• Asian equity markets traded higher as the region received a tailwind from Wall Street where all major indices were lifted amid stimulus hopes
• Senate Majority Leader McConnell suggested that Senate would not leave Washington without a package no matter how long it takes
• In FX, the DXY languished beneath 90.50, EUR/USD sits above 1.2150 and GBP/USD gained a firmer footing above 1.34
• Sources stated that nothing was imminent on Brexit last night and both sides are pretty certain nothing will happen immediately (Times)
• ECB asked banks to refrain from or limit dividends until September 2021
• Looking ahead, highlights include UK & Canadian inflation, EZ, UK & US flash PMIs, US retail sales, DoEs, FOMC rate decision & press conference, ECB's de Guindos, Schnabel

CORONAVIRUS

US COVID-19 cases +204,748 (prev. +181,032) and deaths +1,766 (prev. +1,448), while a major newswire tally stated US cases rose by at least 194,390 to a total of 16.69mln and deaths rose by at least 3,102 to a total of 304.2k. New York COVID-19 cases +10,353 (prev. +9,044), hospitalisations 5,982 (prev. 5,712), case positivity rate 5.33% (prev. 5.66%), deaths +128 (prev. +83).(Newswires)

Pfizer (PFE) CEO said they expect to get the vaccine from its manufacturing facilities to anywhere in the US within two days. It was also separately reported the Co. is in talks with US for more vaccine doses next year and that Panama authorized the use of Pfizer COVID-19 vaccine. Furthermore, Shanghai Fosun Pharmaceutical (2196 HK) entered a supply agreement BioNTech (BNTX) for a COVID-19 vaccine in China in which the latter will supply China with at least 100mln vaccine doses if the vaccine gets approval, while Fosun said it will receive 60% of profit from doses made using imported ingredients and 65% of profit from imported doses that are ready for use. (Newswires)

ASIA

Asian equity markets traded higher as the region received a tailwind from Wall Street where all major indices were lifted amid stimulus hopes after House Speaker Pelosi invited fellow congressional leaders for a meeting to discuss government funding and COVID-19 relief, while Senate Majority Leader McConnell suggested that they would not leave Washington without a package no matter how long it takes. ASX 200 (+0.7%) outperformed for most of the session led by tech, mining names and financials which helped push the ongoing tensions with China to the backseat for now, although dozens of ships carrying Australian coal remain blocked from unloading at Chinese ports and Trade Minister Birmingham is to request formal consultations with China at the WTO regarding Australian barley. Nikkei 225 (+0.3%) was also positive but pared the majority of its initial gains amid recent currency inflows, as well as disappointing data in which trade figures underwhelmed including a surprise contraction in exports for its 24th consecutive month of declines and PMI data also remained in contraction territory. Hang Seng (+0.9%) and Shanghai Comp. (+0.1%) were somewhat varied with the mainland the laggard as ongoing US-China tensions continued to take its toll with MSCI announcing to delete the securities of 7 Chinese companies due to the US blacklisting and which follows similar action by FTSE Russell, S&P Dow Jones Indices and Nasdaq. Finally, 10yr JGBs were lacklustre with demand contained by gains across stocks and with the BoJ to begin its 2-day policy meeting tomorrow, although downside was also stemmed by the BoJ’s presence in the market today for nearly JPY 1.5tln of JGBs with up to 10yr maturities and the central bank also announced to purchase USD 6bln directly from the MoF for the first time ever for smoother execution of its operations.

PBoC injected CNY 10bln via 7-day reverse repos at a rate of 2.20% for a net daily drain of CNY 10bln. (Newswires) PBoC set USD/CNY mid-point at 6.5355 vs exp. 6.5341 (prev. 6.5434)

China Foreign Ministry spokesperson Wang said he was not aware of an official coal ban related to Australia. In related news, Australian Trade Minister Birmingham said they will request formal consultations with China on dumping and other duties regarding Australian barley and will make a formal request to WTO tonight, while he added that the risk profile of trading and conducting business with China has increased throughout the year. (Newswires)

