• Stocks continue to slip with focus on diminishing brexit hopes alongside COVID-19 delays and US fiscal deliberations; Euro Stoxx 50 -1.6%, ES -1.0%.
• European Commission President von der Leyen has informed leaders she has 'low expectations' re. Brexit and a no-deal is now the most likely scenario
• Sanofi and GSK announce a delay in their adjuvanted recombinant protein-based COVID-19 vaccine programme to improve immune response in the elderly
• FDA advisory panel voted 17-4 that benefits of taking the Pfizer (PFE)/BioNTech (BNTX) vaccine outweighed the risks
• EU leaders have reportedly agreed to impose targeted new sanctions on Turkey which they say engaged in unilateral measures and provocations
• GBP lags on the Brexit narrative ahead of Sunday's deadline to the benefit of a modestly firmer DXY as major peers are broadly softer but to a lesser extent
• Looking ahead, highlights include US PPI, Uni. of Michigan, Fed's Quarles, ECB's Lagarde & the EU Council Summit
• Note, on Friday 11th December, the desk will be closing at the earlier time of 18:05GMT/13:05EST after coverage of the Baker Hughes Rig Count

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)

The 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)

AstraZeneca (AZN LN) - Co. is developing versatile immunisation programmes against COVID-19, will soon begin exploring with Russia's Gamelaya Institute to understand if vaccines can be combined. (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)

BoJ is likely to decide next week to extend a range of steps aimed at easing corporate funding strains caused by COVID-19, fund-aid scheme is likely to be extended for at least half a year, according to sources; likely to maintain the assessment that the domestic economy is picking up, may offer a slightly brighter view than in October regarding Exports and Output. (Newswires)

UK/EU

BoE Governor Bailey says the BoE has a lot in the armoury to tackle disorderly markets; BoE undertaking extensive work with banks on practicality of negative rates, work is ongoing. (Newswires)

European Commission President von der Leyen has informed leaders she has 'low expectations' that they can reach a Brexit deal, according to sources cited by Euronews' Franey. Subsequently, stating that no deal is now the most likely option. (Twitter/Newswires)

EU Council President Michel says an agreement to cut greenhouse gas emissions by at least 55% by 2030 has been reached. (Newswires)

ECB's Holzmann says PEPP volume is a limit that can be used up but expectation is that it will not be fully used. (Newswires)

ECB's Villeroy says EUR 500bln PEPP extension is indicative and ECB can do more; vigilant on the exchange rate and all instruments are available on this. (Newswires)

ECB sources state that some policymakers see PEPP ceiling at EUR 500bln; ECB hawks wanted less generous TLTRO; Eligibility increase was scaled back in compromise; Lagarde emphasised that the EUR 500bln PEPP envelop would not need to be spent in full if financing conditions remained easy. Further, the ECB discussions on PEPP increase started at EUR 750bln before EUR 500bln was formally proposed. (Newswires)

GEOPOLITICAL

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

EQUITIES

European equities (Eurostoxx 50 -1.3%) have extended on opening losses as Brexit jitters continue to resonate ahead of Sunday’s self-imposed “deadline”. More specifically, losses after the cash open accelerated after EU Commission President von der Leyen stated that after her meeting with UK PM Johnson on Wednesday, a no deal Brexit is now the most likely option. Although this has echoed comments from other officials in recent days, as Sunday nears and differences remain unresolved, markets will continue to price in the likelihood of an no deal outcome. Accordingly, analysts at Morgan Stanley suggest that a no deal outcome could trigger a 6-10% sell-off in the FTSE 250 and 10-20% decline in banking stocks amid a move into NIRP for the BoE. These fears have subsequently weighed on the likes of Natwest (-6.7%), Lloyds (-4.2%) and Barclays (-3.7%) and overshadowed yesterday’s announcement by the PRA that it judges there is scope for banks to recommence some distributions. Other risks on the horizon, albeit of greater interest stateside is the ongoing logjam on Capitol Hill amid 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; equity index futures in the US are softer, with the e-mini S&P lower by 0.5%. Sectors in Europe trade lower across the board with telecoms lagging amid losses in Ericsson (-5.5%) after the Co. launched legal action filed against Samsung in the US for non-compliance to FRAND commitments. Sanofi (-2.5%) have acted as a drag on the CAC after the Co. and GSK (+0.6%) announced a delay in their adjuvanted recombinant COVID-19 vaccine programme, in order to improve the immune response in the elderly. Rolls Royce (-6.3%) sit at the foot of the Stoxx 600 after it downgraded its 2020 cashflow forecast and continued to warn over the challenging outlook for the industry.

