• Asian equity markets traded mixed with cautious gains in the major regional bourses after the tech-rebound on Wall St. and better than expected Chinese trade data
• In FX, DXY is firmer and briefly eyed 90.50, EUR/USD sits just above 1.2150 and GBP/USD remains on a firm footing above 1.36
• President-elect Biden’s stimulus plan could be valued at USD 2tln which would be USD 700bln greater than what Senate Democrat Leader Schumer had been calling for
• The House voted to impeach President Trump for the second time, although Senate Republican Leader McConnell rejected an impeachment trial before inauguration
• Italia Viva Leader Renzi announced his party ministers are resigning, putting PM Conte's government at risk
• Fed's Brainard said she expects Fed's current pace of asset purchases to remain appropriate for quite some time
• Looking ahead, highlights include ECB minutes, US weekly jobs data, OPEC MOMR, President-elect Biden is to unveil his stimulus package, Fed's Powell, Rosengren, Bostic, Kaplan, supply from Italy

CORONAVIRUS UPDATE

US COVID-19 cases +217,393 (prev. +199,793) and deaths +4,131 (prev. +1,957), while a major newswire tally stated that US cases increased by at least 228,082 to 22.92mln and deaths rose by at least 3,957 to 384.5k. (Newswires)

Johnson & Johnson (JNJ) is on track for a vaccine rollout in March and is to have full efficacy results from the single-dose vaccine trial by the end of January or first week of February, while it remains committed to producing 1bln vaccine doses in 2021 and will have data from South Africa that should show how the vaccine performs against new virus variant. Reports later noted that it's one-shot COVID-19 vaccine was safe and had a promising immune response whereby the interim analysis from the Phase 1/2A trial the showed the vaccine candidate was generally well-tolerated and all volunteers had detectable antibodies regardless of dose or age group by day 57. Furthermore, there were earlier comments from US Operation Warp Speed Chief Slaoui that he expects the Johnson & Johnson COVID-19 vaccine to be 80-85% effective. (Newswires)

Moderna (MRNA) CEO does not believe the UK, South African and Brazil coronavirus variants pose a problem for its vaccine, while a Pfizer (PFE) executive was also bullish about the ability of its vaccine to respond to various mutations and variants. (Newswires)

South African President Ramaphosa said they have secured a provisional 270mln vaccine doses for African countries with at least 50mln to be available between April and June 2021. (Newswires)

UK Transport Secretary Shapps tweeted that passengers will be required to provide proof of negative COVID-19 test prior to travelling to England beginning on Monday. (Newswires/Twitter)

Germany COVID-19 cases increased by 25,164 and deaths rose by a record 1,244. (Newswires)

China COVID-19 cases increased by 138 as of end-January 13th (prev. +115) and it announced 1 new death due to COVID-19, which was the first virus death reported in China for 8 months. (Newswires/AFP)

ASIA

Asian equity markets traded mixed with cautious gains in the major regional bourses after the tech-rebound on Wall St. and better than expected Chinese trade data, although advances were restricted by tentativeness ahead of the upcoming key events stateside including the start of earnings season and President-elect Biden’s stimulus plan announcement. ASX 200 (+0.4%) was higher with outperformance in the tech sector as it drew inspiration from US peers, although Australia's mining stocks were dragged lower in a reversal of yesterday’s fortunes due to weaker underlying commodity prices and lingering tensions with its largest trading partner China which was said to instruct owners of more than AUD 1bln of banned Australian coal to find buyers elsewhere, while Nikkei 225 (+0.8%) outperformed after Machinery Orders and PPI topped estimates. Hang Seng (+0.5%) and Shanghai Comp. (-0.6%) were varied despite the mostly better than expected Chinese trade data which showed USD-denominated exports rose by 18.1%, as the mainland suffered after US President Trump issued an executive order amendment on investments in Chinese military companies which bans Americans from holding securities of blacklisted Chinese firms from November 11th, although the large tech names in Hong Kong were boosted on relief after reports the US government is expected to let Americans continue to invest in Chinese technology giants Alibaba, Baidu and Tencent. Finally, 10yr JGBs were flat with demand sapped by the outperformance in Japanese stocks and pressure in USTs, although the downside was cushioned amid the BoJ’s presence in the market and with the 152.00 focal remaining on the horizon.

