• Asian equity markets were subdued after failing to shrug-off the weak lead from the US where major indices were dragged lower
• President-elect Biden unveiled his USD 1.9tln rescue plan which included a boost in stimulus payments to USD 2,000
• Biden will announce his recovery plan in February and cautioned that everyone will need to pay their fair share of taxes
• Fed Chair Powell suggested the time to raise rates is not going to be anytime soon nor was it the time to be talking about a policy exit
• In FX, the DXY consolidated after failing to breach 90.50, EUR/USD hovers around 1.2150 and GBP/USD held on to a bulk of yesterday's gains
• Italian PM Conte is reportedly set to face a vote of confidence on Monday
• Looking ahead, highlights include UK GDP, US retail sales, NY Fed manufacturing, industrial production, Uni. of Michigan, earnings from JP Morgan, Wells Fargo and Citigroup

CORONAVIRUS UPDATE

US COVID-19 cases +225,815 (prev. +217,393) and deaths +4,096 (prev. +4,131), while a major newswire tally stated US cases increased by at least 232,064 to 22.15mln and deaths rose by at least 3,986 to 388.5k. (Newswires)

A major New York hospital system NYU Langone Health alerted its physicians that it had not yet been allocated COVID-19 vaccine doses for next week and may have to halt its vaccination program without them. (Newswires)

Moderna (MRNA) looks to test COVID-19 booster shots a year after initial vaccination. (CNBC)

UK is reportedly step-up coronavirus vaccinations to 500k a day by next week with some reports suggesting that all over-50s could be vaccinated by the end of March. It was separately reported that the regulator refuses to approve mass COVID testing at schools in England. (FT/Times/Guardian)

German Chancellor Merkel reportedly wants to toughen the lockdown. (Bild)

ASIA

Asian equity markets were subdued as they failed to shrug-off the weak lead from US where the major indices were dragged heading into earnings season and amid discouraging jobless claims numbers, with participants also digesting the US blacklisting of additional Chinese companies and President-elect Biden's stimulus plans in which he announced a two-step rescue and recovery plan. The details of the USD 1.9tln rescue plan had been flagged beforehand which included a boost in stimulus payments to USD 2,000 and called for a USD 15/hour national minimum wage, while the recovery plan will be unveiled next month and he added the vaccination target is for 100mln shots in the first 100 days of his term. Biden also stated that the plan will not come cheaply and made a reference to everyone paying their fair share in taxes which subsequently saw some mild downticks in US equity futures to resume yesterday’s mild declines. ASX 200 (Unch.) closed flat as outperformance in tech helped keep the index afloat and amid hopes of further easing of restrictions with the Victoria state government planning to permit international students to re-enter the state, while Nikkei 225 (-0.5%) languished after recent detrimental currency inflows and calls for PM Suga to consider a nationwide state of emergency declaration. Hang Seng (-0.3%) and Shanghai Comp. (-0.5%) were indecisive despite the PBoC conducting a CNY 500bln 1-year MLF operation, with risk appetite sapped after US added nine companies to the list of firms it considers to be associated with the Chinese military including COMAC and Xiaomi which saw the latter decline by around 10%, while the US also included CNOOC and Skyrizon to its entity list due to threats to national security which subjects them to export restrictions. Finally, 10yr JGBs were steady with prices kept afloat by the uninspired mood in Tokyo and with firmer demand at the enhanced-liquidity auction for longer-dated JGBs doing little to spur prices.

PBoC injected CNY 2bln via 7-day reverse repos and conducted CNY 500bln 1-year MLF operation at 2.95%. (Newswires) PBoC set USD/CNY mid-point at 6.4633 vs exp. 6.4667 (prev. 6.4746)

US Pentagon added nine companies to the list of firms it considers to be associated with the Chinese military including COMAC and Xiaomi, while US State Department official Krach said following the addition of the 9 companies to the China blacklist, there will likely be no other designations from the Trump administration. It was also separately reported that the Trump administration issued interim final telecoms supply chain rules and declared China, Russia, Iran, North Korea and Cuba as foreign adversaries. (Newswires)

China is said to be mulling permitting some imports of Australian coal cargo, but the broader ban on coal imports remains in place. (Newswires)

• Chinese House Prices (Dec) Y/Y 3.8% (Prev. 4.0%). (Newswires)

BoK kept the 7-day Repo Rate unchanged at 0.50% as expected through a unanimous decision. BoK stated uncertainties to the domestic growth path are high and growth projection is inline with prior forecast, while it added that household debt continued to increase and it will monitor severity of virus spread, changes in financial stability and household debt growth. Furthermore, BoK Governor Lee commented that they are to keep an easing stance until a stable recovery is expected. (Newswires)

UK/EU

Italian PM Conte will address the lower house regarding the government crisis on Monday and the address will be followed by a confidence vote, according to sources. (Newswires)

Dutch PM Rutte’s government could resign in its entirety as early as today, according to local press; due to a 2012-17 scandal regarding childcare subsidies. (Politico) Note, the Netherland’s next election is currently scheduled for mid-March

