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Good morning. A last-minute setback in post-Brexit trade talks, an OPEC+ deal and tightening screws on the EU's rebels. Here's what's moving markets.

A Step Back

Brexit trade talks that had been on the verge of a breakthrough descended into a fight between the U.K. and France on Thursday. With negotiators working around the clock in London, optimism had been growing for days that an agreement could be struck this weekend. But British officials said the European Union had suddenly turned up with a new set of demands, sending the talks backward. They didn't say what the demands were and EU officials denied it. Senior figures close to the European side questioned whether the remarks from the U.K. were another case of brinkmanship to pile last-minute pressure on the talks or an effort to disguise the fact that the British themselves are making concessions.

A Step Forward

After five days of difficult talks that exposed new rifts between core members, OPEC+ agreed to gently ease output cuts next year. The deal appeared to satisfy the oil market and most of the cartel's members, but strained the group's unity and set up testing times ahead. After a split emerged between Saudi Arabia and the United Arab Emirates, the cartel couldn't agree on what had been widely expected before this week: a full three-month delay to the scheduled January output increase. Instead, ministers resolved to add 500,000 barrels a day of production to the market next month, then hold monthly meetings to decide on subsequent moves. The accord could add a maximum of 2 million barrels a day to the market. Brent crude oil futures rose as much as 2.5%, reaching their highest level since March.

Hardball

EU leaders are preparing to get around the threat posed by Poland and Hungary's veto of a stimulus fund as Warsaw showed signs of cracking. The clock is ticking to the end of the year, when the lack of unanimity will trigger an emergency budget for the bloc. A new plan would cut Hungary and Poland out of the 750 billion-euro coronavirus-rescue fund, effectively stripping them of the power to stop the flow of much-needed stimulus to the continent's battered economies. It would also leave the bloc without a fully functional regular budget. Manfred Weber, head of the European People's Party caucus in the European Parliament, described this as a "fall-back" option if the holdouts don't relent.

Unwelcome Visits

With new daily cases in France, the U.K. and Italy starting to slow after sweeping restrictions were introduced, the tallies remain stubbornly high in the U.S. Since the country logged its deadliest day of the pandemic on Wednesday, several governors' attention has turned to the virus's spread within people's homes, as hang-out culture remains an open avenue for household mixing after crackdowns on restaurants, gyms and similar sites. President-elect Joe Biden said he would ask all Americans to wear a mask to prevent the spread of the coronavirus for the first 100 days of his administration as well as issue a "standing order" requiring face coverings in federal buildings and interstate transportation. Anthony Fauci, the top infectious-disease expert in the U.S., said he plans to stay on under Biden. In other news, Moderna's mRNA vaccine candidate showed potential for durable immunity. 

Coming Up…

Euro Stoxx 50 futures are pointing modestly lower after a mixed session in Asian markets. The earnings agenda is mostly blank, except for monthly traffic data from insolvent budget carrier Norwegian, which unveiled proposals to reduce its fleet and raise cash on Thursday. German factory orders are due this morning, expected to show a pick-up in October. U.S. nonfarm payrolls for November are due in the afternoon, forecast to show continued gains, albeit at a slower pace.

What We've Been Reading

This is what's caught our eye over the past 24 hours. 

And finally, here's what Cormac Mullen is interested in this morning

With investors primed for a year-end rally in risk assets, a number of warning signs are flashing that the record-breaking U.S. equity run is overextended. A stellar November helped the S&P 500 Index close above its upper monthly Bollinger band, but that may signal a period of consolidation is ahead. Following each of the last three such occurrences, the U.S. stock benchmark posted declines for at least the next two months, as noted by Saut Strategy's Andrew Adams. Meanwhile, a Cboe gauge measuring the volume of bearish options bets relative to bullish ones for U.S. single stocks is highlighting investor positivity at extreme levels. The indicator's five-day moving average has hit its lowest in 20 years, which can often be a contrarian signal for equity markets. Thirdly, a whopping 93% of stocks in the S&P 500 were trading above their 200-day moving average this week, a level used by technical analysts to determine whether a stock is in an uptrend. That's the highest in seven years. And finally, although technology shares have taken a back seat to the recent market narrative looking for gains in cheaper value stocks, the Nasdaq 100 Index still managed to hit a fresh record high Thursday. The tech-heavy gauge -- up 43% this year -- is now trading about two standard deviations above its 50-day moving average, a signal its recent rise may have gone too far. A Santa Claus rally in December may be asking a bit much of the U.S. stock market.

 

Cormac Mullen is a cross-asset reporter and editor for Bloomberg News in Tokyo.

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