• European bourses are pressured, but off lows Euro Stoxx 50 -1.4%, in risk-off trade as further COVID restrictions are implemented/touted
• Albeit, sentiment picked up on Moderna's (+5.4% pre-mrkt) prelim. booster update ahead of a 13:00GMT/08:00EST press conference
• Moderna's prelim. booster data shows a boost to neutralising antibody levels 37-fold higher than pre-dose levels
• In FX, DXY has been choppy but retains 96.50 with performance dictated by the EUR and activity currencies
• US Senator Manchin said he cannot support President Biden’s Build Back Better bill; Schumer says BBB will be considered early-2022
• PBoC cut the 1yr Loan Prime Rate (LPR) by 5bps to 3.80% (prev. 3.85%), but maintained the 5yr LPR at 4.65%
• Looking ahead, Monday has no Tier 1 events scheduled

CORONAVIRUS UPDATE

US President Biden is, on Tuesday, to warn the nation of the risk of remaining unvaccinated against the coronavirus in a planned speech. (Newswires)

US Democratic Senators Booker and Warren have tested positive for COVID. (Newswires)

Beijing reported one confirmed COVID19 case in Tongzhou district on Sun. Chinese top experts advised epidemic-risk areas and cities holding major events to take strict measures during Spring Festival. (Global Times). China reports 102 new COVID cases in mainland on Dec 19th (vs 83 on Dec 18th) (Newswires)

UK Cabinet Meeting at 14:00GMT/09:00EST today, according to a Sun journalist. PM Johnson is reportedly mulling limiting household mixing over Christmas: three options are reportedly on the table - 1) limited indoor contact, 2) no household mixing, return of social distancing and 8pm curfew, 3) full lockdown. (Telegraph) UK government is reportedly mulling a two-week COVID circuit-breaker after Christmas. Indoor mixing will be banned, pubs and restaurants will resort to outdoor-only. The rule of six is to report but schools and shops will remain open. More measures before Christmas have not been ruled out. (Times) UK government advisers said it is still too early to reliably assess the severity of the Omicron variant. (Newswires)

• UK scientists are pushing for 'option two' pandemic measures, a decision PM Johnson has to make this week. (Politico)
• Around a dozen UK ministers, including Chancellor Sunak, Business Secretary Kwarteng, Chief Whip Spencer, Transport Secretary Shapps and Leader of the Commons Rees-Mogg opposed the call for more restrictions before Christmas, The Times reports. (Times)

UK reports 82,886 new coronavirus cases, up 69% from last week. UK reports 12,133 new Omicron cases, the biggest one-day increase on record. Number of people hospitalised with Omicron in England rises to 104, up from 85 yesterday, with 12 deaths, up from 7. (Newswires)

The Netherlands on Saturday became the first European country to announce a full lockdown to fight the variant. (Newswires) Dutch Prime Minister Mark Rutte said that all non-essential shops, restaurants, bars, cinemas, museums and theatres must shut from Sunday until January 14, while schools must close until at least January 9. (AFP)

Germany has announced that from midnight on Monday quarantine restrictions will be imposed on travellers coming from Britain and people will required to show a negative COVID test to enter the country. (Sky News)

Moderna (MRNA) announces preliminary booster data, says currently authorized Moderna COVID-19 booster can boost neutralizing antibody levels 37-fold higher than pre-boost levels; conference call to be held today at 08:00EST/13:00GMT. (Newswires)

COVID-19 Vaccine Independent Safety Monitoring Board was informed of three reports of people who had died with a potential myocarditis in the period following vaccination; Board met to review whether the Pfizer (PFE) vaccine was a factor. (Mirage)

European Commission has accelerated the deliveries of vaccine doses to member states. (Newswires)

