It's a cod awful mess.
From Marc to Market:
Overview: Optimists see the belabored talk between the UK and EU as providing for a dramatic climax of a deal, while the pessimists warn that the divergence is real. Sterling opened three-quarters of a cent lower in early turnover and is now off around two cents. This, coupled with new US sanctions on Chinese officials, is helping spur a larger risk-off moment. Japanese, Chinese, and Hong Kong markets sold-off in the Asia Pacific region while small markets were firm. A five-week advance is also at risk in Europe, where the Dow Jones Stoxx 600 is off around 0.5%, though the FTSE 100, aided by a weaker pound, is posting a modest gain (~0.3%). US shares are also under pressure, and the S&P 500 futures are about 0.5% lower. Benchmark yields are mostly lower. The US 10-year is a couple basis points lower, around 0.94%, while most European yields are 2-3 bp lower, the UK 10-year Gilt yield is off around five basis points (0.30%). The Australian benchmark played catchup with the rise in US yields before the weekend and now offers about 10 bp more than the US. It is not just sterling that is weaker today. The greenback is firmer against nearly all the other currencies too. The yen and Swiss franc are holding in best, while sterling leads on the downside. The JP Morgan Emerging Market Currency Index is about 0.25% lower, which would be its biggest drop in a couple of weeks. Gold is softer, and in late morning turnover in Europe, it is near the middle of the $1822.5-$1842.5 range. Oil has come back lower, and the January WTI contract has given up the pre-weekend gain to return to around $45.50.
Asia Pacific
China reported November trade figures and reserves. Both were stronger than expected. Fueled by a surge in exports, China recorded a $75.4 bln trade surplus, which appears to be the highest ever. Through November, China has recorded a $460 bln trade surplus. The US accounted for about half of China's November trade surplus, and it is more than 50% above November 2019 levels. China shipped almost $52 bln of goods to the US, while its imports from the US rose by a third to $14.6 bln. China's trade surplus with the EU rose by 20% to $11.3 bln, as exports rose 8.6% from a year ago ($37.5 bln), and imports rose 4.5% ($11.3 bln).
Overall, China's exports rose 21% year-over-year in dollar terms to $268 bln. Medical supplies' shipments rose 42% in the January-November period, while electronic exports are up a quarter. Imports rose 4.5% year-over-year, a little less than October (4.5%) and well below expectations (7.0%). China imported a little more than 11 mln barrels of oil a day in November, around 6% more than in October, but practically flat on a year-over-year basis. Iron order imports fell below 100 mln tons for the first time in six months. Coal imports slipped for the second month. Copper imports also fell. Soy imports climbed.
Separately, but not completely unrelated, China reported a $50.5 bln rise in reserves to $3.178 trillion. In dollar terms, it is the largest increase since November 2013. In percentage terms, the 1.6% increase is also the largest in seven years. Changes in foreign exchange valuation played an important role. Consider this thought experiment. Assume that China has 20% of its reserves in euro-denominated instruments. The euro appreciated by 2.4% in November and could have accounted for around a third of China's reserves increase....
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