• In Georgia, Democrat Warnock leads Republican incumbent Loeffler at 50.4% vs 49.6% and Democrat Candidate Ossoff is in a virtual tie with Republican incumbent Perdue at 50% vs 50% with around 97% of votes counted in both races
• US equity index futures head into the EU open softer, albeit the magnitude of price action is limited amid the close nature of the Georgia Senate races. US 10yr yield breached 1% to the upside
• In FX markets, the DXY remains below 89.50, EUR/USD trades above 1.2300 and GBP/USD maintains 1.36+ status
• NYSE is reportedly considering reverting to its original plan for the delisting of Chinese telecoms companies
• OPEC+ agreed for Russia and Kazakhstan to raise output by a total of 75k bpd in February and another 75k bpd in March. Saudi Arabia announced a surprise voluntary 1mln bpd cut
• Looking ahead, highlights include Final EZ, UK & US services & composite PMIs, German regional & national CPI, US ADP, factory orders, DoEs, Congressional Electoral College vote count, FOMC minutes, BoE's Bailey, supply from the UK & Germany

GEORGIA

US Georgia Senate Run-off results came in overnight In what was a closely contested race in which Democrat candidates led for most the count before the Republicans eventually caught up and briefly overtook the lead. As things stand with 97% of expected votes counted, Democratic Challenger Warnock leads Republican incumbent Loeffler at 50.4% vs 49.6% with Decision Desk calling Warnock as the winner of the Special Senate Race and Warnock declaring himself as the winner. Democrat Candidate Ossoff is in a virtual tie with Republican incumbent Perdue at 50% vs 50% after 97% of votes counted, although the full results are still unknown with workers set to halt counting for the night. (Newswires/CNN)

Georgia Secretary of State said workers will probably break for the night and resume vote counts on Wednesday morning, while officials in Chatham County in Georgia said they have stopped counting votes for the night and won't return until 08:00EST on Wednesday. (Newswires)

CORONAVIRUS UPDATE

US COVID-19 cases +173,915 (prev. +212,117); deaths +1,800 (prev. +1,418). New York Governor Cuomo said hospitalisations are at 8,590 which is a large increase from the day before (prev. 8,251), while NYC Mayor De Blasio suggested to stop the half measures and that it is time for a travel ban on the United Kingdom. (Newswires)

US scientists are reportedly studying if the Moderna (MRNA) vaccine supply can be doubled by cutting doses in half. (NYT)

UK PM Johnson said there will be daily updates on how many people have been vaccinated from Monday and that almost one in four of the over 80s have had their first shot, while he stated that they think there is the prospect of beginning to relax the lockdown by the middle of February but with lots of caveats and they will bring in measures to ensure people coming into the country are tested. Furthermore, it was later reported that passengers have been banned from boarding flight to the UK without a negative COVID test. (Newswires/Telegraph)

England Chief Medical Officer Whitty said there are unknowns in extending the gap between vaccine doses and the chances of it leading to a new mutation is a real worry although a small one, while Chief Government Scientific Adviser Vallance said the South Africa coronavirus variant is theoretically more at risk of not being recognised by a vaccine but there is nothing to suggest that is the case yet. (Newswires)

UK COVID vaccine rollout may not hit target pace for two weeks, according to reports in The Guardian. However, it was also reported that millions more COVID-19 vaccines are on the way to the UK and 2mln were dispatched to NHS hubs this week, according to the Times. (Guardian/Times)

The European Medicines Agency is expected to recommend using Moderna’s coronavirus vaccine today. (Politico)

