MNI EUROPEAN OPEN: Familiar Risks Dominate Ahead Of NFP

EXECUTIVE SUMMARY

• BREXIT TALKS HEADING FOR WEEKEND SHOWDOWN BETWEEN BORIS JOHNSON AND EMMANUEL MACRON (TELEGRAPH)
• BRUSSELS WARNS POLAND AND HUNGARY THEY CANNOT STOP EU RECOVERY FUND (FT)
• PFIZER SLASHED ITS ORIGINAL COVID-19 VACCINE ROLLOUT TARGET AFTER SUPPLY-CHAIN OBSTACLES (WSJ)
• MODERNA STUDY SHOWS VACCINE HAS POTENTIAL FOR DURABLE IMMUNITY (BBG)
• U.S. IN TALKS WITH HUAWEI CFO ABOUT RESOLVING CRIMINAL CHARGES
• COMMERCE MULLS BLOCKING CLOUD FIRMS FROM COUNTRIES LIKE CHINA (AXIOS)

Fig. 1: EUR/GBP vs. EUR/GBP 25-Delta 3-Month Risk Reversal

Source: MNI - Market News/Bloomberg

UK

BREXIT: Brexit trade talks that were on the verge of a breakthrough descended into a fight between the U.K. and France on Thursday as the British government said prospects of an imminent deal had receded. With negotiators working around the clock in London, optimism had been growing for days that an agreement could be struck this weekend. But British officials said the European Union had suddenly turned up with a new set of demands, sending the talks backward. They didn't say what the demands were and EU officials denied it. The U.K.'s assessment came after French diplomats raised concerns a day earlier that the EU was making too many concessions to get a deal over the line. (BBG)

BREXIT: Brexit talks are heading for a showdown between Boris Johnson and Emmanuel Macron this weekend with the prospect of an EU deal now dependent on French access to fish in British waters. (Telegraph)

BREXIT: Britain and the EU will resume talks on a post-Brexit trade deal on Friday despite a senior UK government source saying the prospect of a breakthrough is "receding". Sources suggested Brussels had hardened its stance on how common rules and regulations should be enforced with time running out. But an EU source told the BBC "there were never any surprises or new demands" from their side. The current rules end on 31 December. A senior UK government source told BBC political editor Laura Kuenssberg that the EU team were "bringing new elements into the negotiation" at the "11th hour". The source said a breakthrough was "still possible in the next few days but that prospect is receding". Both sides are urgently seeking compromises in key areas, including fishing rights and competition rules. (BBC)

BREXIT: The latest round of talks on a post-Brexit trade deal "did not go well", Sky News understands, with a UK source suggesting that hopes of an agreement are now "receding". According to Sky's deputy political editor Sam Coates, the sticking point was the so-called "level playing field". This is the issue of preventing unfair competition on state subsidies and standards once Britain has left the bloc. (Sky)

BREXIT: Sir Keir Starmer faces the prospect of significant unrest over his plans for Labour to vote in favour of a Brexit deal. At least one shadow cabinet member and several shadow ministers will consider resigning if Labour backs a government free trade agreement with the EU. Sir Keir is leaning heavily towards whipping in favour of a deal if ministers strike one but his top team is divided on the merits of such a move. (The Times)

BREXIT: Switzerland and the UK are expected to agree a deal on Friday allowing professional workers to keep travelling freely between the two countries. (Telegraph)

BREXIT: The European Union's top markets regulator delivered a fresh warning that big European banks will face difficulties trading derivatives when they are locked out of London's dominant trading platforms at the end of the Brexit transition this month. Steven Maijoor, chair of the Paris-based European Securities and Markets Authority, said in an interview Thursday that the London offices of EU firms are headed into a "conflict of law" between the U.K. and Europe, affecting swaps on benchmark interest rates and credit defaults. (BBG)

FISCAL: Boris Johnson has raised the prospect of business tax cuts next year in an attempt to revive the Covid-ravaged British economy, even as chancellor Rishi Sunak looks to increase taxes to repair the public finances. The prime minister's comments hint at tensions to come between Number 10 and Number 11, with Mr Sunak determined to use his March Budget to start plugging a fiscal hole that will reach almost £400bn this year. Mr Johnson told a Facebook Q&A session: "We'll be looking at the tax environment and the regulatory environment and everything we can do to encourage and support business in this country." (FT)

