Brexit Deal Hopes Lift Sterling

Notes/Observations

• Transportation between UK and France resumes
• UK government reportedly considering adding more areas to tier 4 lockdown to stop spread of new strain of covid; unconfirmed reports that strain has already spread beyond the UK, with CDC saying could already be circulating in US. Experts warn against overreaction to new strain.

Asia:

• In BOJ minutes, members agreed shouldn’t hesitate to ease further if needed, eyeing economic impact of pandemic. (Note: Last week Japan recorded record number of new covid cases.)
• Reportedly China looking to scale back fiscal and monetary easing next year

Coronaviurs:

• UK’s speculated increase in areas under tier 4 expected to come effect on Dec 26; government said potential of a full national lockdown following New Year’s
• Japan Health Min says need to strengthen measures to stop spread of covid in Tokyo; Japan suspends travel to non-citizens from UK
• AstraZeneca spokesperson says their vaccine should be effective against new strain of virus; reportedly India to approve vaccine in coming days

Europe:

• Reportedly EU Brexit negotiator Barnier sidelined by European leaders, as they didn’t want to risk losing the deal over fisheries. An agreement is said to be possible later today, as PM Johnson and EC President von der Leyen are to talk again by phone
• Italy reportedly will send its recovery plan to the EC by February

Americas:

• President Trump posts video saying he wants and increase in stimulus checks to $2,0K, “unnecessary” items removed from stimulus bill. Speaker Pelosi said ready to bring larger checks amendment to the floor immediately

Energy:

• Unexpected rise in API crude inventories kept prices under pressure

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.30% at 392.80, FTSE -0.05% at 6,450.46, DAX +0.65% at 13,505.05, CAC-40 +0.67% at 5,503.61, IBEX-35 +0.55% at 7,979.00, FTSE MIB +0.54% at 21,961.50, SMI +0.05% at 10,409.50, S&P 500 Futures +0.30%]
• Market Focal Points/Key Themes: European indices open higher (FTSE 100, SMI notable exceptions opening in the red) and maintained a sideways trajectory as the session progressed; better sentiment attributed to reduced concern over new covid strain; sectors leading to the upside include industrials and materials ; underperforming sectors include consumer discretionary and health care; reportedly Daimler looking to spin off trucks business; reportedly Atlantia receives new offer for roads unit from Italian government; reportedly HeidelbergCement looking to sell US assets; earnings expected during the upcoming US session include Paychex

Equities

• Consumer discretionary: CD Projekt Red [CDR.PL] -3% (game sales)
• Energy: Cairn Energy [CNE.UK] +27% (arbitrage award)
• Healthcare: MaxCyte [MXCT.UK] +8% (trading update)
• Industrials: Daimler [DAI.DE] +3% (Trucks division IPO)

Speakers

• (CN) China Ministry of Finance (MOF): Cutting certain import tariffs for 2021 on Jan 1st
• (UK) Housing Min Jenrick: Still insufficient progress in Brexit talks, same issues persist; Hopes to see trucks moving between France and the UK today, PM Johnson ready to negotiate until Dec 31st
• (UK) BOE’s Haldane (chief economist): BOE must have “laser focus” on inflation post-covid; “last thing we need is a nasty inflation surprise” – interview
• (FR) France EU Affairs Min Beaune: no risk of shortage of products in France following UK/France border closures
• (AT) Austria Chancellor Kurz: Vaccinations in Vienna to begin Dec 27th
• (JP) Japan Econ Min Nishimura: To seek to pass revised special measures law in 2021
• (TR) Turkey President Erdogan: Believes Biden will be ‘mindful’ of Turkey & US ties
• (RU) Russia Foreign Min Lavrov: Will respond to US sanctions across the board

Currencies/Fixed Income

• EUR/USD rebounding off of 1.21 handle on better optimism across the continent following resolution of transportation issue across English Channel. EUR/GBP cross losing some of its prior days’ gains.
• GBP/USD also moving higher on Brexit negotiation news; next resistance seen around the 1.34 handle of yesterday’s highs, followed by 1.35 handle, the high marked after rumors of potentially closing of differences in Brexit negotiations earlier in the week.
• Dollar index lower on better risk sentiment; USD/JPY slightly lower following BoJ minutes release.

