we do not want a guarded border in Ireland. (Newswires)

ECB's Mersch reportedly signaled lifting the ban on banking dividends next year in which he suggested that the regulator may not have the authority to extend the restrictions. (FT)

FX

In FX markets, the DXY remained subdued and approached closer towards the 92.00 level as the mostly positive risk tone in Asia and a record-setting session on Wall Street weighed on haven demand, with focus for USD now turning towards the FOMC minutes due later today. The greenback’s major counterparts were rangebound overnight but held onto their recent spoils with EUR/USD briefly reclaiming 1.1900 status after extending on yesterday’s momentum, while GBP/USD hovered around 1.3350 with price action contained as markets await any fresh updates regarding Brexit-negotiations. USD/JPY and JPY-crosses remained afloat after the heightened risk appetite spurred haven currency outflows on Gotobi day, while antipodeans were steady with upside in AUD/USD contained after softer than expected Construction Work data which feeds into the GDP figures scheduled next week. NZD/USD was also unmoved after the RBNZ Financial Stability Review which stated the economy is relatively resilient and that unemployment is lower than expected to date but also noted high leverage in housing poses risks and they intend to resume loan-to-value restrictions.

RBNZ Financial Stability Review stated the economy is relatively resilient and that unemployment is lower than expected to date, while it added that the financial system has been insulated from significant stress so far. FSR also noted that high leverage in housing poses risks if house prices fall sharply or unemployment rises sharply and that the RBNZ intends to resume loan-to-value restrictions. (Newswires)

RBNZ Governor Orr said monetary and fiscal support limited the shock to households and low interest rates ensured NZD exchange rate remains competitive, while he added that stimulus will continue and the economy performed as well as possible. Furthermore, Governor Orr stated the RBNZ is committed to meet our remit and want to be operationally ready to implement negative OCR should we need to. (Newswires)

Australian Construction Work Done (Q3) -2.6% vs. Exp. -2.0% (Prev. -0.7%). (Newswires)

COMMODITIES

WTI crude futures mildly extended on yesterday's advances to trade above the USD 45/bbl level, with the bearish headline crude private inventory data superseded by the mostly positive risk tone. Further upside was also seen as Chinese participants entered fray in which Shanghai crude oil for January delivery rose more than 6% and Shanghai fuel oil is higher by 3% moments after the open. Gold was little changed and languished around the prior day's lows near the USD 1800/oz level despite the weaker greenback. There were mixed commentary from analysts with Westpac suggesting the price has peaked citing positive vaccine developments and sees prices to average USD 1760 by end-2021 and further slip to USD 1633/oz by end-2022, while Goldman Sachs sees current levels as unsustainable and maintained a 12-month target of USD 2300/oz as it anticipates prices to increase when further evidence of inflation emerges. Elsewhere, copper was initially lifted by the early heightened risk appetite but then pared most the gains after hitting resistance at USD 3.30/lb and as stocks began to pare their advances.

US Private Energy Inventories (bbls): Crude +3.8mln (exp. +0.1mln). (Newswires)

GEOPOLITICAL

Israel has reportedly conducted strikes on Damascus suburbs, according to Syria state news. (Newswires)

US

The Treasury curve was mixed, with shorter-dated yields lower (albeit by around 1bps) while yields on 7-year and upwards were higher (2-5bps). The short-end has taken influence from expectations that the Fed will add to monetary policy accommodation at its December meeting – whether that is via beefed-up forward guidance, boosting the size of asset purchases, or even extending the weighted average maturities of its purchases, perhaps even a combination of all of these. That message has been reinforced by recent Fed speak. It was notable today that Fed dove Bullard, who doesn’t vote on policy until 2022, thinks the size of asset purchases are about right; however, there was some reason for caution, given that Fed’s Williams argued that financial conditions were quite favourable at the moment (it has been easing slightly since mid-October, although hasn’t reached pre-pandemic levels yet, judged by the Chicago Fed’s NFCI), an apparently neutral signal, though the NY Fed President did say that as more clarity on the economy is seen, that would frame the Fed’s view. Meanwhile, the longer part of the curve was being influenced by constructive risk conditions, with equities hitting or flirting with all-time highs. The Treasury sold a record size of 7-year notes which was received well by the market, with the sale stopping through the WI by 0.4bps, perhaps influenced by the concession seen ahead of the supply; cover was higher than the previous sale, though beneath recent averages, but the internals were encouraging. Elsewhere, desks note that the Treasury index extension is hefty in November at 0.16 years, much higher than the 0.12 years average seen in November over the last three years; UBS explained that this large extension is typical in refunding months due to increased index turnover. T-note (Z0) futures settle 2 ticks lower at 138-08.

Fed's Williams (voter) said the Fed has taken an approach that will adjust naturally if the economy does better than expected, while he added that accommodative monetary policy is helping the economy weather the storm and it will help the economy return to full employment ASAP. (Newswires)

Fed's Bullard (non-voter) sees no need to change bond purchases right now and he is encouraged by recent vaccine news, while he added there "seems to be light at the end of the tunnel" and that we have great policy right now. (Newswires)

US Treasury Secretary Mnuchin said he will place the USD 455bln of unspent CARES Act money in a general fund, which would need congressional approval to be utilised. (Newswires)

Congressional negotiators reportedly reach an agreement on spending levels for the 2021 fiscal year spending bills, according to a House Democratic aide. (Twitter)

ELECTION UPDATE

US President Trump questioned why doesn't the Georgia Secretary of State allow us to look at signatures on envelopes for verification and Trump also suggested they will find tens of thousands of fraudulent and illegal votes. (Twitter)

White House Chief of Staff Meadows tweeted that a judge in Nevada allowed state Republicans to present findings of widespread fraud in December 3rd hearing, while he added that Americans will now hear evidence from those who saw firsthand what happened. (Twitter)