CORONAVIRUS: The U.K. moved to exempt "high-value" executives from rules requiring people entering the country to quarantine for two weeks, in a move designed to boost business. (BBG)

EUROPE

ECB: Europe's top banking supervisor is writing to the region's biggest lenders to warn that many of them are failing to do enough to prepare for a likely increase in bad loans due to the fallout from the coronavirus pandemic. Andrea Enria, president of the European Central Bank's supervisory board, said the shortfalls in banks' preparations for a likely rise in bad loans was one factor to be considered in its decision on whether to allow them to resume dividend payments and share buybacks. Speaking at the Financial Times Global Banking Summit, Mr Enria said some of the 117 banks it oversees were "all over the place" on provisioning for the likely rise in non-performing loans. This was "a concern" for supervisors, he warned. (FT)

EU/FISCAL: The EU budget commissioner has warned Poland and Hungary that Brussels is ready to cut them out of the recovery fund and proceed with the project without them if they continue to block Europe's upcoming budget. Johannes Hahn said that Warsaw and Budapest "cannot stop us from helping our citizens" as he confirmed that the commission's lawyers had identified possible ways of circumventing the two capitals' objections to the EU's spending plans. His intervention, in a Financial Times interview, steps up the pressure on the two countries as they block the planned €750bn pandemic recovery fund as well as the EU's seven-year budget. (FT)

EU/FISCAL: With the EU's plans for a landmark €1.8 trillion budget-and-recovery package stalled, a first glimpse emerged Thursday of a way out of the crisis. A Polish deputy prime minister, Jarosław Gowin, told reporters that Warsaw could potentially accept a "binding" declaration — approved by the EU's 27 heads of state and government — to clarify how Brussels would use a new "conditionality" mechanism tying EU budget funds to respect for the rule of law. (POLITICO)

FRANCE: France will vaccinate 1m particularly vulnerable people against coronavirus in January, especially those in old people's homes, with a further 14m being vaccinated in February and the rest of the population in the spring, Prime Minister Jean Castex said on Thursday. (FT)

ITALY: Italy reported a record number of daily coronavirus deaths Thursday, surpassing March's peak, as the government laid out a plan to restrict movements over the coming holiday season. New fatalities linked to the pandemic hit 993, ahead of 969 on March 27. Some 23,225 new cases were recorded, down 20% from the same day last week. The test positivity rate was stable, at about 10%. (BBG)

ITALY: Italian Prime Minister Giuseppe Conte extended a soft lockdown for just over a month, as his government seeks to prevent a flare up of the pandemic during holiday season. A three-tier system tailoring restrictions to regional contagion levels will run through to Jan. 6. The premier wants to avoid a new wave mirroring the outbreak that followed a summer relaxation of the curbs, as well as avert a new strict nationwide lockdown that crippled the economy early this year. "A new resurgence would be inevitable" if the government did not impose further curbs, Conte told reporters. The premier said he "strongly recommended" that Italians don't invite people from other household into their homes over coming weeks. (BBG)

ITALY: Italy plans to sell 7 billion euros ($8.5 billion) of bills due Dec 14, 2021 in an auction on Dec 9. (BBG)

GREECE: Greece will keep lockdown measures in place for an extra week following a slower than predicted decline in Covid-19 cases in the northern city of Thessaloniki and its surrounding regions. (FT)

RATINGS: Potential sovereign rating reviews of note scheduled for after hours on Friday include:

• Fitch on Italy (current rating: BBB-; Outlook Stable), Malta (current rating: A+; Outlook Stable) & Sweden (current rating: AAA; Outlook Stable)
• DBRS Morningstar on Germany (current rating: AAA, Stable Trend) & Poland (current rating: A, Stable Trend)

U.S.

FED: Economist Christopher Waller has been confirmed as a Federal Reserve governor, following a near party-line vote Thursday in the Senate. At the same time, the previous controversial nomination of Judy Shelton for a similar position is likely over now that she has lost key Republican support and the Democrats have officially gained another seat. Though he had much stronger bipartisan support during his confirmation hearing, Waller's name passed by a 48-47 vote, with Republican Rand Paul being the sole GOP member to vote against. (CNBC)

FED: MNI BRIEF: Fed Balance Sheet Holds Near Record at USD7.22 Tln

• The Fed's balance sheet edged up USD6 billion over the last week to USD7.22 trillion, data released Thursday showed, keeping it close to the record high of USD7.24 trillion from mid-November - on MNI Main Wire and email now - for more details please contact sales@marketnews.com.

