• Sentiment is substantially hampered this morning, ES -2.0%, Euro Stoxx 50 -3.1%, WTI Mar'21 -5.0%, amid COVID-19 updates and a lack of Brexit updates overshadowing, for now, US fiscal updates
• UK PM Johnson announced a new Tier 4 level of COVID restrictions across southeast England; a string of countries have banned travellers from the UK amid the more transmittable COVID variant
• US FDA issued EUA for Moderna's COVID-19 vaccine; UK MHRA could authorise the AstraZeneca vaccine on December 28th or 29th, according to sources
• Brexit talks remain blocked over fishing rights; a UK source said significant differences remain; negotiations will continue today
• Senate Majority Leader McConnell announced that an agreement has been reached on a USD 900bln COVID relief deal with votes expected today; House and Senate voted in favour of a one-day stopgap to fund the government
• DXY is supported this morning on the general tone and benefitting from GBP's Brexit-induced downside with Cable below 1.32 at worst
• Looking ahead, highlights include EZ Consumer Confidence (Flash)

CORONAVIRUS UPDATE

UK PM Johnson announced a new Tier 4 level of COVID restrictions across southeast England (including London) - equivalent to a full lockdown - effective Sunday. Non-essential shops, gyms, cinemas, hairdressers and bowling alleys will close for two weeks. Furthermore, people will be restricted to meeting with only one other person from another household in an outdoor public space.Tier 4 restrictions could be toughened further and remain in place until close to Easter, Government sources have admitted. (Sky News/Telegraph)

Germany, France, Italy, the Netherlands, Belgium, Austria, Ireland, Canada, alongside a number of other countries are all halting flights and travel from the UK amid the more infectious COVID-19 variant. France also banned incoming freight by air, sea, or rail. Measures vary between the countries are generally short-term, an EU meeting will be held on Monday morning to discuss a more co-ordinated response; subsequently, the French Transport Minister is intending to, in the coming hours, set up a European wide mechanism to allow traffic with the UK to resume.(BBC) UK PM Johnson is to chair a COBRA meeting on Monday morning to discuss the international travel situation. (Twitter) Italy said it has detected a coronavirus case with the new UK strain. (Newswires)

A new more "severe" coronavirus strain has been detected in South Africa with experts claiming it spreads quicker than current types of the virus. (Daily Express). This variant is similar to the one seen in the UK, but the two appear to be unrelated. (BBC) Some countries have also issued a travel ban to travellers from South Africa. (Newswires)

Senior Whitehall sources believe the MHRA will authorise the AstraZeneca (AZN LN) vaccines on December 28th or 29th, after final data is provided to the regulator. (Telegraph)

US FDA issued an emergency use authorization (EUA) for Moderna's (MRNA) COVID-19 Vaccine to be distributed in the US for use in individuals 18 years of age and older. (FDA)

US FDA is investigating five allergic reactions that happened after being administered the Pfizer (PFE)/BioNTech (BNTX) vaccine. (Newswires) Note, some allergic reactions were previously reported in the UK

EU has agreed to pay EUR 15.50/dose for the Pfizer (PFE)/BioNTech (BNTX) COVID-19 vaccine candidate, via internal documents. (Newswires)

Apple (AAPL) is to temporarily close stores in California as COVID cases surge (Newswires) Amazon (AMZN) has temporarily closed a facility in northern New Jersey after it detected an increase in asymptomatic positive cases, according to a notice obtained by CNBC. (CNBC)

