MNI US Open: Looming Deadlines Weigh On Risk Appetite

EXECUTIVE SUMMARY:

• E.U.'S VON DER LEYEN TELLS SUMMIT THAT 'NO DEAL' MOST LIKELY SCENARIO AHEAD OF SUNDAY "DEADLINE"
• B.O.E. BAILEY: READY TO ACT ON BREXIT SHOCK IF NEEDED
• U.S. GOVERNMENT SHUTDOWN LOOMS AT MIDNIGHT
• VARIOUS REPORTS INDICATE E.C.B. DECISION THURSDAY WAS A COMPROMISE
• SANOFI AND GSK DELAY COVID VACCINE

Fig. 1: Growing Doubts Over A Brexit Deal

BBG/MNI

NEWS:

E.U.-U.K. Bruno Waterfield at The Times tweets a thread on Commission President Ursula von der Leyen's comments to the European Council summit:

• "During her #EUCO briefing Von der Leyen said she would not put a % odds on outcome but that there is a higher probability for no deal than a deal. Spain's Sanchez told her that if no deal decision by Sunday all EU countries must stick to the same clear message"
• "Ireland's Martin praised Sefcovic/Gove for closing deal on withdrawal deal implementation. He stressed no deal will be big loss for all: UK, Ireland, and EU etc. But noted deal cannot come at all cost."
• "EU's agreed lines for #EUCO's PMs and prezs: Situation is difficult. Main obstacles remain. Probability of a no deal is higher than of a deal. Negotiations resuming today. To be seen by Sunday whether a deal is possible. Contingency measures published yesterday. Good progress WA"

B.O.E.: The Bank of England's Financial Policy Committee sees the UK banking system remains resilient to a range of economic outcomes, with the capacity to support business and households even if conditions worsen, the Financial Stability Report Friday. On Brexit and the disruption to cross-border financial services post-transition, the BOE says most financial stability risks have been mitigated. However, the Bank says financial stability is not the same as market stability, adding that financial markets can be expected to react to the outcome of the negotiations on arrangements for trading goods and services between the UK and EU.

B.O.E.: There could be market disruption and volatility as the UK's transition period before leaving the EU comes to a close, the Bank of England's Financial Policy Committee warned Friday However, that UK banks were resilient and that financial stability was not likely to be endangered by any market disruptions.

U.S.: Fox's Chad Pergram sums up today's Congressional docket:

• "Talks continue behind the scenes today on a potential coronavirus package. But unclear what the path forward is. Also work on the omnibus spending bill"
• "Senate today takes procedural vote to end debate on final version of defense bill. It's possible the Senate could take last vote on the bill itself, too -if there's an agreement to proceed"
• "Senate still has not approved stopgap spending measure to avert a shutdown this wknd. Senate could do that today. Otherwise, gov't shuts down after 11:59:59 pm et tonight. Bill funds gov't through December 18"

E.U.-U.K. Morgan Stanley notes potential market moves under 'no deal' Brexit, per Reuters:

• MS sees EUR rallying to 0.95 under "No Deal"
• Sees negative rates and further QE top up in 2021
• FTSE 250 to fall 6-10% and Bank stocks 10-20%

E.C.B. (RTRS): European Central Bank policymaker Vitas Vasiliauskas said he had reservations about providing too much extra stimulus for the euro zone economy but considered the agreement the central bank reached on Thursday as good and positive. Speaking to reporters on Friday, he said he also had concerns about the ECB's rather downbeat assessment of risk, since there were several positive factors on the horizon. "My position was that we need to shoot selectively rather than with a machine gun, without care," Vasiliauskas said.

E.C.B. (RTRS): The European Central Bank is targeting favourable financing conditions rather than pumping a given amount of liquidity into the economy with its latest stimulus decision, ECB policymaker Francois Villeroy de Galhau said on Friday. Villeroy, who is also head of France's central bank, said on BFM Business radio that the aim was not "to invest a certain amount each month, but rather a result", which is favourable financing conditions for the economy. "We will do less if the financing conditions remain favourable like today. If the opposite is needed, we will do more," he said.

COVID (RTRS): Sanofi and GlaxoSmithKline said clinical trials of their COVID-19 vaccine showed an insufficient immune response in older people, delaying its launch to late next year and marking a setback in the global fight against the pandemic.The announcement on Friday, which highlighted the challenges of developing shots at record speed, hinders efforts to develop the multiple options that experts say the world needs to counter a disease that has killed over 1.5 million people.The news, which came on the same day as Australia axed a domestic vaccine project, is also a blow for many governments that have booked hundreds of millions of doses of the shot, including the European Union, United States and Britain.

COVID (RTRS): Britain's AstraZeneca signalled on Friday it would investigate combining its own experimental COVID-19 vaccine shot with Russia's Sputnik V, a move Russian scientists have suggested could sharply boost efficacy. The developers of Sputnik V last month used Twitter to suggest AstraZeneca try the combination. They said it was worth experimenting with the Russian model and using two different shots rather than the same ones.

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