MNI EUROPEAN OPEN: No Deal Worry Dominates, Both In DC & Re: Brexit

EXECUTIVE SUMMARY

• UK PM JOHNSON: 'STRONG POSSIBILITY' OF NO TRADE DEAL WITH EU (BBC)
• EU MAKES FISHING AND TRANSPORT NO-DEAL OFFERS IN RETURN FOR 'LEVEL PLAYING FIELD' (GUARDIAN)
• PFIZER VACCINE GETS NOD FROM FDA ADVISERS (BBG)
• THREAT OF U.S. GOVERNMENT SHUTDOWN LOOMS AMID HOLDUPS TO SPENDING BILL VOTE (CNN)

Fig. 1: EUR/GBP vs. EUR/GBP 25-Delta 1-Month Risk Reversal

Source: MNI - Market News/Bloomberg

UK

BREXIT: Boris Johnson says there is a "strong possibility" the UK will fail to strike a post-Brexit trade deal with the EU. Speaking for the first time since a crunch meeting in Brussels, the PM said "now is the time" for firms and people to prepare for a no deal outcome. Talks continue between the two sides, but Mr Johnson said they were "not yet there at all" in securing a deal. Time is running out to reach an agreement before the UK stops following EU trade rules on 31 December. (BBC)

BREXIT: Ireland urged the European Union last night to help "break the logjam" in Brexit negotiations and compromise to prevent Britain leaving the bloc without a trade deal. Speaking before a critical summit of EU leaders, Micheál Martin, the Irish prime minister, said he believed that an agreement was "within reach" but warned that all sides would "lose out" if the talks failed. Ireland is the EU country most at risk from Britain leaving on World Trade Organisation terms at the end of the transition period and has been playing a prominent role behind the scenes in attempting to strike a compromise. Speaking in Brussels, Mr Martin said that neither side should walk away when "97 per cent of a deal had been agreed". (The Times)

BREXIT: The main sticking point in the EU-UK talks on a trade deal — a so-called level playing field to ensure fair competition between companies — is resolvable so long as neither side treats the matter as a question of high principle, experts said on Thursday. (FT)

BREXIT: The EU has said that in the event of a no-deal Brexit, British airlines could be banned from landing in European destinations and public disorder could break out as haulage routes break down. But in a flurry of announcements, the European commission said it would legislate to temporarily allow airlines from the UK to operate flights across its territory and it would keep roads open to British hauliers for six months, if the government maintained regulations equivalent to EU law. The EU will also offer British fishermen access to its seas and open negotiations over quotas, if the UK government reciprocates. The European commission said the offers were for a limited period and it was only willing to act to avoid the worst disruption, including the risk of outbreaks of violence. (Guardian)

BREXIT: The UK will make a unilateral declaration promising to remain fully aligned to EU food safety and animal health rules for the production of agri-food products destined for Northern Ireland after 1 January, RTÉ News has learned. The EU will also issue its own declaration recognising that British food meets European safety standards during two separate grace periods, one for three months and another for six months. The alignment will be temporary, and will last only so long as there are exemptions from certain EU food safety rules for food importers trading meat and dairy products from Great Britain to Northern Ireland. (RTE)

BREXIT: Brexiteers have warned Boris Johnson that any Brexit trade deal will need more than 24 hours' scrutiny in parliament, as they prepare to sit between Christmas and New Year. (Telegraph)

BREXIT: MPs and peers are at loggerheads over government plans to regulate trade between the four nations of the UK after Brexit. MPs voted down changes to the Internal Market Bill which would have given Scotland, Wales and Northern Ireland a greater say over UK trading rules. Business minister Paul Scully said the government "cannot agree" with the peers' amendments. The bill will now go back to the House of Lords for the third time on Monday. The government has been defeated 14 times on this bill, and by overturning the Lords' latest changes, it will continue to "ping-pong" - the term used when legislation goes back and forth between the Commons and Lords as they reject each others' changes. (BBC)

