• Asian equity markets traded mixed following a similar subdued performance on Wall Street
• Congressional leaders remained at loggerheads on COVID-19 relief, with rampant infections stateside and no-deal Brexit concerns across the pond contributing to the cautious tone
• Sanofi/GlaxoSmithKline have announced a delay in their adjuvanted recombinant COVID-19 vaccine programme
• In FX, the DXY remains sub-91.00, EUR/USD trades north of 1.2150 and GBP/USD sits just above 1.3300
• UK PM Johnson said there is a strong possibility we do not get a deal and cabinet agreed that deal on the table is not right for the UK
• EU leaders agreed on a compromise involving EU budget and rule of law with Poland and Hungary, unblocking the recovery package
• US Senate Majority Leader McConnell reportedly doesn’t see a path on the two main sticking points (aid to states/cities and liability protections)
• Looking ahead, highlights include US PPI, Uni. of Michigan, Fed's Quarles, ECB's Lagarde, EU Council Summit

CORONAVIRUS UPDATE

US CDC reported that total coronavirus cases rose to 15.27mln from 15.04mln the day before and total deaths rose to 288.8k from 285.4k, while a major newswire tally stated US cases rose by at least 220,815 to a total of 15.60mln and deaths rose by at least 2,902 to a total of 292.6k. (Newswires)

Pfizer (PFE) plans to submit official US FDA approval application of its COVID-19 vaccine in April 2021. In relevant news, FDA advisory panel voted 17-4 that benefits of taking the Pfizer (PFE)/BioNTech (BNTX) vaccine outweighed the risks in people aged 16 years and older. FDA later comments it met to discuss Pfizer's request for EUA regarding its COVID-19 vaccine and that the final decision on whether to authorize it will be made by FDA's career officials, while it assured that no vaccine will be authorized in US until FDA officials feel confident in allowing their own families to use it. (Newswires)

Sanofi and GSK announce a delay in their adjuvanted recombinant protein-based COVID-19 vaccine programme to improve immune response in the elderly. Phase 1/2 interim results showed an immune response comparable to patients who recovered from COVID-19 in adults aged 18 to 49 years. Cos stated insufficient response in older adults demonstrates the need to refine the concentration of antigen in order to provide high-level immune response across all age groups. Product availability now expected in Q4 2021 pending successful completion of the development plan. (GSK). (Newswires)

ASIA

Asian equity markets traded mixed following a similar subdued performance on Wall Street where sentiment was mired by an increase in jobless claimant numbers and as congressional leaders remained at loggerheads on COVID-19 relief, with rampant infections stateside and no-deal Brexit concerns across the pond also contributing to the cautious tone. ASX 200 (-0.6%) was pressured by underperformance in healthcare after CSL abandoned trials of its COVID-19 vaccine as it generated antibodies that caused false positives on HIV tests, although losses in the index were initially tempered by strength in tech and with mining names buoyed by upside in iron ore and nickel prices. Nikkei 225 (-0.3%) was dragged by currency effects and amid weak same-store sales from convenience store operators Seven & I and Lawson, while KOSPI (+1.0%) was underpinned after preliminary data showed South Korean Exports during the first 10 days in December jumped 26.9% Y/Y. Hang Seng (+0.5%) and Shanghai Comp. (-1.1%) were varied with Hong Kong lifted by notable gains in the energy giants, although the mainland was subdued after the PBoC drained CNY 350bln liquidity for the week and China's Foreign Ministry announced reciprocal sanctions to target members of US Congress. Finally, 10yr JGBs eked mild gains amid the mostly uninspired risk appetite and with prices spurred by the BoJ rinban operation in which the central bank was in the market for over JPY 1.3tln of JGBs in 1yr-10yr maturities.

PBoC injected CNY 10bln via 7-day reverse repos at a rate of 2.20% for a net weekly drain of CNY 350bln. (Newswires) PBoC set USD/CNY mid-point at 6.5405 vs exp. 6.5378 (prev. 6.5476)

Chinese Finance Minister Liu Kun said they will strengthen financial and tax policy to ensure national economic security and will establish local government debt financing mechanism to bolster prevention of hidden debt risks, while China will also advance the disposal of high-risk financial institutions in an orderly manner. (Newswires)

South Korea December 1st-10th Trade Balance was at a provisional USD 890mln surplus, Exports rose 26.9% Y/Y and Imports rose 7.9% Y/Y. (Newswires)

UK/EU

UK PM Johnson said there is a strong possibility we do not get a deal and cabinet agreed that deal on the table is not right for the UK. PM Johnson added he will go to Paris and Berlin or wherever to get a deal but told cabinet to make no-deal preparations and stated it is vital we now get ready for Australian option (WTO) of no-deal. (Newswires)

EU leaders agreed on a compromise involving EU budget and rule of law with Poland and Hungary, unblocking the recovery package. There were also comments from Poland's Prime Minister Morawiecki that they have much stronger guarantees on the rule of law mechanism than two weeks and two months ago but added they will still take the rule of law mechanism to the EU Court of Justice, while Hungary's PM Orban stated that the ratification by national parliaments is still one more difficult obstacle to pass. (Newswires)

