• Asian equities began the week cautiously following last Friday's negative performance stateside
• In FX, the DXY traded within a tight range, EUR and safe havens were subdued and activity currencies outperformed
• UK ministers announced fresh COVID-19 restrictions for travellers entering the UK
• US President Biden and Russian President Putin are to hold a phone call on Tuesday
• Saudi Aramco over the weekend raised official selling prices for Asia and US customers
• Crypto markets saw substantial losses over the weekend, with Bitcoin plunging over 20% on Saturday
• Looking ahead, highlights include German Industrial Orders, EZ Sentix Index, Riksbank Minutes, Riksbank's Skinglsey, BoE's Broadbent, Eurogroup meeting

CORONAVIRUS UPDATE

US President Biden’s administration is preparing to fast-track authorisation of revamped COVID-19 vaccines to address the Omicron variant. (Newswires) US CDC Director Walensky said that Omicron COVID-19 cases have been found in at least 15 US states but added that the Delta variant of COVID-19 still makes up the majority of US cases not Omicron. There were separate comments from NIH's Fauci that early reports were encouraging regarding the Omicron variant and that it doesn’t look like there’s a great severity to it with initial data from South Africa not showing a resulting surge of hospitalizations. Canada's Toronto Public Health announced the first confirmed COVID-19 cases in Toronto and it is currently investigating the cases of three Toronto residents that tested positive for the new variant. (Newswires)

UK ministers announced fresh restrictions for travellers entering the UK and will require pre-departure testing for all arriving passengers from this week. Government scientific advisers warned that COVID-19 pandemic will pose a threat for at least the next five years before settling into a predictable endemic state. Furthermore, it was reported that the overall number of confirmed Omicron variant cases in the UK is 246, while UK Health Security Agency noted on Friday that 12 of the first 22 cases of the new variant in UK involved people who were double jabbed but none of the 22 were hospitalised. (Newswires/FT/Daily Mail) A government adviser said it is too late to stop the Omicron variant in the UK. (Times)

Johnson & Johnson (JNJ) study showed value of mix and match approach with boosters as its COVID-19 booster administered six months after the BioNTech (BNTX) vaccine regimen, showed a substantial increase in antibody and T-cell responses. Eli Lilly (LLY) sees FDA grant EUA of two monoclonal antibodies for treatment of COVID-19 in young children, including newborns. Bavarian Nordic and Expres2ion Biotechnologies announced positive topline results of Phase 2 results for the ABNCoV2 vaccine candidate which demonstrated a strong boosting effect for neutralising antibodies to highly efficacious levels of over 90% against SARS-CoV-2. (Newswires)

IMF's Georgieva said she has been concerned that the recovery has been losing momentum before the emergence of Omicron, while she added they will likely see some downgrades for forecasts for global growth and noted the rapid spreading of Omicron can dent confidence. Furthermore, she stated that tariff reductions would be a useful tool and is encouraged by the USTR looking into possible reductions. (Newswires)

ASIA

Asian equities began the week cautiously following last Friday's negative performance stateside whereby the Russell 2000 and Nasdaq closed lower by around 2% apiece, whilst the S&P 500 and Dow Jones saw shallower losses. The Asia-Pac region was also kept tentative amid China developer default concerns and conflicting views regarding speculation of a looming RRR cut by China's PBoC. The ASX 200 (+0.1%) was initially dragged lower by a resumption of the underperformance in the tech sector, and with several stocks pressured by the announcement of their removal from the local benchmark, although losses for the index were later reversed amid optimism after Queensland brought forward the easing of state border restrictions, alongside the resilience in the defensive sectors. The Nikkei 225 (-0.3%) suffered from the currency inflows late last week but finished off worse levels. The Hang Seng (-1.3%) and Shanghai Comp. (+0.2%) were mixed with Hong Kong weighed by heavy tech selling and as default concerns added to the headwinds after Sunshine 100 Holdings defaulted on a USD 170mln bond payment, whilst Evergrande shares slumped in early trade after it received a demand for payments but noted there was no guarantee it will have the sufficient funds and with the grace period for two offshore bond payments set to expire today. Conversely, mainland China was kept afloat by hopes of a looming RRR cut after comments from Chinese Premier Li that China will cut RRR in a timely manner and a brokerage suggested this could occur before year-end. However, other reports noted the recent remarks by Chinese Premier Li on the reverse repo rate doesn't mean a policy change and that views of monetary policy moves are too simplistic which could lead to misunderstandings. Finally, 10yr JGBs were steady after having marginally extended above 152.00 and with prices helped by the lacklustre mood in Japanese stocks, while price action was tame amid the absence of BoJ purchases in the market today and attention was also on the Chinese 10yr yield which declined by more than 5bps amid speculation of a potentially looming RRR cut.

• PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a CNY 90bln net daily drain. (Newswires)
• PBoC set USD/CNY mid-point at 6.3702 vs exp. 6.3649 (prev. 6.3738)

China Securities Daily noted that China could reduce RRR as soon as this month, citing a brokerage firm. However, a separate Chinese press report noted that recent remarks by Chinese Premier Li on the reverse repo rate doesn't mean that there will be a policy change and an Economics Daily commentary piece suggested that views of monetary policy moves are too simplistic and could lead to misunderstandings after speculation was stoked for a RRR cut from last week's comments by Premier Li. (Securities Daily/Economics Daily)

China’s securities regulator said it respects Chinese companies’ choice of listing venues on the basis of compliance and noted that the media report that China will ban companies with variable interest entity (VIE) structure from listing in the US is a total misunderstanding and misreading. Furthermore, CSRC noted that US demands for Chinese companies to delist from US stock exchanges are completely wrong but stated that it recently had constructive communication with the US SEC and PCAOB, while it will continue communicating with US counterparts to resolve accounting and regulatory issues. (Newswires)

Chinese developer Sunshine 100 defaulted on USD 170mln of bonds. (Newswires)

A volcano eruption in Indonesia killed at least 14 people and left dozens injured, according to the National Disaster Management Authority. (Newswires)

UK/EU

The BoE is reportedly poised to loosen mortgage lending rules. Officials are said to be mulling softening affordability checks for borrowers, with reviews said to be concluded next week. (Telegraph)

UK CBI cuts UK 2021 GDP growth forecast to 6.9% (prev. 8.2%) and 2022 forecast to 5.1% (prev. 6.9%). (Guardian)

UK PM Johnson reportedly ordered his team to de-escalate tensions with France and told colleagues not to react to recent provocations from France. (FT)

UK PM Johnson’s plan for “levelling up” will be delayed to 2022 after the government white paper that sets out details of the proposal was postponed to after the new year. (Newswires)

UK Chancellor Sunak reportedly instructed Treasury officials to draft plans to reduce the tax burden and is preparing to cut income tax by 2 pence in the pound prior to the next election, while another option being considered is to reduce inheritance taxes. (The Times)

UK will start a trial 'smart' customs border in an effort to lower trade frictions. (FT)

European Banking Authority told banks not to be overly generous with payouts and said that banks face key risk of an abrupt market correction. Furthermore, it is monitoring exposures of EU banks to clearing houses in London and said that banks should consider if capital is needed to cover environment, social and governance risks. (Newswires)

FX

In FX, the DXY was kept afloat but with price action rangebound. Over the weekend, Goldman Sachs cut its US GDP growth forecast to 3.8% from 4.2% citing risks and uncertainty around the Omicron variant. EUR/USD was subdued after retreating beneath 1.1300 and GBP/USD traded sideways. USD/JPY retraced some of Friday’s declines in an attempt to reclaim the 113.00 handle and antipodeans also nursed losses although the recovery was limited amid the tentative risk tone and lack of tier one data releases, with attention turning to tomorrow’s RBA policy meeting.

