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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