Risk sentiment softer across the board this morning.
The ASX fell by 1.2% after a new coronavirus cluster was identified in Sydney’s Northern Beaches area.
Boris Johnson last night called on the European Union to drop its demands to allow Brussels to subsidise industries across Europe while denying the UK the same rights.
Michel Barnier, the EU’s chief negotiator, has called for Brussels aid to be exempt from any future subsidy control regime as part of a Brexit deal.
Mr Johnson told Ursula von der Leyen, president of the European Commission, that the exemption would allow the EU to unfairly support European industries while putting UK firms at a competitive disadvantage.
Michael Gove, the cabinet office minister, told MPs it was not something the UK could agree to. “You would have a situation where the EU, at the level of the 27 [member states] could provide [financial] support, let’s say, for the production of electric vehicles,” he said. “But if the UK said we too want to use government money to pump-prime that new technology, then the terms which the EU wants us to agree would mean that we would be prevented from doing so.” He added: “We think that that is a fundamental problem. The EU has sought for itself, freedom from restraints, that they won’t grant us.”
A government source said: “It is completely asymmetric and not something we can sign up to.”
Boris Johnson has urged Ursula von der Leyen to help him clear two final hurdles to a Brexit trade deal amid hopes an agreement could come this weekend.
The Prime Minister told the European Commission president that a deal can be done if Brussels gives ground on fish and state subsidies, as MEPs set a new deadline of this Sunday.
However, he warned her that a deal was “drifting away from us” unless the EU “substantially” changes its position, and that talks were in a “serious situation”.
Mrs von der Leyen said bridging the gap between the two sides would be “very challenging” but negotiations will continue on Friday, and sources in the European Parliament claimed the two sides were “close to an agreement”.
Michel Barnier, the EU’s chief negotiator, said a deal was “difficult but possible” while Michael Gove, the Cabinet Office minister (see below), claimed the odds on an agreement were “less than 50 per cent”.
Once again, we are heading into the weekend with talks 'in the balance' and GBP under pressure.
The risk of negative weekend headlines has seen GBP lower on a Friday in recent weeks, ever since talks entered the 'crunch period'.
The same appears likely today.
Worth nothing that these disputes should be overcome and Sunday isn't the 'deadline' any more than the previous ones have been.
The only deadline is the 31st of December.
On the Covid front, the spread is increasing across the U.S, just as in Europe;
The availability of intensive care unit beds throughout Southern California hit 0% Thursday, and officials warned that conditions in hospitals are expected to erode further if the coronavirus continues to spread unchecked.
With ICUs filled, hospitals will step up measures to ensure the sickest patients still get the highest levels of care possible. That often means moving some patients who would typically be in the intensive care unit to other areas of the hospital, such as a recovery area, or keeping them in the emergency room for longer than normal.
The patients are still getting intensive care, and that strategy can work to a point. But eventually, there may be too many critically ill patients for the limited numbers of ICU doctors and nurses available, leading to greater chances of patients not getting the specialized care they need. And that can lead to increases in mortality.
Vaccines can now be administered, and the list of approved treatments is growing.
An advisory panel on Thursday recommended that the Food and Drug Administration issue an emergency use authorization for a Covid-19 vaccine developed by Moderna, all but guaranteeing the agency will do so.
The authorization, expected on Friday, will mark the second Covid-19 vaccine cleared by the agency — and amount to one more step toward curbing a pandemic that has infected an estimated 17 million people and killed more than 300,000 in the United States.
Both Moderna’s vaccine and the one developed by Pfizer and its partner BioNTech, which was granted an EUA last week, use messenger RNA to instruct the body’s cells to produce copies of the spike protein found on the exterior of the SARS-CoV-2, the virus that causes Covid-19. Those vaccine-induced proteins teach the immune system to recognize the coronavirus as an invader and attack it when an immunized person is exposed to the virus.
Yesterday saw another increase in unemployment claims, putting the spotlight firmly on the contentious stimulus negotiations.
Current pandemic unemployment beneifts expire on December 26th.
It's looking increasingly likely that Congress will need to work through the weekend.
Congress is preparing for the possibility of a short government shutdown as leaders attempt to wrap up a nearly $1 trillion coronavirus relief package ahead of Friday’s deadline but as weekend work becomes almost inevitable.
As of Thursday evening, Republicans and Democrats were still sparring over tens of billions of dollars in government spending. Disagreements remained over who is eligible for stimulus checks, how to spend money for health care, disaster relief funds and winding down the Federal Reserve’s emergency lending program.
The coronavirus package will include a new round of roughly $600 stimulus checks, beefed up unemployment benefits of $300 a week, about $325 billion for small businesses and money for transportation, vaccine distribution and schools, according to lawmakers and aides. Leaders are hopeful it will be married with the omnibus spending bill funding the government through September and have held off on releasing the text as the continue to haggle over coronavirus provisions.
