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Focus On UK-EU Meeting Later Today In Attempt To Break The Deadlock In Brexit Negotiations

Notes/Observations

  • Focus on Wednesday dinner between UK PM Johnson and EU Commission President von der Leyen in Brussels; meeting viewed as last-ditch attempt to salvage a Brexit trade deal
  • Risk appetite trying to find some tailwinds as last-ditch Brexit talks and hopes for more US stimulus measures continue

Asia:

  • China Nov CPI registered its 1st decline since Oct 2009 (Y/Y: -0.5% v 0.0%e)

Europe:

  • UK PM Johnson to meet EU Commission chief Von der Leyen in Brussels on Wedfor talks on a Brexit deal. Progress at a political level might allow negotiations to resume over the coming days but it was important to be realistic that an agreement might not be possible

Americas:

  • Trump administration has put together a relief package that would offer far leaner federal unemployment benefits in exchange for another round of stimulus checks worth $600 per person and $600 per child
  • Treasury Sec Mnuchin proposes $916B relief plan which includes money for state and local governments and robust liability protections for businesses, schools and universities
  • House Speaker Pelosi (D) and Senate Minority Leader Schumer (D) call Mnuchin’s $916B stimulus proposal as ‘unacceptable’ citing it cuts funding allocated in the bipartisan bill for unemployment insurance

Energy:

  • Weekly API Crude Oil Inventories: +1.1M v +4.1M prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 +0.5% at #, FTSE +0.61% at 6,598.84, DAX +1.07% at 13,420.75, CAC-40 +0.32% at 5,578.35, IBEX-35 +0.31% 8,253.00, FTSE MIB -0.07% at 22,038.50, SMI +0.44% at 10,439.66, S&P 500 Futures +0.26%]
  • Market Focal Points/Key Themes: European indices open higher across the board and stayed in the green as the session progressed (FTSE MIB the notable exception); sectors leading to the upside include materials and financials consumer discretionary and technology sectors among those underperforming; reportedly Unicredit considering merger with BPER; Tesco annnounces closure of Asia business; earnings expected in the upcoming US session include Slack Technologies, Campbell Soup and DoorDash

Equities

  • Consumer discretionary: Modern Times [MTGB.SE] +10% (acquisition), Howden Joinery Group [HWDN.UK] +7% (trading update)
  • Consumer staples: British American Tobacco [BATS.UK] -1% (trading update)
  • Healthcare: Roche [ROG.CH] +1% (partners with Moderna)
  • Industrials: Balfour Beatty [BBY.UK] +1.5% (trading update)
  • Technology: STMicro [STM.FR] -11% (mid-term targets), Signify [LIGHT.NL] -5% (CMD update)

Speakers

  • UK Govt official Gove stated that the resolution on Internal Market Bill helped the path to trade agreement on Brexit. He added that it would be very difficult to get a Brexit deal unless the EU moved. He added there was scope for compromise on fisheries
  • German Chancellor Merkel commented in Parliament that fighting the pandemic conditions was a requirement for economic growth. Would l not be able to do enough vaccinations in Q1 to bring about a major change in the course of the pandemic. All in flux ahead of Thursday’s EU Leader Summit. Still a chance for a Brexit deal but level Playing Field must be ensure. Not sure we would get an agreement on rule of law; great uncertainty was surrounding EU budget
  • Italy PM Conte commented that he hoped EU Recovery Fund became permanent
  • Ireland Dep PM Varadkar reiterated stance of seeing chances as 50-50 probability of Brexit trade agreement occurring
  • Ireland Foreign Min Coveney: UK agreement on Northern Ireland shows that UK seeks to rebuild trust
  • Ireland Debt Agency (NTMA) on 2021 issuance: To sell €16-20B in debt during year
  • Poland Dep PM Gowin saw room for compromise on EU budget that is acceptable for both Poland and Hungary; deal should be agreed upon by Friday at the latest. Veto of budget should only be a last resort
  • Russia Central Bank (CBR) Gov Nabiullina stated that could cut key rate below 4.0% level but not viewed as the base-line scenario. Saw end-Dec inflation at 4.5% with CPI peaking around 5.0% in Feb
  • China Foreign Ministry spokesperson reiterated its opposition to unilateral US actions on sanctions. Hoped Australia could see the Belt and Road Initiative (BDI) in an objective manner

Currencies/Fixed Income

  • US