US equity futures, global stock and oil prices rose on Monday while the dollar and Treasuriss fell amid renewed hopes for economic revival on coronavirus vaccines, even as the world contended with surging case numbers and delays to fresh U.S. stimulus. Shortly after 2am ET, futures spiked to session highs, after AstraZeneca become the latest major drugmaker to say its vaccine for the virus could be around 90% effective, joining Pfizer and Moderna.

Ironically, while futures jumped amid expectations that at least one of these vaccines will be successful, AstraZeneca's own shares fell 1.8% as traders perceived the efficacy data as disappointing compared with rivals, whose efficiency was around 95%.

There was more Covid action, with Regeneron also jumping 5.7% in pre-market trading after it announced during late U.S. hours on Saturday that its antibody cocktail for treating early Covid-19 symptoms received FDA emergency-use authorization (EUA). "While not surprising, this represents another important milestone for the infectious disease franchise,” Barclays analyst Carter wrote, adding that he sees the treatment adding an “incremental near-term driver” for earnings from 4Q through next year.

Finally, also over the weekend we learned that the first COVID-19 vaccine could be available within weeks after the U.S. Food and Drug Administration said it was likely to approve in mid-December the distribution of the vaccine made by Pfizer and German partner BioNTech, a top official of the government’s vaccine development effort said on Sunday.

"Markets continue to look through the near-term Covid-19 burdens,” said Robert Greil, chief strategist at Merck Finck Privatbankiers. "With political uncertainty in the U.S. fading in addition to the end of the virus tunnel looming, speed bumps for markets become less scary going forward."

The rally showed investors are willing to look past the grim U.S. case numbers - cases topped 12 million over the weekend - and weak European economic data released on Monday. Evidence of high efficacy rates in experimental vaccines lifted the benchmark S&P 500 to a record high earlier this month, although gains have since been capped by concerns around more lockdowns to contain a surge in infections. Nevada on Sunday became the latest U.S. state to tighten restrictions on casinos, restaurants and bars, while imposing a broader mandate for face-coverings over the next three weeks.

Despite the backdrop of accelerating COVID-19 infections in the United States, the forecast helped to raise hopes that lockdowns that have paralyzed the global economy could be nearing an end: "Today’s vaccine news is positive, but it is only partly responsible for the rally in stock markets this morning, which is also being driven by the news that the United States hopes to start the vaccination program in under three weeks," said Philip Shaw, chief economist at Investec in London.

Meanwhile, after data last week signaled a faltering labor market recovery, flash readings of business activity surveys due today are expected to show the manufacturing and services sectors expanded at a slower pace in November. Indeed, the progress towards approval and roll-out of multiple vaccines overshadowed the sobering news concerning the first European PMI readings of November, which saw the service PMI tumble from 46.9 to 41.3, missing expectations, while mfg PMI beat despite also sliding amid the new covid lockdowns.

• EU Comp Flash PMI 45.1 vs. Exp. 46.1 (Prev. 50.0)
• EU Services Flash PMI 41.3 vs. Exp. 42.5 (Prev. 46.9)
• EU Manufacturing Flash PMI (Nov) 53.6 vs. Exp. 53.1 (Prev. 54.8)

Or maybe not, because after surging 0.9% in early trading on the AZN news, Europe's Stoxx 600 index which had risen to its highest since February, gave up all gains and was little changed as of 12:11pm in London, with health-care stocks among the weakest sectors, led - paradoxically - by the health-care index down -0.8%, with AstraZeneca -1.7%, and the personal care index was worst-performing sector, down 1.2%. Meanwhile, energy stocks continue to rally, up 2%; basic materials stocks also outperform, +1.3%; Banks are up 1.2%.