ECONOMY: MNI INTERVIEW: Rising Virus Cases Keep US Service Workers Away

• Increasing Covid-19 case counts are driving workers away from the U.S. services sector, and even with signs a vaccine is coming it may take years to restore the confidence of customers kept out by health restrictions, Institute for Supply Management chair Anthony Nieves told MNI Thursday - on MNI Main Wire and email now - for more details please contact sales@marketnews.com.

ECONOMY: MNI REALITY CHECK: November Hiring To See Seasonal Slowdown

• Job growth in the U.S. slowed again in November as lower-than-average seasonal hiring in the services industry and rising Covid-19 case counts across the nation again drove workers away from the market, recruiters and industry leaders told MNI. But positive data from alternative sources through the month means there's potential for an upside surprise - on MNI Main Wire and email now - for more details please contact sales@marketnews.com.

ECONOMY: A powerful panel of U.S. regulators is warning that a surge in coronavirus-driven bankruptcies could jam up the court system so badly that corporations might go into liquidation while they await hearings. In its final annual report released during the Trump Administration, the Financial Stability Oversight Council outlined dangerous trends in leveraged lending, short-term funding markets and other corners of finance. With so many companies suffering clash flow shortages during the economic downturn, the group said businesses may struggle to pay their debts. And with courts overwhelmed with bankruptcies, risks are rising that firms won't be able to restructure their debts in a timely fashion, potentially "forcing them into liquidation," according to the report. (BBG)

ECONOMY: U.S. President-elect Joe Biden on Thursday named Brian Deese, who helped lead President Barack Obama's efforts to bail out the automotive industry and negotiate the Paris climate agreement, as his top economic adviser. (RTRS)

FISCAL: Senate Majority Leader Mitch McConnell said he has seen "movement in the right direction" toward a coronavirus stimulus deal. Congressional leaders still have a lot of work to do to scrape together a relief package before the end of the year. McConnell, a Kentucky Republican, said a compromise "is within reach" after Democrats cut their demands for relief spending. He reiterated his support for a roughly $500 billion aid plan which would address small business loans, education funding and Covid-19 vaccine distribution. Even so, Senate Minority Leader Chuck Schumer, D-N.Y., said his GOP counterpart "does not seem inclined to compromise." (CNBC)

FISCAL: A POLITICO reporter tweeted the following on Thursday: "Nearly every source i've spoken to since this morning say they feel better about getting a targeted covid deal than an omnibus spending deal. Meaning, there's a universe in which there's a small covid deal and then a stopgap spending deal till March." (MNI)

FISCAL: Some states and cities are forging ahead to provide relief to residents financially scarred by the Covid crisis, as negotiations for a federal rescue package continue on Capitol Hill. Alaska, California, Colorado, Maryland, New Mexico and New York City are among the areas that have injected fresh rounds of assistance over the past two weeks, including stimulus checks, extra unemployment benefits, interest-free loans for small businesses and housing assistance. Minnesota lawmakers are working to push through similar measures. (CNBC)

CORONAVIRUS: The US on Thursday reported more than 200,000 coronavirus cases in a single day for the first time, while hospitalisations continued to climb and deaths rose by the third-biggest daily jump on record. States reported a further 210,161 coronavirus cases, eclipsing the previous record of 195,695 set on Wednesday, according to Covid Tracking Project data. (FT)

CORONAVIRUS: President-elect Joe Biden said he would ask all Americans to wear a mask to prevent the spread of the coronavirus for the first 100 days of his administration as well as issue a "standing order" requiring face coverings in federal buildings and on all interstate transportation. "Not forever, for 100 days," he said. "And I think we'll see a significant reduction" in infections. (BBG)