Mastercard (MA) loses supreme court case over UK class action, which gives the green light to USD 18.6bln class action. (Newswires)

FX

GBP, EUR - Sterling sees another session of losses amid compounded Brexit pessimism telegraphed by various sources - whereby EU’s von der Leyen reportedly told leaders she has 'low expectations' that they can reach a Brexit deal and that a no deal scenario is the most likely outcome following her dinner with UK PM Johnson and heading into Sunday’s newly set deadline. Further, BoE’s Governor Bailey stated the Central Bank has a lot in its arsenal to tackle disorderly markets, but there are limits to what the BoE can do. Cable has receded from its overnight high at 1.3324 (21 DMA) to a current intraday base at 1.3186 with the next support levels on watch the 50 DMA at 1.3150. The EUR meanwhile experienced a pullback following verbal intervention from ECB GC member Villeroy who highlighted that the central bank is vigilant on the exchange rate and all instruments are available on this if needed, in turn prompting EUR/USD to a current low of 1.2115 from a 1.2162 high - but with losses somewhat cushioned by the EUR/GBP cross extending gains to levels just shy of 0.9200 from its 0.9116 daily low.

DXY - The index trades firmer but remains contained sub-91.000 within a tight 90.613-989 range as the Sterling’s slip provides support for the Buck, whilst State-side stimulus and government funding remains up in the air. Senate Majority Leader McConnell last night poured cold water on COVID-relief hopes as reports stated the official does not see a path on the two main sticking points but wants a narrow package, although talks are set to continue today behind the scenes. Meanwhile, the Senate ended up not voting on the government funding stopgap bill with the today’s deadline to avert a shutdown nearing.

JPY, AUD. NZD, CAD - Notwithstanding the firmer Buck, the Yen stands as the G10 gainer amid the deteriorating risk sentiment triggered by a barrage of downbeat Brexit commentary. USD/JPY resides around 104.00 having had briefly dipped below the level to a current low at 103.93 from 104.27 at best. High-beta FX have lost steam and reside towards session lows as the risk environment eroded in early European hours. AUD/USD waned from its overnight peak at 0.7572 to a low at 0.7521, whilst its Kiwi counterpart yielded its 0.7100 handle to print a base at 0.7075 (vs. high 0.7112). USD/CAD meanwhile remains sub-1.2800 but off its 1.2719 low and closer to the 1.2771 intraday high.

TRY - A double whammy for the Turkish Lira amid two separate geopolitical developments whereby the US is reportedly mulling CAATSA sanctions over Turkey’s purchase of the Russian-made NATO-incompatible S-400, whilst the EU is considering restrictions amid Turkey’s behaviour in the Easter Mediterranean. USD/TRY rose from its 7.8861 base to eclipse 8.000 before waning off highs.

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)

FIXED

The complex seems set for a firmer final session of the week given the general risk picture at present with multiple factors on the Brexit, fiscal and COVID-19 narrative, among others, bolstering the debt picture. Bunds are the mornings outperformers with gains of around 50 ticks presently, but off session highs of 178.75, given the magnitudes of the mornings move there is little in the way of technical resistance prior to the 179.00 mark itself; in-spite of the plethora of ECB sources we have seen since the gathering and the moves in the complex the BTP-Bund yield spread remains affixed to the 115bp mark – with support touted around 112bp before the figure itself. Turning to Gilts, which have been bolstered given the aforementioned factors but with attention more affixed to Brexit matters as the framing of a deal continues to pivot ever further in the direction of a no-deal outcome; with Commission President von der Leyen herself saying this is now the most likely result. The benchmark itself faces psychological resistance at the 136.00 figure which is ~10 ticks above the current peak, after which a fib at 136.07 could be a sticking point. Finally, USTs are bolstered alongside their European counterparts, with the curve currently bull-flattening a touch. but as the session progresses attention for Treasuries will likely focus-in on fiscal updates given the looming shutdown deadline and as negotiations on COVID-19 relief are set to continue today.

COMMODITIES

WTI and Brent front-month futures trade choppy within tight ranges but with upside limited amid the subdued risk sentiment on the back of pessimistic Brexit updates. Nonetheless, crude futures hold onto a bulk of yesterday's gains with Brent Feb still north of USD 50/bbl (vs. high 57.74), just off yesterday's 51.06 best, whilst WTI Jan trades sub-47/bbl after reaching a high of USD 47.72/bbl yesterday. New flow for the complex has remained light throughout the European morning, but note the JMMC will now be meeting on the 16th Dec, a day earlier than scheduled. The upcoming JMMC meeting will see a review secondary source data alongside current market fundamentals before proposing policy recommendations – thus no policy decision will be taken at this meeting. The findings of the gathering are likely to be overlooked as the overall environment is little changed since the start of the month. Elsewhere, spot gold and silver see lacklustre trade once again with the former meandering around USD 1835/oz and spot silver trading sub-24/oz. In terms of base metals, Dalian iron ore futures soared almost 10% spurred by Chinese demand and Sino-Aussie woes, with some traders also citing a cyclone which could affect loadings in Australia. LME copper meanwhile sees losses in tandem with the firmer Buck and deteriorated risk sentiment.

OPEC+ JMMC meeting will take place on Dec 16, according to Russian Energy Minster Novak's spokesperson. (Newswires)