Despite the wobble, today's action took Europe's November gains to 15% and followed another record high for Asian equities even before the announcement of latest vaccine news.  MSCI’s broadest index of Asia-Pacific shares outside Japan looked set to end the day 0.8% higher. Australian shares gained 0.3% as the country eased some COVID-19 restrictions. Most of the country has seen no new community infections or deaths in several weeks. Chinese bluechips had finished 1% higher, Seoul’s KOPSI climbed 1.9% and Bangkok jumped 2.2% to hit a five-month high. China’s CSI 300 Index of key equities listed in Shanghai and Shenzhen rose 1.3% to close a session over 5,000 points for the first time since June 2015; a subindex of energy stocks adds 3.8% as the best performer among the measure’s 10 industry groups. Yanzhou Coal Mining rose by the daily limit of +10% while China Oilfield Services was up +6.7%. The SSE 50 Index of large caps advances 1.7% to highest in 12 years after hovering near that level since July

In FX, the BBDXY slipped to new lows for the year (-0.30%), while the the euro edged up to 1.1864 as the dollar tested the bottom of a range. The pound rallied as much as 0.8% to 1.3381, highest since Sept. 2, bolstered by signs the U.K. and European Union are close to agreeing a deal. According to Bloomberg, sterling options suggest a Brexit trade deal is largely priced in; demand for puts stays strong across tenors, with the front-end better bid for dollar topside. In Asia, the Renminbi underperformed slightly as onshore rates dipped, following numerous (consecutive) days of gains last week. However, the overall disposition of Asian currencies was healthy, reflecting what is now an embedded trend vs the USD (KRW +0.30%, THB +0.15%).

In rates, yields rose around the globe amid a wave of risk-on sentiment. Treasury futures hovered near session lows as U.S. trading began after the AstraZeneca news, which added to pressure on Treasuries with holiday-week compressed auction cycle set to begin. Yields were cheaper by 0.5bp to 3.6bp across the curve led by long end, steepening 2s10s and 5s30s by more than 2bp; 10-year yields around 0.85% is ~3bp higher on the day and ~2bp wider vs bunds. Sales include record-sized 2Y ($56BN) and 5Y ($57BN) auctions on Monday and $56BN sale of 7-year paper on Tuesday.

Commodity markets rose with traders optimistic about a recovery in crude demand pushing oil higher. Brent crude futures rose 63 cents, or 1.4%, to $45.59 a barrel in London. WTI crude gained 49 cents, or 1.2%, to $42.91 a barrel. Both benchmarks jumped 5% last week. “Positive sentiment continues to be driven by the recent good news about the efficacy of coronavirus vaccines in development and the expectation that the OPEC+ meeting at the end of this month could see the group extend current cuts by three to six 6 months,” said Stephen Innes, chief global markets Strategist at Axi, a financial services firm.

Safe-haven gold, meanwhile, drifted at $1,872 per ounce, having lost almost 10% since peaking in earlier August.

On Today's calendar we get the Chicago Fed Activity Index, and the Markit US Manufacturing PMI data. Fed speakers include Barkin, Daly, Evans. Also as noted above, the U.S. sells 2Y and 5Y notes, and TSY bills.

Market Snapshot

• S&P 500 futures up 0.6% to 3,575.75
• STOXX Europe 600 up 0.5% to 391.56
• MXAP up 0.6% to 189.96
• MXAPJ up 0.8% to 630.45
• Nikkei down 0.4% to 25,527.37
• Topix up 0.06% to 1,727.39
• Hang Seng Index up 0.1% to 26,486.20
• Shanghai Composite up 1.1% to 3,414.49
• Sensex up 0.5% to 44,095.28
• Australia S&P/ASX 200 up 0.3% to 6,561.59
• Kospi up 1.9% to 2,602.59
• Brent futures up 1.9% to $45.82/bbl
• Gold spot down 0.1% to $1,869.14
• U.S. Dollar Index down 0.2% to 92.20
• German 10Y yield rose 0.4 bps to -0.579%
• Euro up 0.2% to $1.1876
• Italian 10Y yield fell 0.8 bps to 0.522%
• Spanish 10Y yield fell 0.2 bps to 0.063%