ASIA

Asian equity markets traded cautiously with markets fully focused on the Georgia Senate Run-off results which has been a close contest in which the Democrat candidates have led for most the day which saw an early bout of weakness in US equity futures as some began to price in a potential blue wave and increased prospects of higher corporation tax, as well as tougher regulations on large tech, but with price action limited given that the race was still too close to call. As things stand, Democratic Challenger Warnock retook the lead from Republican incumbent Loeffler at 50.4% vs 49.6% and Decision Desk has even called Warnock as winner of the Special Senate Race and Democrat Candidate Ossoff is in a virtual tie with Republican incumbent Perdue after 97% of expected votes were counted, although the full results are still unknown with workers to halt counting for the night. ASX 200 (-1.1%) weakened with tech leading the broad declines across nearly all sectors aside from energy which benefited from the OPEC+ agreement whereby Russia and Kazakhstan are to raise output by a total of 75k bpd in February and another 75k bpd in March, which Saudi Arabia have overcompensated for with a voluntary 1mln bpd cut. Nikkei 225 (-0.3%) was tentative heading into the state of emergency decision due tomorrow with Japan said to eye a 1-month emergency for the Tokyo region and KOSPI (Unch.) was initially buoyed after breaching the 3,000 level for the first time ever but then succumbed to the widespread caution. Hang Seng (-0.1%) and Shanghai Comp. (+0.3%) were indecisive with sentiment not helped after US President Trump signed a fresh executive order banning transactions with 8 Chinese software applications including Ant Group's Alipay and Tencent QQ, while NYSE flip-flopped again and is reportedly considering reverting to the original plan for the delisting of Chinese telecom giants if they are confirmed to be part of the executive order banning firms with links to Chinese military. Finally, 10yr JGBs were subdued with price action stuck around the 152.00 focal point amid tepid 10yr JGB auction results which were mostly in line with the prior and alongside pressure in T-notes as the 10yr yield breached 1% with markets beginning to price in chances of a blue sweep which would increase prospects for greater stimulus measures and bond issuances.

PBoC injected CNY 10bln via 7-day reverse repos at a rate of 2.20% for a net daily drain of CNY 130bln. (Newswires) PBoC set USD/CNY mid-point at 6.4604 vs exp. 6.4567 (prev. 6.4760)

- Chinese Caixin Services PMI (Dec) 56.3 vs. Exp. 57.9 (Prev. 57.8)

• Chinese Caixin Composite PMI (Dec) 55.8 (Prev. 57.5)

US President Trump signed an executive order banning transactions with 8 Chinese software applications including Ant Group's Alipay, while CamScanner, QQ Wallet, SHAREit, Tencent QQ, VMate, WeChat Pay and WPS Office are the other apps targeted, while Commerce Secretary Ross stated that they will begin implementing President Trump's executive order regarding Chinese apps. (Newswires)

NYSE is reportedly considering reverting to its original plan for the delisting of Chinese telecoms companies in which a source noted it will restart delisting plans against the 3 Chinese telecom giants if those companies are confirmed to be part of the executive order banning firms with links to Chinese military. This follows earlier reports US officials said NYSE's Monday announcement caught the White House off guard and telecom companies are still at risk of being delisted, while they added that NYSE's U-turn is a short reprieve for China and Treasury Secretary Mnuchin also commented he told NYSE he disagrees with the reversal on Chinese stocks. Furthermore, it was separately reported that S&P Dow Jones said they will keep China telecoms ADRs in indexes which were previously being deleted. (Newswires)

Hong Kong police were reportedly rounding up dozens of pro-democracy politicians and have entered law firm of former pro-democracy politician Albert Ho where they arrested American lawyer John Clancey under national security laws, while there were Incoming US Secretary of State Blinken says Hong Kong arrests are an assault on human rights, according to AFP. (Newswires/Twitter)

UK/EU

• UK BRC Shop Price Index (Dec) Y/Y -1.8% (Prev. -1.8%). (Newswires)

FX

In FX markets, the USD extended on losses during the Wall St trading session which saw DXY slip beneath the 89.50 level, although has since nursed some of the losses as cautiousness seeped through alongside the results of the closely contested Georgia Senate run-off and with yields rising overnight. EUR/USD was choppy and faded an initial breakout above the 1.2300 handle with price action at the whim of the USD fluctuations, while GBP/USD briefly retreated beneath 1.3600. USD/JPY and JPY-crosses were mixed with the former coat-tailing on the USD rebound and antipodeans were choppy amid an indecisive greenback, cautious risk tone and bout of intraday CNH weakness following another Trump offensive against China with the latest Executive Order signing.

COMMODITIES

WTI crude futures held on to gains above the USD 50.00/bbl level following the OPEC+ agreement for Russia and Kazakhstan to raise output by a total of 75k bpd in February and another 75k bpd in March, which Saudi Arabia have overcompensated for with the announcement of a surprise voluntary 1mln bpd cut, while the latest private sector inventory report failed to spur any significant price moves despite the slightly larger than expected draw in crude stockpiles as both gasoline and distillate components showed substantial builds. Elsewhere, gold prices were contained amid an indecisive greenback and copper remained afloat despite the overnight cautiousness amid supply disruptions in Peru where protests have reportedly blocked 189k tonnes of Las Bambas copper exports and will result in a halt of copper operations at the mine.