ASIA

Asia-Pac equities traded mostly lower following a similar downbeat lead from Wall St where US equities pulled back from fresh record intraday highs in what was a volatile Friday session ahead of Tesla's S&P debut today. State-side, futures opened firmer but thereafter trimmed gains upon Senate Majority Leader McConnell's announcement of a bipartisan COVID relief bill, with some participants citing "sell the news" play. Meanwhile, equity futures across Europe saw more pronounced losses as a Brexit trade deal is yet to be reached whilst the region tackles the new COVID-19 variant seemingly emanating from Britain - with DAX Mar'21 futures extending downside after falling below 13,500. Back to APAC, the ASX 200 (-0.1%) was pressured by its financial and travel & leisure sectors as COVID-related restrictions were tightened for the Greater Sydney area, whilst Nikkei 225 (-0.2%) initially traded with gains and rose to the highest since April 1991 before pulling back from best levels just shy of 27,000 as it conformed to the broader losses across the region. South Korea's KOSPI (+0.2) was initially hampered by the rising COVID-cases with the country reporting over 1,000 cases for a fifth consecutive day, but the index later pared losses. Elsewhere, Shanghai Comp (+0.8%) outperformed despite the PBoC maintaining its LPR setting as expected, as China said it will continue to implement proactive fiscal policy and maintain the sustainability, stability and continuity of macro policies, whilst sources suggested China's leadership plans to set its real economic growth target at about 8% for 2021. Conversely, the Hang Seng (-0.7%) saw a lacklustre session as heavyweight oil and banking names traded with losses, with Alibaba also pressured by source reports that Jack Ma in early November offered to hand over parts of Ant Group to the Chinese government. Finally, 10yr JGB futures traded with modest gains in tandem with the broader gains across the fixed-income complex amidst the downbeat risk tone, whilst the long-end of the curve saw some pressure as the Japanese Ministry of Finance announced that 40yr JGB issuance is poised to increase by JPY 100bln per auction starting April.

US President Trump signed the bill that could prevent some Chinese companies from listing shares on US exchanges unless they adhere to US auditing standards. US blacklists China shipbuilding entities over the South China Sea. (Newswires)

PBoC LPR (Dec) 1yr 3.85% vs. Exp. 3.85% (Prev. 3.85%); 5yr 4.65% vs. Exp. 4.65% (Prev. 4.65%). (Newswires)

PBoC set USD/CNY mid-point at 6.5507 (Prev. 6.5315). (Newswires)

PBoC injected CNY 10bln via 7-day reverse repos and CNY 100bln via 14-day reverse repos at maintained rates of 2.20% and 2.35% respectively. (Newswires)

Japan's Cabinet has approved a record amount of FY21/22 general account budget spending worth JPY 106.6tln; tax revenue estimated at JPY 57.4tln vs prev. estimate of JPY 63.5tln. Japan is to increase issuance of 40yr JGB by JPY 100bln per auction from April, will keep issuance of other JGBs unchanged. (Newswires)

US

Senate Majority Leader McConnell announced that an agreement has been reached on a USD 900bln COVID relief deal, “The four leaders of the Senate and the House finalized an agreement.”. (Newswires) Republicans and Democrats came to an agreement on Sen. Toomey's language to limit the Fed’s emergency lending programs. Sen. Toomey has agreed to drop the broad language in his proposal that would have prevented the Fed chair from establishing similar facilities in the future. (Politico) The bill proposed by Congress includes USD 600 of direct payments, USD 300 more per week in unemployment payments, USD 15bln for US airlines payroll assistance and USD 25bln rental assistance. (CNBC) Click here for the full details.

US House is likely to vote on the COVID bill today as time is needed to finish the bill. (Twitter) Senate Minority Leader Schumer says the COVID-relief bill "should" have votes to pass Congress

US House and Senate have voted in favour of a one-day stopgap bill to avert a government shutdown as expected in order to give Congress more time to finish writing the omnibus and COVID relief bill. US President Trump later signed the bill into law. (Newswires/Twitter)

US House rules committee to meet as early as 13:00GMT/08:00EST to prep the COVID-19 bill for the floor; following this, timing for the House debate is unclear. Senate will not be meeting until 17:00GMT/12:00EST, Fox's Pergram; Senate will need cooperation from all 100 senators to accelerate the process on the coronavirus bill and not go through all of the parliamentary hurdles to finish the bill today. (Twitter)