BREXIT: The U.K. government fears that its post-Brexit trade deal with Canada will not come into force in time to prevent tariffs being imposed between Britain and its 12th-largest trading partner from Jan. 1. The agreement is yet to be approved by the Canadian parliament which rises for its recess on Friday, and that is causing deep concerns among U.K. officials, according to a person familiar with the matter, speaking on condition of anonymity. (BBG)

FISCAL: A proposed wealth tax on hundreds of thousands of homeowners would wreck Britain's recovery and punish wealth creation, accountants and a leading business group have warned. (Telegraph)

EUROPE

ECB: The European Council appointed Frank Elderson as a member of the European Central Bank's executive board. Frank Elderson is currently a member of the executive board of De Nederlandsche Bank (the national central bank of The Netherlands). He will take up his duties on 15 December 2020 for a non-renewable term of eight years. Frank Elderson will replace the outgoing member Yves Mersch, whose term of office expires on 14 December 2020. (European Council)

FRANCE: France will delay much of the planned easing of its nationwide lockdown from December 15 and will impose a strict curfew from 8pm to 6am from that day to try to curb the still-active second wave of the coronavirus pandemic. Jean Castex, prime minister, and other ministers announced the new measures in a news conference on Thursday evening, declaring that cinemas, theatres and sports centres would not after all be able to reopen on Tuesday and cancelling a planned curfew relaxation for New Year's Eve parties on December 31. (FT)

ITALY: Italy will buy a 60% stake in the company operating the Taranto steel mill from ArcelorMittal SA, marking the state's return to the industry after 25 years. Government investment agency Invitalia will pay 1.1 billion euros ($1.3 billion) for the stake in AM InvestCo Italy Srl, Invitalia and ArcelorMittal said in statements Thursday.

SWEDEN: Sweden is trying to figure out how to expand capacity in its health-care system after almost running out of intensive care beds in Stockholm. Stockholm's ICU capacity reached 99% this week, as infection rates in the largest Nordic capital soar. Across Sweden, there were only 148 ICU beds left as of Thursday. Efforts to expand capacity are being complicated by a shortage of trained staff, with many on sick leave after months of overtime. Others quit their jobs after the first wave of the pandemic in the spring. (BBG)

• Fitch on Spain (current rating: A-; Outlook Stable) & Switzerland (current rating: AAA; Outlook Stable)
• Moody's on Luxembourg (current rating: Aaa; Outlook Stable) & Norway (current rating: Aaa; Outlook Stable)
• S&P on Slovenia (current rating: AA-; Outlook Stable)

U.S.

FED: MNI BRIEF: Fed Balance Sheet Nearly Matches Prior Record High

• The Federal Reserve's balance sheet edged up to USD7.243 trillion this week on increased holdings of Treasuries, just shy of the previous record set in mid-November, data released Thursday showed - on MNI Main Wire and email now - for more details please contact sales@marketnews.com.

FISCAL: Senate leaders are trying to resolve last-minute objections to two must-pass bills, which could trigger a brief government shutdown, even as they struggle to reach critical deals on a new pandemic stimulus and a sweeping government funding package before the end of the year. (CNN)

FISCAL: Small businesses with battered finances could be in line for additional funding through the Paycheck Protection Program. Bipartisan lawmakers unveiled a $908 billion Covid relief framework on Wednesday, which set aside $300 billion for the Small Business Administration, the federal agency responsible for the lending program. These PPP loans are forgivable if business owners devote at least 60% of the proceeds toward payroll expenses. (CNBC)

FISCAL: The bipartisan group on Thursday removed one of the last remaining hurdles to a complete stimulus framework when they agreed on a needs-based formula to distribute $160 billion in state and local aid, according to two congressional aides. (Washington Post)

FISCAL: Senate Majority Leader Mitch McConnell's staff told other congressional leaders on Wednesday that the bipartisan coronavirus negotiators will be unlikely to satisfy Senate Republicans, according to a senior Democrat familiar with the conversations. (POLITICO)

FISCAL: Few signs of progress toward a coronavirus relief deal emerged Thursday as Congress inches closer to letting millions of Americans fall deeper into financial peril. They will have to wait longer for Washington to figure out how to help them. After votes Thursday, House Majority Leader Steny Hoyer, D-Md., told representatives the chamber would adjourn until at least Tuesday pending an agreement on pandemic aid and full-year government funding. (CNBC)

