• European bourses are somewhat mixed, Euro Stoxx 50 -0.2%, in a continuation of the mixed APAC session but magnitudes are overall somewhat more modest; ES +0.2%
• USD is broadly unchanged in-spite of coming under pressure via GBP as the BoE Governor highlighted issues regarding NIRP, in contrast to remarks from the likes of Tenreyro yesterday; paring back implied pricing for such a policy
• US President Trump's administration is set to deliver fresh guidelines today that will get COVID-19 vaccines moving "much faster", via Axios
• Fed's Barkin (Voter) said the Fed would have to make substantial progress towards its goals before QE tapering gets discussed
• Core debt counterparts continue to move lower; yield wise, 2s-10s surpassed 100bp and the 10yr yield itself is at highs of 1.16%
• Looking ahead, highlights include EIA STEO, Fed Discount Rate Minutes, Fed's Brainard, Kaplan, Mester, Rosengren, ECB's de Cos, supply from the US

CORONAVIRUS UPDATE

US President Trump's Administration is set to deliver fresh guidelines today that will get COVID-19 vaccines moving "much faster", according to Axios; will recommend opening up the process to everyone older than 65 and expanding the venues where people can get vaccinated. (Axios)

Moderna (MRNA) CEO anticipates delivering 600mln doses of the vaccine this year, while they are also very comfortable with achieving up to 1bln doses of its COVID-19 vaccine this year. (Newswires)

German Chancellor Merkel expects the German lockdown to last until early-April, according to Bild. (Newswires) Current measures expire at end-January

Portugal President Marcelo Rebelo de Sousa has tested positive for COVID-19, according to his office which follows an announcement last week that he would self-isolate after being in contact with someone who tested positive for the virus (Newswires)

Japanese PM Suga reportedly told ruling lawmakers he plans to declare a state of emergency for Osaka, Kyoto and Hyogo prefectures, while there were earlier reports that Japan will declare an emergency for the Osaka area as soon as Wednesday. Separately, Finance Minister Aso stated they are asking restaurants to shut early due to increased COVID-19 risk and will provide JPY 400k for small firms that experience a sales decline by half or more due to shorter hours. (Newswires)

China's Global Times tweeted that large scale free testing and 7-day quarantine will be applied to Langfang City after 1 case was found in Gu'an which is a county neighbouring Beijing. In other news, China's Coronavac vaccine was reported to have a general efficacy of less than 60% in its Brazilian trial. (Newswires/Twitter)

ASIA

Asian equity markets traded cautiously as the region struggled to break from the weak performance among global peers including the tech-led declines on Wall Street amid fears of tougher regulation on the tech giants and with sentiment also dragged by ongoing COVID-19 concerns. ASX 200 (-0.3%) and Nikkei 255 (+0.1%) were rangebound for most the session with strength in Australia’s top-weighted financials sector just about kept the local benchmark afloat although pressure in tech and miners ultimately wiped out gains at the close, while Tokyo trade was indecisive on return from the extended weekend with Japan facing a possible State of Emergency declaration this week for the Osaka, Kyoto and Hyogo prefectures. Nonetheless, Chugai Pharmaceutical was the biggest gainer on recent news that the UK government found the Co.’s arthritis drug Actemra to be effective against COVID-19 and Tepco was also boosted by record power prices amid cold weather conditions and tighter supply. KOSPI (-0.7%) was worst performer after its recent record streak with Samsung Electronics also pulling back from all-time highs and South Korea's FSC to lift the ban on short sales from March 16th which had been implemented last year due to COVID-19. Hang Seng (+1.3%) and Shanghai Comp. (+2.2%) pared opening losses to trade in the green after the mainland eventually shrugged off the PBoC’s tepid liquidity operations and with the Hang Seng flirted with resistance around the 28k level, led by a continued rebound in the Chinese telecom giants. Finally, 10yr JGBs were lacklustre after the continued pressure seen in stateside peers and indecision in stocks, but with downside cushioned by the BoJ's presence in the market for over JPY 1.1tln of JGBs.

PBoC injected CNY 5bln via 7-day reverse repos at a rate of 2.20% for a net daily drain of CNY 5bln. (Newswires) PBoC set USD/CNY mid-point at 6.4823 vs exp. 6.4794 (prev. 6.4764)

China reportedly plans a further crackdown on Hong Kong in which the city's elections could face reforms that are aimed at reducing the influence of democrats, according to sources. (Newswires)

Tencent (700 HK/TME) is said to be mulling a secondary listing which could raise a minimum of USD 2bln, sources said. (Newswires)

Chinese M2 Money Supply YY (Dec) 10.1% vs. Exp. 10.5% (Prev. 10.7%)

• Outstanding Loan Growth (Dec) 12.8% vs. Exp. 12.8% (Prev. 12.8%)
• New Yuan Loans (Dec) 1260B vs. Exp. 1220.0B (Prev. 1430.0B)