MSCI announced to delete securities of 7 Chinese companies named in the US Presidential Executive Order, including SMIC (981 HK), China Communication Construction H & A shares (1800 HK/601800 CH), China Spacesat (600118 CH), China Railway Construction H & A shares (1186 HK/601186 CH), CRRC H & A shares (1766 HK/601766 CH), Hangzhou Hikvision (002415 CH) and Dawning Info (603019 CH). (Newswires)

• Japanese Trade Balance (JPY)(Nov) 366.8B vs exp. 529.8B (prev. 872.9B, rev. 871.7B)
• Japanese Exports (Nov) Y/Y -4.2% vs exp. 0.5% (prev. -0.2%)
• Japanese Imports (Nov) Y/Y -11.1% vs exp. -10.5% (prev. -13.3%)

UK/EU

Sources stated that nothing was imminent on Brexit last night and both sides are pretty certain nothing will happen immediately, while a deal is very much still not there although the next few days have potential, according to The Times' Waterfield. Furthermore, Sky's Parsons suggested that although Westminster is apparently talking about an imminent deal, he has not heard anyone say that among Brussels diplomats, while ITV's Brand tweeted that Brussels source said we are not there yet by any stretch of the imagination. (Twitter)

EU sources stated that UK dropped its push for renationalising fishing vessels in Brexit talks. (The Guardian)

UK Leader of the House Jacob Rees Mogg suggested UK MPs may not vote on any Brexit deal until next year after it has come into force. (Independent)

UK Treasury is moving ahead with reforms of the way specialist vehicles used by private equity and infrastructure funds are taxed to boost London's appeal. In other news, UK is reportedly devising plans to transform London into a shipping hub to rival Singapore by attracting more vessels to register in the UK with reforms to tonnage tax. (FT)

UK Ministry of Housing, Communities and Local Government announced new measures to help cities recover from COVID-19 and confirmed over GBP 12bln of investment in affordable housing over next 5 years as announced in spending review. (Newswires)

ECB asked banks to refrain from or limit dividends until September 2021 with dividends to remain below 15% of cumulated 2019-20 profits and not higher than 20bps of CET1 ratio, while it recommended that banks exercise extreme prudence on dividends and share buy-backs. (Newswires)

FX

In FX markets, the DXY languished beneath 90.50 after having recently printed fresh 2-year lows with the greenback pressured amid the gains in stocks and stimulus hopes, with tentativeness also seen as participants await the upcoming FOMC conclusion later today where participants will be eyeing updated guidance on asset purchases and if there is an extension to the weighted average maturities of its purchases, as well as the latest dot plot forecasts. EUR/USD was stable with the 1.2150 level providing a focal point for this week’s price action in the single currency, while GBP/USD retested yesterday’s best levels with a firm footing on the 1.3400 handle after a buzz among Conservative MPs that the UK was heading towards a Brexit agreement which lifted the pair, despite an abundance of sources later pushing back on the prospects of an imminent deal. USD/JPY extended on losses following a slide below 104.00 and antipodeans traded mixed with AUD/USD relatively unchanged although NZD/USD marginally benefitted after slightly better than expected Current Account figures, mild improvement to forecasts in the Half-Year Economic and Fiscal Update and with ASB upgrading its milk price forecast.

BoC Governor Macklem said economic recovery from pandemic is at a very difficult stage and that CAD appreciation is hurting competitiveness of Canadian exporters in the US market. Macklem also stated that in the near term, rising infections will dampen growth and could even deepen the economic hole, while he stated that Canada must boost exports, productivity and business investment to ensure a sustainable recovery. Furthermore, he commented that there are tools available if we need to do more and options include lowering the effective lower bound but noted that the bar to go into negative territory is very high. (Newswires)

New Zealand forecasts September quarter GDP at +10.5% vs -12.2% in Q2 and sees Q1 GDP at +1.5% vs budget forecast of -1.0%, while Net Debt Forecast for 2021 was at 39.7% vs prev. Budget forecast of 44.0%. (Newswires)

• New Zealand Current Account (NZD)(Q3) Q/Q -3.521B vs exp. -3.652B (prev. 1.828B). (Newswires)
• New Zealand Current Account/GDP (Q3) -0.8% vs exp. -0.9% (prev. -1.9%)