FISCAL: A reporter with The Hill tweeted the following on Thursday: "Senate GOP whip John Thune says he doubts bipartisan group will reach a deal on liability protection and predicts issue will be punted to next year." (MNI)

FISCAL: As questions loom on Capitol Hill over whether or not there will be second stimulus checks, one senator is introducing a bill to make those payments a reality. Sen. Josh Hawley, R-Mo., said in an interview Thursday with Fox News that his plan for second checks includes $1,200 per individual, $2,400 per couple and $500 per child. "The most important thing that Congress can do is send direct assistance checks to every working family who needs them," he said. Hawley said he will not be discouraged if Congress cannot come to a compromise on the ongoing coronavirus relief negotiations. (CNBC)

FISCAL: The U.S. government posted a $145 billion budget deficit for November, down from $209 billion a year ago, the Treasury Department said on Thursday, but the decline was largely due to calendar shifts of federal benefit payments. Without these adjustments, Treasury said November receipts would have fallen 6% from November 2019, while outlays would have increased 11%, which would have led to a $207 billion November deficit. (RTRS)

CORONAVIRUS: The US reported a further 3,000 coronavirus deaths on Thursday, just one day after crossing the threshold for the first time. States attributed 3,067 deaths to coronavirus, down from an upwardly revised record of 3,088 on Wednesday, according to Covid Tracking Project data. Over the past week, 16,327 people in the US have died, a record for a seven-day period, and averaging out to a rate of about 2,281 fatalities a day. Since the start of the pandemic, 283,555 deaths in the US have been attributed to coronavirus, according to CTP data. (FT)

CORONAVIRUS: Once 75%–80% of people get vaccinated against the coronavirus, there should be strong enough herd immunity that we can return to normal activities, NIAID director Anthony Fauci tells Axios. (Axios)

CORONAVIRUS: Location tracking and priority flights are among the special treatments FedEx and United Parcel Service are planning to give coronavirus vaccines, executives said Thursday. The shipping giants told a Senate transportation subcommittee that the vaccines will receive priority over any other items, even as the busiest holiday shipping season on record nears its peak. FedEx Express Executive Vice President Richard Smith said the company is calling it the "shipathon." (CNBC)

CORONAVIRUS: Virginia Governor Ralph Northam announced a "modified stay- at-home order" that requires people to stay at home from midnight to 5 a.m, with exemptions including grocery shopping, work travel and medical emergencies, from Monday through Jan. 31. Virginia counted a record 4,398 new cases a day earlier. "If you don't need to go out, go home," Northam said at a press conference. "This is just plain common sense." Virginia also will reduce the social-gathering limit to 10 people from 25 and step up enforcement of a statewide mask mandate, which Northam expanded on Thursday in line with the latest CDC guidance. (BBG)

CORONAVIRUS: Pennsylvania is suspending indoor dining from Saturday and prohibiting gatherings and events of more than 10 people, Governor Tom Wolf said on Twitter. The measures will remain in place until Jan. 4. (BBG)

CORONAVIRUS: Governor Mike DeWine said state health officials are extending a 10 p.m. to 5 a.m. curfew in Ohio until Jan. 2, seeking to limit social gatherings in and outside people's homes while awaiting a vaccine. (BBG)

POLITICS: President-elect Joe Biden will travel to Atlanta, Georgia, on Tuesday to stump for Democratic Senate candidates Jon Ossoff and Raphael Warnock, his first campaign trip since he was elected president in November. (CNBC)

POLITICS: The battleground states whose presidential election results are being challenged by Texas at the Supreme Court urged the justices on Thursday not to take up the case. The four states targeted in the lawsuit warned in uncharacteristically sharp briefs that granting Texas' unprecedented request would "do violence to the Constitution" and "disenfranchise millions" of voters. (CNBC)