CORONAVIRUS: Americans should avoid traveling and congregating for the remainder of the holiday season, White House coronavirus advisor Dr. Anthony Fauci said, warning that the current surge of Covid-19 hospitalizations "is not fake." "I know how difficult that is, we all have a strong degree of empathy knowing — and myself included — about wanting to be with your family, wanting to have a large Christmas dinner with family and friends over," Fauci told MSNBC's "Andrea Mitchell Reports." "Right now that just should not be done. To the best of our capabilities we should avoid travel and avoid congregate settings," he said. (CNBC)

CORONAVIRUS: California will impose a limited stay-at-home order on certain regions of the state where Covid-19 cases are placing a strain on intensive care units, Gov. Gavin Newsom announced Thursday. The state will be split into five regions — the Bay Area, Greater Sacramento, Northern California, San Joaquin Valley and Southern California. If the remaining ICU capacity in a region falls below 15%, it will trigger a three-week stay-at-home order, Newsom said. (CNBC)

CORONAVIRUS: New York City Mayor Bill de Blasio on Thursday announced the creation of the Pandemic Response Institute dedicated to preparing the city for future health emergencies and epidemics. (FT)

CORONAVIRUS: Delaware Gov. John Carney issued a stay-at-home advisory for the state during the holidays, discouraging residents from gathering indoors with anyone outside their immediate household from Dec. 14 through Jan. 11. The advisory does not apply to workplaces or commuting, according a release from the governor's office. Carney also issued a broader mask mandate, requiring Delawareans to cover their faces any time they're inside with people outside their household. Masks were already required in public settings, but the new guidelines extend to private gatherings as well. (CNBC)

COORNAVIRUS: Massachusetts is preparing to boost its field hospital capacity this weekend as the state prepares for a second surge of coronavirus infections. (FT)

POLITICS: The Wisconsin Supreme Court on Thursday said it would not hear President Donald Trump's latest legal attempt to challenge his loss to Joe Biden in the presidential election. (CNBC)

POLITICS: With weeks until two critical Senate runoff elections in Georgia, both races appear centered on accusations of improper equity trading and President Donald Trump's mixed messaging about the integrity of the state's ballots. (CNBC)

POLITICS: Some progressives tell Axios they believe the window for influencing President-elect Joe Biden's Cabinet selections has closed, and they're shifting focus to policy — hoping to shape Biden's agenda even before he's sworn in. (Axios)

POLITICS: Even as Republicans balk President Donald Trump is considering pre-emptively pardoning as many as 20 aides and associates before leaving office, frustrating Republicans who believe offering legal reprieves to his friends and family members could backfire. Trump's strategy, like much of his presidency, is non-traditional. He is eschewing the typical protocol of processing cases through the Justice Department. And he may argue that such pre-emptive pardons for his friends and family members are necessary to spare them from paying millions in legal fees to fight what he describes as witch hunts. Those up for clemency include everyone from Trump's personal attorney, Rudy Giuliani, to several members of his family — all people who haven't been charged with a crime. Weighing on Trump's mind is whether these pardons would look like an admission of guilt. (POLITICO)

POLITICS: Fresh off another rejection in Pennsylvania's courts, Republicans on Thursday again asked the U.S. Supreme Court to block President-elect Joe Biden's victory in the battleground state, while the state's lawyers say fatal flaws in the original case mean justices are highly unlikely to grant it. (Washington Post)

STIRS: MNI POLICY: U.S. Treasury Panel Mulls Funding Market Reforms

• Short-term funding markets still have "potentially significant" vulnerabilities, a U.S. regulatory panel reported Thursday, warning that new safeguards may be needed. The Financial Stability Oversight Council, led by the Treasury Department, said threats remain in nonfinancial business leverage, short-term wholesale funding markets, cybersecurity, and nonbank mortgages. The panel recommends regulators review vulnerabilities including the risk of large-scale redemptions in money-market mutual funds, and any role leveraged nonbank entities may have played in March's repo market stresses - on MNI Main Wire and email now - for more details please contact sales@marketnews.com.