Fed Stress Tests stated banks will be permitted to pay out dividends and buy back stock on a limited basis in Q1. Furthermore, banks have enough capital to withstand over USD 600bln in losses from a short sharp economic slump, as well as a moderate longer-lasting downturn. Fed said dividends/buybacks are not allowed to exceed net income from the last year. Fed suggested it will not use the new results to tweak how much it ordered each bank to hold as a "stress capital buffer" following the previous test results. (Newswires)

Apple's (AAPL) contractors in India and China have protested over unpaid wages and bonuses. (FT)

US Senate Commerce Committee concluded that Boeing (BA) and the FAA worked together to manipulate 737 Max recertification tests. Senate investigators also said that Boeing officials "inappropriately coached" test pilots during efforts to recertify the company's 737 Max aircraft. (Senate Commerce Committee/BBC) Click here for the full release.

Nike (NKE) reported Q2 2021 (USD) EPS 0.78 (exp. 0.62); revenue 11.2bln (exp. 10.56bln). Gross profit margin: 43.1% (exp. 42.8%). Total liquidity: 15.8bln (prev. 13.4bln). (Newswires) N.B Co. has a 0.6% weighting in the SPX and 3.0% weighting in the DJIA. **Co. shares rose 5.6% after-market. **

UK/EU

Brexit talks remain blocked over fishing rights as officials weighed whether another phone call between UK PM Johnson and European Commission President von der Leyen could help to break the deadlock. An official said such a call is not yet confirmed. (FT)

A UK source said Brexit discussions are still difficult and significant differences remain. Talks are set to continue on Monday. Over the weekend, UK sources said it is increasingly likely that an agreement will not be reached in time. The source added that the EU are continuing to make demands that are incompatible with UK independence. (Sky News) Sources suggested talks are unlikely to wrap up on Sunday, but should do so before Christmas. (Newswires) UK Cabinet Minister Gove suggested UK and EU can agree on a series of "mini unilateral" deals to ease any chaos if no deal can be agreed before the end of the transition period. (Telegraph)

European Parliament Spokesman said the European Parliament will not be in a position to grant consent to a Brexit agreement this year as the sides failed to reach consensus on Sunday. Following the morning's meeting, MEP McAllister says the European Parliament has done its utmost to be in a position to grant consent before the end of the transition period and will meet with the European Parliament President to discuss the next steps. (Twitter)

Irish Foreign Minister says Brexit discussions are not in a good place, significant progress on level-playing-field made last week; very unlikely that EU states will support further offers on fisheries from those which were offered at the weekend - needs to be a middle ground. (Newswires)

On Brexit a number of UK MPs have this morning called for an extension to the transition period, currently ends at 23:00GMT on 31st December, given the recent COVID-19 developments with MPs also noting the amount of progress that has been made so far. However, there is reportedly no ability to extend the transition period by more than a few days, ITV's Peston citing EU/UK sources; but, a few extra days are unlikely to give the required time to conclude negotiations. (Twitter)

UK Lloyds Business Barometer (Dec) -4 (Prev. -21). (Newswires)

GEOPOLITICAL

China’s military has accused the United States of jeopardising peace and stability in the Taiwan Strait by sending a guided missile destroyer through the waterway on Saturday. (SCMP) Chinese Navy spokesperson said China's Shandong carrier sailed through the Taiwan Strait to the South China Sea on Sunday for military drills

The US Embassy in Baghdad confirmed rockets targeting the International Zone resulted in the engagement of Embassy defensive systems. There was some minor damage on the Embassy compound but no injuries or casualties. (Twitter) US Secretary of State Pompeo tweeted "Iran-backed militias once again flagrantly and recklessly attacked in Baghdad, wounding Iraqi civilians." (Twitter)

A small number of UK organisations are known to have been affected by a suspected Russian hacking campaign. Sources stated no public sector bodies are yet known to be among the UK-based victims. (Newswires)

US President Trump tweeted that the recent cyberattack suspected to be Russia is "far greater in the Fake News Media than it actually is" and floated the possibility it may be China. (Twitter)