Top Overnight News from Bloomberg

• President-elect Joe Biden intends to name his longtime adviser Antony Blinken as secretary of state, according to three people familiar with the matter, setting out to assemble his cabinet even before Donald Trump concedes defeat
• Several key allies for Trump appeared to lose their patience over the weekend. Senators Lisa Murkowski of Alaska and Kevin Cramer of North Dakota -- one of Trump’s staunchest allies -- on Sunday called for the transition to Biden to begin. Senator Pat Toomey congratulated Biden on his victory after Trump suffered another legal defeat in Pennsylvania
• The Trump administration is close to issuing a list of 89 Chinese aerospace and other companies that would be unable to access U.S. technology exports due to their military ties, Reuters reported, a move that could escalate tensions as the Biden administration prepares to take over
• The admission of foreign investors into China’s $15 trillion bond market—cemented this year when the country rounded out its inclusion in all three of the top global indexes—may just mark the big bang equivalent to WTO entry
• U.K. Prime Minister Boris Johnson will announce a massive increase in community coronavirus testing on Monday as part of a plan to reintroduce tiered restrictions in place of the England-wide lockdown that ends on Dec. 2
• Norges Bank reduces its daily foreign exchange sales on behalf of government from Nov. 23 as there is less foreign exchange for Norges Bank to convert than previously assumed due to reduced transfers from wealth fund
• The euro area is slipping into another contraction amid new virus restrictions that are taking a massive toll on parts of the economy. IHS Markit’s composite Purchasing Managers’ Index fell to 45.1 in November from 50 in October, hinting at declining output, according to data published Monday
• Germany is moving toward extending and tightening its shutdown restrictions, setting measures that would rein in New Year’s festivities as the country struggles to slow the rapid spread of the coronavirus

A look around global markets courtesy of NewsSquawk

Asian equity markets began the week on the front boot amid virus treatment hopes after reports the FDA granted EUA for Regeneron’s REGN-COV2 antibody cocktail but with some of the optimism in the region offset by concerns regarding rising infections. ASX 200 (+0.3%) traded higher following upgrades in domestic PMI data and as the energy sector spearheaded the commodity-led push after Ampol surged on reports it will receive a higher amount for the stake in its convenience property portfolio and will conduct a AUD 300mln share buyback. However, the gains in the index were restricted as financials lagged with IAG shares resuming their underperformance for a 3rd consecutive session. KOSPI (+1.9%) outperformed after a surge in exports for the first 20 days in November helped participants overlook the rising COVID-19 infection rates which prompted an increase in the Greater Seoul area social distancing level to 2 from 1.5 effective from Tuesday. Hang Seng (+0.1%) and Shanghai Comp. (+1.1%) were mixed with the mainland kept afloat following a PBoC liquidity injection and with Hong Kong subdued by weakness in casino and property names. Furthermore, the HK-Singapore travel bubble was delayed for 2 weeks which pressured shares in their respective flag carriers, while recent reports also noted the US is very close to declaring that 89 Chinese aerospace and other companies have links to the Chinese military which could stop them from receiving certain US exports. As a reminder, Japanese markets were closed due to Labor Thanksgiving Day.

Top Asian News

• Hong Kong-Singapore Bubble Delay Hits Travel Rebound Hopes
• Abu Dhabi Plans $122 Billion in Oil Spending to Boost Output

European equities kicked the week off higher across the board amid tailwinds from the APAC region and amid another positive COVID-19 vaccine update, this time from AstraZeneca, whose vaccine candidate reported an average efficacy of 70% across two dosing regiments. One regiment showed efficacy of 90% (half dose followed by a full dose at least one month apart), whilst the second regiment showed 62% efficacy when given as two full doses at least one month apart. Storing conditions are also favourable as the vaccine can be stored, transported and handled at normal refrigerated conditions (2-8 degrees Celsius/ 36-46 degrees Fahrenheit) for at least six months. By way of comparison, Pfizer/BioNTech's candidate showed a 90% efficacy rate with storage temperatures at -70 degrees Celsius, whilst Moderna's candidate showed efficacy of 94.5% with stable storage at standard fridge temperatures (2-8 degrees Celsius) for 30-days and shipping/long-term storage conditions at standard freezer temperatures of -20 degrees Celsius for 6-months. Since the update however, European cash and equity futures have waned off best levels (Euro Stoxx 50 +0.6%) but ES (+0.6%), NQ(+0.4%) and RTY (+1.0%) hold onto gains. The update resulted in flows into cyclicals as opposed to the rotational/reflationary playbook experienced upon the release of the early data from PFE/BNXT and MRNA. This cyclical play is reflected in European sectors as Oil & Gas, Basic Resources, Banks outpace peers whilst defensive sectors Utilities, Healthcare and Staples lag. Interestingly, AstraZeneca shares trade lower by some 1.5% with some citing the average efficacy being sub-par when compared to PFE/BNTX and MRNA, whilst others note of "buy the rumour, sell the fact" play. Nonetheless, losses in the largest FTSE 100 constituent has capped the index which trades with gains of some 0.3%, whilst losses in Healthcare prompted the SMI (-0.1%) to dip into negative territory. Elsewhere, the Travel & Leisure sectors is buoyed by the vaccine news alongside reports that UK will lift blanket quarantine restrictions on December 15th so families can travel to red list countries for Christmas, while the length of time people will need to self-isolate will be cut to 5 days from 14 days if a UK holidaymaker tests negative 5 days after returning. Thus, IAG (+4%) and easyJet (+5.4%) trade with firm gains, whilst Carnival (+2.8%) shrugs off reports that the US CDC escalated its warning for cruise travel to the highest level, alongside separate reports that Carnival's Holland America Line extended cruise pause to include all departures through March 31 2021.