COMMODITIES

Commodities were rangebound overnight as the complex took a breather from yesterday's strength in which WTI crude futures held on to recent gains around the USD 47.50/bbl level after prices received a lift from the positive risk tone and stimulus hopes, while a surprise build in the latest private inventory headline crude stockpiles and downgrades to IEA global oil demand forecasts failed to dent the mood for crude. Gold also held on to this week's spoils amid a weaker greenback and stimulus hopes with the USD 1850/oz level providing a floor for the precious metal overnight, while copper is flat with prices somewhat stalling as its largest purchaser China lagged.

US Private Inventory Data (w/e Dec 11th): Crude +1.97mln (exp. -1.90mln). (Newswires)

Iran has reportedly begun trans-shipment of oil in regions once thought to be too risky including waters off the coast of US allies Iraq and the UAE, according to sources. (WSJ)

US

Treasuries bear-steepened on Tuesday amid the risk rally on rising stimulus hopes. By settlement, 2s +0.6bps at 12.3bps, 10s +2.9bps at 92bps, 30s +3bps at 165.9bps; T-Note futures volumes were average. Note, while 10- and 30-year TIPS yield were little changed, the 5-year fell by 2.8bps to make new all-time-lows at -151.2bps. It was essentially one-way, sluggish traffic for yields as they moved higher through the session, breaking back above key technical levels of 92bps and 164bps in 10s and the long-bond cash yields respectively. Hedge funds were reportedly on the offer today, coming amid some caution on whether or not the Fed will go ahead on Wednesday (click here for preview) with changes to its asset purchases, or an extension of WAM. There was somewhat of a pause in UST selling in late European trade, which coincided with a busy schedule of Fed purchases amid no operations on Wednesday (due to FOMC), although as stimulus chants grew louder ahead of the key "Four Corners" + Mnuchin meeting later on Tuesday, an extended rally in stocks saw yields fall further up into the close. T-note (H1) futures settled 7 ticks lower at 137-27+.

House Speaker Pelosi invited fellow congressional leaders for a meeting to discuss finalising government funding and COVID relief, while people involved with the Pelosi/McConnell talks said they will not wrap up the year until a COVID deal is put together. Furthermore, Pelosi later responded “we will see” when asked if a COVID deal will be reached and following the meeting, she stated they will be back early Wednesday and on schedule to get the job done. (Politico/NYT/Twitter)

US Senate Majority Leader McConnell said we are not leaving here without a package no matter how long it takes and reiterated the way to get a deal is to put aside liability protections, as well as state and local aid, while he added we ought to agree on what we can agree on. McConnell later stated that negotiators are making significant progress on COVID-19 relief as well as government funding and that he anticipates an agreement will be reached sometime soon. (Newswires)

US Senate Minority Leader Schumer said negotiators are continuing work on COVID-19 relief and government funding, while he thinks there is a genuine desire to reach a deal and House GOP leader McCarthy also commented after the meeting that the negotiations on COVID-19 relief and spending bill were moving in the right direction. (Newswires)

US GOP Senator Thune said that the list of differences for a COVID package has narrowed. There were also comments from US Democrat Senator Manchin that the bipartisan group of Senators have received assurances from Senate GOP leadership that their USD 748bln proposal will be used as the framework for a relief package. (Fox/Axios)

Multiple sources say Congressional Progressive Caucus is considering taking a hardline and voting to oppose any proposal which doesn't include stimulus checks, according to Politico's Caygle. (Politico)

White House Press Secretary McEnany said the Electoral College vote was one step in the process and that President Trump is still in ongoing election litigation. In relevant news, Senate Majority Leader McConnell, Senators Blunt and Thune reportedly pleaded with Senate GOP's to not object to the election results on January 6th. (Newswires/Politico)

US President-elect Biden has reportedly chosen Pete Buttigieg for Transportation Secretary role and is to nominate former Michigan Governor Granholm as Energy Secretary, while he is also said to be considering some well-known Republicans for Commerce Secretary position. (Newswires/Axios)