Good morning,

We’ll start with a correction: Earlier in the week we said it was Facebook that was getting sued by 40+ US states, when it’s Google’s parent company, Alphabet (apologies, it’s been a long year!).  Unfortunately for Alphabet, that list of just who wants a piece of this legal action has grown longer, with more local and regional authorities lining up behind the states to get involved.

Other tech news: Microsoft says it has found malicious software in some of its systems following the SolarWinds hack. Microsoft uses some of SolarWinds network management software, but has been quick to confirm that they’ve “found absolutely no indications that our systems were used to attack others”.  The US government is in a real pickle with this one, as the breadth and depth of the attack becomes more apparent and has left one Senator “deeply alarmed, in fact downright scared”.  Most of the investigation so far is classified, so it’s hard to establish just how vulnerable critical infrastructure and intelligence has become.  It also seems to be the case that even though they now know about the attack, it may still be ongoing. The FT has a little more.

Staying in the US: The next bailout is all but a done deal, with the only real possible spanner being a change of heart from Donald Trump – which shouldn’t be entirely ruled out.  The legislation isn’t likely to be passed until next week though, which means that another emergency round of government funding will need to be signed off to prevent a mini shutdown from today.  Stock markets bid higher on the continued expectation that this was going to happen, so when it does finally get signed off they’ve probably not got too much higher to go.

The US is also the first country in the world to have two licensed covid vaccines, as the FDA’s ‘vaccines and biological products committee’ has recommended that the Moderna vaccine be approved by the FDA – so basically a done deal.  This means that the rollout of the jab could start next week and there are already six million manufactured doses ready for distribution.

In the UK we managed to deliver almost 138,000 doses to patients in the first week of the rollout, which though impressive from a standing start does need to be ramped up very swiftly and should hopefully serve as a reminder to people that we’re still months away from normality.  The government yesterday put millions more people into tier three and is also said to be considering closing all but non-essential retail in some areas if transmission numbers don’t turn around.  This weekend is expected to be the busiest shopping weekend of the year, with in person retail forecast to collect almost £3bn over the two days – which is going to mean crowds everywhere, so buyer beware.

on Brexit:  Michael Gove warned that the chances of a deal were less than 50% and BoJo and UvdL had another call yesterday, with both saying afterwards that large challenges remained.  This still feels like posturing to us and holding out for last minute concessions wherever possible, but we’ve been wrong before (see first line of the report).  The talks are set to resume today and the sticking point remains fishing, but also there seems to be issue around state aid, in that the EU want to be able to grant state aid at an EU level without rebuke, something that the UK finds unacceptable (and reasonably so).  Still, the direction of travel is the right one and we’re seemingly very close.

The EU has been able to reach agreement with someone else though: China.  It’s an agreement in principle to open up some investment opportunities in various sectors within China and in return to allow China to invest in Europe’s renewable energy infrastructure.  The news is unconfirmed and is in the South China Morning Post so make of that what you will – however the point they make which we can definitely agree with is that such a deal might make Joe Biden’s life a little trickier when it comes to forging a very united trans-Atlantic partnership that would be better equipped to stand up to China.  The agreement apparently has the backing of Angela Merkel and Emmanuel Macron, but not everybody is said to be behind it, with some Eastern European countries concerned that such a deal might frustrate the US who play a strong deterrent role along Europe’s Eastern border with Russia.

Today’s data calendar has a couple of items that would normally be considered big hitters, such as UK retail sales and the German IFO index – the latter could give some insight into what Europe’s biggest economy is in store for over the coming months, but UK retail sales from last month seems pretty irrelevant to the here and now and should therefore be overlooked.  For the markets it’s a big day of options expiries, both in equities and the FX market, and as such we might well see some volatility as these volumes roll off.

Have a great weekend.


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