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Unfortunately the same cannot be said for Japan's CPI...
Japan’s core consumer prices dropped in November at their fastest pace in a decade as the coronavirus pandemic hit demand, stoking fears of a return to deflation and wiping out the benefits of former premier Shinzo Abe’s stimulus policies.
Core consumer prices, which exclude volatile fresh food costs, fell 0.9% in November from a year earlier, government data showed on Friday, matching a median market forecast.
It was the fourth straight month of falls and the fastest pace of year-on-year decline since September 2010.
While the drop was blamed largely on the government’s travel discount campaign and weak energy prices, it underscored how sluggish domestic demand was in keeping a lid on prices and hobbling the recovery from a pandemic-induced slump.
“The resurgence in inflections will keep people home and an expected decline in winter bonus payments will prevent a pickup in consumption,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“Consumer prices will keep falling heading into 2021.”
The Bank of Japan on Friday unveiled a plan to probe more effective ways to achieve its 2% inflation target, following in the foot steps of its U.S. and European counterparts as a renewed spike in inflections threatened to derail a fragile recovery.
As widely expected, the central bank kept monetary policy steady and extended by six months a range of measures aimed at easing funding strains of companies hit by COVID-19.
“Given the economy and prices are projected to remain under downward pressure for a prolonged period due to the impact of COVID-19, the BOJ will conduct an assessment on further effective and sustainable monetary easing,” the central bank said in a statement on its policy decision.
The BOJ will announce the findings of the review, which it says will not lead to any changes to its yield curve control framework, in March.
The surprise move underscores the growing concern among BOJ policymakers over the diminishing return and rising cost of prolonged easing such as the hit to bank profits from years of ultra-low rates, analysts say.
“Today’s surprise was the announcement of its plan to review its monetary easing. That would be in line with recent moves by European Central Bank and the Federal Reserve to examine the course of monetary policy,” said Yasunari Ueno, chief market economist at Mizuho Securities.
“The BOJ must have thought it would be left behind in the global monetary policy trend if it did not follow suit.”
At the two-day rate review ending on Friday, the BOJ kept intact its yield curve control (YCC) targets of -0.1% for short-term rates and 0% for 10-year bond yields.
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The United States is set to add dozens of Chinese companies, including the country’s top chipmaker SMIC, to a trade blacklist on Friday, two people familiar with the matter told Reuters on Thursday.
The move, which has not previously been reported, is seen as the latest in President Donald Trump’s effort to cement his tough-on-China legacy. It comes just weeks before Democratic President-elect Joe Biden is set to take office on Jan. 20.
In total, the United States is expected to add around 80 additional companies and affiliates to the so-called entity list, nearly all of them Chinese.
The designations by the Commerce Department are expected to name some Chinese companies that Washington says have ties to the Chinese military, including some helping it construct and militarize artificial islands in the South China Sea, as well as some involved in alleged human rights violations, the sources said.
The US Treasury department is attempting to water down an executive order from President Donald Trump that bars Americans from investing in Chinese companies with suspected ties to the People’s Liberation Army.
The effort has been met with furious opposition from the Pentagon and state department, opening up a heated dispute over one of the last big anti-Beijing policies of the Trump era.
Mr Trump last month issued an order barring US investors from investing in Chinese companies that the Pentagon put on a list of groups suspected of helping the Chinese People’s Liberation Army.
The effort is part of a broad push to counter China’s “military-civil fusion” strategy which compels Chinese companies to share technology with the PLA. The Trump administration argues that the strategy means US investors who invest in Chinese companies are helping Beijing and damaging America’s national security.
“Treasury is reportedly insisting on narrowing, diluting and otherwise defanging key provisions of the order,”
"It appears to demonstrate more interest in protecting Wall Street’s fees and Beijing’s interests than scores of millions of unwitting American retail investors and our national security"
- Roger Robinson, former National Security Council official
Looking ahead, it's quadruple witching day, the last 'rpoper' trading day of the year, AND the last day before the worlds' most valuable car company is finally included in the S&P 500.
Tesla joins the S&P at Friday’s closing price, a day expected to be volatile already because it is also the quadruple witching quarterly options expiration.
“The 18th is when all the action happens,” said Silverblatt. But he noted investors, other than the indexers, could be adding Tesla before that and trading the other names in the index.
Quadruple witching is one of four days each year when stock futures contracts, stock index options, individual stock options, and single-stock futures contracts all expire.
Little of note on the calendar.
German IFO is expected to remain unchanged, but is this accounting for the latest lockdown measures and downbeat rhetoric from Merkel?
Maybe some potential for downside surprise...