• Asia-Pac bourses took impetus from the gains on Wall Street where stocks rallied to all-time highs and the Nasdaq outperformed
• BoJ kept policy settings unchanged as expected whilst reiterating that it will not hesitate to act further if needed
• In FX, the DXY was subdued beneath 90.50, EUR/USD reclaimed 1.21 and GBP/USD eyes 1.37 again
• US Republican Senator Romney said he is not looking for new stimulus in the immediate future
• Looking ahead, highlights include Norges Bank, CBRT and ECB rate decisions & ECB press conference, US weekly jobs, EZ consumer confidence, supply from Spain, France, UK & US, earnings from Intel

CORONAVIRUS UPDATE

US coronavirus cases increased by at least 178,361 to 24.32mln and deaths rose by at least 4,332 to 405.8k, according to a major newswire tally. (Newswires)

UK PM Johnson said it looks as though infection rates might be peaking or flattening but they are not flattening very fast, while he thinks there will be real difference by the spring thanks to vaccines. In other news, UK residents reportedly face a ban on entering the EU under a plan by Germany to close down borders and sever transport links with non-EU countries that have virus variants, should member states consider it necessary to protect public health. (Newswires/The Times)

Oxford scientists are readying new versions of its vaccine with AstraZeneca (AZN LN) to tackle emerging variants of the coronavirus. (Telegraph)

Hong Kong is reportedly set to approve the Pfizer (PFE)/BioNTech (BNTX) vaccine before the end of the week. (SCMP)

ASIA

Asia-Pac bourses took impetus from the gains on Wall Street, where stocks rallied to all-time highs on Inauguration Day and the Nasdaq outperformed as strong results from Netflix inspired the large tech names. ASX 200 (+0.8%) was lifted from the open with tech stocks inspired by their US peers and the largest-weighted financials sector also notched respectable gains, but upside was capped as participants also reflected on mixed quarterly production updates from Santos, South32 and Woodside Petroleum. Nikkei 225 (+0.7%) traded positively with exporters cheering a predominantly weaker currency and following the trade data which was mostly softer than expected although still showed the first Y/Y growth in Exports (2.0% vs exp. 2.4%) since November 2018. Hang Seng (+0.3%) and Shanghai Comp. (+1.4%) were slightly varied with the former stalling after it breached the 30k milestone to print its highest level since May 2019, while the mainland was kept afloat following another firm liquidity operation by the PBoC and on some hopes of better ties between US and China in the aftermath of the transfer power in Washington D.C. with the Chinese telecom giants even filing requests for a review of the NYSE determination to delist their American depositary shares. However, there were later comments from President Biden's National Security Council spokeswoman who criticized China's sanctions on former Trump administration officials and suggested that President Biden looks forward to a bipartisan effort for the US to out-compete China. Finally, 10yr JGBs were rangebound with price action restrained around the psychological 152.00 level and amid the BoJ policy announcement which provided very little in terms of surprises as the central bank maintained policy settings and downgraded current fiscal year growth estimates as expected, but raised growth forecasts for the years after and extended its deadline for loan schemes encouraging banks to boost lending by 1 year.

PBoC injected CNY 250bln via 7-day reverse repos at rate of 2.20% for a net daily injection of CNY 248bln. (Newswires) PBoC set USD/CNY mid-point at 6.4696 vs exp. 6.4677 (prev. 6.4836)

China sanctioned former President Trump administration figures including former Secretary of State Pompeo. There were later comments from US President Biden's National Security Council spokeswoman that China's decision to sanction former Trump administration officials is unproductive and cynical, while she added that the administration calls on both parties to criticize China's move against Trump officials and that President Biden looks forward to working with leaders from both parties to position America to out-compete China. (Newswires)

China Unicom (762 HK), China Mobile (941 HK) and China Telecom (728 HK) filed requests for review of the NYSE determination to delist their American depositary shares. (Newswires)

BoJ kept policy settings unchanged with rates held at -0.10% and QQE with YCC control maintained to target 10yr JGB yields at around 0% as expected with the vote on YCC at 7-1 as board member Kataoka dissented and Deputy Governor Amamiya was absent from the meeting. The BoJ extended its deadline for loan schemes encouraging banks to boost lending by 1 year, while it reiterated that it will take additional easing steps without hesitation as needed with an eye on the pandemic and that the economy is in a severe state but recovering as a trend which will likely improve. In terms of the Outlook Report, the BoJ cut its Real GDP forecast for the current fiscal year to -5.6% from -5.5% but raised its fiscal 2021 and 2022 growth forecasts to 3.9% (prev. 3.6%) and 1.8% (prev. 1.6%), respectively. (Newswires)

• Japanese Trade Balance Total Yen (Dec) 751.0B vs. Exp. 942.8B (Prev. 366.1B).
• Japanese Exports YY (Dec) 2.0% vs. Exp. 2.4% (Prev. -4.2%); first Y/Y increase since November 2018
• Japanese Imports YY (Dec) -11.6% vs. Exp. -14.0% (Prev. -11.1%)

UK/EU

BoE Governor Bailey said GDP was still about 10% lower in September than pre-COVID levels and the picture has been mixed since September with the resurgence of the virus although showed the economic impact is diminishing. Bailey also stated there is little evidence to go on for the January lockdown effect and expects a pronounced impact from Q1 lockdowns although he believes we are going to see a pronounced recovery in the economy. Furthermore, he added that the BoE has not taken any decision on negative rates but should have options of negative rates as a tool. (Newswires)