EQUITIES: Tech companies with millions of European users or active in at least two sectors will be classified as online gatekeepers subject to tough new EU rules aimed at curbing their power, three people familiar with the matter said on Thursday. The criteria defining online gatekeepers which control access to people, services and information are expected to hit Alphabet unit Google, Facebook, Apple and Amazon. (RTRS)

OTHER

U.S./CHINA: The Federal Communication Commission ordered carriers to remove network equipment that poses a security risk, taking another step aimed at China's Huawei Technologies Co. and ZTE Corp. The agency in a 5-0 vote also said it would establish a list of proscribed equipment, and it set up a program to reimburse carriers for replacing suspect gear that will start once Congress devotes an estimated $1.6 billion. The agency said the actions, which affect providers that take federal subsidies, implement a law Congress passed in March. (BBG)

U.S./CHINA: The U.S. Federal Communications Commission (FCC) said on Thursday it begun the process of revoking China Telecom's authorization to operate in the United States as it took further steps to crack down on China's role in U.S. telecommunications. (RTRS)

U.S./CHINA: The U.S. is demonstrating ideological bigotry and its fear of a stronger China through the passing of the so-called Hong Kong People's Freedom and Choice Act, the officially owned China Daily said in an editorial. The U.S. attack on Hong Kong's national security law is to protect its own interests and global hegemony, said the Daily. China on Thursday announced the cancelation of visa-free travels to Hong Kong and Macau for Americans holding diplomatic passports, citing what it said is the U.S. infringement on China's national interests, according to statements from the Ministry of Foreign Affairs. (MNI)

EU/CHINA: Europe's top business association pulled out of a meeting with a Beijing think tank after the Chinese side opposed the participation of two perceived China critics, a person familiar with the event said. The incident, which happened last month but only came to light now, casts a shadow over negotiations between China and the European Union on a major investment agreement as they enter their final stretch. (BBG)

U.S./JAPAN: Japan will not sign a new cost-sharing agreement on American military bases in the country this year, opting instead to negotiate with the incoming administration of U.S. President-elect Joe Biden, Nikkei has learned. (Nikkei)

CORONAVIRUS: A Food and Drug Administration advisory panel voted 17 to 4 on Thursday that the benefits of the vaccine by Pfizer Inc. and BioNTech SE outweigh the risks for use in people ages 16 and older. One member of the group abstained. The FDA doesn't have to follow the recommendation, though often it does agree with its advisers. (BBG)

CORONAVIRUS: Pfizer Inc said on Thursday it planned to file for full U.S. approval of its experimental coronavirus vaccine by April next year, even as the vaccine awaits emergency use authorization by the U.S. Food and Drug Administration. (RTRS)

HONG KONG: Hong Kong media tycoon and prominent pro-democracy activist Jimmy Lai will be charged under the city's sweeping national security law with foreign collusion, broadcaster TVB reported, citing unidentified people. In early December, Lai, the 73-year-old founder of Next Digital Ltd. and owner of the pro-democracy Apple Daily newspaper, was denied bail on new charges relating to his dramatic August arrest under Hong Kong's controversial new security measures. His arrest and a dramatic police raid on Apple Daily's newsroom prompted an outcry from foreign governments including the U.K., which said the law was being used to crack down on press freedoms in the former British colony. U.K. Prime Minister Boris Johnson's spokesman, James Slack, said Lai's arrest was "further evidence that the national security law is being used as a pretext to silence opposition." (BBG)

JAPAN: A Japanese government panel is set to discuss the order of priority for receiving vaccinations against the coronavirus, Economy Minister Yasutoshi Nishimura said Friday. The panel will also debate policy on people returning to their home towns for the New Year holidays. Highest level of caution remains necessary as record numbers of infections are found. Health care system facing heavy burden. (BBG)

JAPAN: Japan to use 385.6b yen from reserve for travel, handouts. Of the amount, 311.9 billion yen ($3 billion) will be for Go To travel campaign and 73.7 billion yen for cash handouts for single-parent households, Japan's Finance Minister Taro Aso told reporters in Tokyo. The government is likely to miss its originally estimated tax revenue of 63.5 trillion yen for the current fiscal year that ends in March 2021. Aso didn't say how much tax revenue it expects. Japan needs to lure private investment into promising sectors. (BBG)

