• Equities have continued to grind higher throughout the morning amid sparse newsflow following the cautious APAC lead; Euro Stoxx 50 +0.5% ES +0.6%
• Electoral College officially voted to confirm President-elect Bidens election victory with sufficient electors required to become President
• US House Speaker Pelosi and Treasury Secretary Mnuchin conducted a phone call yesterday in which Pelosi stated that remaining items in the spending bill can be resolved easily
• FX features a modestly downbeat DXY as sentiment gradually strengthens with G10 peers little changed at present and Brexit updates minimal thus far
• IEA cut 2020 and 2021 global oil market demand forecasts citing poor aviation demand and expect it to take several months for the vaccine to offer assistance
• Apple (AAPL) is reportedly planning a 30% Y/Y increase in iPhone output for H1 next year, Nikkei citing sources
• Looking ahead, highlights include NY Fed manufacturing, industrial production, Australian PMIs, Japanese trade balance, ECB's Lane, BoC's Macklem

CORONAVIRUS UPDATE

European Medical Agency (EMA) is aiming to approve the Pfizer (PFE)/BioNTech (BNTX) COVID-19 vaccine on December 23rd, according to Bild citing sources. Subsequently, the EMA reiterates that they will decide on the Pfzier (PFE)/BioNTech (BNTX) vaccine on December 29th at the latest. (Bild/Newswires)

Italian PM says it is necessary to adopt additional COVID-19 restrictions over the holiday season to avoid a 3rd wave. (Newswires)

German Health Minister says the country's COVID-19 infection numbers and deaths are too high; additionally, RKI says the COVID-19 situation is worse than ever and there is a risk the situation deteriorates further. (Newswires)

German Health Minister says it is possible additional COVID-19 vaccine contracts will be signed, also with Moderna (MRNA). (Newswires)

WHO is in discussions with Pfizer (PFE)/Moderna (MRNA) to determine whether their COVID-19 vaccines can be part of the early roll-out of COVAX vaccines priced as appropriate to populations

ASIA

Asian equity markets followed suit to the cautious performance in the US where sentiment was pressured by lockdown concerns after New York City Mayor De Blasio warned of the possibility of a full shutdown for NYC which weighed on the overall market sentiment and saw the S&P 500 and DJIA reverse course with the blue-chip index falling from fresh record intraday highs, although the Nasdaq remained afloat as stay-at-home tech names benefitted, while some analysts noted this week’s looming FOMC, quad witching and portfolio rebalancing heading into the holiday season were also headwinds for stocks. ASX 200 (-0.4%) and Nikkei 225 (-0.2%) declined with Australia dragged by underperformance in mining names and losses in the largest weighted financials sector despite the industry regulator announcing it will no longer hold banks to a minimum level of earnings retention from 2021, while the Japanese benchmark also languished with ANA Holdings the worst hit on news that Japan is to suspend the Go To Travel subsidy campaign. Hang Seng (-0.7%) and Shanghai Comp. (-0.1%) were subdued with a substantial CNY 950bln 1-year MLF operation by the PBoC failing to spur risk appetite and as participants digested the latest activity data in which Industrial Production printed in line with estimates at 7.0% but Retail Sales missed at 5.0% vs exp. 5.2% although was still an increase in pace from the prior month’s growth of 4.3%. Finally, 10yr JGBs were flat above the 152.00 level with only minimal gains seen despite the cautious risk tone in stocks and slightly better demand at the enhanced liquidity auction for 10yr, 20yr & 30yr JGBs.