The EU is willing to ease friction at its borders with Britain if it ditches its plan to create a "Singapore on Thames", according to sources. (Times)

Italian PM Conte received parliamentary backing for extra deficit spending of EUR 32bln to support the nation’s health service and the COVID-hit economy. (Newswires)

FX

In FX markets, the DXY was subdued beneath the 90.50 level amid the constructive risk tone. UBS noted that although the Biden administration may not specifically aim to weaken the greenback, further depreciation of the currency is likely. EUR/USD was indecisive but has since recovered from its brief stumble below 1.2100 and nearby 100-Hour MA with focus for the single currency turning to today’s ECB policy meeting where they are expected to refrain from any adjustments to policy settings but will be an opportunity for policymakers to take stock of existing measures. GBP/USD also benefitted from the weaker greenback to pick itself up from yesterday’s failed incursion into 1.3700 territory. BoE Governor Bailey stated the Bank has not taken any decision on negative rates but should have options of negative rates as a tool. Mitsubishi UFJ Group cast doubts on its prior forecasts for a rate cut next month which it suggested was less likely citing vaccination progress and reduced concerns regarding cross-border trade gridlock. USD/JPY was dragged lower by a pressured USD and after an unsurprising BoJ policy announcement although JPY-crosses were kept afloat by the positive risk appetite, while antipodeans were underpinned amid the constructive tone and larger than expected fall in Australia’s Unemployment Rate, as well as Westpac abandoning calls for two RBNZ rate cuts this year and now expects the OCR to remain on hold for the foreseeable future.

• Australian Employment Change (Dec) 50.0k vs. Exp. 50.0k (Prev. 90.0k)
• Australian Unemployment Rate (Dec) 6.6% vs. Exp. 6.7% (Prev. 6.8%)

Brazil Central Bank kept the Selic rate unchanged at 2.00% as expected through a unanimous decision, while it stated that the conditions for maintaining forward guidance are no longer satisfied. Brazil Central Bank stated that removal of forward guidance does not mechanically imply an increase in interest rates because the economy continues to require extraordinarily high stimulus and that with forward guidance removed, monetary policy will continue to follow its inflation targeting regime. (Newswires)

COMMODITIES

WTI crude futures traded subdued overnight and briefly declined beneath the USD 53.00/bbl amid several bearish factors including a surprise build to headline crude stockpiles in the latest private inventory report and with a continued surge in global COVID-19 infections. Gold traded sideways as the effects of a weaker greenback were counterbalanced by the lack of haven demand for the precious metal and copper extended on gains amid the buoyant risk tone.

US Private Energy Inventories (w/e Jan 15th): Crude +2.6mln (exp. -1.2mln), Cushing -4.3mln, Gasoline +1.1mln (exp. +2.8mln), Distillate +0.8mln (exp. +1.2mln). (Newswires)

GEOPOLITICAL

White House said follow-on diplomacy will lead to constraints on Iran's nuclear program and plans for Iran negotiations will be part of Biden's early consultation with allies, while there later reports that Iranian Foreign Minister Zarif said regional matters and Iranian missiles are not on the agenda for any discussions with the US regarding Iran's nuclear program. (Newswires/Twitter)

US

Treasuries were firmer after cyclical assets lost steam in US trade and duration-sensitive assets prospered. By settlement, 2s unch. at 13.1bps, 10s -0.2bps at 109bps, 30s +0.3bps at 184.2bps; futures volumes were lacklustre; TIPS curve continued to bull-steepen with the 5yr real making new lows -4bps at -176bps. Yields had been slightly higher coming out of Europe, but as big tech surged post-NFLX earnings, and the DXY moved off its lows, duration pared losses while oil and value stocks faltered. The strength ran straight up into the 20-year offering, which was disappointing. The USD 24bln bond auction tailed by 1.4bps, covered less than average and saw lacklustre participation from non-dealers, in what was something of a downer for duration longs after last week's successful 10- and 30-year auctions. One desk noted that hedge funds had been linked to block sales of 10k USH and 25k TYH in the wake of the auction, although those sales were comfortably gobbled up by real money accounts. While the Treasury has now concluded its January duration offerings, it's worth keeping rough eyes on the corporate front too, particularly as we see companies come out the other side of their earnings blackout periods, perhaps rushed to raise in fear of a rising rate environment. T-note (H1) futures settled 1 tick higher at 136-31.

White House said President Biden's first foreign leader call will be with Canadian PM Trudeau on Friday in which they will discuss relationship between their countries and the Keystone XL Pipeline decision. The White House also said the Senate can do its constitutional duty regarding the Trump impeachment while conducting other business and it was initially stated that the Senate vote on Yellen's Treasury Secretary nomination is not expected until next week, although reports later noted that the Senate Finance Committee scheduled a meeting this Friday to consider Yellen's nomination which congressional sources suggested raises the possibility for the final confirmation later that day. (Newswires)

US Republican Senator Romney said he is not looking for new stimulus in the immediate future, while Republican Senator Graham said separately commented that the USD 15/hour minimum wage will not be included in the stimulus plan. (Newswires)