• A tentative mood was seen in Asia-Pac bourses following the flat performance on Wall St, whilst Chinese Caixin Services PMI printed its second highest reading in a decade
• US and EU have reportedly renewed their push to settle the Boeing (BA) Airbus (AIR FP) subsidy dispute
• In FX markets, the DXY has slipped below 91.00, EUR/USD holds onto 1.21+ status, GBP/USD trades sub-1.34
• Newsflow around Brexit continues to suggest that EU Chief Negotiator Barnier remains under pressure from member states to not give ground to the UK
• Senate Minority Leader Schumer stated that the latest GOP COVID plan is an inadequate, partisan proposal
• Looking ahead, highlights include EZ, UK and US Markit Services and Composite Final PMIs, EZ Retail Sales, US Initial Jobless Claims, ISM Services PMI, OPEC+ meeting and supply from France

CORONAVIRUS UPDATE

US COVID cases +178,395 (prev. +152,022) and deaths +2,461 (prev. +1,251). NY COVID cases +8,973 (prev. +7,285); deaths +69 (prev. +66) and California COVID cases +20,759 (prev. +12,221) which was a new record. The Los Angeles Mayor later issued a stay-at-home order with only essential businesses to remain open and travel prohibited, while failure to comply will constitute to a misdemeanor subject to fines and imprisonment. (Newswires)

US HHS Official said states have been told to submit Pfizer (PFE) distribution plans by the end of the week, while US Operation Warp Speed Chief Slaoui said both Johnson & Johnson (JNJ) and AstraZeneca (AZN) trials in the US should have efficacy data by late December or early January. Furthermore, it was reported the FDA is unlikely to approve the AstraZeneca's COVID-19 vaccine until it gets the data from the US trial, according to an official. (Newswires/WSJ)

UK's National Health Service CEO Stevens said a bulk of the vaccine programme will be between January to March/April for the vulnerable and that 50 hospital hubs will start offering the vaccine from next week, while England Deputy Chief Medical Officer Van-Tam stated he doesn't believe COVID-19 will ever be eradicated and that it could become a seasonal problem. (Newswires)

German Chancellor Merkel confirmed the extension of partial lockdown measures until January 10th and that officials will meet to reassess on January 4th, while the Bavarian Premier said tougher restrictions could be needed. Spain is to ban movement between regions between December 23rd-January 6th and Italy's government approved new COVID-19 restrictions for the holiday period in which movement between regions will be banned between December 21st-January 6th. (Newswires)

ASIA

A tentative mood was seen in Asia-Pac bourses following the flat performance on Wall St where recent vaccine developments and stimulus hopes were offset by weak jobs data in which ADP Employment disappointed ahead of Friday's NFPs and amid lingering US-China tensions. ASX 200 (+0.4%) was positive with broad strength in the commodity sectors led by iron ore miners including Fortescue Metals which rose to an all-time high and Rio Tinto shares also printed their best levels in 12 years amid record Dalian iron ore prices and after Vale recently lowered its 2020 iron ore output guidance. However, upside for the index was capped by losses in financials, tech and defensives, as well as ongoing tensions with China whereby Australian Treasurer Frydenberg stated they will not give ground on 14 China grievances. Nikkei 225 (+0.1%) swung between gains and losses amid an indecisive currency and with participants digesting reports the government will extend the Go To Travel subsidy campaign. Hang Seng (+0.6%) and Shanghai Comp. (-0.2%) traded mixed despite encouraging Caixin Services PMI which printed at its second highest in a decade and added to the recent streak of solid Chinese PMI data, with sentiment in the mainland clouded after the PBoC drained liquidity again and following the US House approval of the China delisting bill which requires foreign companies to comply with US auditing rules or risk being delisted from US exchanges. Finally, 10yr JGBs were choppy and oscillated around the 152.00 focal point amid the indecision in stocks and following mostly weaker results at the 30yr JGB auction.

PBoC injected CNY 10bln 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 6.5592 vs. Exp. 6.5564 (Prev. 6.5611)

US House passed the China delisting bill which requires foreign companies to comply with US auditing rules or risk being delisted from US exchanges, while the White House confirmed US President Trump is expected to sign the bill. In other news, the Trump administration imposed an import ban on cotton and textiles produced by Xinjiang Production and Construction Corps (XPCC) which is said to be a quasi-military organization that uses forced labour. (Newswires)

US appeals court set December 14th for oral arguments in government appeal of injunction barring government from banning new TikTok downloads, according to a filing. (Newswires)

• Chinese Caixin Services PMI (Nov) 57.8 vs. Exp. 56.5 (Prev. 56.8); 2nd highest in a decade.
• Chinese Caixin Composite PMI (Nov) 57.5 (Prev. 55.7)

UK/EU

UK Chancellor Sunak said UK's GBP 400bln deficit will become unaffordable if interest rates rise and that the UK is much more sensitive to rate rises because of its debt burden. (The Times)

France is reported to have told EU Chief Brexit Negotiator that a Brexit deal risks being vetoed if he gives into UK demands. There were separate comments from an EU source that the next 48-hours are key for Brexit talks and a UK source agreed but also suggested we may or may not get there by the end of the week and it is very difficult to call, according to Sky's Rigby. Furthermore, BBC's Kuenssberg later tweeted that the UK and EU may reach a Brext deal by end of the week. (Newswires/Twitter)

US and EU have reportedly renewed their push to settle the Boeing (BA) Airbus (AIR FP) subsidy dispute. (Newswires)

FX

In FX markets, the DXY was subdued and eventually breached 91.00 to the downside. The weakness in the greenback spurred its major counterparts which helped EUR/USD reclaim the 1.2100 handle, while there hasn’t been much of a shift in the latest ECB commentary. GBP/USD recouped some losses but remained beneath 1.3400 amid Brexit uncertainty after EU Chief Brexit Negotiator Barnier noted differences remain on the three sticking points and with France threatening a veto if Barnier gives in to UK demands. USD/JPY mirrored the indecisive risk tone with price action stuck around 104.50, while antipodeans were rangebound although AUD/USD held on to most the prior day’s gains as support at 0.7400 and improved trade data provided a platform for the currency.