Russian Kremlin regards US sanctions on Nord Stream 2 as the commencement of a hybrid war, Sputnik. Elsewhere, Russian President Putin calls for a urgent response to Western missile deployment at Russian borders, via Sputnik. (Twitter)

EQUITIES

European equities trade notably lower (Eurostoxx 50 -3.9%) as the twin threats of a more transmissible COVID strain and increasing likelihood of a no deal Brexit weighs on prices. On the former, various European nations have imposed travel bans on the UK after PM Johnson imposed tighter lockdown restrictions on London and parts of the South East amid fears over a more transmissible strain of COVID; accordingly the travel & leisure sector is getting hit hard today with IAG (-12.0%), easyJet (-11.3%), Carnival (-11.4%) and Ryanair (-6.8%) all suffering. Furthermore, from a UK perspective, the passing of another Brexit “deadline” yesterday after MEPs demands for a deal by Sunday (in order to have enough time to vote on the matter) were not met has made the prospect of a no deal outcome more likely. The subsequent softening of the GBP has provided some mild reprieve for the less-domestically-focused FTSE 100 (-3.0%) and is actually outperforming peers; albeit, still substantially pressured. Stateside, losses were initially less pronounced as participants took some solace from the stimulus updates in which Congress is expected to vote on a COVID relief package today after a compromise was struck in discussions. However, as the session progressed, the selling contagion spread to the US with the e-mini S&P lower by 2.5% and heading towards 3600 with the e-mini Russell lower by 3.7% and e-mini Nasdaq down 1.7%. An anti-cyclical bias can be seen in Europe with heavy losses seen in oil & gas, travel & leisure, banks and auto names as part of a typical lockdown play. Within the oil & gas space, Shell (-6.7%) are a noteworthy laggard alongside softer oil price and announcing that it will have to write down the value of some of its assets by USD 3.5-4.5bln after a series of impairments. With a bulk of the price action being swayed by broader macro themes, rather than stock specific developments, individual movers that fall outside of this category are on the light side. That said, against the trend of the market, Danske Bank (+0.4%) are firmer on the session after the US Treasury Department's Office of Foreign Asset Control has closed the investigation regarding the Co. and Estonia with no action to be taken.

FX

GBP - The Pound was already back pedalling before reports about a fresh and more fast-spreading form of the coronavirus that has subsequently forced PM Johnson into tightening restrictions in London and the South East to Tier 4, while also prompting a change in the more relaxed rules for Xmas. However, Sterling has subsequently retreated further as other nations take preventative action by closing borders with Britain in an attempt stop the aggressive mutation entering, all while the UK and EU remain at loggerheads over fisheries beyond the deadline set by Brussels to get a deal ratified. Cable has now fallen through 10 and 21 DMAs on the way down to circa 1.3190 from around 1.3478 and 1.3625 or so last Thursday when a trade pact seemed close if not quite imminent, while Eur/Gbp is probing 0.9200 compared to sub-0.8900 at one stage. Technically, the 50 DMA at 1.3209 has now given way, so further declines in Cable cannot be ruled out.

DXY - Cable collapse aside, the Dollar is also benefiting from broader demand on safe-haven grounds as risk sentiment sours markedly on heightened fears over COVID-19 contagion and the fallout from no Brexit deal that will counter some of the positivity or relief if US fiscal stimulus is finally delivered later today. Hence, the index has rebounded firmly from recent deep lows to establish a considerably firmer base on the 90.000 handle and revisit 90.500+ between 90.187-91.022 parameters vs 89.723 last week.

NZD/AUD/CAD - No surprise to see the high beta currencies suffer most after the pro-cyclical Pound as the Kiwi and Aussie recoil towards or just beneath 0.7000 and 0.7500 respectively, while the Loonie is trying to contain losses near 1.2900 against the backdrop of plunging crude prices. Back down under, the Aud also has pandemic issues of its own to contend with given the outbreak in Sydney that has resulted in a return to more stringent measures.