Turkish President Erdogan said that Turkey will provide low rates to its people and he hopes to stabilise FX early-2022. (Newswires)

Fitch raised Italy’s sovereign rating by one notch to BBB; Outlook Stable and it affirmed Russia at BBB; Outlook Stable, while Moody’s affirmed Turkey at BBB; Outlook Stable. (Newswires)

COMMODITIES

Crude oil futures saw strength overnight as they recovered from the weakness seen on Friday with Saudi Aramco over the weekend raising official selling prices for Asia and US customers. There were also notable gains in Shanghai crude futures which were underpinned amid RRR cut speculation. On the geopolitical front, last week's talks on the Iran nuclear deal were not seen as successful and Europe warned that talks are heading for a collapse if Iran doesn't shift as the latter proposed unacceptable changes to the existing draft agreement and fast-forwarded its nuclear programme, while French President Macron stated that he does not rule out that the Iran nuclear talks do not resume in the short-term following the latest unsuccessful round of negotiations. Gold prices were little changed as the greenback marginally strengthened overnight and copper was kept float but with upside limited by the tentative gains in risk assets.

US Baker Hughes Rig Count (w/e Dec 3rd): Oil flat at 467, Nat Gas flat at 102, and Total flat at 569. (Newswires)

OPEC Secretary General Barkindo said OPEC will continue with supply adjustments to attain stability in the oil market. (Newswires)

Saudi Arabia set January Arab light crude oil OSP to Asia at Oman/Dubai average +USD 3.30/bbl which is an increase from this month’s premium of USD 2.70/bbl, while it set light crude OSP to North West Europe at ICE Brent –USD 1.30/bbl vs. this month’s discount of USD 0.30/bbl and set light crude OSP to US at ASCI +USD 2.15/bbl vs this month’s premium of USD 1.75/bbl. (Newswires)

US EPA is expected to broaden the kinds of renewable fuel production processes that are eligible to receive credits under the US Renewable Fuel Standards programme, according to sources. It was also reported that the Biden administration is going to propose expanding the kinds of renewable fuel production processes that are eligible to receive credits under the US Renewable Fuel Standard program, according to sources. (Newswires)

Canada’s Trans Mountain said it successfully restarted its pipeline after completion of necessary assessments and repairs of protective earthworks required for a restart and will monitor the line, while it will continue with additional emergency work during the weeks ahead. (Newswires)

GEOPOLITICS

White House said they are concerned about forced labour in the Xinjiang region and they support Uyghur human rights legislation. In relevant news, US Defense Secretary Austin suggested he was concerned about China’s continued incursions into Taiwan’s ADIZ and warned that the repeated incursions could be a rehearsal for an eventual invasion of Taiwan. In other news, US intelligence suggested that China is considering establishing its first military post on Africa’s Atlantic coast which has alarmed officials at the White House and Pentagon. (Newswires) The Biden administration is expected to announce that no US government officials will attend the 2022 Beijing Olympics, implementing a diplomatic boycott. (CNN)

Russia said it will protest an incident which occurred on Saturday in which a civilian aircraft had to divert over the Black Sea due to a US spy plane. (Newswires)

Iranian military air defences fired missiles to test the rapid reaction force of Natanz. In relevant news, a senior Iranian diplomat said they see no impasse in the Iran talks, while he added that Iran has provided other parties their draft proposals and encouraged them to come up with written responses or new ideas, according to journalist Abas Aslani. (Newswires/Twitter)

US Secretary of State Blinken said the path to diplomacy in Iran nuclear talks is getting shorter and shorter, while he added that Iran is not being serious right now and that's why talks were ended this week. Furthermore, he said they will pursue other options if path to compliance is a dead end and that Iran has some very important decisions to make in the days ahead. Blinken also commented that it would be a potentially disastrous decision for China to invade Taiwan and said that Russia should withdraw its forces near the border with Ukraine to de-escalate the crisis. (Newswires)