Economic Data

• (FI) Finland Nov PPI M/M: 0.7% v -0.2% prior; Y/Y: -4.6% v -5.4% prior
• (DE) Germany Nov Import Price Index M/M: +0.5% v 0.3%e; Y/Y: -3.8% v -4.0%e
• (DK) Denmark Q3 Final GDP Q/Q: 5.2% v 4.9% prelim; Y/Y: -3.7% v -4.0% prelim
• (TH) Thailand Central Bank (BoT) leaves interest rate unchanged at 0.5%, as expected
• (FR) France Nov PPI M/M: 1.7% v 0.1% prior; Y/Y: -1.8% v -2.1% prior
• (TW) Taiwan Nov Industrial Production Y/Y: 7.8% v 7.7%e
• (ES) Spain Q3 Final GDP Q/Q: 16.4% v 16.7% prelim; Y/Y: -9.0% v -8.7% prelim
• (ES) Spain Nov PPI M/M: 0.8% v -0.4% prior; Y/Y: -2.8% v -4.1% prior
• (HU) Hungary Oct Final Trade Balance: €0.89B v €0.9B prelim
• (AT) Austria Oct Industrial Production M/M: 0.8% v 2.0% prior; Y/Y: -0.6% v -1.4% prior
• (IT) Italy Dec Consumer Confidence Index: 102.4 v 98.0e
• (PL) Poland Nov Unemployment Rate: 6.1% v 6.1%e

Fixed income Issuance

• (IN) India sells combined INR160B in 3-month, 6-month and 12-month bills
• Sells INR90B in 3-month bills; Avg Yield: 3.1092% v 3.1275% prior
• Sells INR30B in 6-month Bills; Avg Yield: 3.3501% v 3.3501% prior
• Sells INR40B in 12-month Bills; Avg Yield: 3.4574% v 3.4458% prior
• (DK) Denmark sells total DKK2.54B in 3-month and 12-month Bills
• Sells DKK340M in 3-month bills; Avg Yield: -0.600% v -0.600% prior; bid-to-cover: x v 1.58x prior
• Sells DKK2.2B in 12-month bills, Avg Yield: -0.570% v -0.575% prior; Bid-to-cover: x v 3.70x prior

Looking Ahead

• 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-Month Bills; Avg Yield: % v 0.47% prior; bid-to-cover: x v 1.50x prior (Dec 9th 2020)
• 06:00 (PT) Portugal Oct Current Account Balance: No est v -0.1B prior
• 06:00 (BR) Brazil Dec FGV Construction Costs M/M: No est v 1.3%
• 06:00 (RO) Romania to sell RON700M in 4% 2023 Bonds; Avg Yield: % v 2.77% prior; bid-to-cover: x v 1.45x prior
• 06:00 (RU) Russia OFZ Bond auction
• 06:30 (CL) Chile Central Bank Dec Minutes
• 07:00 (US) MBA Mortgage Applications w/e Dec 18th: No est v 1.1% prior
• 07:00 (MX) Mexico Oct IGAE Economic Activity Index (Monthly GDP) M/M: No est v 1.0% prior; Y/Y: No est v -5.5% prior
• 07:30 (BR) Brazil Nov Total Outstanding Loans (BRL): No est v 3.872T prior; M/M: No est v 1.4% prior; Personal Loan Default Rate: No est v 4.5% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) Nov Personal Income: -0.3%e v -0.7% prior; Personal Spending: -0.1%e v 0.5% prior; Real Personal Spending (PCE): No est v 0.5% prior
• 08:30 (US) Nov PCE Deflator M/M: 0.1%e v 0.0% prior; Y/Y: 1.2%e v 1.2% prior
• 08:30 (US) Nov PCE Core Deflator M/M: 0.15e v 0.0% prior; Y/Y: 1.4%e v 1.4% prior
• 08:30 (US) Nov Preliminary Durable Goods Orders: 0.6%e v 1.3% prior; Durables (ex-transportation): 0.5%e v 1.3% prior; Capital Goods Orders (non-defense/ex-aircraft): No est v 0.8% prior; Goods Shipments (non-defense/ex-aircraft): No est v 2.4% prior
• 08:30 (US) Initial Jobless Claims: No est v 885K prior; Continuing Claims: No est v 5.508M prior
• 08:30 (CA) Canada Oct GDP M/M: No est v 0.8% prior; Y/Y: No est v -3.9% prior
• 09:00 (US) Oct FHFA House Price Index M/M: 0.5%e v 1.7% prior
• 10:00 (US) Dec Final University of Michigan Confidence: 80.9e v 81.4 prelim
• 10:00 (US) Nov New Home Sales: 990Ke v 999K prior
• 10:30 (US) Weekly DOE Oil Inventories
• 13:00 (US) Treasury to sell 2-Year FRN Reopening
• 14:00 (AR) Argentina Q3 Current Account Balance: No est v $2.8B prior
• 14:00 (AR) Argentina Oct Economic Activity Index (Monthly GDP) M/M: No est v 1.9% prior; Y/Y: No est v -6.9% prior