Risk on tone continues as UK markets outperform following Brexit deal

Notes/Observations

- Muted inter holiday trading session in penultimate full trading day of the year; risk sentiment improved following Congressional action in the US to support stimulus and amicable rhetoric from UK and EU following deal.

- EU and China are reported to have advanced negotiations on new investment deal, with final agreement expected to resemble Phase I trade deal signed between China and US.

Asia

- Nikkei traded up to 30-year highs

- China reports container throughput +9.8% y/y

- Indonesia FSA to extend stimulus for non-banking financial institutions until 2022

Coronaviurs

- UK to review area banding tomorrow, with expectation to expand lockdowns

- Reportedly EU regulators to approve AstraZeneca’s covid vaccine before year end

Europe

- Following press comments yesterday speculating that that an EU vote on ratification of Brexit deal might come in March at the earliest, EU Parliament Foreign Relations Chief said vote would be at the latest in March.

- Reportedly more calls from Russian lobbyists to raise export tariffs on steel products.

- EU agreement of Brexit deal to formally be approved by 27 governments later today.

Americas

- US House passes increased covid Checks to $2,000, moving bill to Senate. Senate majority leader McConnell has not addressed the issue; is expected to comment with Senate coming into session today. Senate is also expected to vote on NDAA later this week which passed the House with well over 2/3 need to override veto.

Energy

- Crude prices move higher on expectations of higher demand next month.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +1.05% at 402.78, FTSE +2.57% at 6,669.05, DAX +0.43% at 13,852.30, CAC-40 +0.50% at 5,616.47, IBEX-35 +0.40% at 8,188.00, FTSE MIB +0.07% at 22,303.50, SMI +0.63% at 10,670.71, S&P 500 Futures +0.47%]

Market Focal Points/Key Themes: European indices open higher across the board and move further in the green as the session progressed; FTSE 100 best performer after holiday yesterday; better performing sectors include consumer discretionary and materials; underperformers, though still in the green, include financials and energy sectors; no major events expected during the upcoming US session

Equities

- Consumer discretionary: THG Holdings [THG.UK] +5% (acquisition)

- Healthcare: AstraZeneca [AZN.UK] +5% (European Regulators unlikely to approve AztraZeneca's vaccine candidate in Jan)

Speakers

- (KR) South Korea KCDA: Coronavirus infections are on a downward trend

- (CN) China Banking and Insurance Regulatory Commission (CBIRC): Issues warning related to excessive lending by internet platforms

- Indonesia Health Min: Have secured 50M doses of coronavirus vaccine from Pfizer, and 50M Doses from Astrazeneca; has not detected new coronavirus strain in Indonesia

- (PH) Philippines Central Bank (BSP) Gov Diokno: Dec CPI y/y likely within 2.9 to 3.7%

- (RU) Russia Finance Ministry: govt prepares income tax breaks for business in Arctic

- (CN) China Foreign Ministry: Hopes EU China Investment deal can come to fruition at early date, Major progress made on talks with EU

- (EU) EU MP McAllister (German CDU, Chair of EUP Foreign Affairs Committee): EU will vote on EU-UK Brexit deal no later than early Mar 2021

- (DE) German BGA exporters association forecasts 2020 exports -12%

- (CN) China PBoC official: reiterates stance to keep liquidity reasonably ample - Quarterly meeting

- (IN) India Minister: Expects aviation sector to get back to pre-pandemic levels in H1 of next year

Currencies/ Fixed Income

- Commodity trade dominates the FX market in thin trading session, with AUD, NZD and CAD strengthening. Pound and Euro also moving higher as market digests the result of Brexit.

- General risk on sentiment weighs on dollar (as well as other safe haven assets such as gold and silver).

- EUR/USD pushing against 1.2250 resistance at the post-Brexit high, with extension towards 1.2270, the high since 2018

Economic Data

- (CN) China Beige Book: ~66% of those surveyed see the recovery to pre-COVID conditions, profitability and hiring still more than three months away; SMEs & retailers are struggling to access credit amid a weak recovery in consumer spending

- (TR) Turkey Dec Economic Confidence: 86.4 v 89.5 prior

- (SE) Sweden Nov Household Lending Y/Y: 5.3% v 5.3% prior

- (SE) Sweden Nov Trade Balance (SEK): 1.4B v 5.0B prior

- (AT) Austria Dec Manufacturing PMI: 53.5 v 51.7 prior

Fixed income Issuance

- (IT) Italy Debt Agency (Tesoro) sells €6.5B vs. €6.5B indicated in 6-month bills; Avg Yield: -0.52% v -0.52% prior; Bid-to-cover: 1.71x v 2.22x prior

Looking Ahead

- 06:00 (PT) Portugal Nov Retail Sales M/M: No est v 1.5% prior; Y/Y: No est v -0.7% prior

- 06:00 (BR) Brazil Dec FGV Inflation IGPM M/M: No est v 3.3% prior; Y/Y: No est v 24.5% prior

- 07:00 (BR) Brazil Oct National Unemployment Rate: No est v 14.6% prior

- 08:00 (UK) Daily Baltic Dry Bulk Index

- 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)

- 08:55 (US) Weekly Redbook LFL Sales data

- 09:00 (US) Oct S&P/Case-shiller House Price Index (20-City) M/M: No est v 1.27% prior; Y/Y: No est v 6.57% prior; House Price Index (HPI): No est v 232.52 prior

- 09:00 Oct S&P/Case-shiller House Price Index (overall) YoY: No est v 6.96% prior; HPI: No est v 226.80 prior

- 09:00 (EU) Weekly ECB Forex Reserves

- 10:00 (MX) Mexico Weekly International Reserve data

- 11:30 (US) Treasury to sell 52-Week Bills

- 13:00 (US) Treasury to sell 7-Year Notes

- 16:00 (KR) South Korea Jan Business Manufacturing Survey: No est v 81 prior; Non-Manufacturing Survey: No est v 72 prior

- 16:30 (US) Weekly API Oil Inventories