ASIA

Asia-Pac equities traded mostly lower following the volatile session on Wall Street on Friday, which saw the Dow Jones, S&P 500 and the Nasdaq all posting varying degrees of losses, whilst the Russell 2000 outperformed with decent gains. Overnight, US equity futures opened with a mild upside bias, albeit the optimism faded in early trade as risk aversion materialised, with the ES Mar 2022 contract falling below its 50 DMA (4,596) whilst the NQ and RTY saw losses of over 1% apiece. Sentiment was hit by the slew of concerning COVID headlines over the weekend, whilst Friday saw further hawkish rhetoric from Fed officials - with Fed’s Waller suggesting the whole point of accelerating the bond taper was to make the March Fed meeting a live meeting for the first hike, and under his base case March is very likely for lift-off, although it could be pushed back to May. The ASX 200 (-0.3%) was pressured by some large-cap miners and banks, whilst the Nikkei 225 (-2.1%) and KOSPI (-1.8%) conformed to the downbeat tone, with upside in the former also capped by recent JPY strength. The Hang Seng (-1.9%) and Shanghai Comp (-1.1%) initially saw shallower losses after the PBoC opted to cut the 1yr Loan Prime Rate by 5bps, whilst the 5yr rate was maintained, although the property sector faced more woes after S&P downgraded Evergrande to Selective Default, whilst Kaisa shares slumped after trade resumed following a two-week hiatus, with the Co. in discussions regarding a debt restructuring plan. The Hang Seng dipped below 23,000 for the first time since May 2020. Elsewhere, US 10yr futures continued edging higher as APAC risk aversion supported the haven, whilst Goldman Sachs also cut its US real GDP Growth forecasts on the Build Back Better blockade.

PBoC injected CNY 10bln via 7-day reverse repo and CNY 10bln via 14-day for a net neutral daily position, at maintained rates of 2.20% and 2.35% respectively

• PBoC set USD/CNY mid-point at 6.3933 vs exp. 6. 3880 (prev. 6.3631)

Japan lawmakers approve extra stimulus budget; USD 317bln spending to support COVID struck economy. (Newswires)

Apple (AAPL) reportedly asked India's watchdog to dismiss the case alleging abuse of market dominance, according to a filing. (Newswires)

Chinese property name Kaisa Group (1638 HK) did not make payment on USD 400mln senior notes on Dec 7th; Co. in discussions regarding a debt restructuring plan with respect to outstanding senior notes. (Newswires)

SenseTime relaunches Hong Kong IPO, to start trading on Dec 30th. (Newswires)

CENTRAL BANKS

ECB policymakers wanted explicit acknowledgement of upside risks to inflation at last week's policy meetings, Reuters reports citing sources; these policymakers were reportedly rebuffed by chief economist Lane. (Newswires)

ECB's Holzmann said if upside risks to CPI materialises, then the ECB is ready to act. He added that the inflation forecast shows it is to slow steadily next year. (Newswires)

ECB's de Cos says rate hikes are unlikely in 2022. (Expansion)

Joachim Nagel to replace Jens Weidmann as Bundesbank chief. (Handelsblatt)

PBoC cut the 1yr Loan Prime Rate (LPR) by 5bps to 3.80% (prev. 3.85%), but maintained the 5yr LPR at 4.65%. (Newswires)

BoJ Governor Kuroda said it is too early to consider normalising policy now, we're still in a phase to patiently continue large-scale easing

US

Moderate Democratic Senator Manchin said he cannot support President Biden’s Build Back Better bill. He said it costs trillions more than its supporters claim, according to a statement. Manchin said Build Back Better Bill will risk the reliability of US electrical grid and increase dependence on foreign supply chains. (Fox) The White House said they will find a way to move forward next year on Build Back Better. (Newswires)

US Senate Sanders believes a vote on Build Back Better should be held. (CNN)

Goldman Sachs cuts US real GDP Growth forecast on Build Back Better blockade; Q1 2022 seen at 2% (prev. 3%) and Q2 at 3% (prev. 3.5%). (Newswires)

UK/EU

UK Brexit Minister Frost has resigned citing the "political direction" of the Prime Minister's Government and will leave in January. He also warned about taking "coercive measures" to control the spread of coronavirus. Foreign Secretary Truss will replace Lord Frost as the UK's lead negotiator with the EU in post-Brexit talks. (Sky News/BBC)

UK Treasury sources "have played down the idea of a new fund - or furlough equivalent - being introduced in the coming days, as some have called for. Chancellor held more talks with business Friday about support already on offer", according to BBC. (BBC)

