A softer risk tone overnight, with Asia following Wall Street's downbeat lead.  

Bonds are back in demand with the US 10Y yielding 0.87% and the 30Y 1.62%.

Now that we know there are efective vaccines & there's light at the end of the tunnel - why isn't the S&P at 4,000 already?

In Christine Lagarde's words:

“From a huge river of uncertainty, we see the other side now, but I don’t want to be exuberant about this vaccination because there is still uncertainty” over its production and distribution.

Jerome Powell:

“We do see the economy continuing on a solid path of recovery, but the main risk we see to that is clearly the further spread of the disease here in the U.S. ... the next few months could be challenging,”

In other words, it's still a pretty wide river.

Throw in the risks of a sitting president who won't concede, U.S. fiscal stimulus negotiations back where they started (R: <$1T vs D: $3.4T), increasing Covid cases & hospitalisations = a greater likelihood of further lockdowns/restrictions...

And let's not forget the increasing tensions between China and the Western world, and Poland still wanting to veto the EU recovery fund.

I could go on.

Long and short of it, winter has barely started and the other side of that river looks a long way off.

But markets are forward looking, and us humans are pretty good at figuring things out.

Remember those logistical problems with the vaccines needing to be kept at freezing temperatures?

Looks like those are already solved;

Imperial College team work out how to keep an RNA coronavirus vaccine in the fridge rather than -70C

A British team at Imperial College has worked out how to keep an RNA vaccine, similar to the leading Pfizer/BioNTech coronavirus candidate, stable in the fridge.
The research is significant because one of the leading obstacles to a full-scale roll-out of the Pfizer vaccine is the fact that it needs to be deep frozen at -70C.
One formulation has remained stable in the fridge for five months, the team's leader, Professor Robin Shattock, told The Telegraph.
"We are already looking at how to make our vaccine stable at refrigerated temperatures, and it is absolutely possible," he said.
"We have started monitoring it in our lab, and we already have a research formulation that's been stable at a refrigerated temperature for five months. We still need significant investment to get it to a clinical product."

About those China tensions.

Trump bans U.S. investments in firms linked to Chinese military

The Trump administration on Thursday unveiled an executive order prohibiting U.S. investments in Chinese firms that Washington says are owned or controlled by the Chinese military, ramping up pressure on Beijing after the U.S. election.
The order, which was first reported by Reuters, could impact some of China’s biggest companies, including telecoms firms China Telecom Corp Ltd, China Mobile Ltd and surveillance equipment maker Hikvision.
The move is designed to deter U.S. investment firms, pension funds and others from buying shares of 31 Chinese companies that were designated by the Defense Department as backed by the Chinese military earlier this year.
Starting Jan. 11, the order will prohibit purchases by U.S. investors of the securities of those companies. Transactions made in order to divest ownership in the companies will be permitted until Nov. 11, 2021.
“China is increasingly exploiting United States capital to resource and to enable the development and modernization of its military, intelligence, and other security apparatuses,” said the order released by the White House.
Thursday’s action is likely to further weigh on already fraught ties between the world’s top two economies, which are at loggerheads over China’s handling of the coronavirus pandemic and its move to impose security legislation on Hong Kong.
Biden has not laid out a detailed China strategy but all the indications are that he will continue a tough approach to Beijing, with whom Trump has become increasingly confrontational in his last year in office.

Trump's final Fed picks may get Senate nod next week

Senate votes on Trump’s former economic adviser Judy Shelton and St. Louis Fed research director Christopher Waller could take place as early as next week, Republican Senator John Cornyn told Bloomberg News on Thursday. Cornyn’s communications director confirmed the comments to Reuters.
Republican leaders have previously said they would not advance the nominations unless they were confident that Shelton, who has drawn criticism for being too partisan for the job, has the support needed for approval.
Critics have said Shelton could politicize the Fed’s interest-rate setting because of her ties to Trump, though she told lawmakers in her confirmation hearing that “no one tells me what to do.”
Shelton’s term would end in January 2024. Waller’s would end in 2030.
Both would be regular voters on the Fed’s 12-member rate-setting panel. Trump also picked the Fed chair and all but one of the other Fed Board governors.

Shelton is a controversial choice;

Ms. Shelton will “challenge some of the long-held and wrongheaded orthodoxies that are still prevalent” at the Fed, said Stephen Moore, an economic commentator who encouraged Mr. Trump to tap Ms. Shelton for the job after his own candidacy collapsed due to resistance from Senate Republicans last year. “Most importantly, she doesn’t believe that printing dollars creates jobs.”
Ms. Shelton has been a longtime proponent of a return to the gold standard, which would limit the Fed’s ability to influence inflation and employment, and concedes that her views are outside the mainstream of economics.

China’s President Xi Jinping Personally Scuttled Jack Ma’s Ant IPO

Senior government leaders were furious about wealthy entrepreneur’s criticisms of regulators; rebuke was the culmination of years of tense relations
Chinese President Xi Jinping personally made the decision to halt the initial public offering of Ant Group, which would have been the world’s biggest, after controlling shareholder Jack Ma infuriated government leaders, according to Chinese officials with knowledge of the matter.
The rebuke was the culmination of years of tense relations between China’s most celebrated entrepreneur and a government uneasy about his influence and the rapid growth of the digital-payments behemoth he controlled.
Mr. Xi, for his part, has displayed a diminishing tolerance for big private businesses that have amassed capital and influence—and are perceived to have challenged both his rule and the stability craved by factions in the country’s newly assertive Communist Party.
On Oct. 24, Mr. Ma took the stage at a financial forum in Shanghai attended by top regulators, politicians and bankers. He said Ant’s IPO was “a miracle,” being such a large deal taking place away from New York. Attendees included China’s Vice President Wang Qishan, central bank governor Yi Gang and some senior state-bank executives.
During his 21-minute speech, he criticized Beijing’s campaign to control financial risks. “There is no systemic risk in China’s financial system,” he said. “Chinese finance has no system.”
He also took aim at the regulators, saying they “have only focused on risks and overlooked development.” He accused big Chinese banks of harboring a “pawnshop mentality.” That, Mr. Ma said, has “hurt a lot of entrepreneurs.”
His remarks went viral on Chinese social media, where some users applauded Mr. Ma for daring to speak out. In Beijing, though, senior officials were angry, and officials long calling for tighter financial regulation spoke up.

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Looking ahead, nothing on the calendar today should really tell us anything new.