Top European News

• U.K. Output Contracts as New Covid Lockdown Hits Services
• Germany Moves Toward Tightening Partial Lockdown to Dec. 20
• Bank That Pioneered Green Bonds Sets Ultimatum for Clients
• Europe’s Virus Lockdowns Push Economy Into Another Contraction

In FX, the Pound is outperforming across the board amidst heightened hopes that UK and EU negotiators can make further progress via videoconference following reports that a trade deal is just 5% away from being completed, albeit with the remaining unresolved issues said to be the core areas of contention. PM Johnson is supposedly working on significant intervention in an effort overcome differences and to this end is expected to speak to European Commission President von der Leyen to tray and clear the remaining obstacles. Cable has cleared several recent highs in response, including a pseudo double top circa 1.3312-14 on the way through September 3’s 1.3359 peak to expose 1.3400 and the 1.3403 September 2 apex, while Eur/Gbp is back below 0.8900 and eyeing 0.8861 from November 11. For the record, not much response to better than expected flash PMIs as services and composite readings both retreated into contractionary territory.

• AUD/NZD/CAD/DXY - The non-US Dollars are all revelling in the upbeat and risk-on market tone assisted by more positive COVID-19 vaccine updates, while the Aussie is also acknowledging improvements in PMIs and the Kiwi a healthy rebound in retail sales. Aud/Usd is back on the 0.7300 handle and Nzd/Usd is hovering around 0.6950, while Usd/Cad has retreated to test 1.3050 against the backdrop of buoyant crude prices in advance of comments from BoC’s Gravelle. Conversely, the Greenback has started the new week under pressure with the index hovering within a 92.343-92.072 range after dipping under the low seen on November 11 (92.129) awaiting the US national activity index, preliminary Markit PMIs and further Fed speeches from Daly and Evans.
• EUR - Somewhat mixed Eurozone PMIs have not really impacted the Euro, with perhaps more focus on the preliminary surveys that could show more coronavirus contagion given the resurgence in Spain and Italy. Instead, Eur/Usd is holding firmly above 1.1850 and targeting last week’s best levels clustered between 1.1891-94 for another attempt to reach 1.1900 and the 1.1920 pinnacle posted on November 9, but wary that this may well prompt more verbal intervention from the ECB.
• CHF/JPY - The traditional safe-havens are floundering alongside the Buck within tight ranges near 0.9100 and 104.00 respectively, with the former probably surprised to see no evidence of SNB action from weekly Swiss sight deposits and the latter devoid of domestic input due to Japan’s Worker’s Day market holiday.
• SCANDI/EM - Somewhat mixed impulses for the Sek and Nok in particular given broad risk appetite and the aforementioned rise in oil, but the Norges Bank cutting daily foreign currency sales to Nok 500 mn from Nok 1.6 bn. Hence, Eur/Sek and Eur/Nok are both meandering within 10.2240-2020 and 10.7135-6410 parameters. Elsewhere, the Try continues to unwind post-CBRT recovery gains, but the Zar is holding up relatively well in spite of SA ratings downgrades from S&P and Fitch.