JPY/EUR/CHF - Even the Yen is yielding to Greenback advances, albeit also wary perhaps that Japanese PM Suga has apparently drawn a line in the sand at 100.00 after rolling out a supplementary budget, as Usd/Jpy trades close to the upper end of a 103.25-85 band. Elsewhere, the Euro is eyeing any stops below 1.2130 after triggering enough at 1.2164 to take out the 10 DMA (1.2160) and the Franc is holding around 0.8900 following mixed Swiss sight deposit balances post-SNB and the US Treasury designating the country as a currency manipulator.

SCANDI/EM - Not much solace for the Nok via Norges Bank Governor Olsen downplaying the likelihood of reverting to NIRP as the aforementioned reversal in oil along with increasingly bearish risk undermines the Crown more than the Sek, while EMs are floundering across the board and even GOLD is underperforming having had a brief look above Usd 1900/oz..

Japanese PM Suga reportedly told the Japanese Finance Minister to make sure USD/JPY does not cross 100.00. "His comment, which was confirmed by multiple sources, came with an unspoken message: Be prepared to sell yen for dollars in case the Japanese currency breaches the key threshold." The comments were reportedly made in early November following the US election, Nikkei reported. (Nikkei)

FIXED

Bonds are somewhat belatedly moving higher again as another bout of Brexit deal pessimism adds to angst over new strains of the virus that are mutating quicker. Gilts are leading the way, closely followed by US Treasuries and Bunds are bringing up the rear in terms of the core complex, but not far from best levels as BTPs reverse sharply through 152.00. Looking at prices in more detail, the 10 year UK benchmark has been up to 135.86 (+90 ticks), T-note as high as 138-07+ and German equivalent is 14 ticks off the earlier 178.44 Eurex apex. Back to Italy, some reports suggesting the COVID-19 variant has been detected appears to be adversely impacting sentiment.

COMMODITIES

WTI and Brent have succumbed to the drop in broader sentiment this morning given negative COVID-19 developments out of the UK and the associated impact on demand via travel and other components alongside the undertone of no breakthrough in Brexit discussions. Currently, WTI and Brent are lower by over 5.0% with the benchmarks having moved below the USD 47/bbl and USD 50/bbl marks respectively in European hours; in a continuation of APAC performance. The aforementioned negative factors have served to overshadow, thus far at least, US fiscal progress with the US House rules committee to meet from 13:00GMT/08:00 to begin preparation for a vote (timing TBC). Returning to the crude complex and as Brent has dropped below the USD 50/bbl mark, a figure it only recently reclaimed on the 10th of December, if the pressure exacerbates throughout the day participants will be mindful of the 50-DMA at USD 44.98/bbl before the 100-DMA at USD 44.05/bbl. Fundamentally, newsflow explicitly for the complex has been sparse in European hours but overnight/weekend we did see updates from Saudi’s Energy Minister that themselves and Russia are on the same page regarding market management alongside renewed tensions around Iran after the US Secretary of State attributed rocket attacks in Baghdad to the nation. Moving away from crude and to metals spot gold has, in-spite of the broader tone, not received much in the way of haven-allure with the precious metal down by just shy of USD 10/oz at present compare to earlier losses of as much as USD 25/oz. Such downside is in-light of the USD’s performance with the DXY in proximity to highs ~91.00 largely because of GBP being significantly hampered regarding Brexit and COVID-19 updates in the region.

Saudi Energy Minister Abdulaziz stated that oil market speculators will "remain on their toes" and Saudi and Russia are on the same page when it comes to oil market management, according to EnergyIntel. (Twitter)

China's steel product demand seen rising 9.6% in 2020 and +1% in 2021, according to a government research body. Chinese iron ore demand seen +9.2% in 2020, -1.2% in 2021; imports seen +9.% in 2020 and -2.7% in 2021. (Newswires)

Russia is planning to sign 20-25 year deals with India on oil supply, according to Russian envoy cited by RIA. (RIA)