FX

In FX markets, the DXY remained impaired following its fall beneath the 91.00 level with the greenback pressured by several bearish factors including recent strength in most its major counterparts, an increase in jobless claimants, ongoing divisions in stimulus discussions and with the Senate still to vote on the stopgap bill to avert a government shutdown heading into today's midnight deadline. EUR/USD gained post-ECB meeting and after reports EU leaders agreed on a compromise involving EU budget and rule of law with Poland and Hungary, to unblock the recovery package, but with gains capped in Asia trade around yesterday’s resistance levels near 1.2160. GBP/USD attempted to nurse some of the recent losses but with the rebound only marginal after the increased pessimism regarding a Brexit deal with UK PM Johnson suggesting there is a strong possibility a deal may not happen and that the cabinet agreed the deal on the table was not right for the UK. USD/JPY retreated beneath the 104.00 handle due to the lacklustre risk tone coupled with the softness in the greenback and antipodeans were higher after a firmer reference rate setting by the PBoC and recent upside in commodity prices.

RBNZ published its response to the Finance Ministry regarding house prices and recommended that the Government’s specific housing objective be issued as a factor for the Reserve Bank to take into account when setting policy but added that including house price consideration to monetary policy remit is not the preferred option. (Newswires)

BoC Deputy Governor Beaudry said the BoC could cut rates further without going into negative territory if the economy went into persistent downturn, while expanding QE or YCC are other options that could be used to tackle a major downturn and that vaccine news represents upside risk. (Newswires)

COMMODITIES

WTI crude futures oscillated around the USD 47.00/bbl level with price action hampered by the cautious risk tone and ongoing stalemate in US stimulus discussions but with downside limited by the lack of pertinent newsflow for energy and with Brent crude futures finding support near the USD 50/bbl level. Gold prices ignored the softer greenback and continued its sideways trade with reflationist hopes dampened as COVID-19 relief discussions drag. Copper initially advanced alongside the opening strength in Chinese commodity prices, in which Dalian iron ore rose by 4% and Shanghai Nickel jumped 6% as commodities trade in the mainland got underway, although copper then faltered alongside the cautious risk tone.

GEOPOLITICAL

US military is on alert for potential Iranian attack in Middle East and the Pentagon is closely watching “troubling indicators of potential attack preparations” from Iranian militias in Iraq, according to a military official. (Politico)

US is poised to impose CAATSA sanctions on Turkey over its acquisition of Russian missile defense systems, with sanctions expected to be announced any day, according to sources. (Newswires)

EU leaders have reportedly agreed to impose targeted new sanctions on Turkey which they say engaged in unilateral measures and provocations. (AFP)

US

Treasuries were firmer on Thursday after a strong 30-year auction and a choppy session for risk assets. By settlement, 2s -0.1bps at 14.3bps, 10s -2.3bps at 91.8bps, and 30s -3.6bps at 165.3bps; real yields down between 1/2bps; T-note futures volumes were lacklustre. Sovereigns were firmer coming into the session, where a sell-off on the back of the ECB didn't manage to weigh on USTs too hard. The TPLEX didn't catalyse much in either direction after the US data today too: Jobless Claims rose more than expected, although CPI came in hotter than estimates, in both the headline and the core figures. There was some very modest concession into the 30-year auction, coinciding with a partial recovery in stocks, alongside commodities catching a strong bid; the Fed active in the 7-20year bucket likely kept yields suppressed. However, duration knee-jerked higher after the solid 30-year Treasury bond auction: stopped through the 1.684% WI by 1.9bps, covered 2.48x (vs avg. 2.3x), and saw a smaller than average dealer participation as competitive bidders stepped in. With yields close to cycle highs it was somewhat unsurprising to see strong demand at the auction, especially as stocks struggled to hold recent all-time highs. T-note (H1) futures settled 8+ ticks higher at 137-28+.

US Senate Majority Leader McConnell reportedly doesn’t see a path on the two main sticking points (aid to states/cities and liability protections) and wants a narrow package without those although House Speaker Pelosi and Senate Minority Leader Schumer reject that idea, according to sources, while it was also suggested that even if group gets a deal, it might not pass Senate. (CNN)

Bipartisan senate proposal formed by the "Gang of Eight" reached an agreement on state and local aid to distribute the USD 160bln with a needs-based formula, although there is still no agreement on liability. There were also separate comments from US Senate GOP whip Thune said he doubts bipartisan group will reach a deal on liability protection and predicts issue will be punted to next year, while House GOP Leader McCarthy said he supports the USD 916bln aid plan but not the bipartisan USD 908bln version. (Newswires/CNN/The Hill)

US House Leader Hoyer said members are advised that pending an agreement on the omnibus and further Coronavirus relief legislation, votes in the House could occur as early as 18:30EST on Tuesday, December 15th. In relevant news, sources stated that another interim spending bill to avert a shutdown before Christmas is not ruled out and if the omnibus spending bill is not settled by Monday or Tuesday, another "band-aid" spending bill may be needed to avoid shutdown. (Fox)