GEOPOLITICS

Chinese Senior Diplomat Wang Yi says China will not fear confrontation with regards to US-China relations. (Newswires)

Iran said on Sunday that the technical inspection of new surveillance cameras for the Karaj nuclear facility had begun. (AFP)

Two rockets shot down near US embassy in Baghdad, security sources said. (AFP)

Saudi-led coalition said air defenses destroyed two drones launched towards Abha airport. (Newswires)

CRYPTO

Bank for International Settlements’ Cœuré said regulators will likely agree crypto framework in 2022. (FT)

EQUITIES

European bourses commenced the week on the backfoot, continuing the broad pressure seen in APAC trade, as focus is firmly fixed on the Omicron variant. The downside in APAC hours was also a feature of the choppy trade in the US on Friday, and amid non-COVID catalysts such as US Senator Manchin presenting a stumbling block to BBB which effectively ends the chances it can be passed this year, while hawkish central banks is also a theme traders are cognizant of for next year. Euro Stoxx 50 -1.4%, benchmarks are lower across the board as further COVID-19 restrictions are imposed/touted; thus far, the most stringent has seen the Netherlands return to lockdowns, while the likes of the UK and Germany are mulling measures. Vaccine producer Moderna (+5.5% in premarket trade) released preliminary booster data vs Omicron, which saw a modest paring of the risk-off conditions; the vaccine boosts neutralising antibody levels by 37-fold vs pre-boost levels. All sectors remain in the red however, with underperformance in those most exposed to COVID restrictions, such as Travel & Leisure, Oil & Gas and Autos. Individual movers were predominantly dictated by the broader price action; however, THG (+12.5%) is the morning’s outperformer following reports that a notable short on the name has removed its position. Meanwhile, US futures are softer across the board (ES -1.3%) ahead of a very sparse docket where focus will, as it is in European hours, centre around the fiscal narrative and COVID. On the latter, President Biden is due to speak on the situation on Tuesday, calling for individuals to get vaccinated.

UK shopper numbers over the last weekend -2.6% W/W: central London -8.5%, cities ex-London -6.4%, Springboard. (Newswires)

FX

DXY - The Dollar is mixed across the board, but retaining an upward bias overall amidst greater gains vs high beta, activity and cyclical currencies compared to losses against safer havens as broad risk sentiment sours on a number of factors, but mainly COVID-19. Hence, the index is holding quite firmly above 96.500 within a 96.504-680 range even though US Treasury yields are soft and the curve is marginally flatter, with traction or the Greenback coming via hawkish comments in wake of last week’s FOMC from Fed’s Waller who would not object to lifting rates as soon as tapering is done next March. Ahead, a very sparse Monday agenda only comprises November’s leading index.

JPY/EUR/CHF/XAU - As noted above, risk-off positioning due to the ongoing spread of Omicron has prompted demand for the Yen, the Euro, with added momentum from bullish Eur/Gbp cross flows, plus the Franc and Gold to lesser extents. Usd/Jpy is tethered around 113.50 in response, though unhindered by imposing option expiries in contrast to last Friday and the headline pair capped by technical resistance in the form of 21 and 50 DMAs that come in at 113.77 and 113.83 respectively today. Meanwhile, Eur/Usd is back above 1.1250 amidst mixed ECB vibes as de Cos underscores guidance for no hikes in 2022, but sources say that GC hawks wanted explicit recognition of upside inflation risks and were shouted down by chief economist Lane. However, Eur/Gbp has bounced even more firmly from sub-0.8500 lows on what looks like a combination of early year end demand or RHS orders and Pound underperformance on pandemic, political and Brexit-related factors. Elsewhere, Usd/Chf is hovering mostly sub-0.9250 and Eur/Chf is pivoting 1.0400 with latest weekly Swiss sight deposits showing no sign of intervention and Gold is rotating around Usd 1800/oz after a false upside breach of Usd 1810, but not quite enough follow-through buying to scale another upside target circa Usd 1815.

GBP/AUD/NZD/CAD - The major fall guys, as Sterling loses 1.3200+ status yet again on all the aforementioned negatives, and also feels some contagion from weakness in Brent, while the Aussie is straddling 0.7100, the Kiwi is trying to keep its head above 0.6700 and the Loonie contain declines through 1.2900 alongside the latest retracement in WTI.