PBoC injected CNY 2bln via 7-day reverse repos at a rate of 2.20% for a net daily drain of CNY 8bln. (Newswires) PBoC set USD/CNY mid-point at 6.4746 vs exp. 6.4712 (prev. 6.4605)

US President Trump issued an executive order amending prior the order on investments in Chinese military companies, which bans Americans from holding securities of blacklisted Chinese firms from November 11th 2021. (Newswires)

US government is expected to let Americans continue to invest in Chinese technology giants Alibaba (9988 HK), Baidu (BIDU) and Tencent (700 HK), according to WSJ. This followed weighing the firms’ alleged ties to China’s military against the potential economic impact of banning them although the report noted that 9 other Chinese companies will be added to Pentagon’s Chinese military companies list. (WSJ)

• Chinese Trade Balance (USD)(Dec) 78.17B vs. Exp. 72.35B (Prev. 75.4B)
• Chinese Exports (Dec) Y/Y 18.1% vs. Exp. 15.0% (Prev. 21.1%)
• Chinese Imports (Dec) Y/Y 6.5% vs. Exp. 5.0% (Prev. 4.5%)
• Japanese Machinery Orders (Nov) M/M 1.5% vs. Exp. -6.2% (Prev. 17.1%)
• Japanese Machinery Orders (Nov) Y/Y -11.3% vs. Exp. -15.4% (Prev. 2.8%)

UK/EU

UK RICS Housing Survey (Dec) 65 vs. Exp. 62 (Prev. 66). (Newswires)

Italy's Italia Viva Leader Renzi said his party ministers are resigning which puts PM Conte's government at risk, and he commented that there is no way he will join a government with the right but he has no veto against anyone as a prime minister, while it was also reported that Italy's opposition centre-right parties are calling for immediate resignation of PM Conte. (Newswires)

FX

In FX markets, the DXY was slightly firmer and briefly eyed yesterday’s best levels near 90.50 with support seen on the reflation-trade as yields edged higher after reports that President-elect Biden’s stimulus plan could be valued at USD 2tln which would be USD 700bln greater than what Senate Democrat Leader Schumer had earlier been calling for. There was another busy slate of Fed speakers which tilted to the dovish side, including Fed’s Brainard who expects the Fed's current pace of asset purchases to remain appropriate for quite some time and stated the Fed stands ready to increase bond purchases if needed, while Fed’s Clarida said the Fed is not going to lift off until we get to 2% inflation for a year. Focus was also on Congress where the House voted to impeach President Trump for the second time as expected, although Senate Republican Leader McConnell noted there was no chance a fair and serious impeachment trial can conclude at the Senate prior to the inauguration. EUR/USD languished around 1.2150 with the single currency largely influenced by the USD moves and political uncertainty in Italy after Italia Viva Leader Renzi announced his party ministers are resigning which puts PM Conte's government at risk, while GBP/USD was indecisive with the currency not helped by lockdown-related concerns after PM Johnson refused to rule out further tightening of COVID-19 restrictions. USD/JPY reclaimed the 104.00 status as the greenback strengthened on the reflation trade, while antipodeans consolidated with both AUD/USD and NZD/USD kept afloat after the mostly better than expected Chinese trade data.

COMMODITIES

WTI crude futures languished below USD 53/bbl amid the tentative risk tone, continued rampant COVID-19 infection rates and after recent support from the larger than expected drawdown in headline EIA crude stockpiles was short-lived. Gold was subdued by the mild strength in the greenback but with downside also stemmed by anticipation of further stimulus, while copper traded sideways amid the indecisive risk tone and underperformance in China.

JPMorgan raised its WTI 2021 forecast to USD 58/bbl from 47/bbl and raised its Brent 2021 forecast to USD 61/bbl from 50/bbl. (Newswires)

GEOPOLITICAL

Israeli Prime Minister Netanyahu is reportedly forming an interagency team to prepare a strategy for engaging the Biden administration on the Iran nuclear file, according to officials in the Prime Minister’s office. (Axios)

UN aid chief is to urge the US to reverse the decision of designating Yemen's Houthis as a foreign terrorist group and will warn that such a designation will result to large-scale famine to an extent not seen in nearly 4 decades. (Newswires)