PBoC injected CNY 10bln via 7-day reverse repos for a net daily drain of CNY 50bln and announced a CNY 950bln 1-year MLF operation at rate of 2.95%. PBoC set USD/CNY mid-point at 6.5434 vs exp. 6.5409 (prev. 6.5361). (Newswires)

China's National Bureau of Statistics stated the economy still faces many challenges although later noted that China Q4 economic growth is expected to quicken from Q3 and it anticipates full year growth to be relatively sound but cannot say if there will be significant changes to China's economy next year due to a lower base. (Newswires)

• Chinese Industrial Production (Nov) Y/Y 7.0% vs exp. 7.0% (prev. 6.9%)
• Chinese Industrial Production YTD (Nov) Y/Y 2.3% vs exp. 2.3% (prev. 1.8%)
• Chinese Retail Sales (Nov) Y/Y 5.0% vs exp. 5.2% (prev. 4.3%)
• Chinese Retail Sales YTD (Nov) Y/Y -4.8% vs exp. -4.9% (prev. -5.9%)
• Chinese FDI (YTD)* (Nov) 6.3% (Prev. 6.4%)

Japan's Economy Minister Nishimura says the new stimulus package is likely to increase GDP by 0.5% in FY20, +2.5% in FY21 and +0.6% from FY22-onwards. (Newswires)

US

US bipartisan group lawmakers announced the details of their relief proposal in which they offer liability compromise and bill sets gross negligence standard, while lawsuit protections would last a year. Furthermore, the two-part COVID plan is split up into a USD 748bln package and a USD 160bln plan with state/local aid plus liability protections, while the relief plan includes an extra USD 300/week unemployment assistance for 16 weeks. (Newswires/Fox)

US House Speaker Pelosi and Treasury Secretary Mnuchin conducted a phone call earlier in which Pelosi stated that remaining items in the spending bill can be resolved easily and she reiterated Democratic concerns about liability provisions in COVID-19 relief, according to an aide. (Newswires)

US Senate Majority Leader McConnell said it is time for GOP and Democrats to find consensus on COVID-19 relief and that the need consensus before the holidays. (Newswires)

Electoral College officially voted to confirm President-elect Biden election victory with sufficient electors required to become President, while Biden commented after the announcement that the will of the people prevailed and criticized attempts by President Trump to challenge the results. (Newswires/BBC)

US President Trump tweeted that Attorney General Barr will be stepping down before Christmas and Deputy AG Rosen will be acting AG, while there were also comments from Barr that the DoJ will continue to pursue voter fraud allegations. (Twitter)

US Treasury Secretary Mnuchin says he is unlikely to support a consent order to end the Gov't conservatorships of Fannie Mae and Freddie Mac before President Trump leaves office. (WSJ)

UK/EU

ECB's Rehn says that PEPP envelope is not a target but a ceiling for now. The FX rate is not a policy target but it does have an impact; is monitoring FX very closely. (Newswires)

The UK furlough scheme could be used to support firms hit hardest by a no-deal Brexit. (Telegraph)

UK ILO Unemployment Rate (Oct) 4.9% vs. Exp. 5.1% (Prev. 4.8%)

• Average Week Earnings 3M YY (Oct) 2.7% vs. Exp. 2.2% (Prev. 1.3%); Avg Earnings (Ex-Bonus)* (Oct) 2.8% vs. Exp. 2.6% (Prev. 1.9%)
• Employment Change (Oct): -144k vs exp. -250k (prev. -164k)
• UK Claimant Count Unemploment Change (Nov) 64.3k (Prev. -29.8k)

EQUITIES

Stocks across Europe have diverged following the uninspiring cash open, with the major EZ-bourses extending gains (Euro Stoxx 50 +0.5%) whilst the periphery and Switzerland see a more subdued session thus far (IBEX -0.4%, FTSE MIB +0.2%, SMI -0.2%). News flow during the European morning has been light, but several risk events are looming including the FOMC policy announcement, quad-witching and month/quarter/year-end re-balancing. Losses in the IBEX are driven by heavyweight Inditex (-2.3%) post-earnings as sales slumped amid the pandemic, whilst gains in the FTSE MIB are hampered by Italy's re-imposition of lockdown measure throughout the holiday period. Sectors in Europe are mostly in the green with a pro-cyclical bias. Healthcare stands as the marked underperformer and subsequently weighs on the pharma-heavy SMI. In terms of individual movers, Volkswagen (+4.9%) resides as one of the top gainers after the supervisory board soothed tensions by backing the CEO, whilst separately, the CEO said the group is to further advance e-mobility, digital and battery technology whilst cutting overhead and material costs substantially across all brands and regions. Elsewhere, chip names in Europe failed to garner much traction from reports that Apple (+0.5% pre-mkt) is reportedly planning a 30% Y/Y increase in iPhone output for H1 next year to 96mln units. Apple is also said to be preparing an aggressive 2021 production schedule for its high-end computers, including the MacBook Pro and iMac Pro, sources added. Looking ahead to next year, analysts at Standard Chartered have highlighted eight "non-zero probability" underpriced risks to be aware of: 1) Democrats win Georgia’s seats to take the Senate, 2) US and China find common ground, 3) Monetary and fiscal stimulus drives strongest recovery in a century, 4) OPEC abandons supply quotas, 5) European fiscal stimulus hopes dashed, 6) US Treasury Secretary abandons strong USD policy, 7) Emerging-market debt defaults and sovereign downgrades and 8) US President Biden steps down.