FX

In FX markets, the DXY consolidated after a recent failed incursion above the 90.50 level which was cut short owing to the indecisive picture in stocks and choppy yields, as well as comments from Fed Chair Powell who reinforced a dovish message and suggested the time to raise rates is not going to be anytime soon nor was it the time to be talking about an exit with the economy far from the Fed’s goals. Attention then turned to President-elect Biden’s remarks where he unveiled relief proposals including a boost in stimulus checks to USD 2,000, although this saw a muted reaction across the FX space with many of the details flagged beforehand. Furthermore, some desks were unconvinced of the tailwinds to USD from the Biden agenda with UBS suggesting the incoming administration may reverse some of the Trump policies which were USD-supportive such as tariffs and tax cuts, while Credit Agricole noted the stimulus plans are unlikely to encourage further gains to treasury yields, as well as the greenback. EUR/USD was rangebound around 1.2150 where there is an option expiry of nearly EUR 1bln rolling off at today’s New York cut and with price action in the single currency mired by political uncertainty in Italy where PM Conte is said to face a vote of confidence on Monday, while GBP/USD was little changed and held on to most of yesterday’s gains. USD/JPY languished after failing to hold on to the 104.00 status and antipodeans were kept subdued by the indecisive risk tone and a tentative CNY amid continued tensions following the latest US blacklisting of Chinese firms.

COMMODITIES

WTI crude futures marginally pulled back from the prior session's gains where prices extended above the USD 53.00/bbl. Nonetheless, prices have since eased overnight due to the uninspiring risk tone and with reports noting that Iraq are in discussions seeking a delay to compensation cuts. Gold was relatively steady with prices finding a platform at the USD 1850/oz level on what was a drab market reaction to the Biden rescue plan and as the greenback consolidated, while copper prices were mildly pressured on the subdued overnight sentiment.

Iraq is in talks with OPEC+ members to allow it to delay compensation for its overproduction and stated that compliance with the OPEC+ oil cut deal at 79% due to non-commitment from the Kurdish region to cut its share, while the Iraqi Oil Minister expects oil prices to stay steady and reach around USD 57/bbl in Q1 2021. (Newswires)

US Energy Department plans a sale of up to roughly 20mln bbls of crude oil from the SPR, as directed by laws passed in 2015 and 2018. (Newswires)

ANZ Bank expects global oil demand to increase by 4mln-5mln bpd and sees Brent to reach USD 60/bbl in H2, while it sees Brent averaging USD 57.90/bbl in 2021 and USD 61.80/bbl in 2022 and forecasts WTI averaging USD 55.30/bbl in 2021 and USD 59.70/bbl in 2022. (Newswires)

US

Treasuries were choppy, but ultimately lower, amid chunky stimulus expectations, disappointing jobless claims and Fed's Powell affirming FAIT. By settlement, 2s -0.2bps at 14.5bps, 10s +3.6bps at 112.4bps, 30s +5.4bps at 187.2bps; futures volumes were average; inflation breakevens were wider across the curve, with the 30yrBE and 5yrBE back at/above 210bps. USTs saw sharp downside overnight, in albeit thinner liquidity conditions, after CNN reported Biden's still-to-be-announced stimulus bill would have a chunky USD 2trln price stage. Yields moved sideways through to the Jobless Claims print, which printed a lot higher than expected, seeing buyers step in amid the downgraded, near-term outlook. However, given that "bad news is good news" for the likelihood of more fiscal support, there is also some uncertainty in rates markets on the second-order effects of disappointing economic data, however, yields gradually moved lower up until Powell spoke this afternoon. There was some marginal yield downside as Powell relieved fears that he might potentially take a more hawkish stance (like Bostic/Kaplan) than other core Fed members, and instead affirmed the Fed's 2% AIT framework, noting that the Fed would not move preemptively to concerns inflation will overshoot. However, yields then moved higher amid a pick-up in selling out the curve, the moves were gradual and seemingly unconnected to Powell's comments, although some traders had suggested the comment on the unsustainability of federal debt had put some dent in the "risk-free" quality of the asset. Meanwhile, the Treasury announced it will sell USD 24bln of 20-year bonds on January 20th, settling on January 1st, and USD 15bln of 10-year TIPS on January 21st, settling on January 29th.

US President-elect Biden announced a two-step plan of rescue and recovery in which he unveiled details of the rescue plan and stated the recovery plan involving infrastructure will be unveiled next month, while he will layout the vaccine plan today in which his vaccination goal is for 100mln shots during the first 100 days in office. Biden's rescue plan confirmed USD 2,000 check payments as he stated that USD 600 for Americans isn't enough and suggested the national minimum wage should be USD 15/hour. Furthermore, he noted the plan will not come cheaply and suggested increasing disparity between people at the top and the rest of US, as well as made references to paying fair share in taxes. Details of the plan had been announced hours beforehand in which the USD 1.9tln stimulus package included USD 400bln to bolster virus response, about USD 1tln of direct relief to households, around USD 440bln for business and communities most-affected by the pandemic, with the weekly unemployment benefit to be increased to USD 400 from USD 300 and extended to September. (Newswires)

Fed Chair Powell said flexible average inflation targeting means the Fed has not tied itself to a mathematical formula and the Fed wants inflation well anchored at 2.0%, while he noted that since the Fed announced its new inflation framework, there is evidence that the market has shifted expectations to be consistent with the Fed's guidance. Powell said the Fed will need to see inflation rise back above 2.0% for a time for the new framework to be credible to the public and that the Fed won't raise rates just to ward off theoretical inflation threats. Powell also stated if inflation were to move up in ways that were unwelcome, the Fed has the tools which it will use and no one should doubt that, while he added when the time comes to raise rates, the Fed will do so right away and no time sooner which is not going to be anytime soon. Furthermore, he suggested now is not the time to be talking about an exit with the economy far from the Fed's goals and need to be very careful about communicating about asset purchases, while he added they will be very transparent as they get close to tapering and will let the world know well in advance of any taper of asset purchases. (Newswires)