US

Treasuries bull-flattened as a strong 30-year auction and dovish comments from Fed's Brainard supported further unwinding of steepeners. By settlement, 2s unch. at 14.7bps, 10s -5bps at 108.8bps, and 30s -6.7bps at 181.8bps; futures volumes were decent; TIPS yields were lower out the curve. Rates were little changed overnight, although after the CPI print - which was in-line with expectations - came into the rearview mirror, bidders emerged; part of the strength was likely spillover from Europe amid a strong rally in German Bunds. Yields trundled lower throughout the US/EU interregnum, to then drop lower acutely after a solid 30-year Treasury auction: stopped through by 1.4bps, covered more than average, and strong participation from both directs and indirects. The solid offering concluded this week's supply slate as a strong one after Tuesday's decent 10-year offering. Furthermore, as the auction occurred, Brainard's speech hit the wires, which further pushed back on some of the hawkish/QT/tapering Fed sentiment built in recent weeks, marking the second core FOMC member to assert its accommodative for longer stance, coming ahead of Powell on Thursday. T-note (H1) futures settled 12 ticks higher at 136-24+.

Fed's Beige Book said most Federal Reserve Districts reported that economic activity increased modestly since the previous Beige Book period although conditions remained varied and reports on consumer spending were mixed, while some Districts noted declines in retail sales and demand for leisure and hospitality services, largely owing to the recent surge in COVID-19 cases and stricter containment measures. A majority of Districts reported that employment rose but with the pace slow and the recovery remained incomplete with a growing number of Districts reporting a drop in employment levels relative to the previous reporting period. Furthermore, almost all Districts saw modest price increases since the last report, with growth in input prices continuing to outpace that of finished goods and services. (Newswires)

Fed's Brainard (voter) said she expects Fed's current pace of asset purchases to remain appropriate for quite some time and that timing of interest rate lift-off depends on realized progress toward maximum employment and 2% average inflation with changes in Fed's policy rate after lift-off likely to be only gradual. Brainard also said asset purchases have been a key part of policy response to the pandemic which are providing substantial support in the form of lower rates and the Fed stands ready to increase bond purchases if needed, while she added MBS purchases have been particularly helpful in providing direct support. (Newswires)

Fed’s Clarida (voter) said we are not going to lift off until we get to 2% inflation for a year and stated that when it comes to rate, we won’t have far or long to go to reach neutral. (Newswires)

Fed's Rosengren (non-voter) said the labor market could be more stagnant for upcoming couple of months until there is more widespread vaccinations and economy could face significant weakness in near-term as virus infections increase. However, Rosengren also stated the arrival of vaccines and outlook for further fiscal support are longer run tailwinds and that a fiscal program which gives grants to struggling business may be best method to provide support, while he the future need for Fed emergency lending programs are dependent on what occurs with pandemic and vaccines. (Newswires)

Fed's Harker (non-voter) said the Fed is going to keep rates low for long and is willing to overshoot inflation a little bit but not let it run out of control. (Newswires)

US House voted 232-197 (10 Republicans joined 222 Democrats) to impeach President Trump for a second time as expected, with the Article of Impeachment charging President Trump for inciting insurrection concerning Capitol riot and House leaders will decide when to send charges to the Senate. However, US Senate Republican Leader McConnell later commented that it is best if Congress uses next 7 days to facilitate a safe inauguration and orderly transition, while he added there is no chance a fair and serious impeachment trial can conclude prior to the inauguration and that the Senate impeachment process will start in the first regular meeting after receiving the impeachment article from House. Furthermore, he noted that even if the Senate began the trial this week a verdict will not be reached until after President Trump left office. (Newswires)

US President-elect Biden's aides are reported to have told allies in Congress that Biden's aid plan could be valued about USD 2.0tln which is USD 700bln higher than what Senate Democrat Leader Schumer was calling for earlier, while it was also reported that Biden will outline his stimulus and vaccine plan today at 19:15 ET. (Newswires/CNN)

US President-elect Biden is expected to include a significant new benefit for children in poor and middle-class households in the COVID relief package he will release tomorrow, according to sources. Reports added that while a final decision has not been made, Biden may push for a proposal to provide USD 300 per month to American households for every child under 6, as well as USD 250 per month for every child between the ages of 6 and 17 which would amount to USD 3,600 per year for families with one young child, as well as USD 3,000 per year for families with older children. (Washington Post)