US

Fed's Barkin (voter) said H2 2021 will be very strong and suggested it will be "bumpy" but elevated savings and potential stimulus are backstops, while he added we will see stronger inflation in Q2 because of lower inflation a year ago. Furthermore, Barkin stated that he doesn't want to put a date onto when the Fed will taper bond purchases but is a consideration and that the Fed would have to make substantial progress towards its goals before QE tapering gets discussed. (Newswires)

Fed's Kaplan (non-voter) said next couple of months will be challenging due to virus resurgence and sees 2020 GDP to decline between 2.25%-2.50% but forecasts 2021 GDP growth of 5.0% and noted that Q1 GDP is likely to be positive. Kaplan also commented that he is hopeful that later this year, we will meet the substantial progress bar for tapering QE, while he added that he would be strongly against negative rates in US. (Newswires)

US House GOP Leader McCarthy told the House GOP that he does not support a Trump impeachment, while it was other reports noted that House GOP are preparing to introduce a resolution on Tuesday to censure President Trump for role in the Capitol siege. (Newswires)

US NFIB Business Optimism Index (Dec) 95.9 (Prev. 101.4).

UK/EU

UK BRC Retail Sales YY (Dec) 4.8% (Prev. 7.7%); BRC said 2020 was the worst year for retail sales since records began in 1995 with sales down 0.3% Y/Y. There were also comments from Barclaycard that UK consumer spending fell 2.3% Y/Y in December which is the largest drop since June. (Newswires)

US Customs and Border Protection said it will begin collection of additional duties on aircraft parts and wines from France and Germany beginning Tuesday at 00:01 EST. (Newswires)

BoE Governor Bailey: Negative rates are a controversial issue and there are lots of issues with such rates, doing lots of work with banks on the practicality of such a policy. To soon to draw a conclusion on the need for additional stimulus, expects plenty of further evidence in the next few weeks. Expects Q1 output to be softer than in the November MPR forecasts and the economic impact of COVID restrictions in November and December appears less than the impact seen in the Spring. True unemployment is likely above the official estimate, probably sits around 6.5%. (Newswires)

BoE's Broadbent says he stands by the BoE's August statement on negative rates; says experience of other countries shows retail deposit rates tend not to fall below zero; judgement lies in how negative rates would impact UK bank lending. (Newswires) In August the MPR noted "Negative policy rates at this time could be less effective as a tool to stimulate the economy." While Bailey said "negative rates are in the toolbox but do not think BOE is about to use them, that is not the current plan".

Italy PM Conte will not try to form a new Government with the Italia Viva party in the event they pull out of the cabinet, via a source close to PM Conte. (Newswires)

German BDI forecasts 2021 GDP growth of 3.5%; expects exports to rise by 6% in 2021. The Domestic economy has a good chance of reaching its pre-crisis level in H2 2022. (Newswires)

GEOPOLITICAL

US Secretary of State Pompeo is travelling to Brussels on Wednesday and Thursday for discussions with NATO leaders, while it was also reported that Pompeo will use newly declassified US intelligence today to publicly accuse Iran of links to Al-Qaeda, according to sources familiar with the matter. (Newswires)

EQUITIES

European stocks are exhibiting a somewhat mixed and directionless picture thus far (Euro Stoxx 50 -0.1%) with a similarly cautious tone observed during APAC hours amid a lack of catalysts, and with the ongoing COVID-19 concerns weighing on investors' minds ahead of a plethora of central bank speakers in the run-up to US earnings season. US equity futures meanwhile tread water with mild gains. Sectors in Europe are also mixed and portray a pro-cyclical bias with clear outperformance seen across the energy names amid price action in the crude complex. Financials also see support from steeper yield curves, with the US 2s/10s topping 100bps in early European trade, whilst the IT sector eyes the new tech unveiled at CES 2021. Travel & Leisure continue to grind higher on vaccine rollout hopes, with the latest via Axios suggesting that the Trump Admin is poised to issue new guidelines to ramp up COVID-related vaccination. To the downside, the defensive Healthcare, Consumer Staples and Utilities alongside underperform. In terms of individual movers, Kingfisher (+3.3%) resides as one of the top Stoxx 600 gainers after reporting LFL revenue +16.9% YY and noting that it continues to experience demand across its markets. Meanwhile, German heavyweight BASF (+1.0%) benefits from a positive broker move at Bernstein, with Sodexo (+3.3%) also bolstered by an upgrade at JPMorgan Chase. Finally, UBS (+0.9%) is supported by the broader gains across the banking sector, whilst the Co's APAC Investment Chief said the group is looking for asset management partners in China in a bid to double their wealth management footprint in the region within the next 3-5 years. Furthermore, Chairman Weber said the group will increase the search for a new chairman post-AGM and will be looking for wealth or asset management acquisitions.

Toyota (7203 JT) is halting some production lines in China until the 14th due to chip shortages, via Nikkei.