AUSTRALIA: Australia will launch Covid-19 vaccines on its own schedule next year as it has successfully contained the virus, prime minister Scott Morrison said on Friday, allowing it to monitor the roll out of programmes in the UK and US. Speaking after a national cabinet meeting, Mr Morrison said Australia's successful suppression of the virus meant it had more time to assess the decision on the best science. (FT)

AUSTRALIA: The development of Australia's home grown Covid-19 vaccine has been abandoned after several trial participants returned "false positives" for HIV during testing. However, Canberra said on Friday the setback would not delay its vaccination programme and announced it had bought 31m extra doses of rival vaccines produced by AstraZeneca and Novavax. (FT)

AUSTRALIA/CHINA: Impacts of the downward spiral of China-Australia relations on Australian exports are striking in both scope and severity. As the most important part of China-Australia trade, iron ore may be less vulnerable to political shocks compared to other products, but it is not completely immune. (Global Times)

RBNZ: New Zealand's central bank said it doesn't like the government's suggestion that it add house prices to its monetary policy remit, and instead proposed other measures to tackle the rampant property market. In a detailed response to Finance Minister Grant Robertson published Friday in Wellington, Governor Adrian Orr said forcing the Reserve Bank to consider house prices when setting interest rates could lead to below-target employment and inflation. He recommended that the bank be required to address the issue via financial policy, and requested it be allowed to add debt-to-income ratios to its macro-prudential toolkit. "If you wish to strengthen the Reserve Bank's role in relation to house prices, our recommendation is that this would be best achieved by amending our financial policy remit," Orr wrote. "Adding house prices to the monetary policy objective would be unique internationally, which could make monetary policy less effective and impact financial market efficiency." (BBG)

BOC: MNI POLICY: BOC Says Boosting QE Pace Is Unlikely Option

• While the recent path of the pandemic adds layers to upside and downside risks, the Bank of Canada in a much more damaging second wave may tweak QE rather than pick up the pace again, Deputy Governor Paul Beaudry said Thursday - on MNI Main Wire and email now - for more details please contact sales@marketnews.com.

TURKEY: Turkey plans to roll out a China-made vaccine for Covid-19 in "only a matter of days", state media quoted the country's health minister as saying on Thursday. The Sinovac vaccine will be administered first to health care workers, the Anadolu news agency reported. (FT)

TURKEY: The United States is poised to impose sanctions on Turkey over its acquisition last year of Russian S-400 air defense systems, five sources including two U.S. officials told Reuters on Thursday, a move likely to worsen already problematic ties between the two NATO allies. (RTRS)

TURKEY: The European Union pledged to expand a list of Turks targeted with travel bans and asset freezes over controversial energy exploration in the eastern Mediterranean while stopping short of moving toward more economically painful sanctions against the government in Ankara. EU leaders gave the go-ahead in Brussels for work on enlarging a blacklist now composed of two employees of Turkish Petroleum Corp. in response to Turkey's natural-gas hunt off Cyprus. This may lead to more individuals being targeted, and - potentially - the inclusion of some companies and governmental organizations. The 27-nation bloc's government heads resisted Greek-led demands to start drafting tougher penalties such as a ban on transactions between European institutions and Turkish businesses. Instead, they held out the possibility of weighing more punitive measures by March should Ankara continue its confrontational acts in the eastern Mediterranean. (BBG)

MEXICO: A bill approved by the Mexican Senate this week exposes the central bank to money laundering risk, Banxico Governor Alejandro Diaz de Leon told W Radio. (BBG)

BRAZIL: Brazil faces a 35 billion reais ($7 bln) hole in its 2021 budget due to emergency aid payments being held over to next year and welfare benefits indexed to a higher inflation rate than anticipated, a source on the government's economy team said. (RTRS)