EQUITIES: The Trump administration has sued Facebook Inc., accusing the social-media company of illegally reserving high-paying jobs for immigrant workers it was sponsoring for permanent residence, rather than searching adequately for available U.S. workers who could fill the positions. (WSJ)

OTHER

GLOBAL TRADE: Veteran engineers and high-level executives are leaving top US chip design toolmakers for Chinese rivals as Beijing seeks to break America's near monopoly on this key segment of the semiconductor industry. Three Chinese start-ups established since September last year were founded by or have hired executives and engineers from Synopsys and Cadence Design Systems of the US, the world's two biggest makers of electronic design automation (EDA) tools, as such software is known. The start-ups include Nanjing-based X-Epic, Shanghai Hejian Industrial Software and Hefei-based Advanced Manufacturing EDA Co, or Amedac, in which Synopsys owns a stake. The push to recruit US chip tool talent comes as Washington's crackdown on Huawei Technologies exposes key weaknesses in China's chipmaking ecosystem, including in EDA tools, which are used to design integrated circuits, printed circuit boards and other electronic systems. (FT)

GLOBAL TRADE: Japanese chipmaker Kioxia has received permission from U.S. authorities to export some products to sanctioned Chinese telecommunications equipment manufacturer Huawei Technologies, Nikkei has learned. (Nikkei)

GLOBAL TRADE: A proposed executive order aimed at keeping American cloud computing companies out of certain foreign countries is being circulated within the Trump administration and to tech industry players, Axios has learned, disconcerting the firms that could be affected. The proposal would likely represent a chance to plant another tough-on-China flag before the president leaves office. Trump's Commerce Department, where the draft order originated, has repeatedly sought to prove that it will stand up to countries that it believes want to supplant or infiltrate American tech. (Axios)

U.S./CHINA: The U.S. Justice Department is discussing a deal with Huawei Technologies Co. finance chief Meng Wanzhou that would allow her to return home to China from Canada, in exchange for admitting wrongdoing in a criminal case that has strained Beijing's relations with the U.S. and Canada, people familiar with the matter said. Lawyers for Ms. Meng, who faces wire and bank fraud charges related to alleged violations of U.S. sanctions on Iran on Huawei's behalf, have spoken to Justice Department officials in recent weeks about the possibility of reaching a "deferred prosecution agreement," the people said. (WSJ)

U.S./CHINA: The Trump administration on Thursday added China's top chipmaker SMIC and oil giant CNOOC to a blacklist of alleged Chinese military companies, a move likely to escalate tensions with Beijing before President-elect Joe Biden takes office. The Department of Defence designated a total of four additional companies as owned or controlled by the Chinese military, including China Construction Technology Co. and China International Engineering Consulting Corp. (SCMP)

U.S./CHINA: The U.S. is increasing the portion of the spying budget devoted to China by nearly one-fifth this year, U.S. officials said on Thursday, reflecting rising concern over what the Trump administration says is a top economic, security and counterintelligence threat from Beijing. While the precise amounts are classified, the officials said spending on China is being boosted across the roughly $85 billion annual intelligence budget to glean secrets from the country, analyze its current actions and predict its future course. "We have shifted resources in the FY21 budget to increase China spending by nearly 20 percent," the Office of the Director of National Intelligence said in a statement, referring to the government's fiscal year 2021, which began Oct. 1. In an interview, Director of National Intelligence John Ratcliffe said the shift involves "money and manpower," and suggested that some spy-agency analysts focused on counterterrorism would be refocused on China. "When the evidence is so clear, and increasingly clear, that China and China alone can compete with us in all spaces, when we've looked at all of the different threat streams... the resources needed to be shifted," Mr. Ratcliffe said. (WSJ)

U.S./CHINA: Sound and stable China-U.S. relations are essential for the post-pandemic world, Chinese Ambassador to the United States Cui Tiankai said on Thursday. "It is clear that the post-pandemic world would not be stable and global governance would not be effective without sound and stable relations between China and the U.S.," Cui said in his opening remarks at the annual conference of the Institute for China-America Studies (ICAS). This has been a very unusual year, probably a turning point in history, the ambassador said, underlining pressing priorities to overcome the pandemic, restore global economic growth and protect people's livelihood. (Xinhua)

GEOPOLITICS: Anticipation of a closer alliance between the EU and the incoming Biden administration as a counter to China's rising influence will be difficult to put into practice as the U.S. focus is on protecting its hegemony in leading the western alliance while Europe's concerns are protecting its economic interests, wrote Hu Xijin, the editor of the state-run Global Times. The two sides will have difficulties in coordinating their desired goals and policy measures, and China shouldn't have any fears beyond the psychological pressure, the commentary said. (MNI)