FX

USD - It’s too early to call time on the Greenback revival, but Tuesday is shaping up to be one of those testing, if not make or break sessions as buyers continue to draw encouragement from rising yields and sellers seem more inclined to trade along risk appetite and aversion lines. To recap, the Dollar extended recovery gains broadly yesterday to the point where the DXY reached a high of 90.730 before fading when US stocks pared some losses, and the index has subsequently pulled back further within a 90.620-302 band ahead of more Fed orators and the Discount Rate minutes, NFIB sentiment, weekly Redbook sales, JOLTS and Usd 38 bn 10 year supply that could all have a bearing on direction.

GBP - The major beneficiary of the waning Buck as Cable retests 1.3600 from almost the big figure below at one stage, but the Pound has also rebounded in relation to the Euro from circa 0.9000 to 0.8950+ at best in wake of remarks from BoE Governor Bailey highlighting plenty of ‘issues’ on the controversial subject of NIRP, adding that it is too soon to determine whether the economy needs more stimulus. For the record, MPC member Broadbent steered clear of negative rates in a speech on the coronavirus and consumption.

AUD/NZD/CAD - No real surprise to see Monday’s G10 laggards recover more lost ground than most currency counterparts, bar Sterling, with the Aussie firmly back above 0.7700, Kiwi within a whisker of 0.7200 and Loonie over 1.2750 with some assistance from buoyant oil prices awaiting Canadian PM Trudeau’s cabinet reshuffle.

EUR/JPY/CHF - All relatively contained and narrowly mixed against the Greenback, as the Euro pivots 1.2150 where decent option expiries reside (1.1 bn) and the Yen hovers under 104.00 also eyeing expiry interest at the strike (1.2 bn). Elsewhere, the Franc is straddling 0.8900 amidst a lack of independent impulses and this prone to Dollar moves and overall risk considerations.

SCANDI/EM - The Nok is also drawing some support from crude surpassing Usd 53/brl in WTI terms and Brent breaching Usd 56.50, but perhaps the fact that contraction in Norwegian GDP slowed considerably in November. Turning to EMs, a broad reprieve or sigh of relief is the overriding theme as losses vs the Usd are reclaimed to varying degrees, but the Try is labouring after dipping below the psychological 7.5000 level irrespective of conciliatory vibes between Turkey and Greece, so could be lamenting the higher cost of oil.

Notable FX Expiries, NY Cut:

• EUR/USD: 1.2150 (1.1BLN), 1.2200 (1.4BLN), 1.2230 (632M), 1.2250 (1.4BLN)
• USD/JPY: 103.00 (519M), 103.20 (565M), 104.00 (1.2BLN)

FIXED

The overriding theme remains the same as bear-steeping continues virtually unabated and downside momentum in bonds picks up pace, with Bunds, Gilts and US Treasuries ploughing new cycle lows in futures terms and vice-versa for yields. Scores on the doors so far, 176.50, 133.80 and 136-05+ or -47 bp, 34 bp and almost 1.16% in cash, while Italian BTPs have been down to 151.38 and 57+ bp amidst yet more political uncertainty due to coalition conflict. Ahead, a fairly busy pm agenda with attention on any further taper chat from the Fed and whether enough concession has been built for the 10 year note sale. On that note, UK supply was covered quite well, but has not prompted a positive reaction so it is still a fade or sell into dead cat bounce market.

COMMODITIES

WTI and Brent front month futures extend on APAC gains as the softer Buck and reflationary hopes and nations attempt to ramp up mass vaccination in a bid for a return to pre-COVID times. The complex could also feel support from measures to keep the travel sector afloat - which namely translates to jet fuel demand - as the UK government is poised to announce that requirement for COVID-19 negative test prior to departure on those travelling to England will begin from Friday, whilst the Greek government is reportedly proposing a vaccine certificate within the EU in order to facilitate travel for those who have received a COVID-19 vaccine. This, coupled with efforts by OPEC+ to balance supply and demand, has led UBS to expect the oil market this year to be undersupplied by some 1.5mln BPD. WTI Feb futures grind higher above USD USD 52.50/bbl (vs. low USD 52.07/bbl) as it briefly topped the USD 53/bbl mark. Brent Mar meanwhile extends gain above USD 56.00/bbl and test the USD 56.50/bbl psychological mark at the time of writing. Elsewhere, precious metals nurses some of their recent losses as the softer Buck and vaccine-driven reflation playbook aids the complex, with the yellow metal gains more ground above USD 1850/oz as it inches closer towards the 50 DMA at ~1866.50/oz. Turning to base metals, Shanghai copper fell to one-week lows as a mild resurgence of COVID-19 prompted China to impose new virus-related curbs. Further, Shanghai steel futures declined over 3% in APAC hours amid a build-up of steel inventories in China.

Russia's OPEC+ compliance reportedly slipped to 93% in December, according to Energy Intel. (Twitter)

Goldman Sachs expects Brent crude to average USD 60/bbl in Q2 2021 and reach USD 65/bbl in July vs prev. forecast of December, while it sees 1.3mln bpd deficit in April despite OPEC+ increasing production. (Newswires)