• An indecisive tone was seen across APAC markets overnight
• US equity futures traded flat with a downside bias
• In FX, DXY traded on either side of 96.500, USD/JPY briefly dipped under 114.00 and AUD/JPY drifted lower
• Oxford and AstraZeneca are working on an Omicron-targeted version of their vaccine
• UK PM Johnson does not think there is enough evidence to justify any tougher restrictions before Christmas
• Looking ahead, highlights include UK GDP, US GDP, Consumer Confidence, Existing Home Sales

CORONAVIRUS UPDATE

US President Biden's Administration is reportedly weighing a shorter COVID isolation period for those vaccinated, according to Bloomberg Law. (Newswires)

UK PM Johnson does not think there is enough evidence to justify any tougher restrictions before Christmas; but said he cannot rule out any further measures after Christmas. Additionally, the UK government is reducing COVID self isolation period in England to seven days (prev. 10 days). (Newswires)

French Government Spokesman said Omicron COVID variant is spreading quickly in Paris, and 20% of new cases in France are the Omicron variant. (Newswires)

German Chancellor Scholz said COVID measures already taken are having an effect but a fifth wave is a threat and it is a question of weeks before Omicron is the dominant variant in Germany. (Newswires)

Singapore is to pause ticket sales for vaccinated travel lane (VTL) flights and buses from Dec 23rd to Jan 20th. (Newswires)

Australian PM Morrison said the Cabinet has agreed to respond to surging COVID cases; haven’t seen an impact on hospital system yet due to Omicron. National Cabinet has not implemented a mandate for masks, but PM Morrison said it is "highly recommended" people wear them while indoors. (Newswires)

Oxford and AstraZeneca (AZN LN) are working on a Omicron-targeted version of their vaccine. (FT)

Within weeks, scientists at the Walter Reed Army Institute of Research expect to announce that they have developed a vaccine that is effective against COVID-19 and all its variants, even Omicron. (defenseone)

Israeli government advisors recommend giving a fourth booster shot. (Newswires)

ASIA

Asia-Pac stocks were indecisive overnight following the sharp rebound seen on Wall Street - which was spurred by the tech sector as Micron led the charge following solid earnings, whilst some reopening plays such as airlines and cruise lines saw substantial gains. The Russell 2000 saw gains of 2.9%, the Nasdaq rose 2.4% whilst the S&P 500 and DJIA closed higher by 1.8% and 1.6% respectively. US equity futures trade flat with a mild downside bias, whilst APAC stocks gradually trimmed earlier gains. The ASX 200 (+0.1) spent most of the session in modest negative territory, but gains in Tech cushioned losses. The Nikkei 225 (Unch) and KOSPI (+0.2%) opened with mild gains but the upside momentum petered out. The Hang Seng (+0.4%) initially outperformed amid a revival of large tech, with Alibaba, Tencent, NetEase and JD.com among the biggest gainers at one point. The Shanghai Comp (Unch) conformed to the indecisive tone, with the index caged to a tight range. US 10yr Treasury futures reflected the indecisiveness of markets overnight.

Chinese Senior State Planning official said China has the confidence, condition, and ability to keep economic growth at a reasonable level. (Xinhua)

• PBoC injected CNY 10bln via 7-day reverse repo and CNY 10bln via 14-day for a net neutral daily injection of CNY 10bln, at maintained rates of 2.20% and 2.35% respectively
• PBoC set USD/CNY mid-point at 6.3703 vs exp. 6.3690 (prev. 6. 3729)

BoJ October meeting minutes note board members discussed the impact of a weaker JPY on the economy. (Newswires)

UK/EU

Spanish Senate has sent the 2022 budget bill back to the lower house with one amendment, according to a Reuters parliamentary source. (Newswires)

FX

In FX, DXY traded within a narrow band on either side of 96.500 for most of the session before finding a later bid. EUR/USD and GBP/USD were subdued under 1.1275 around 1.32.50 respectively but EUR/GBP retained its 0.8500+ status. JPY saw some mild but fleeting strength in holiday-thinned trade in which the USD/JPY briefly lost its footing above 114.00, potentially catching up to a late US bid in long-end Treasuries. Antipodeans drifted lower alongside the risk tone after the Chinese cash equity open, with AUD/USD also moving under its 21 DMA (0.7130). The risk-gauge AUD/JPY also saw mild losses heading into the European open. TRY saw further strength in a continuation of the action seen by the extraordinary measures taken by Turkey to stem and reverse some of the detrimental price action.