The draft of the EU's Digital Markets act states that it could label tech companies as "repeat offenders" if they are fined three times within five year and prompt the EU to structurally separate their business, according to FT sources. (FT)

Apple (AAPL) is reportedly planning a 30% Y/Y increase in iPhone output for H1 next year to 96mln units. Apple is also said to be preparing an aggressive 2021 production schedule for its high-end computers, including the MacBook Pro and iMac Pro, sources added. (Nikkei)

FX

AUD/GBP/NZD - It’s tight at the bottom of the G10 table, but aside from some wavering in general risk sentiment Aussie ‘underperformance’ looks partly related to weakness in commodities and on confirmation from China that coal has joined the list of embargoed imported goods, prompting a curt response from PM Morrison about the ruling breaching WTO rules. For the record, RBA minutes hardly impacted as they reaffirmed dovish-leaning guidance to leave Aud/Usd meandering between 0.7546-08 parameters awaiting flash PMIs for further direction. Similarly, the Pound gleaned no traction from better than anticipated UK labour and earnings data as Brexit remains in the balance, with Cable retreating further from yesterday’s peak to test 1.3300 and stops through Sunday’s 1.3290 Asian 1.3290 trough, while Eur/Gbp tests 0.9150 to the upside amidst potential RHS fixing interest. Elsewhere, the Kiwi has also retrenched having topped out above 0.7100 and is hovering within a 0.7091-60 range ahead of NZ current account metrics tonight and GDP on Wednesday following another warning from the RBNZ about the highly uncertain economic outlook as the risks to health and growth remain skewed to the downside.

DXY - The Dollar and index by default, if not quite design, have maintained recovery momentum, as the latter holds above 90.500 and Monday’s new y-t-d/multi-year low (90.419), albeit still unable to reach 91.000 and fading just below yesterday’s high, at 90.824 vs 90.907. Markets are somewhat caught and indecisive on the upbeat vaccine developments fostering optimism that the worst of the coronavirus and contagion may be over, but cautious about the fall-out from latest lockdowns and restrictions that are being tightened in some places due to new strains of COVID-19. Moreover, this week’s major risk events lie ahead and will vie with early positioning for month, quarter and year end, while stocks also have quad-witching to contend with.

EUR/CAD/CHF/JPY - All narrowly mixed vs the Greenback with the Euro holding around 1.2150 and bound by decent option expiry interest at 1.2100 and 1.2175 (1 bn at each strike) after forming an effective double top at the current 2020 apex, while the Loonie is pivoting 1.2750 in the run up to Canadian housing starts, manufacturing sales and a speech from BoC Governor Macklem. Back to Europe, little reaction to mixed Swiss producer import prices or SECO forecasts pending Thursday’s SNB policy review, though the Franc continues to trade on the front foot above 0.8900 and 1.0800 against the Euro in contrast to the Yen that is losing 104.00+ status before the spotlight falls on Japanese trade data, but not to the extent that 1 bn option expiries between 104.50-55 appear likely to be triggered.

SCANDI/EM - The Nok does not look overly ruffled by waning crude prices or a narrower Norwegian trade surplus as it broadly keeps pace with the Eur and Sek near 10.6300 and 1.0400 respectively, but the Try has taken US sanctions vs Turkey largely in stride in wake of a marked improvement in the budget balance and the Cnh has absorbed a raft of Chinese data that straddled consensus with the aid of a hefty PBoC 1 year MLF injection (Cny 950 bn). Usd/Try is eyeing 7.8200 and Usd/Cnh 6.5300.