In commodities, WTI and Brent Jan futures continue on their upwards trajectory on vaccine euphoria coupled by expectations that OPEC+ will continue current cuts through Q1 2021 irrespective of the recent vaccine updates, which, as things stand provide a rosier price outlook in the medium-term as reflected by the six-month Brent contango being at the shallowest since mid-June. Aside from that, news-flow has been somewhat light throughout early European hours. Overnight there were reports that Yemeni Houthis carried out a missile attack on a Saudi Aramco distribution station, although sources via Energyintel suggested there was no damage to any facilities or personnel. Separately, Abu Dhabi's Supreme Petroleum Council announced new discoveries of 22bln bbls of recoverable unconventional oil resources, although this is unlikely to impact near-term supply to the market as UAE is still constrained by OPEC+ quotas. WTI Jan now back under USD 43bbl (vs. low 42.29/bbl), whilst its Brent counterpart briefly eclipsed USD 46/bbl (vs. low 44.89/bbl) before yielding the handle. Spot gold and silver move in-line with the risk sentiment as the precious metals post mild losses with the former around USD 1870/oz (vs. high 1876/oz) whilst spot silver dipped below USD 24/oz (vs. high ~24.35/oz), whilst copper prices fail to coattail on the risk appetite as a union at the Candelaria mine accepted a wage offer, in turn bringing an end to a month-long strike, albeit "a worker’s union at Antofagasta’s Centinela copper mine is set to reject management’s latest contract offer next week, which could lead to strike action", according to ING.

US Event Calendar

• 8:30am: Chicago Fed Nat Activity Index, est. 0.3, prior 0.3
• 9:45am: Markit US Manufacturing PMI, est. 53, prior 53.4
• 9:45am: Markit US Services PMI, est. 55, prior 56.9
• 9:45am: Markit US Composite PMI, prior 56.3

DB's Jim Reid concludes the overnight wrap

Regular readers will know that the soundtrack to my WFH has been Acoustic Chill Radio. They do have a limited playlist though and after 8 months and I can now pretty much second-guess the loop of songs they are going to play once I hear one. I’ve always prided my self on being very knowledgable about music but there’s been one song that I’ve really, really liked that I’d never heard before. 8 months later I finally decided to try to find out what it was. Maybe it was some obscure artist I could impress people with once I was allowed back into the wild again. Imagine my shock when I discovered it was the acoustic version of the debut solo single from Zayn from One Direction and that it was actually a huge global hit in 2016. I’m not sure when I got old.

I might get a chance to recover from the shock in the second half of this week as with Thanksgiving on Thursday, activity is likely to progressively die down on Wednesday through to the weekend. The most important events of the last two weeks have both happened just before 7am NY on Monday with the Pfizer/BioNTech and Moderna vaccine news. It doesn’t feel like AstraZeneca/Oxford is quite ready to report but as a precaution I will have my eyes glued to the wires at this time today just in case. The latest on the vaccine from the weekend is that the US seems to be targeting December 11th or 12th for the start of the rollout, according to the head of the Warp Speed program. Overnight, the Telegraph has reported that the UK may give emergency approval to Pfizer’s vaccine as soon as this week.

In terms of the latest on the virus, as cases are stabilising in Europe, various governments are now planning to exit their lighter lockdowns. The Telegraph has reported that the UK will announce today that quarantine restrictions will ease in time for Christmas so that families can travel to high-risk countries to visit relatives while Bloomberg has reported that PM Johnson will announce a massive increase in community testing as part of a plan to reintroduce tiered restrictions. The French government is planning a three-phase reduction in lockdown measures in December. Italy is also mulling over the temporary easing of lockdown restrictions in the run-up to Christmas to allow shops to open for longer hours in the worst-hit regions. However, in the US, states are continuing to impose fresh restrictions with the latest being Nevada where Governor Steve Sisolak announced that capacity at gaming operations and venues including restaurants, bars and gyms will be reduced to 25% of fire-code capacity, down from 50%. Elsewhere, the Greater Los Angeles area will see outdoor dining get banned with restaurants, breweries and bars once again limiting their businesses to just pick-up and delivery. On the positive side, Regeneron’s antibody cocktail received an emergency-use authorisation from the US FDA for treatment of early Covid-19 symptoms.

On the restrictions, today we’ll know a bit more about how much they have stunted the economic recovery as the flash November PMIs from around the world are released. So far in Asia, Australia’s PMIs printed better than last month with manufacturing at 56.1 (vs. 54.2) and services at 54.9 (vs. 53.7) bringing the composite reading to 54.7 (vs. 53.5 expected). Meanwhile, markets in the region have started the week on the front foot with the Shanghai Comp ( +1.27%), Kospi (+1.83%) and ASX (+0.34%) all up. The Hang Seng is down a modest -0.09% and Japan’s markets are closed for a holiday. Futures on the S&P 500 are up +0.26%. In FX, the US dollar index is down -0.15%.

