• Asian equity markets traded cautiously despite fresh record levels on Wall Street
• BoJ kept its main policy settings unchanged but extended funding measures to support COVID-19 stricken firms
• In FX, the DXY hovers around 90.00, EUR/USD sub-1.2250 and GBP remains at the whim of Brexit updates
• UK PM Johnson held a call with European Commission President von der Leyen with both leaders stressing the difficulties in discussions over fisheries
• House Speaker Pelosi commented that we'll see if the House will pass the COVID-19 and funding bill on Friday
• The US FDA has reportedly decided to approve Moderna's COVID-19 vaccine on an emergency basis following the panel recommendation
• Looking ahead, highlights include UK retail sales, German IFO, Canadian retail sales, quadruple witching

CORONAVIRUS UPDATE

US COVID-19 cases +236,913 (prev. +201,776) and deaths +3,435 (prev. +2,960), while a major newswire tally stated US cases rose by a record of at least 239,903 to a total of 17.16mln and deaths rose by at least 3,335 to a total of 311.1k. (Newswires)

US FDA advisory committee voted (20 yes, 0 no and 1 abstain) that benefits of taking Moderna (MRNA) vaccine outweigh the risks in people aged 18 years and older. Following this, the FDA informed Moderna it will rapidly work towards finalization and issuance of emergency use authorization for its COVID-19 vaccine, while FT later reported that sources close to the process stated the FDA decided to approve Moderna's COVID-19 vaccine on an emergency basis following the panel recommendation. (Newswires/FT)

New England Journal of Medicine published positive initial Regeneron (REGN) antibody cocktail results in non-hospitalized patients with COVID-19 which stated a smaller proportion of patients treated with the antibody cocktail required medically-attended visits due to COVID-19 through Day 29 compared with a placebo and there was even greater benefit on endpoint among sero-antibody-negative patients in additional prospective results. (Newswires)

Mesoblast (MSB AT) updated on its Remestemcel-L trial for treatment of acute respiratory distress syndrome related to COVID-19 infection, in which it stated the Data and Safety Monitoring Board noted the trial is not likely to meet its 30-day mortality reduction endpoint at planned 300 patient enrollment. (Newswires)

Pfizer (PFE) said it is not having any production issues with its vaccine and it has millions more doses sitting in its warehouse but has not yet received any shipment instructions, while it was also reported the Co. applied for approval of its COVID-19 vaccine in Japan on Friday. (Newswires)

Australia's New South Wales Premier said everyone in Greater Sydney is to be on high alert as Sydney infection cluster rose to 28 cases, while states in Australia have imposed border restrictions amid the virus cluster in Sydney with Victoria state to issue permit system for entering the state from New South Wales. (Newswires)

ASIA

Asian equity markets traded cautiously as momentum from the fresh record levels on Wall Street where sentiment was underpinned by stimulus hopes, failed to resonate in the region heading into the weekend and amid unresolved US stimulus and Brexit talks. ASX 200 (-1.2%) was pressured as tech and financials led the descent and with a cluster of infections in Sydney prompting states to impose border curbs, while investor appetite was also bruised by heavy losses in Mesoblast which slumped 35% after poor results in its Remestemcel-L trial for the treatment of acute respiratory distress syndrome related to COVID-19 and with QBE Insurance suffering after it flagged an FY loss of around AUD 1.5bln. Nikkei 225 (-0.2%) was also lacklustre but with downside stemmed by a mixed currency and tentativeness amid the BoJ policy decision in which the central bank maintained its main policy settings and but extended corporate funding measures for COVID-stricken firms as expected. Hang Seng (-1.1%) and Shanghai Comp. (-0.5%) were uninspired after another tepid PBoC operation and mixed newsflow with EU said to have agreed in principle for an investment treaty with China, although there were also reports the US issued a new ban to prohibit electric utilities that supply critical defense facilities, from importing certain power system items from China and that the Trump administration is set to add dozens of Chinese companies including SMIC (981 HK) to the Commerce Department's entity list today. Finally, 10yr JGBs were lacklustre with prices remaining near support at the psychological 152.00 level and after the BoJ provided very few surprises.