RBA Minutes from December meeting reiterated that the board is prepared to do more if required and policy is focused on bond buying, while it will review the size of program and its impact to the economy in future meetings. RBA also reaffirmed that it does not expect to raise the cash rate for at least 3 years and will not raise rates until inflation sustainably within 2%-3% target band. Furthermore, it stated that stated that substantial support will be needed for a considerable period and it is prepared to buy bonds in whatever amount needed to maintain 3yr yield target. (Newswires)

Notable FX Expiries, NY Cut:

• EUR/USD: 1.2000 (1.2BLN), 1.2100 (1.1BLN), 1.2135 (548M), 1.2175 (1BLN)
• USD/JPY: 102.90 (501M), 104.00 (559M), 104.50-55 (1BLN), 104.00 (400M)

Swiss SECO Forecasts (Winter): 2020 GDP -3.3% (prev. -3.8%); 2021 +3.0% (prev. +3.8%); 2020 CPI -0.7% (prev. -0.7%); 2021 CPI +0.1% (prev. -0.1%); 2022 GDP +3.1%; 2022 CPI +0.3%. (SECO)

FIXED

Not much to report in terms of movement or direction given lacklustre trading volume and minimal deviation or extension from early ranges in core debt awaiting clearer direction from breaking headlines and/or scheduled events. However, Gilts are marginally outperforming and did reach 135.38 at one stage (+19 ticks), while Bunds and the 10 year T-note continue to idle around par before a relatively busy pm agenda comprising NY Fed manufacturing, US import/export prices, ip and ECB’s Lane before BoC’s Macklem and API crude stocks.

Japan is to increase new bond issuance this FY by JPY 22.4tln. (Newswires)

COMMODITIES

WTI and Brent front-month futures have trimmed the modest losses seen in APAC in tandem with the steady rise across stocks, but price action has been constrained as the complex juggles vaccine hopes with nearer-term COVID-related restriction measures in Europe, whilst geopolitics and OPEC's reaction function are also monitored. On that note, the JTC and JMMC meetings have been pushed back to Jan 3rd/4th from Dec 16/17, with the latter also coinciding with the policy-setting meeting where ministers are poised to decide on Feb production levels. Elsewhere, the morning also saw the findings of the latest IEA oil market report whereby the agency cut its 2020 and 2021 global oil demand forecasts (in-fitting with the EIA STEO and OPEC MOMR) by 50k BPD and 170k BPD respectively citing poor aviation demand alongside a slip in European demand due to the re-imposition of lockdown measures. The report also stated it will be several month before vaccines make an impact on global oil demand - hardly surprising given a bulk of the vaccine rollouts are to take place next year. Price action amid the report was minimal but the benchmarks did wane off best levels, with WTI Jan 21 trading on either side of USD 47/bbl (46.54-47.19/bbl range), whilst Brent Feb 21 resides just north of USD 50/bbl (49.78-50.47/bbl range). Elsewhere, precious metals have continued the positive momentum seen during APAC hours ahead of a number of key risk events including FOMC and month/quarter/year-end re-balancing - with spot gold eyeing 1850/oz to the upside (vs. low 1825.66/oz) but encountering mild resistance just before, whilst spot silver extends gains above USD 24/oz (vs. low 23.82/oz). Meanwhile, LME copper fails to coattail on the gains across stocks - with upside also capped as wage talks in Chile's Centinela mine have been extended in a bid to avert imminent strike action.

IEA Monthly Oil Market Report: Cuts 2020 and 2021 global oil demand forecasts; Lowers 2020 oil demand forecast by 50k BPD, lowers 2021 by 170k BPD; cites poor demand from aviation whilst stating the demand for gasoline and diesel will recover in 2021.

• Will be several months before vaccines make an impact on global demand.
• European demand is falling with Q4 to be softer than Q3 due to re-imposition of lockdowns.