In other overnight news, Reuters has reported that the US is close to issuing a list of 89 Chinese companies (aerospace and other sectors) that have military ties and would be unable to access US technology exports.

In terms of week ahead, the Brexit talks will move to a virtual format after one of the EU negotiators tested positive for Covid-19. There had been reports last week suggesting that we may see a deal reached by the start of this week but it doesn’t feel we’re there yet. For a few months it’s felt like a case of five steps forward and four back on the path to some kind of deal. So progress but painfully slow. The Telegraph reported last night that PM Johnson is set to make a “significant Brexit intervention” whatever that means and speak to EC President Von Der Leyen “in an attempt to clear away final barriers” towards a deal. The article suggested that a week tomorrow is the new deadline. Face to face negotiations apparently begin again on Thursday.

Staying on the UK, this Wednesday will see the announcement of a one-year Spending Review, which will set departmental budgets for 2021-22. There had previously been hopes to conduct a multi-year review, but the Covid-19 uncertainty surrounding the public finances have seen the government opt for a one-year approach. This might give some clues though as to how long the fiscal taps will stay open and the first signs of how quickly and where taxes will be raised or public spending cut to try to restore some order. So important read-throughs for the future.

From central banks there isn’t a great deal taking place this week, though we will get the minutes from the FOMC’s November meeting on Wednesday. Our economists believe the focus will be on what the committee are thinking about in terms of changes to QE and perhaps on shaping future forward guidance. Their base case is that the Fed would prefer to gather a bit more information on the fiscal outlook and the economy before eventually extending the duration of purchases early next year.

Elsewhere in central bank world, today will see Bank of England Governor Bailey, as well as the MPC’s Haldane, Tenreyro and Saunders give evidence before the House of Commons’ Treasury Committee. Both the Riksbank and the Bank of Korea will also be announcing their latest monetary policy decision on Thursday.

Recapping last week now. The week started off with very promising vaccine news as Moderna announced efficacy numbers for its experimental vaccine that uses similar technology as that of Pfizer/BioNTech’s vaccine. The study showed a 94.5% efficacy rate and “only” needs to be transported at minus 20C, which is well above the minus 70C that the Pfizer/BioNTech vaccine is said to require. It also did well in reducing the severity of illness of those who still contracted the disease. This news moved markets less than the original Pfizer announcement; however, it gave the rotation trades into cyclicals slightly more momentum. The S&P 500 dropped -0.77% on the week (-0.68% Friday), while the high-growth tech stocks that make up the largest weightings of the index continued to lag.

Nevertheless, the NASDAQ rose +0.22% (-0.42% Friday) but the star of the week was Tesla which gained +19.86% after it was announced that the electric car maker would be included in the S&P 500 from December. Banks stocks on both sides of the Atlantic continued their rally even as yields fell, US banks rose +1.24% while European Banks were up a greater +4.00%. Similarly, European equities again outperformed given the STOXX 600’s more cyclical bias. The STOXX 600 ended the week +1.15% higher (+0.52% Friday) while the FTSE MIB (+3.84%), CAC 40 (+2.15%), and IBEX (+2.49%) all outperformed by even more.

Sovereign bonds gained even with the positive vaccine news as yields dropped back from close to their pandemic highs. US 10yr Treasury yields fell -7.2bps (-0.5bps Friday) to finish at 0.824% as 10yr Gilt yields dipped -3.6bps (-2.1bps Friday) to 0.30%. 10yr Bund yields were -3.6bps (-1.2bps Friday) to -0.58%. Elsewhere, credit spreads in the US and Europe tightened further on the week. US HY cash spreads were -11bps tighter, while European HY cash spreads tightened -18bps. US IG cash spreads tightened -5bps and IG was -4bps in Europe. In commodities, WTI (+5.03%) and Brent crude (+5.10%) rose sharply as global demand forecasts improved further as gold kept selling off (-0.96%). The last word goes to Bitcoin, which rallied +14.08% on the week (+3.59% Friday) as the cryptocurrency is dialling in on its all-time high from December 2017 again, but this time with more institutional buy-in. A fascinating story to watch.