Indecisive overnight trade in Asia, with indices mainly drifting lower.

For the 100th time this year Reuters is running the 'Asian stocks under pressure as pandemic concerns outweigh stimulus hopes' headline.

California, the nation’s most populous state, announced new restrictions on travel and business activity after record case numbers and hospitalizations. And officials in New York warned similar restrictions could be employed soon, which further weigh on the nation’s recovery.

U.S. Congress to vote on stopgap funding bill as COVID-19 aid talks continue

Lawmakers in the Republican-led Senate and Democratic-run House of Representatives need to enact a government spending measure by Friday, when funding for federal agencies is set to expire. House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell hope to attach long-awaited COVID-19 relief to a broad $1.4 trillion spending bill, known as an omnibus.
A group of emergency aid programs implemented in response to the pandemic, including additional unemployment benefits and a moratorium on renter evictions, is set to expire at the end of December.
But with success eluding negotiations on both spending and pandemic relief, McConnell and House Majority Leader Steny Hoyer said separately on Monday that the two chambers would vote this week on a measure to allow an additional week of talks.

The same issues remain.

A group of House and Senate lawmakers had been expected as early as Monday to issue a text of the bipartisan COVID-19 aid bill, which would provide economic support into the early months of President-elect Joe Biden’s administration, which begins on Jan. 20.
But lawmakers and their staffs failed to finalize it over the weekend. They were stalled on provisions to help state and local governments, which Democrats want, and protect businesses from coronavirus-related lawsuits, a top Republican priority.

The extension vote should happen tomorrow (Wednesday).

UK, EU leaders to meet face-to-face to try to seal Brexit trade deal

With just over three weeks before Britain completes its journey out of the bloc, a senior UK government source said there was “every chance we are not going to get there” and EU officials said, if anything, negotiations had gone backwards.
Prime Minister Boris Johnson will travel to Brussels to meet European Commission President Ursula von der Leyen, the timing of which has yet to be confirmed, in what some say will be a last roll of the dice to secure a trade deal.
But he is not expected to time his trip to coincide with an EU summit on Thursday and Friday.
Irish Foreign Minister Simon Coveney said negotiators face a Wednesday deadline, ahead of the summit, to prevent a “no-deal” scenario when the UK leaves the EU’s orbit on Dec. 31, which would hit both sides’ economies and compound the pain of the COVID-19 pandemic.
Leaders of the 27 EU member states have agreed to step up contingency planning for the effects of a “no deal” on their economies when they meet for the summit.
“The conditions for an agreement are not there due to remaining differences on critical issues,” von der Leyen and Johnson said in a joint statement after their call, which followed an equally fruitless conversation on Saturday.
“We asked our chief negotiators to prepare an overview of the remaining differences to be discussed in person in the coming days,” they said. The EU Commission spokesman said Johnson would travel to Brussels for the meeting.
A senior UK government source described talks as being “in the same position now as they were on Friday. We have made no tangible progress”.
“It’s clear this must now continue politically. Whilst we do not consider this process to be closed, things are looking very tricky and there’s every chance we are not going to get there,” the source said.

UK retail sales growth slows as November lockdown hits non-food sales - BRC

British retail sales growth slowed in November when non-essential stores shut as part of a four-week lockdown in England, but online sales were able to fill more of the gap than in the first lockdown in March, industry data showed on Tuesday.
The British Retail Consortium said year-on-year total retail sales growth slowed to 0.9% in November from 4.9% in October, the weakest spending growth since a 5.9% fall in May.
A measure of like-for-like sales - which includes online retail and stores that were able to remain open - rose by 7.7% compared with a year earlier, the biggest gain since June.
“Some retailers were able offset a proportion of lost sales through greater online and click-and-collect sales, ensuring they could still serve their customers,” Helen Dickinson, chief executive of the British Retail Consortium, said.
The fall in spending masks big differences between sectors.
Spending at supermarkets was up 24%, and online food shopping was 98% higher than a year earlier, while spending in restaurants and pubs was less than half year-ago levels.
Department stores and clothing retailers, many of whom have struggled to sell online, saw drops in spending of 18% and 13% respectively, Barclaycard said.
“The big question now is whether Brits will flock to the high street for Christmas shopping after the November lockdown, providing a much-needed boost in December,” Barclaycard executive Raheel Ahmed said.


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Japan unveils $708 billion in fresh stimulus with eye on post-COVID growth

Japan announced a fresh $708 billion economic stimulus package on Tuesday to speed up the recovery from the country’s deep coronavirus-driven slump, while targeting investment in new growth areas such as green and digital innovation.
The new package will include about 40 trillion yen ($384.54 billion) in direct fiscal spending and initiatives targeted at reducing carbon emissions and boosting adoption of digital technology, Prime Minister Yoshihide Suga said in a meeting with ruling party executives.
In Japan, the pandemic has forced the government to put its fiscal reform agenda on the backburner, despite holding the industrial world’s heaviest public debt burden, which is twice the size of its gross domestic product.
“We have compiled the new measures to maintain employment, sustain business and restore the economy and open a way to achieve new growth in green and digital areas, so as to protect people’s lives and livelihoods,” Suga said at the meeting.
Suga’s cabinet is set to endorse the stimulus package later on Tuesday, which would bring the combined value of coronavirus-related stimulus to about $3 trillion.
The government will compile a third extra budget for the current fiscal year worth around 20.1 trillion yen to fund the fresh economic stimulus, a government source told Reuters on Tuesday.
Some investors expect the additional new bond issuance needed to fund the third extra budget to be around 15 trillion yen.
“Japan needs to make a plan for fiscal reform and shift to reconstructing public finance at some point. But now is the time to help firms and households hit by the pandemic,” said Yuichi Kodama, chief economist at Meiji Yasuda Research Institute.
“The government’s new bond issuance is expected to top 100 trillion yen for this fiscal year. But I don’t think the size of the package will roil the market.”
Two previous packages this year worth a combined $2.2 trillion focused on dealing with the immediate strain on households and business from the pandemic.
The new plan includes a 2-trillion yen fund to promote carbon neutrality by 2050, 1 trillion yen to accelerate digital transformation and 1.5 trillion yen in subsidies to support restaurants hurt by shortened trading hours due to COVID-19.