• Australian Trade Balance (AUD)(Oct) 7.5B vs. Exp. 5.8B (Prev. 5.6B). (Newswires)
• Australian Exports (Oct) M/M 5% (Prev. 4.0%)
• Australian Imports (Oct) M/M 1% (Prev. -6.0%)

COMMODITIES

WTI crude futures were choppy around the 45.00/bbl level as focus centres on today's OPEC+ meeting with recent reports suggesting headway was made towards an agreement and that OPEC+ delegates are said to positive that consensus will be reached. This renewed optimism helped price action and briefly lifted WTI near the USD 46.00/bbl before pulling back, while the recent mixed inventory data, tentative risk tone and COVID-19 concerns contained overnight price action. Gold eked marginal gains amid a softer greenback and copper prices were kept flat by the tepid risk appetite and resistance at USD 3.50/lb.

Russia production was above its OPEC+ ceiling again, according to EnergyIntel citing data from the Russian energy ministry. (Twitter)

Saudi Aramco announced a malfunction in one of the pumps at the petroleum derivatives distribution station in the Jazan region, according to state press, while teams are looking to fix the issue ASAP so that it can continue to provide petroleum derivatives and supplies of petroleum products have gradually returned. (Newswires)

GEOPOLITICAL

US President Trump’s administration is pulling out as many as half of America's diplomats from the US Embassy in Baghdad, Iraq as fears grow that Iran may try to strike US staff in Baghdad. (Politico)

US

Treasuries continued their steepening on Wednesday as stimulus hopes and recovery narratives dominate, albeit not to the same extent as Tuesday. By settlement, 2s -0.8bps at 16.6bps, 10s +1.4bps at 94.8bps, 30s +3bps at 170.6bps; T-note futures volumes were average. USTs had been bid and stocks offered overnight, with participants citing the reports that Biden would not look to terminate the China Phase 1 trade agreement immediately. That Treasury strength proved short-lived, where yields began rising again as US participants entered the fray. A disappointing ADP print saw a brief bid for bonds, although sellers soon reemerged; one desk noted that CTAs, hedge funds, and dealers were all sellers. The overarching narrative of potential stimulus and the economic recovery continues to provide fuel to bets of a steeper curve. The former saw ignited a late-session extension of duration selling after Pelosi and Schumer said the bipartisan proposal of USD 908bln would form a basis for the two sides to negotiate over, seeing the 10-year cash yield come within a basis point of its post-COVID high of 97.5bps from earlier in November (the day the Pfizer vaccine data was first announced) and the 2s10s spread hitting its highest since February 2018 (79.6bps). Thursday's refunding announcement is likely keeping rates offered too, where the Treasury will announce sizes for next week's 3s, 10s and 30s offerings, coming ahead of the focal data point of the week on Friday, NFP, where employment data points running into it have painted a cautious tone. T-note (H1) futures settled half a tick lower at 137-13+.

Fed's Beige Book stated most Federal Reserve Districts have characterized economic expansion as modest or moderate since the prior Beige Book period. Four Districts described little or no growth and five narratives noted that activity remained below pre-pandemic levels for at least some sectors, while Philadelphia and three of the four Midwestern Districts observed that activity began to slow in early November as COVID-19 cases surged. Furthermore. nearly all Districts reported that employment rose, but for most, the pace was slow at best and the recovery remained incomplete. (Newswires)

Fed's Williams (voter) said the economy was recovering more strongly than expected until recently and that we are still in a very deep recession, while he added recent data showed signs of slowing in pace of growth due to second wave of virus cases and growth is also slowing due to lack of fiscal aid, which is expiring or diminishing. (Newswires)

Fed's Kaplan (voter) said guidance will be needed on asset purchases and officials need to start thinking about conditions that could lead to a reduction in buying Treasury and mortgages. Kaplan also said he doesn't believe the Fed should extend the weighted average maturity of Treasury purchases at the minute nor should it increase the total amount of purchase. (Newswires/CNBC)

Federal Reserve Governor nominee Christopher Waller cleared procedural vote in the Senate by 50-45 before the confirmation vote, while reports stated the confirmation vote will likely take place on Thursday. (WSJ)

Senate Minority Leader Schumer stated that the latest GOP COVID plan is an inadequate, partisan proposal. (Newswires/Politico)

US House Speaker Pelosi and Senate Minority Leader Schumer back the bipartisan COVID relief framework as a basis for talks and stated that they and others will offer improvements but the need to act is immediate and believe that with good-faith negotiations, an agreement can be reached, while it was also reported that Pelosi and Schumer had offered a secret proposal to Senate Majority Leader McConnell and House Minority Leader McCarthy valued at USD 1.3trln at the start of the week which didn't progress. (Newswires/Politico)

US Congressional Negotiators agreed on the final version of the National Defense Authorisation Act, without the section 230 repeal demanded by US President Trump. (Newswires)

US Office of the Director of National Intelligence stated that Chinese agents have stepped up their efforts to influence President-elect Biden's incoming administration. (BBC)