CBRT said it is to sell FX via tenders and derivates market to exporters. FX sales are to be made with one or three month maturity. (Newswires)

Turkish Finance Minister said they do not want hot money into the country as it is uncertain when it leaves; CBRT decides to support forex accounts being converted into Lira. CBRT will pay the difference between FX rate and Lira interest rate for new financial instrument. Finance Minister said GDP growth will be in the double digits in 2021, while speculative games on currency can only do so much and markets find its balance eventually. He said the recent Lira appreciation was due to individual transactions and there was no intervention. (Newswires)

Brazilian Lower House approved the 2022 budget. (Newswires)

COMMODITIES

The crude complex was underpinned by a more constructive COVID sentiment, with the UK and US working to loosen some travel quarantine rules, whilst AstraZeneca and Oxford University announced they have taken preliminary steps in producing an Omicron-specific vaccine. The complex saw some modest downticks heading into the weekly Private Inventories, which printed a larger-than-expected draw but mixed internals. News flow for crude overnight has been sparse, whilst sentiment had been non-committal for most of the session. WTI Feb briefly regained a footing above USD 71.50/bbl after encountering some resistance at the level yesterday. Spot gold held a tight range above its 21 and 100 DMAs at 1,783 and 1,789 respectively. LME copper was subdued overnight but remained above USD 9,500/t, whilst a Peruvian Community Leader said they will not lift blockade against Las Bambas copper mine yet - a mine which accounts for roughly 2% of global copper supply.

US Private Inventories: Crude -3.67mln (exp. -2.8mln), Cushing +1.27mln, Gasoline +3.7mln (exp. +0.5mln), Distillates -0.85mln (exp. 0.0mln). (Newswires)

Peruvian Community Leader said they will not lift blockade against Las Bambas copper mine yet; a discussion will happen with residents. (Newswires) Peru is the world's no. 2 copper producer. Las Bambas accounts for 2% of world copper supply.

Magnitude 6.3 earthquake hit Southern Alaska, according to EMSC. (Newswires)

GEOPOLITICAL

German Chancellor Scholz said there is an urgent need for de-escalation on the Ukraine border and he expressed his concerns in a call with Russia President Putin. (Newswires)

US Secretary of State Blinken said there are currently no plans for President Biden and Russia President Putin to meet in person and the US wants to see if there is any diplomatic progress first. (Newswires)

New export control measures being discussed by the US could pause Russia's imports of smartphones and key jet and automobile components, according to Reuters citing an official. (Newswires)

US is considering using tools used by former President Trump and President Biden admins to block Huawei from accessing advanced semiconductors, according to Reuters citing an official. (Newswires)

US

Treasury selling pressure continued on Tuesday as equities rallied following the declines on Monday with the Treasury complex tracking risk sentiment. Although there was a risk-on feel to trading on Tuesday, the COVID picture still remains mixed with more restrictive measures being implemented in Europe. The risk on was supported by strong earnings after-market Monday from Nike (NKE) and Micron (MU) while perhaps the Build Back Better fears were overdone, as it looks like negotiations will restart in the New Year, and given Manchin is willing to accept a USD 1.8tln bill, it opens the door for further talks, especially as the Democrats are keen to get the bill through, in one form or another. The Treasury selling pressure halted after a stellar 20yr auction which saw strong demand metrics across the board, which helped provide a slight bid to the longer end of the curve. However, as trade came to a close, those bids gradually unwound. T-Note futures (H2) settled 19 ticks lower at 130-18.

US Senate Majority Leader Schumer pushed for a vote on Build Back Better bill (BBB) in a Senate Dem caucus call on Tuesday despite Manchin’s opposition to the bill, according to Huffpost's Bobic. (Twitter)

House Democrat Wasserman Schultz said they will pass a version of the Biden agenda bill. (Newswires)