US President Biden and Russian President Putin are to hold a phone call on Tuesday which follows a recent meeting between US and Russian diplomats. In relevant news, there were comments from the White House Press Secretary that the US wants be prepared in case Russia invades Ukraine and that the US could impose economic sanctions and other tools. Furthermore, she stated that US security assistance for Ukraine remains under consideration and declined to say whether military planning is part of Biden's comprehensive plan for Ukraine. (Newswires)

Intelligence-sharing by the US has reportedly convinced allies in EU and NATO that Russia could be set to invade Ukraine and nations including Germany are persuaded of the need to compile a threat of robust sanctions. (FT)

Islamic State militias reportedly took over a village in Northern Iraq, according to security sources although there has been no official confirmation. (Newswires)

Apple (AAPL) recently told US State Department employees that their phones were targeted with a sophisticated hacking tool created by Israeli technology firm NSO Group, while NSO Group said it has begun an investigation into the matter, according to sources. (Newswires)

US

Treasuries saw a fourth consecutive flattening as risk appetite pares and the liquidity outlook diminishes into year-end. Futures volumes above average. At settlement, 2s -2.8bps at 0.591%, 3s -4.8bps at 0.847%, 5s -8.6bps at 1.124%, 7s -10.1bps at 1.291%, 10s -10.8bps at 1.341%, 20s -9.6bps at 1.757%, 30s -9.4bps at 1.674%. 5yr TIPS -8.9bps at -1.619%, 10yr TIPS -6.8bps at -1.108%, 30yr TIPS -5.3bps at -0.599%. 5yr BEI -0.9bps at 2.743%, 10yr BEI -2.9bps at 2.426%, 30yr BEI -4.0bps at 2.289%. The curve had a quiet bull-flattener into the NY handover Friday with volumes light and positioning cited ahead of the US jobs report, with eyes moving ahead to year-end. The headline miss on NFP saw T-Notes spike higher, although a delving into the promising slack metrics and upward revisions saw sellers emerge not long after in a flattening fashion, again. Some renewed hawkish rhetoric for the need for accommodation removal from Bullard only added to the front-end sales, with 2yr yields reaching new cycle peaks at 65.5bps. T-Notes hit lows of 130-13+ before chunky stock sales at the NYSE open saw bidders emerge across the Treasury curve, but more so the long-end, with IFR noting "some very large asset reallocation trades (out of stocks into bonds by two large balanced funds)" which were then piled in on by algos as resistance levels were broken in cash 10s beneath 1.40%. The super-strong ISM Services print couldn't shake the strength. Instead, the bid carried through into the settlement, with cash 30s falling beneath 1.70%, while parts of the belly look to be approaching inversion, such as the 7s10s which sits at a mere 5bps currently. Markets now look to next week's 3s, 10s, and 30s reopening auctions, with seemingly little noticeable concession made from Dealers. CPI next Friday is the only real standout data point ahead of FOMC the week after, where traders won't have to deal with a deluge of Fed speak leading into the event either, where otherwise, liquidity conditions are expected to deteriorate into the last few weeks of the year. T-note (H2) futures settle 27+ ticks higher at 131-14+.

US President Biden signed the stop-gap funding bill on Friday to keep the government funded to mid-February.(Washington Post)

US Democrats will start meeting with the Senate Parliamentarian on Monday on the health care provisions of the reconciliation bill, while Republicans and the pharmaceutical industry are gunning for private sector drug price controls. (Politico)

Canada’s Trade Minister said they will retaliate "accordingly" if the US Senate votes in favour of EV tax credit. (Newswires)

CRYPTO

Crypto markets saw substantial losses over the weekend with Bitcoin (BTC) plunging over 20% on Saturday before finding support around USD 45k.

Crypto exchange Binance is reviving efforts to launch in the UK. (Telegraph)

Singapore’s financial regulator has reportedly suspended crypto exchange Bitget over a row with South Korean artists. (Guardian)