Risk sentiment a little softer this morning.

U.S. futures slightly lower, oil holding on to yesterday's gains.

FX basically flat.

Perhaps the vaccine optimism is fading, and markets are being forced to consider the immediate challenges rather than looking wistfully towards next year?

Maybe it's the upcoming inclusion of a massive accounting fraud Tesla into the S&P 500?

Or maybe it's just markets pausing for breath before resuming yesterday's trend.

We'll find out soon enough...  

BREXIT boss David Frost has told Boris Johnson to expect a Brussels trade deal “early next week”, The Sun can reveal.

I know it's not the most reputable source, but GBP reacted to the story overnight.

There's not much substance to the article, the main point being that

Britain’s chief negotiator has pinpointed “a possible landing zone” as soon as next Tuesday.

Something to keep an eye on, let's see if there's any pushback from either side today.

Tesla to join S&P 500, spark epic index fund trade

S&P Dow Jones Indices announced that the company would join the S&P 500 index prior to the opening of trading on Dec. 21, potentially in two tranches making it easier for investment funds to digest.
“(Tesla) will be one of the largest weight additions to the S&P 500 in the last decade, and consequently will generate one of the largest funding trades in S&P 500 history,” S&P Dow Jones Indices said.
With a stock market value over $400 billion, Tesla will be among the most valuable companies ever added to the widely followed stock market index, larger than 95% of the S&P 500’s existing components.
Its inclusion means investment funds indexed to the S&P 500 will have to sell about $51 billion worth of shares of companies already in the S&P 500 and use that money to buy shares of Tesla, so that their portfolios correctly reflect the index, according to S&P Dow Jones Indices. Tesla will account for about 1% of the index.
In a separate press release, S&P Dow Jones Indices asked investors for feedback about whether to include Tesla all at once on Dec. 21, or in two tranches, with the first added a week earlier, due to Tesla’s unusually large market capitalization.
Tesla short sellers point to looming competition from longer-established rivals. They are also skeptical of Tesla’s corporate governance under Musk, who in 2018 agreed to pay $20 million and step down as chairman to settle fraud charges.

No signs of the PBOC intervening on recent yuan strength.

U.S. states are imposing further restrictions.

Iowa joins U.S. states from coasts to heartland acting to curb COVID-19

Several U.S. governors, from the coastal states of New Jersey and California to the heartland of Iowa and Ohio, acted on Monday to restrict gatherings and boost face-coverings in confronting a coronavirus surge they warned is out of control.
Each of the four governors, representing both ends of America’s political divide and a mix of urban and rural regions, cited health data showing the pandemic reaching its most perilous point yet in the United States, threatening to overwhelm hospitals and claim thousands more lives in the weeks ahead.
They acknowledged that tighter limits on social interactions would prove especially difficult through the winter holidays. But without efforts to immediately tamp down the spread of the virus, the governors warned, more drastic action would be necessary in the near future.
Health experts have projected the coming holiday travel season and the onset of colder weather, with more people tending to congregate indoors, is likely to worsen the situation.
More than 70,000 Americans were hospitalized for treatment of COVID-19 as of Monday, the most ever at any time since the pandemic began, according to a Reuters tally of public health figures.

Pfizer to start pilot delivery program for its COVID-19 vaccine in four U.S. states

Pfizer Inc has launched a pilot delivery program for its experimental COVID-19 vaccine in four U.S. states, as the U.S. drugmaker seeks to address distribution challenges facing its ultra-cold storage requirements.
“We are hopeful that results from this vaccine delivery pilot will serve as the model for other U.S. states and international governments, as they prepare to implement effective COVID-19 vaccine programs,” Pfizer said in a statement on Monday.
It picked Rhode Island, Texas, New Mexico, and Tennessee for the program after taking into account their differences in overall size, diversity of populations, immunization infrastructure, and need to reach individuals in varied urban and rural settings.
The four states will not receive vaccine doses earlier than other states by virtue of the pilot, nor will they receive any differential consideration, Pfizer said.
The company expects to have enough safety data on the vaccine from the ongoing large scale late-stage trials by the third week of November before proceeding to apply for emergency use authorization (EUA).

Europe's spending surge will not make debt unsustainable: ECB

A surge in public spending across Europe to contain a pandemic-induced recession will not make debt levels unsustainable, even if some euro zone members are sitting on excessively large debt piles, European Central Bank chief economist Philip Lane said.
Governments are running up record deficits this year to keep their economies going amid partial lockdowns and public debt will exceed 100% of GDP this year, with further small rises seen next year and in 2022.
“Yes, there will be more public debt, but in the context of very low interest rates, in the context of the macroeconomic environment, the assessment should be that this is something that is sustainable,” Lane told Portuguese broadcaster RTP.
“There is no reason to believe that this has some kind of intrinsic dynamic that will lead us to a return of the conditions of ten years ago,” Lane said, referring to the bloc’s debt crisis. “The cost of making the payments on this debt in the years to come will be quite contained.”

Despite vaccine progress, investors eye Fed support as coronavirus surges

Investors are weighing the chances the Federal Reserve will increase its purchases of U.S. government debt in coming weeks to counteract the economic fallout of a COVID-19 resurgence, an intervention that could reverse a recent rise in Treasury yields to multi-month highs.
Still, some investors believe that rising coronavirus cases may threaten the fragile U.S. economic recovery at a time when fiscal stimulus is likely to be delayed and widespread access to a vaccine remains months away. The United States recorded more than 1 million new COVID-19 cases last week.
That combination of negative factors could push the central bank to increase its support, some investors argue, even though asset purchases already stand at record levels and the Fed has not indicated it intends to raise them at its next two-day policy meeting, Dec. 15-16. Fed Chairman Jerome Powell is slated to speak Tuesday afternoon, and investors will be listening carefully for any insight into the Fed’s thinking.
Steve Englander, head of global G10 FX research and North America macro strategy at Standard Chartered, believes the Fed may surprise markets by increasing its asset purchases to $120 billion a month before the December meeting if it appears that rising COVID-19 cases are weighing on the economy.
The Fed has bought at least $80 billion a month since the start of the pandemic.
The Fed “may feel like it needs to act, even if they expect the vaccine to come,” Englander said. “It looks like there will be a two- or three-month period before the vaccine is widely available that looks like it will be really, really painful.”
Analysts at JPMorgan on Monday said in a note that they expect the Fed to increase the average maturity of its Treasury holdings at its December meeting, which could push yields lower.
Fed Vice Chair Richard Clarida in a speech Monday gave no direct indication that the central bank was on course to boost its purchases. Some investors are taking the Fed at their word.
“The markets are functioning well and unless we see the need for additional lockdowns or closures, I think that they won’t make any big moves before the end of the year,” said Kevin Giddis, head of fixed income at Raymond James.
But even if the near-term picture appears benign, some investors believe the Fed will step up its asset purchases as a precaution.
“My view is the Fed will increase (bond purchases) to $160 billion a month in December even if we have good news on the vaccine front and irrespective of what the news is regarding economic recovery,” said Thomas Costerg, senior economist at Pictet Wealth Management in Geneva. “They have learned their lessons from the past experience.”

Powell will speak at 18:00 (GMT) today.

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Looking ahead, there's not much of note on the calendar this morning.

U.S. retail sales are the main highlight.

A weak report could see some reconsider the recent moves into small caps and cheap value stocks.

Aside from Powell, other Fed members will have their say this afternoon, and we will also hear from ECB's Lagarde & De Guindos, BOE's Bailey & Ramsden & BOC governor Macklem.