Japanese manufacturers' gloom eases slightly in December - Reuters Tankan

Sentiment among Japanese manufacturers and service-sector firms in December improved to its least pessimistic since February, as businesses eyed a slow and bumpy recovery from COVID-19 disruptions, a Reuters poll showed on Tuesday.
Both sectors expect conditions to stay negative into next spring, with respondents’ negative comments about business outnumbering positive ones, according to the monthly Reuters Tankan, which tracks the Bank of Japan’s (BOJ) closely watched tankan quarterly survey.
Manufacturers highlighted worsening conditions in capital spending due to the coronavirus’ hit to demand in the poll of 485 large- and mid-sized companies, in which 245 firms responded on condition of anonymity.
While firms at home remained wary about new investments, inquiries from China were rising, according to a manager at a machinery maker.
“It will take time for those to contribute to our revenue,” the manager said.
“Demand at home and in Europe is stagnating due to a resurgence of coronavirus infections,” a manager at a paper and pulp maker wrote in the Reuters Tankan survey. “Only China is going well.”

It's a pretty dire picture overall in Japan.

Real wages and consumer spending are both down too.

Japan Cash Earnings Link Seventh Fall

Japan's nominal cash earnings declined 0.8 percent year-on-year in October 2020 after falling an upwardly revised 1.3 percent in September, dropping for the seventh straight month. Regular pay, which accounts for the bulk of monthly wages, increased 0.3 percent after declining 0.3 percent in the prior month. Meanwhile, one-off special payments dropped 7.2 percent, following a 0.6 percent decline in September, while overtime pay contracted 11,7 percent following a 13.5 percent slump.
Real wages, a gauge of household purchasing power, shrank 0.2 percent following a 1.4 percent fall.

Japan Household Spending Rebounds Less than Expected

Household spending in Japan rebounded 1.9 percent in real terms in October from the previous year following a 10.2 percent decline in the previous month and compared to consensus of a 2.5 percent increase. Growth was mainly explained by gains in furniture & household utensils (up 39.7 percent), medical care (15.9 percent), housing (13.4 percent), and utilities (7.4 percent). In contrast, transportation & communication spending declined 3 percent.
On a monthly basis, spending advanced 2.1 percent after growing 3.8 percent, beating expectations of a 1 percent increase.

A different story in Australia...

Roy Morgan

Australia Passes Law That Can Scrap China Belt and Road Accords

Prime Minister Scott Morrison has new powers to veto or scrap agreements that state governments reach with foreign powers under laws that could stymie China’s Belt and Road Initiative in Australia and further inflame tensions between the trading partners.
The laws passed by Parliament on Tuesday will give the foreign minister the ability to stop new and previously signed agreements between overseas governments and Australia’s eight states and territories, and with bodies such as local authorities and universities.
Morrison’s government will be able to block or curtail foreign involvement in a broad range of sectors such as infrastructure, trade cooperation, tourism, cultural collaboration, science, health and education, including university research partnerships. An early target is likely to be an agreement the Victoria state government signed in 2018 to join President Xi Jinping’s signature infrastructure-building BRI.
The laws could further worsen ties between Australia and its largest trading partner, which have been in free fall since April, when the prime minister called for an independent probe into the origins of the coronavirus. Beijing has since inflicted a range of trade reprisals, including imposing crippling tariffs on Australian barley and wine while blocking coal shipments.
Partnerships between Australian universities and Beijing-sponsored bodies could be scrapped. There is mounting concern in intelligence circles about China’s influence in universities, and a program under which academics sign over intellectual property rights to their work in return for research grants, the Australian newspaper reported in April.
Under the law, Morrison won’t be able to scrap deals between state governments and commercial companies or state-owned enterprises. That means the lease of a strategic port in Darwin, used by the U.S. military, to a Chinese company by the Northern Territory government in 2015 could not be overturned.
It’s the latest move by the government to safeguard national interests. Morrison also plans to toughen foreign investment screening, regardless of the size of the deal, for sectors such as telecommunications, energy and technology.

One for fun;

Looking ahead, Germany's ZEW index and U.S. redbook retail sales the main data points of note, with the API crude stocks later this afternoon.

The EU gave Poland & Hungary a deadline of today to drop the veto (we all know about the EU and their deadlines though!). Highly unlikely that they will.

We have seen a few headlines surrounding vaccine distribution/orders recently too;

Output of Oxford-AstraZeneca doses held up

Pfizer tells U.S. officials it cannot supply substantial additional vaccine until late June or July

Worth keeping an eye on these in case any major setbacks are announced.