Good morning,

Let’s get the good news out of the way first!… The vaccine rollout begins today in the UK and is likely to gather pace in the days and weeks ahead, assuming there is enough availability from the manufacturers. This has already been dubbed ‘V day’ by Matt Hancock and is really the government’s chance to switch the narrative on covid from reactive to proactive. Such a shift will need to be carefully managed, as back slapping isn’t what’s required, but being in a position to build confidence will be critical for the wider, consumer driven, recovery.

That consumer drive recovery is a mixed bag if you look at November’s retail sales. The data show that total retail sales growth slowed to just 0.9% as we were in lockdown for most of the month. The lack of footfall has claimed some high profile stores in the last few weeks, but those with a largely online retail experience have understandably faired well, with increased of around 8%. The major winners were supermarkets, with sales up by a quarter and online shopping double that of what it was last November.

Now, Brexit: Boris is off to Brussels later this week to see if he and Ursula von der Leyen can get agreement in hours, where others have failed in months. The market has tempered its expectations once again. The options market is skewed towards a no deal outcome, with more people buying protection against sterling moving lower than higher and though this week’s meeting won’t be a final roll of the dice (because markets will hope that December 31st is the real deadline) it is going to set the tone for risk as we go into the end of the year.

The further twist to this is that yesterday MP’s voted to restore the sections of the Internal Market Bill that allows the government to break international law should it be required. This contentious piece of legislation was pushed back on heavily and had been taken out by the House of Lords, so the move to reinstate it is being viewed poorly across the Channel. However, the government has said that they’d be willing to remove or deactivate these clauses in the event that a deal can be reached. The three main sticking points remain fish, the level playing field and how everything is enforced – the FT has put together a summary of the problems within each point, which is worth a couple of minutes.

The US relief bill is the other never ending story…. Both sides want to agree a stimulus package at the same time as signing off a government funding plan. Now though it looks like they’re going to have to temporarily split the two agenda items and get a short term deal to continue government funding to the end of next week, as it’s due to expire on Friday. The $900bn stimulus deal that is being worked on is being touted by both sides as doable, but the market isn’t yet buying the positive noises coming from both camps and wants to see ink on paper before moving higher.

It’s ‘Safe Harbor Day’ in the US today, which in most other election years would be a day that goes largely unnoticed. It’s the day where states confirm their electoral college votes and any outstanding court cases have to be settled. This means that once today passes those votes are locked in and Congress will have to accept the votes that are sent its way. Trump has chosen this day to make a White House address, which is probably no coincidence. His lawyer, Rudy Giuliani would normally be nearby at a time like this but is currently in hospital with Covid-19.

Other news to be aware of: Japan is readying a $700bn stimulus package as covid is hitting the country relatively hard. As a relative measure, Japan has done incredibly well in managing the virus, with only 165,000 total cases, but the numbers are growing swiftly and they’re bringing in the military to help with their test and trace system.

The Australia – China spat is going nowhere, as Australia has passed a law that would allow them to retrospectively deny permission to overseas investments in the country. First on the list of projects to review is Victoria’s infrastructure agreement with China’s Belt and Road Initiative, which was signed in 2018. Bloomberg has a good summary of the current state of relations between the countries.

Aside from Trump’s address, we’ll be looking at Eurozone GDP for Q3 and little else. Markets are undecided on their theme for the day, so a quick shot in the arm from European GDP might send us slightly on the up.

Have a great day

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