• Asian equity markets were cautious amid headwinds from the soured mood on Wall St with the downturn led by hefty losses in the Nasdaq
• UK PM Johnson and EU's von der Leyen agreed that a firm decision should be taken about the future of talks by Sunday
• In FX, the DXY gave back some of its gains, EUR/USD lost 1.21 status ahead of ECB and GBP/USD trades sub-1.34
• The US House has come together on passing the one-week stopgap funding measure to avoid a government shutdown
• Senate Leader McConnell expressed his dissatisfaction with the Democrats and alleged that they rejected further GOP aid proposals
• Looking ahead, highlights include UK GDP & output data, Swedish inflation, ECB rate decision & press conference, US CPI, IJC, EU Council Meeting, BoC's Beaudry, FDA EUA meeting, supply from Italy & the US

CORONAVIRUS UPDATE

US COVID-19 cases +217,046 (prev. +186,215) and deaths +2,566 (prev. +1,532), while a major newswire tally stated US cases rose by at least 220,927 to a total of 15.38mln and deaths rose by a record of at least 3,253 to a total of 289.7k. California reported a record 30,851 new cases and its 14-day avg. positivity rate jumped to 8.8% which was the highest since spring. (Newswires)

US official said could have EUA on Pfizer's (PFE) COVID vaccine within days of FDA meeting and that Americans could start receiving vaccinations from next week.( Newswires)

Oxford's Jenner Institute Director said if FDA waits for the end of Oxford University/AstraZeneca (AZN LN) vaccine trial, the vaccine will not be available in the US until mid-2021. (Newswires)

ASIA

Asian equity markets were cautious amid headwinds from the soured mood on Wall St where the major indices pulled back from record levels amid frictions in US stimulus talks and lack of any breakthrough in Brexit negotiations across the pond, with the downturn led by hefty losses in the Nasdaq. ASX 200 (-0.7%) was pressured amid notable weakness in gold miners after recent losses in the precious metal and as tech stocks reflect the underperformance of their stateside peers, with the ongoing deterioration in Aussie-Sino ties also adding to the glum. This was after MOFCOM issued its ruling on anti-subsidies investigation on Australian wine imports and confirmed to collect anti-subsidy deposits from Friday, while Nikkei 225 (-0.1%) traded negative for most the session but with downside cushioned by favourable currency flows on Gotobi day and with SoftBank shares surging double digits which was attributed to paper profits from the DoorDash IPO. Hang Seng (-0.3%) and Shanghai Comp. (-0.2%) began subdued although the mainland bourse showed resilience and briefly recouped opening losses which also follows the recent jump in lending and financing data, while Hong Kong languished as its Chief Executive Lam faces a freeze-out from Japanese banks with US operations after Tokyo said it will abide by US sanctions. Finally, 10yr JGBs were higher on a rebound from support near 152.00 and following a similar mild recovery in T-notes with prices helped by the cautious tone in stocks, although gains were pared following mixed results and weaker demand at the 20yr JGB auction.

PBoC injected CNY 10bln via 7-day reverse repos at a rate of 2.20% for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 6.5476 vs exp. 6.5485 (prev. 6.5311)

China's MOFCOM issued the ruling on anti-subsidies investigation on Australian wine and said it will impose temporary anti-subsidies deposits against Australian wine imports beginning December 11th. (Newswires)

S&P DJI said it will remove 10 Chinese firms' A-shares, H-shares and ADRs prior to December 21st open including Hikvision (002415 CH) and SMIC (981 HK) following US blacklisting. (Newswires)

Asian Development Bank revised its 2020 economic growth forecast for developing Asia to -0.4% from -0.7% and raised 2020 Chinese GDP growth to 2.1% from 1.8%. (Newswires)

UK/EU

UK PM Johnson acknowledged the Brexit situation is difficult but noted they will not leave any route to a fair deal untested, while he added the deal must respect UK independence and sovereignty, while EU Commission President von der Leyen said we gained a clear understanding of each other's positions and that they remain far apart but added we agreed the teams should immediately reconvene to try resolve the issues. (Newswires)

A senior UK source said very large gaps remain and it is still unclear if the gaps can be bridged, while the source added that UK PM Johnson and EU's von der Leyen agreed that a firm decision should be taken about the future of talks by Sunday. There were also comments from an EU official that both sides appear to see a Brexit deal is possible and that PM Johnson and EU's von der Leyen agreed talks were constructive. (Newswires)

EU is reportedly to tell large tech firms to police the internet or face substantial fines, according to report citing a confidential draft regulation which involves penalties of up to 6% of annual turnover. (FT)

UK RICS Housing Survey (Nov) 66 vs. Exp. 60.0 (Prev. 68.0, Rev. 67). (Newswires)