SCANDI/EM - Although crude prices have bounced some Usd 1-1.5/brl from worst levels and the overall market mood has improved due to Moderna delivering a relatively positive preliminary booster study update, the Nok is still reversing further from post-Norges Bank hike highs. Nevertheless, the Try has only regained a little composure from beneath 17.5000 in wake of Turkish President Erdogan banging the low interest rate drum again and ruling out the use of what he describes ‘ridiculous’ capital controls. Conversely, the Cnh and Cny are steady after dips through 6.3900 and 6.3800 respectively following the PBoC trimming its 1 year by 5 bp, largely unexpectedly and the Pln is underpinned by mostly hawkish NBP rhetoric (Zubelewicz believes current level of interest rates is too low, Interia reports and does not rule out the prospects of double-digit inflation and Hardt states that states that a wage price spiral must be avoided a likely 50bp hike in January will not be the last move to offset Lon who prefers only a small hike.

Turkish President Erdogan reiterated his belief that higher interest rates cause inflation, and added that the economic problems are not due to the lowering of interest rates. He said he has lowered inflation to 4% before and he will do it again. Erdogan said the "economic independence war" is continuing successfully. Erdogan also noted that capital controls are "ridiculous" and Turkey will continue to operate within free-market economy. Separately, Turkish business group have called for an end to Erdogan’s low-rates policy. (Newswires)

FIXED

Some chart-related and perhaps less technical/more sentimental impulses were probably behind the initial fade in debt futures, but the more recent retreat appears headline or event driven, as Moderna’s preliminary publication of booster results ahead of a conference call scheduled for 13.00GMT have been received positively. Indeed, Bunds have now been just below par at 174.39 (-4 ticks) vs 6 ticks away from 175.00 and Gilts only 5 ticks away from 127.00 compared to 3 ticks shy of 127.50 vs last Friday’s 126.88 Liffe close, irrespective of a dip in CBI’s industrial trends orders. Similarly, US Treasuries have whittled safe haven gains with the 10 year T-note midway between 131-19/131-06+ overnight parameters awaiting November’s leading index in the absence of anything else scheduled.

COMMODITIES

WTI and Brent are also risk-off, moving in tandem with the equity action, on the COVID-19 narrative and implementation/prospect of further restrictions hitting the demand-side of the equation. WTI relinquishes USD 67.00/bbl and Brent gave up the USD 70.00/bbl level. In fitting the broader market move, some easing of the initial downside was seen post-Moderna’s update. Elsewhere, in crude specifics, Libya’s NOC confirmed reports that the Petroleum Facilities Guard was blocking several fields in the region; some suggest production of oil has dropped to 950k BPD due to losses of production at El Sharara field (estimated at 280k BPD). Elsewhere, OPEC+ compliance has reportedly increased marginally in November, in-fitting with the assessments in earlier sourced reports. In metals, spot gold and silver are contained on the session with little evidence of risk-off making its self-known at this point in time, with the yellow metal pivoting USD 1800/oz. Elsewhere, copper is impacted on the risk tone but offset somewhat by Chile’s President-elect Boric saying he will oppose the Dominga copper-iron mine project.

OPEC+ compliance with oil production cuts has risen slightly to 117% in November, according to two sources cited by Reuters. (Newswires)

China focuses state sector reforms on rare-earth industry and coal mining consolidation this year, as a three-year action plan for refashioning SOEs is 70% complete, according to a senior official cited by GT. (Global Times)

Chile has elected leftist Boric as President after opposition Kast conceded. Chilean President-elect Boric says he will oppose the Dominga copper-iron mine project. (Newswires) Boric is leaning towards a more active role for the State in the sector, as well as higher royalties. Kast has instead talked of more private investment in state-owned copper giant Codelco

Libya's production of oil drops to 950k BPD due to the loss of the production of El Sharara field (estimated at 280k BPD), after it was closed by an armed group affiliated with the PFG, according to engineers; subsequently confirmed by the NOC. (Newswires)