Markets Drift Higher As EU Prepares To Ratify Post-Brexit Trade Deal Later Today

Notes/Observations

• UK parliament expected to approve Brexit deal today
• Markets trade marginally higher despite increase in covid cases across the region
• Reportedly progress continues on EU-China investment deal; potentially an agreement could be announced later today. Reminder that the deadline for the current round of negotiations is tomorrow

Asia:

• Reportedly top aids to South Korean President Moon have offered to resign ahead of expected Cabinet reshuffle
• Nikkei closes lower after breaking 30 year high yesterday; Kospi hits record high. Last trading day of the year for Japan and Korea indices
• China NBS revises 2019 GDP lower to 6.0% from 6.1%

Coronaviurs:

• UK extends Tier 4 restrictions, expected to to delay school reopennings.
• Tokyo prefecture announces record covid infections.
• Sinopharm announces vaccine candidate has 79.3% efficacy, to apply for use in China
• Denmark extends lockdowns until Jan 17; India announces considering local restrictions to stop spread of virus
• India latest country to extend flight ban from UK; Taiwan and Chile among latest countries to detect UK strain
• German daily covid fatalities surpass 1K for first time since beginning of epidemic

Europe:

• German Chancellor Merkel to give annual speech in parliament, UK PM Question Time to be altered for Brexit vote

Americas:

• McConnell seen as blocking $2,000 stimulus checks approved by House; introduces bill that combines increased payout with repeal of Section 230 protections and establishment of voter fraud commission. Was not clear on when a vote for the legislation would be called.

Energy:

• Crude trading higher after fall in US inventories.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.24% at 402.58, FTSE +0.25% at 6,619.26, DAX +0.05% at 13,768.70, CAC-40 +0.15% at 5,619.96, IBEX-35 +0.14% at 8,186.00, FTSE MIB +0.26% at 22,317.50, SMI +0.33% at 10,717.22, S&P 500 Futures +0.37%]
• Market Focal Points/Key Themes: European indices open mixed but later traded with a slightly higher bias; better performing sectors include consumer discretionary and financials; utilities and industrials sectors among underperformers; UK government approves Oxford/AstraZeneca vaccine; Unicredit and Liberbank reach merger agreement; Germany and Austria close early ahead of holidays; no major events seen during upcoming US session

Equities

• Consumer discretionary: Saipem [SPM.IT] +2% (awarded contract)
• Healthcare: AstraZeneca [AZN.UK] +1% (vaccine approved in the UK)

Speakers

• (ID) Indonesian Institute of Sciences (LIPI): No scientific data to corroborate new COVID variant is deadlier
• (IN) India Official: May not need to raise additional funds in current FY, revised INR110B budget should suffice
• (IN) India Home Ministry: May implement local restrictions to prevent spread of coronavirus (in line)
• (IT) Italy Finance Min Gualtieri: Italy will not ask immediately for recovery fund loans
• (TW) Taiwan CDC: Taiwan to acquire total 30M coronavirus doses; to receive coronavirus vaccines as soon as March (Note: Taiwan is seeking to develop domestic vaccine program)
• (UK) UK Dept of Health: NHS will prioritize giving vaccines first to those in highest risk categories
• (UK) Health Min Hancock: Rollout of AstraZeneca vaccine expected on Monday, Jan 4th; time from first dose to the second is up to 12 weeks; we are going to extend tiers today
• (CN) China Foreign Ministry: Reiterates good progress on talks with EU on trade deal
• (TR) Turkey Foreign Min Cavusoglu: ready for healthy ties with US in 2021; Gulenits and Syria continue to be problems
• (PT) Portugal Finance Minister Leao: sees strong economic recovery in 2021