US Private Energy Inventories (bbls): Crude -1.7mln (exp. -1.3mln), Cushing +1.0mln, Gasoline +5.5mln (exp. +0.6mln), Distillate +7.1mln (exp. +2.4mln).

OPEC+ agreed to raise oil production by 75k BPD in February and another 75k BPD in March 2021 on the back of higher Russian and Kazakh production, according to a draft statement. Furthermore, it was reported that Russia and Kazakhstan will be allowed to increase their output by 75k BPD total in February and March while all the other members rollover, although other reports stated that Saudi Arabia offers to make additional voluntary oil cuts in excess of 400k BPD for February and March. (Newswires/Energy Intel)

Saudi Energy Minister stated its own voluntary cuts are to amount to 1mln BPD in February-March and that Saudi oil output is to be at 8.125mln BPD from February 1st, while he also stated that in addition to the Saudi voluntary cut, there is the OPEC+ cut and the compensation plan cuts in February and March so the total cut will exceed 1.425 million bpd. (Newswires)

Russian Energy Minister Novak said output rises need to be taken very carefully and oil demand is on a recovery path, while he later stated that OPEC+ agreed to prepare reports on output outside the group. Furthermore, the Kazakhstan Energy Ministry said it will increase oil output by 10k BPD in February and by a further 10k BPD in March, while Russia will increase oil output by 65k BPD in February and by another 65k BPD in March. (Newswires/Energy Intel)

OPEC+ will hold the next JMMC meeting on February 3rd with the next full meeting on March 4th, while earlier reports also noted that OPEC+ technical and monitoring ministerial meetings are scheduled for February 2nd and 3rd, according to a document. (Newswires)

CME lowered crude oil futures NYMEX maintenance margins for February by 4.7% to USD 4,525/contract from USD 4,750/contract. (Newswires)

US

Treasuries bear steepened on Tuesday as cyclicals outperformed amid the OPEC-induced oil rally, preparation for a potential GA Senate shake-up and supply pressures. By settlement, 2s +0.8bps at 12.3bps, 10s +4.3bps at 96.0bps, and 30s +5.6bps at 171.2bps; futures volumes were decent; inflation breakevens were wider amid reals rising less acutely. The march lower in sovereigns made headway as stocks opened up to the upside in NY. There wasn't anything too incremental on the macro sphere, rather, it appeared to be a dip-buying opportunity after Monday's stock sell-off, not to mention the likelihood of investors likely wanting to gain exposure to cyclical/reflation assets in the event that Dems make a surprise sweep of Georgia in the Senate run-offs tonight/tomorrow. The theory is that a Dem majority Congress would authorise fiscal excess under the Biden administration more easily than the current hawk-eyed GOP Senate, which would likely incur more Treasury issuance as a result. UBS' analysts estimate an extra USD 275bln in 2021 Treasury issuance under that scenario and see the 10s cash yield moving to 1.10%. Meanwhile, Tuesday was another busy day for corporate issuers raising dollars for the new year, particularly European-based issuers, which have a shorter time period to raise amid their earnings season blackout period on the horizon. The busy credit slate provided tailwinds for the move higher in Treasury yields, coming ahead of the duration Treasury auctions next week, with the refunding announcement due on Thursday. T-note (H1) futures settled 9 ticks lower at 137-27.

Fed's Evans (voter, dove) repeated the view that rates will stay low for a long time and asset purchases will likely continue for a while, while it will take years to reach 2% average inflation goal , while he also suggested they would welcome above 2% inflation and 3% would not be so bad, but added it is hard to imagine out of control inflation. (Newswires)

US VP Pence said he told President Trump he lacks power to change election results and will attend election certification, according to NYT. In related news, the election debate plan for Wednesday has changed in which the leading plan now is for full objections to just three states which are Arizona, Georgia and Pennsylvanian which will get both House and Senate objections, triggering a debate, according to PBS citing sources. (PBS)