CORONAVIRUS: The global death toll of the coronavirus has climbed to 1.5 million, according to a tally from Johns Hopkins University. More than 10,000 people die each day due to the virus, Reuters reports. (CNBC)

CORONAVIRUS: When Pfizer Inc. said last month it expects to ship half the Covid-19 vaccines it had originally planned for this year, the decision highlighted the challenges drug makers face in rapidly building supply chains to meet the high demand. "Scaling up the raw material supply chain took longer than expected," a company spokeswoman said. "And it's important to highlight that the outcome of the clinical trial was somewhat later than the initial projection." Pfizer still expects to roll out more than a billion doses in 2021 as originally planned. (WSJ)

CORONAVIRUS: Moderna says participants in the Phase 1 study of mRNA-1273 retained high levels of neutralizing antibodies through 119 days following first vaccination. Study was led by the National Institute of Allergy and Infectious Diseases. (BBG)

JAPAN: Japan aims to restore the economy to its pre-pandemic level in the year ending in March 2022, according to government documents outlining a new stimulus package obtained by Bloomberg. The nation needs a fresh powerful economic stimulus to stem the risks of falling back into deflation, given a large demand shortfall in the pandemic- ravaged economy, the documents showed Friday. The government and the Bank of Japan will closely coordinate on their policy mix, while the package will focus on virus measures, economic restructuring for the post-pandemic era and infrastructure resilience, the documents showed. The documents didn't mention the cost of the package, but said it would be funded by a third extra budget and a regular budget for the next fiscal year. The third extra budget is set to be announced next week. (BBG)

JAPAN: Japan plans to extend travel campaign until end-June. (Kyodo)

AUSTRALIA/CHINA: China's deputy ambassador to Australia has accused Scott Morrison of overreacting to an inflammatory tweet by a Chinese official and has reiterated that Australia will have to take "concrete steps" if it wants to improve the bilateral relationship. (ABC)

NEW ZEALAND: Fonterra has lifted the mid-point of a narrowed milk price forecast to $7.00 per kg of milk solids from the previous mid-point of $6.80, driven by demand out of China. The co-op also raised its first-quarter normalised earnings and kept to its 2020/21 earnings forecast of 20 to 35 cents per share. (NZ Herald)

SOUTH KOREA: South Korea reported more than 600 new coronavirus cases on Friday, the most in nearly nine months, despite stronger antivirus measures, fueling concerns over a bigger wave of infections during the winter. (FT)

SOUTH KOREA: The Seoul city government said Friday it will reduce bus and subway services by 30 percent after 9 p.m. to help curb the spread of the coronavirus. Acting Seoul Mayor Seo Jeong-hyup made the announcement during a virtual press briefing, saying the reduction will apply to buses starting Saturday and to the subway starting Tuesday. (Yonhap)

SOUTH KOREA: South Korean President Moon Jae-in reshuffled his cabinet, replacing four ministers amid decline in approval rating. (BBG)

BOC: MNI BRIEF: BOC Should Pare QE Next Week: CD Howe Shadow Panel

• Bank of Canada should pare back QE at its meeting next week, according to six of nine members on a shadow council run by the C.D. Howe think-tank. The current pace of at least CAD4 billion a week of bonds, itself scaled back earlier this year from a pace of CAD5 billion, still left many members concerned "about the Bank's apparent role as a major buyer of government debt," according to the report - on MNI Main Wire and email now - for more details please contact sales@marketnews.com.

TURKEY/RUSSIA: Lawmakers took aim at Russia in the annual defense policy bill, with provisions that include sanctions on Turkey for purchasing a Russian- made missile system and on the Nord Stream 2 natural gas pipeline from Russia to Germany. The legislation, which was agreed to by armed services committee members of both parties in both chambers, could get floor votes in the House and Senate as soon as next week. It's expected to pass despite veto threats from President Donald Trump who's demanding that it include a provision abolishing a law that protects technology companies from liability over most user-generated content. Trump also opposes a provision in the measure to rename military bases that honor Confederate generals. (BBG)

MEXICO: Mexico's senate may vote as soon as next week on a currency bill that has sounded alarm bells at the central bank and risks triggering sanctions from the U.S. The legislation would force the central bank to buy up foreign currency from local banks, who end up with excess dollars from cash remittances and tourism. The proposed law is intended to ease currency transactions in a market that's been hamstrung by U.S. money-laundering controls, but carries a risk that the central bank itself could face penalties for handling dollars that may be of dubious origin. (BBG)