PBoC injected CNY 10bln via 7-day reverse repos with rate maintained at 2.20%. (Newswires) PBoC set USD/CNY mid-point at 6.5315 vs exp. 6.5301 (prev. 6.5362)

US President Trump's administration is reportedly set to add dozens of Chinese companies including SMIC (981 HK) to the Commerce Department's entity list today, according to sources. (Newswires)

US Treasury Department is reportedly seeking to weaken President Trump's Chinese securities ban, while the Pentagon and State Department are said to be angered by the attempt to ease the impact of the Executive Order. (FT)

US issued a new ban on Thursday to prohibit electric utilities that supply critical defense facilities from importing certain power system items from China. (SCMP)

EU is reported to have agreed “in principle” to an investment agreement with China and the latter agreed to open up its market in multiple sectors for EU businesses, according to sources cited by Chinese press which suggested the symbolic move comes just a month before Biden will become the US President, dealing a blow to his hope of reviving the transatlantic partnership in a bid to take on China’s growing assertiveness. (SCMP)

BoJ kept policy settings unchanged as expected with rates held at -0.10% and QQE with Yield Curve Control maintained to flexibly target 10yr JGBs at around 0%, while the central bank also extended the March deadline for the package of measures to ease corporate funding strains by 6 months as was widely anticipated and it announced it is to remove the JPY 100bln upper limit on funds provided to each eligible counterparty against loans made by financial institutions to cash-strapped firms. Furthermore, BoJ stated it will conduct an examination of more effective and sustainable monetary easing framework to achieve the price goal and will release outcome of the examination at the March meeting but noted there is no need to change the YCC framework, while it maintain its assessment of the economy being in a severe state but picking up and which is likely to recover moderately as a trend. (Newswires)

• Japanese National CPI (Nov) Y/Y -0.9% vs. Exp. -0.8% (Prev. -0.4%)
• Japanese National CPI Ex. Fresh Food (Nov) Y/Y -0.9% vs. Exp. -0.9% (Prev. -0.7%)
• Japanese National CPI Ex. Fresh Food & Energy (Nov) Y/Y -0.3% vs. Exp. -0.3% (Prev. -0.2%)

UK/EU

UK PM Johnson and European Commission President von der Leyen held a call to update of how talks are going. UK PM Johnson underlined that negotiations were in a serious situation with time very short and it looked very likely an agreement would not be reached unless the EU changed its position substantially. Furthermore, UK said EU's position in fishing was simply not reasonable and if there was to be an agreement it needed to shift significantly, while EU’s von der Leyen said the two welcomed substantial progress on many issues but bridging them will be very challenging and that big differences remain to be bridged particularly on fisheries, with talks to continue on Friday. (Newswires)

UK Brexit Negotiator Frost said progress seems blocked and time is running out and that situations in talks with the EU was very serious, while there were earlier comments from UK Cabinet Minister Gove that realistically, the Brexit deadline is in days immediately after Christmas. (Newswires)

Irish Deputy PM Varadkar said he is still on the optimistic side regarding Brexit talks and a deal is in sight on the level playing field but noted fisheries is the real difficulty. (Newswires)

UK has reportedly already begun drafting legislation for a Brexit deal, according to Huffington Post. However, there were separate reports that Brexit talks have found a new impasse regarding state aid over Brussel's EUR 750bln Recovery Fund with the UK stating that EU-level spending including the RF cannot be exempt from enforceable principles on state aid in a Brexit trade deal, according to FT. (Huffington Post/FT)

UK GfK Consumer Confidence (Dec) -26 vs exp. -31.0 (prev. -33.0). (Newswires)

FX

In FX markets, the DXY nursed its losses after having slipped through the 90.00 level and briefly reclaimed 90.00 status, helped by haven support as risk appetite dwindled overnight and alongside a pullback across its major counterparts including EUR/USD which trickled beneath 1.2250. GBP/USD remained at the whim of the tumultuous Brexit-related headlines. UK PM Johnson also held a call with European Commission President von der Leyen to update on the current state of talks which were said to be in a serious situation with time very short and that big differences remain to be bridged particularly on fisheries, while UK Brexit Negotiator Frost said progress seems blocked and it was also reported that Brexit talks have found a new impasse regarding state aid over Brussel's EUR 750bln Recovery Fund which the UK stated cannot be exempt from enforceable principles on state aid under a Brexit deal. Elsewhere, USD/JPY rebounded off lows after briefly dipping below 103.00 but saw a muted reaction to the BoJ which kept its main policy settings unchanged but extended funding measures to support COVID-19 stricken firms as expected. Furthermore, the BoJ announced to conduct an examination of more effective and sustainable monetary easing framework to achieve the price goal, although this failed to spur a reaction in the currency as the central bank noted there is no need to change the YCC framework and given that source reports had flagged a few hours beforehand that the BoJ were to announce an examination on how inflation was missing its target. Antipodeans were initially steady after inline trade figures for New Zealand but were then eventually pressured by the resurgence of USD and amid the cautious risk tone.