Currencies/Fixed Income

• USD weaker despite softer risk sentiment through the session, touching year lows.
• Pullback in Japanese equities helped the yen gain strength, which helped USD/JPY to drop to lows not seen since mid-2016
• Bunds trade sideways reflecting general lack of movement in markets; EURUSD trades up 0.2% after failing to crack the 1.23 handle overnight.
• Pound the best performer among the majors, gaining 0.6% against the dollar, and EUR/GBP dropping to week’s lows.
• (CN) Unigroup fails to make CNY1.3B interest payment on Dec 28th

Economic Data

• (FI) Finland Nov House Price Index M/M: 0.2% v 0.0% prior; Y/Y: 3.0% v 2.8% prior
• (UK) Dec Nationwide House prices M/M: 0.8% V 0.4%e; Y/Y: 7.3% V 6.4%e
• (TH) Thailand Nov BOP Current Account Balance: -$1.5B v $0.6Be
• (ES) Spain Dec preliminary CPI M/M: 0.2% V 0.2%e; Y/Y: -0.5% V -0.6%e; CPI EU Harmonized M/M: 0.1% v 0.1%e; Y/Y: -0.6% v -0.7%e
• (CH) Swiss Dec KOF Leading Indicator: 104.3 v 101.0e
• (AT) Austria Nov PPI M/M: 0.3% v 0.2% prior; Y/Y: -1.4% v -1.5% prior
• (AT) Austria Central Bank (ONB) updates economic outlook: Maintains 2021 GDP growth forecast from 3.6% to 3.6%; Maintains 2022 GDP growth forecast from 4.0% to 4.0%; Sees 2023 GDP growth at 2.2%
• (CN) China FX Regulator SAFE: Nov Services Trade Deficit $10.9B
• (CH) Swiss Dec Expectations Survey: 46.8 v 30.0 prior
• (NO) Norway Central Bank (Norges) Jan Bank Daily FX Purchases (NOK): -0.8B v -0.5B prior
• (ES) Spain Oct Current Account: €1.3B v €0.3B prior

Fixed income Issuance

• n/a

Looking Ahead

• 06:00 (PT) Portugal Nov Industrial Production M/M: No est v 0.7% prior; Y/Y: No est v 0.1% prior
• 06:00 (RU) Russia OFZ Bond auction; to sell RUB400B
• 07:00 (US) MBA Mortgage Applications w/e Dec 25th: No est v 0.8% prior
• 07:00 (UK) Weekly PM Question time in House (none during holidays)
• 07:30 (BR) Brazil Nov Primary Budget Balance (BRL): No est v 3.0B prior; Nominal Budget Balance: No est v -30.9B prior; Net Debt to GDP Ratio: No est v 61.2% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) Nov Preliminary Wholesale Inventories M/M: No est v 1.1% prior; Retail Inventories M/M: No est v 0.8% prior
• 08:30 (US) Nov Advance Goods Trade Balance: No est v -$80.3B prior
• 09:45 (US) Dec Chicago Purchaser Managers Index (PMI): No est v 58.2 prior
• 10:00 (US) Nov Pending Home Sales M/M: No est v -1.1% prior; Y/Y: No est v 19.5% prior
• 10:00 (CO) Colombia Nov National Unemployment Rate: No est v 14.7% prior; Urban Unemployment Rate: No est v 16.8% prior
• 10:30 (US) Weekly DOE Oil Inventories
• 11:00 (RU) Russia Q3 Final GDP (3rd reading) Y/Y: No est v -3.4% prelim
• 18:00 (KR) South Korea Dec CPI M/M: No est v -0.1% prior; Y/Y: No est v 0.6% prior; CPI Core Y/Y: No est v 1.0% prior
• 19:30 (AU) Australia Nov Private Sector Credit M/M: No est v 0.0% prior; Y/Y: No est v 1.8% prior
• 20:00 (CN) China Dec Manufacturing PMI: No est v 52.1 prior; Non-manufacturing PMI: No est v 56.4 prior; Composite PMI: No est v 55.7 prior
• 21:00 (SG) Singapore Nov M2 Money Supply Y/Y: No est v 12.6% prior; M1 Money Supply Y/Y: No est v 33.1% prior