MEXICO/RATINGS: S&P affirmed Mexico at BBB; Outlook Negative

BRAZIL: Talks between government and Congress over tax reform are interrupted, said Economy Minister Paulo Guedes on a virtual panel. Government does not want proposal to raise tax burden, said the Minister. Government proposed flexible fiscal target for 2021 because of uncertainties in revenue behavior, explained. (BBG)

SOUTH AFRICA: South African President Cyril Ramaphosa reimposed several curbs aimed at containing the coronavirus pandemic in one of the nation's biggest municipalities, which is battling a second wave of infections. A 10 p.m. to 4 a.m. curfew will be reinstated in Nelson Mandela Bay in the south of the country, Ramaphosa said in a televised address on Thursday. Alcohol sales be restricted and the consumption of alcoholic beverages in public spaces will be forbidden. (BBG)

RATINGS: Potential sovereign rating reviews of note scheduled for after hours on Friday include:

• Moody's on Russia (current rating: Baa3; Outlook Stable) & Turkey (current rating: B2; Outlook Negative

OIL: Unable to agree on a long-term production plan, OPEC and its partners will go month-to-month on setting output levels, aiming to release crude gradually onto the market without tipping it into a supply glut during an uncertain recovery from the coronavirus pandemic. The deal, announced Dec. 3, calls for the OPEC+ alliance to boost production by an initial 500,000 b/d in January, after which ministers will meet monthly to determine whether to tweak that for the month ahead. Each monthly adjustment will not exceed 500,000 b/d in either direction, Russian energy minister Alexander Novak said, while Iranian oil minister Bijan Zanganeh told state media that the arrangement will remain in place until the total production rise reaches 2 million b/d. (Platts)

OIL: Russian Deputy Prime Minister Alexander Novak told state Rossiya-24 TV on Thursday the cumulative oil output increase by the OPEC+ group will likely reach a planned 2 million barrels per day (bpd) by April barring a force majeure. OPEC and Russia on Thursday agreed to slightly ease their deep oil output cuts from January by 500,000 bpd comparing to earlier planned 2 million bpd. (RTRS)

CHINA

YUAN: China should include yuan exchange rate volatility in monetary policy frameworks such as the formation of a Financial Conditions Index (FCI), YiCai reported on Thursday citing Guan Tao, an economist from BOC International. Since the PBOC has stopped normalized intervention in the forex market, a FCI could serve as a tool to assess liquidity in the market and as a reference to future policy decisions, Guan said. A FCI would help ensure domestic economic and financial stability and would not target a specific exchange rate level, YiCai reported citing Guan. (MNI)

CAPITAL FLOWS: China should include regulations on cross-border data flow in trade and investment negotiations and take the initiative on these issues given the lack of a universal data policy, the Economic Information Daily reported. Data is a strategic resource which is a part of sovereignty, regardless of whether it is owned by individuals or the state, the Daily report said. China should establish legal systems that balance data protection and data flow. Ensuring data protection and privacy is seen as one barrier preventing China from becoming a part of the CPTPP. (MNI)

OVERNIGHT DATA

AUSTRALIA OCT RETAIL SALES +1.4% M/M; SEP -1.1%

NEW ZEALAND Q3 BUILDING WORK PUT IN PLACE +34.6%; MEDIAN +31.5%; Q2 -22.6%

SOUTH KOREA OCT BOP CURRENT ACCOUNT BALANCE +US$11.6579BN; SEP +US$10.1255BN
SOUTH KOREA OCT BOP GOODS BALANCE +US$10.1503BN; SEP +US$11.9336BN

CHINA MARKETS

PBOC NET DRAINS CNY110 BILLION VIA OMOS FRI

The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with rates unchanged at 2.2% on Friday. This resulted in a net drain of CNY110 billion given the maturity of CNY120 billion of reverse repos today, according to Wind Information.

PBOC SETS YUAN CENTRAL PARITY AT 6.5507 FRI VS. 6.5592 THURS

The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower for a third day at 6.5507 on Friday, compared with the 6.5592 set on Thursday.

MARKETS