BRAZIL: It's almost impossible for the federal government to help states and municipalities again, because federal govt has a big debt, President Jair Bolsonaro said in a webcast live. Country otal debt is in the order of 700b reais, he said. Bolsonaro said that asked governors to not take measures that harm shops, because everyone already said, including the World Health Organization itself, that Health and the Economy must walk together. President said that Brazil was one of the countries that worked better on the economic issue during the pandemic. (BBG)

IRAN: The U.S. military is on heightened alert and shoring up its forces in the Middle East to respond to a potential Iranian attack, a military official told POLITICO. Specifically, the Pentagon is closely watching "troubling indicators of potential attack preparations" from Iranian militias in Iraq, the official said. (POLITICO)

OIL: Kuwait Petroleum Corp. lowered its January official selling prices for crude bound for the United States and Europe, while it raised prices of barrels headed Asia, according to a notice seen by S&P Global Platts Dec. 10. (Platts)

OIL: Kuwait Petroleum Corp. lowered its January official selling prices for crude bound for the United States and Europe, while it raised prices of barrels headed Asia, according to a notice seen by S&P Global Platts Dec. 10. (Platts)

CHINA

ECONOMY: China 2020 GDP growth may be about 2%, NDRC researcher says. (BBG)

POLICY: China should continue to strengthen its financial and tax policies to support the development of a self-sustaining domestic consumption model, Minister of Finance Liu Kun wrote in the CPC-owned Study Times. China should also cut red tape and improve distribution to allow production to respond better to consumption demand, wrote Liu. He advocated balanced development in terms of finance, real estate and the real economy. China should also create transparent local government debt financing tools and prevent hidden debt risks. (MNI)

ASSET MANAGEMENT: Chinese regulators have extended the deadline for banks to fully account for unregulated asset management products on their regular balance sheets after banks complained that they would not be able to fulfill the requirement in time, the 21st Century Business Herald reported citing bank sources. The deadline of 2021 has now been extended to 2025. One of China's largest national banks told the newspaper that it still has CNY300 to CNY400 billion in irregular products to deal with by the end of this year. (MNI)

OVERNIGHT DATA

NEW ZEALAND NOV BUSINESSNZ M'FING PMI 55.3; OCT 52.4

BusinessNZ's executive director for manufacturing Catherine Beard said that the sector has now remained in positive territory for the sixth consecutive month, despite swings in the actual activity levels. "The key indices of production (55.4) and new orders (57.6) both displayed healthy levels of expansion during November, while employment (51.5) eased back to September levels. Interestingly, finished stocks (59.0) recorded its highest value since the survey began, which may be due to COVID related delayed activity and distribution issues that has plagued 2020". "Overall, the sector is shaping up to end 2020 on a positive note, which would be a considerable contrast to what was seen during the first half of the year". BNZ Senior Economist, Doug Steel said that "as a measure of change, the PMI suggests that the manufacturing sector continues to move in the right direction after getting hit hard earlier in the year by COVID related restrictions". (BNZ)

NEW ZEALAND NOV FOOD PRICE INDEX -0.9% M/M; OCT -0.7%

NEW ZEALAND NOV REINZ HOUSE SALES +29.6% Y/Y; OCT +25.0%

SOUTH KOREA DEC 1-10 EXPORTS +26.9% Y/Y; NOV +20.1%
SOUTH KOREA DEC 1-10 IMPORTS +7.9% Y/Y; NOV +7.8%

CHINA MARKETS

PBOC INJECTS CNY10BN VIA OMOS, LIQUIDITY UNCHANGED

The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with rates unchanged at 2.2% on Friday. This keeps the liquidity unchanged after offsetting the maturity of CNY10 billion repos today, according to Wind Information.

• The operation aims to maintain the liquidity in the banking system at a reasonable and ample level, the PBOC said on its website.
• The 7-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.1965% at 09:32 am local time from the close of 1.8975% on Thursday.
• The CFETS-NEX money-market sentiment index closed at 57 on Thursday vs 39 on Wednesday. A lower index indicates decreased market expectations for tighter liquidity.

PBOC SETS YUAN CENTRAL PARITY AT 6.5405 FRI VS 6.5476

The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 6.5405 on Friday, compared with the 6.5476 set on Thursday.

MARKETS