FX

In FX markets, the DXY gave back some of its gains and the 91.00 status amid ongoing frictions in stimulus talks with Senate Leader McConnell expressing his dissatisfaction with the Democrats and alleged that they rejected further GOP aid proposals and admitted to previously blocking aid due to the election. Conversely, the US House has come together on passing the one-week stopgap funding measure to avoid a government shutdown and provide more time for discussions on government funding and pandemic relief, which the Senate plans to vote on today. EUR/USD partly nursed yesterday’s losses beneath the 1.2100 handle with price action tentative heading into the ECB meeting later where the central bank is widely expected to announce additional supportive measures and with the EU Summit also beginning today where policymakers are looking to reach a consensus on the Budget and recovery fund. GBP/USD was pressured after the dinner showdown between UK PM Johnson and European Commission President von der Leyen as sources noted very large gaps remained and it was still unclear if the gaps can be bridged, although the leaders agreed that a firm decision should be taken about the future of talks by Sunday. This dragged GBP/USD below 1.3400 although some of the losses were pared after the dust settled given that the overall situation hasn’t changed much and with the negotiating teams to continue working towards a deal for at least the next few days. USD/JPY and JPY- crosses were lifted amid Gotobi demand and antipodeans also benefitted from a softer greenback but with NZD/USD slightly lagging following softer Electronic Card Retail Sales data and cross-related headwinds after AUD/NZD extended above 1.0600.

RBNZ revised weightings on trade weighted index for next year in which it raised lowered AUD weighting to 18.71% from 19.19%, but raised USD to 13.64% from 13.27% and increased CNY to 23.48% from 22.89%. (Newswires)

Brazil Central Bank maintained the Selic rate at 2.00% as expected through unanimous vote and reaffirmed forward guidance that it does not intend to reduce monetary stimulus as long as specified conditions are met. BCB said the latest inflation data was above expectations and is expected to remain high in December but noted despite stronger short-term inflationary pressure, the committee still believes shocks are temporary. Furthermore, it stated conditions for maintaining forward guidance may not be satisfied soon and if forward guidance is removed, monetary policy will continue to follow an inflation targeting regime. (Newswires)

COMMODITIES

WTI crude futures stabilised after finding support at the USD 45.50/bbl level, which was at sharp contrast to yesterday's price jitters following a staggering surprise build in headline EIA crude inventories of around 15.2mln bbls which desks attributed to several factors such as lower demand on Thanksgiving weekend and lockdown restrictions, while there was also a record 2.7mln BPD net imports of oil last week amid a big drop-off in exports and some also speculated that Saudi could be looking to impact US inventories again by keeping the trade one way. Elsewhere, gold was little changed which provided some reprieve after yesterday's slump in prices as US stimulus hopes were pushed back by frictions between congressional leaders, while copper prices languished overnight amid the cautious risk tone.

US

Treasuries were sold on Wednesday, although a paring in risk appetite in later trade saw yields off their highs. By settlement, 2s +0.2bps at 15.3bps, 10s +2.8bps at 94.1bps, 30s +2.8bps 168.8bps; real yields fell another few bps; T-Note futures volumes were average. The steepening had got off overnight, alongside a modest bid for stocks, after two sessions of duration bidding saw yields back away from their post-COVID highs. Dealers were reportedly supporting the selling pressure in anticipation for the 10- and 30-year auction today and Thursday. The USD 36bln 10-year offering was lacklustre, with a 0.4bps tail, although participation was above average, likely with added foreign players after the recent yield pick-up in the US. There wasn't much price action on the back of the auction, instead, bidders appeared to emerge after Senate Leader McConnell tweeted his dismay with the stubbornness of Dems on stimulus proposals. The rest of trade was rather choppy, with duration almost reversing all its steepening at one point, although by futures settlement the curve was still steeper; preparation for Thursday's USD 24bln 30-year offering is also likely keeping duration pressured. T-note (H1) futures settled 6 ticks lower at 137-20.

US Treasury Secretary Mnuchin said stimulus cheques in COVID-19 relief package have bipartisan support and President Trump's backing, while he added talks between GOP and Democrats are quite constructive but few sticking points remain regarding a deal. (Newswires)

US Senate Majority Leader McConnell said Democrats rejected two more GOP aid proposals in the space of two hours and they now admit they blocked aid all summer and fall because there was an upcoming election. There were separate reports that US Senators King and Graham were close to a deal on liability protections in COVID relief talks and were getting input from congressional leaders, while they had hoped to unveil the bill language yesterday. (Newswires/CNN)

US House voted 343-67 to pass the one-week stopgap funding measure to avoid a government shutdown as expected, while Senate plans to vote on it today. (Newswires)

USTR said the US is exercising rights under the USMCA challenging Canada's allocation of dairy tariff-quotes. In other news, US President-elect Biden is reportedly to nominate Katherine Tai as the next USTR. (Newswires)

US President-elect Biden's son Hunter Biden said US AG office is investigating his tax affairs although he is confident a review will show his affairs were handled legally and appropriately. (Newswires)

17 US states told the Supreme Court that they support an effort by Texas Attorney General to sue to effectively reverse President-elect Biden’s projected win in the Electoral College. Furthermore, it was also reported that the Trump campaign called on the Supreme Court to let it intervene in the Texas lawsuit to halt a Biden election victory. (Newswires)