Mexican Central Bank kept rates at 4.25% as expected with the vote at 3-2 in which 2 members opted for a 25bps cut, while the central bank stated that this pause provides the necessary room to confirm that the trajectory of inflation converges to the target and that looking ahead, monetary policy implementation will depend on the evolution of the factors that have an incidence on headline and core inflation, on their foreseen trajectories within the forecast horizon and on their expectations. Furthermore, it stated that headline inflation expectations for the end of 2020 were adjusted downwards and those for the medium and long terms remained stable at levels above the 3% target. (Newswires)

• New Zealand Trade Balance (NZD)(Nov) 252M vs exp. 250M (prev. -0.5M, rev. -472M). (Newswires)
• New Zealand Exports (NZD)(Nov) 5.20B vs exp. 5.21B (prev. 4.78B, rev. 4.80B)
• New Zealand Imports (NZD)(Nov) 4.95B vs exp. 4.95B (prev. 5.29B, rev. 5.27B)
• New Zealand ANZ Activity Outlook (Dec) 21.7 (prev. 9.1)
• New Zealand ANZ Business Confidence (Dec) 9.4 (prev. -6.9)

COMMODITIES

Commodities were mixed as price action was constrained by the cautious risk tone with mild losses in WTI crude futures as the momentum from the record highs of stocks on Wall Street failed to reverberate into Asia, while record daily COVID-19 infections stateside and lack of breakthrough in stimulus discussion also did no favours for the energy complex. Gold consolidated overnight after yesterday's rally towards the USD 1900/oz level, while copper prices defied the cautious risk tone and instead took its cue from the early upside in Dalian iron ore which rallied around 3% shortly after the open.

GEOPOLITICAL

US President Trump spoke with Saudi Arabia’s King Salman in which they discussed regional security and resolving the gulf rift. (Newswires)

US states were also hacked as part of the suspected Russian attack that hit various federal government departments, while the US Department of Energy and National Nuclear Security Administration have evidence that the suspected Russian hackers accessed their networks. (Newswires/Politico)

Microsoft (MSFT) was breached in the suspected Russian hack which took advantage of SolarWinds software and Microsoft products which were used to infect others, according to sources. Furthermore, Microsoft later stated it found SolarWinds intrusion in company systems but no evidence that hackers accessed customer data, while it stated the latest cyber assault is effectively an attack on the US and its government, as well as other critical institutions. (Newswires)

US

Treasuries were ultimately modestly steeper after a roller-coaster of a session saw the curve flip after an earlier bull-flattener was offset by supply woes. By settlement 2s +0.6bps at 12.5bps, 10s +1.3bps at 93.3bps, 30s +1.6bps at 168.0bps; real yields were flat, rising off earlier lows; T-Note futures volumes were solid compared to recent averages. Yields were little changed to slightly higher heading into the US session as equity futures entered on the front foot. That sentiment soon shifted following a string of bad data in the US. Weekly Jobless Claims came in above expectations, while the Philly Fed survey was generally just miserable amid big declines across all components; housing data was firmer, although overshadowed. That saw duration bidders come out the woodwork, seeing 10s and 30s hit lows of 89.2bps and 162.6bps, respectively. Those flows were likely supported by the lack of visible progress on US stimulus/Brexit too. There was also technical support for longs ahead of the Fed stepping into the long-end and short TIPS. However, that strength could not sustain, with sellers emerging amid Europe departing for the day, only to find additional downside momentum after the Treasury's 20-year refunding announcement. The US is to sell USD 24bln of 20-year bonds (as expected) on Monday, Dec 21st, to settle on Dec 31st; also to sell USD 24bln of 2-year FRNs on Dec 23rd, to settle on Dec 28th. Yields rose further with dealers reported to be the main sellers in preparation for the offerings; the outlook for the remaining auctions this year is not particularly bright, with many desks likely to be closing up early. Historically, Treasury market depth sees a marked decline into year-end. Furthermore, following the FOMC holding back from any WAM/increased asset purchases, there is a growing supply imbalance as the Treasury continues to expand its longer-dated issuance while the Fed provides a non-tailored, equal across all maturities, asset purchase programme. T-note (H1) futures settled 1 tick lower at 137-27+.

White House aides reportedly intervened to prevent US President Trump from a last-minute demand for stimulus checks of as much as USD 2,000/person with aides telling President Trump his demands could blow up talks. (Washington Post)

US House Speaker Pelosi commented that we'll see if the House will pass COVID-19 and funding bill on Friday. In related news, GOP Senator Cornyn said he expects another stop gap bill instead of a shutdown and GOP Senator Toomey was reportedly proposing to repurpose Federal Reserve money in a new COVID package, while there were also comments from GOP Senator Hawley that he will vote on a standalone bill for USD 1200 checks and GOP Senator Thune said that senators will object to a new short-term funding measure. (Newswires)