• Asian equity markets traded cautiously after the mixed lead from Wall St where most indices stalled at record levels
• The Nasdaq was bolstered by continued strength in large tech including firm gains in Intel which announced its results prior to the closing bell
• US Treasury Secretary nominee Yellen said the US has a full array of tools to counter China's practices
• In FX markets, the DXY remained subdued, EUR/USD held on to yesterday's gains and GBP/USD oscillated around 1.37
• Looking ahead, highlights include UK & Canadian retail sales, EZ, UK, US flash PMIs, existing home sales, DoEs

CORONAVIRUS UPDATE

US COVID-19 cases +188,156 (prev. +153,106) and deaths +4,383 (prev. +2,297), while a major newswire tally stated US cases rose by at least 191,982 to 24.51mln and deaths rose by at least 4,157 to almost 410.0k. (Newswires)

US President Biden released his national strategy for the COVID-19 response and stated the vaccine rollout has been a dismal failure so far. Biden also warned that things will get worse before it gets better, while he announced that everyone flying to the US will need to test before they get on a flight and will also have to quarantine. (Newswires)

NIH's Fauci said Johnson & Johnson (JNJ) has sufficient data on its COVID-19 vaccine and later commented that the administration is seeking higher vaccine production from Moderna (MRNA), Pfizer (PFE) and Johnson & Johnson (JNJ). There were also separate reports that Pfizer (PFE) and BioNTech (BNTX) agreed to supply their COVID-19 vaccine to the WHO's COVAX vaccination scheme, according to sources. (Newswires)

EU Commission President Von der Leyen said the Johnson & Johnson (JNJ) vaccine application is due in February and AstraZeneca (AZN LN) vaccine deliveries are to start in mid-February. Furthermore, she suggested targetted measures are needed to keep external and internal borders open and proposed a "dark red" zone to show an even worse COVID-19 situation. (Newswires)

A UK government source has suggested that a two-phase unlocking plan is under consideration whereby the national lockdown would be stretched out for several months before moving the entire country into tier 2 restrictions. (Telegraph)

Portugal PM Costa announced the suspension of flights to and from the UK beginning on Saturday to curb spread of the COVID-19 variant. It was also reported that EU leaders are to move towards restricting non-essential travel, while German Chancellor Merkel said she opposes vaccine certificates for now and warned EU leaders of a risk of dramatic rise in infections. (Newswires)

Hong Kong is to impose a lockdown for tens of thousands of its residents who will have to show negative tests to exit certain neighbourhoods and which is expected to begin this weekend. (SCMP)

Japan's vaccine programme chief Kono said Japan will begin its vaccinations using Pfizer (PFE) vaccines and they aim to begin vaccinations as soon as late February with 10k medical staff at 100 hospitals. (Newswires)

India will reportedly start commercial exports of the AstraZeneca (AZN LN) vaccine from Friday with first supplies to Brazil, Morocco, Saudi Arabia and South Africa. (Newswires)

ASIA

Asian equity markets traded cautiously after the mixed lead from Wall St where most indices stalled at record levels aside from the Nasdaq which was bolstered by continued strength in large tech including firms gains in Intel which announced its results prior to the closing bell and beat on both top and bottom lines and with Apple also boosted by optimism from Morgan Stanley regarding the tech giant’s upcoming earnings report. Nonetheless, trade across the Asia-Pac region was subdued with ASX 200 (-0.3%) pressured by heavy losses in the energy sector and as smaller tech stocks were shunned in the shadow of the global industry giants, with a larger than expected decline in Retail Sales adding to the glum mood. Nikkei 225 (-0.3%) was negative following soft inflation data, which was not as bad as feared, but still registered the fastest pace of decline since September 2010. In addition, there was an initial report that Japan's government is said to have privately concluded the Tokyo Olympics will have to be cancelled due to the pandemic and focus will be on securing games for Tokyo at the next available year in 2032, although PM Suga later pushed back against this and said they are determined to realize the Olympics. Hang Seng (-1.4%) and Shanghai Comp. (-0.7%) conformed to the downbeat picture with Hong Kong weighed on by expectations of a tough lockdown to be imposed from this weekend for certain districts and with CNOOC the worst performer after MSCI announced yesterday it will delete the Co. from its MSCI ACWI and MSCI China All Share Indexes. There were also recent comments from US Treasury Secretary nominee Yellen who suggested the US will use a full array of tools to counter China's abusive and illegal practices, while she added that they will not alter China tariffs until allies have been consulted and that a new approach is needed for meaningful pressure on China. Finally, 10yr JGBs are lower after its pullback from resistance near the 152.00 focal point and alongside similar lacklustre trade in T-notes, with prices ignoring the improved results and stronger demand seen at the enhanced liquidity auction for JGBs ranging from 2yr- 20yr maturities.

PBoC injected CNY 2bln via 7-day reverse repos at rate of 2.20% for a weekly net injection of CNY 598bln. (Newswires) PBoC set USD/CNY mid-point at 6.4617 vs exp. 6.4618 (prev. 6.4696)

US Treasury Secretary nominee Yellen said US will take on China's abusive and illegal practices, as well as use a full array of tools to counter China's practices. Yellen also stated they will not alter China tariffs until allies have been consulted and that a new approach is needed for meaningful pressure on China, while they will assure international COVID aid is not used to pay China loans. (Newswires)

Japan's government was reported to have privately concluded that Tokyo Olympics will have to be cancelled due to the pandemic and focus is on securing games for Tokyo next available year in 2032, according to The Times citing a senior ruling coalition member. However, Japanese PM Suga later said they are determined to realize the Olympics with close cooperation with Tokyo and the IOC, while a government spokesman also affirmed there was no truth to the report about a possible Olympics cancellation and that they will clearly deny the report. (Newswires)

• Japanese National CPI (Dec) Y/Y -1.2% vs. Exp. -1.3% (Prev. -0.9%); fastest decline since Sept. 2010
• Japanese National CPI Ex. Fresh Food (Dec) Y/Y -1.0% vs. Exp. -1.1% (Prev. -0.9%)
• Japanese National CPI Ex. Fresh Food & Energy (Dec) Y/Y -0.4% vs. Exp. -0.4% (Prev. -0.3%)

UK/EU

UK Chancellor Sunak is reportedly set to unveil plans to restore the nation's finances as part of the March budget. The extent of the plans will be contingent on developments surrounding the pandemic. (Newswires)

• UK GfK Consumer Confidence (Jan) -28 vs. Exp. -29 (Prev. -26). (Newswires)

ECB is reportedly seeking new gauges to help with stimulus decisions including a new gauge of euro-area financial conditions and was said to ask staff for proposals on new gauges by March, according to sources. (Newswires)

FX

In FX markets, DXY remained subdued following its ongoing softening trend and eyed the 90.00 level to the downside after the recent record highs in stocks on Wall Street. EUR/USD held on to yesterday’s gains owing to a weaker USD and after the ECB meeting where the central bank did little to rock the boat, while GBP/USD was choppy at the 1.3700 handle amid a lack of fresh catalysts for the pair although there were reports UK Chancellor Sunak is to unveil plans to restore the nation's finances in the March budget. USD/JPY was restricted after the soft inflation data, as well as the uninspired risk mood which also clouded over antipodean currencies, with AUD/USD digesting weak retail sales data and NZD/USD only briefly supported by firmer than expected New Zealand CPI.

• Australian Retail Sales (Dec P) M/M -4.2% vs. Exp. -2.5% (Prev. 7.1%)
• New Zealand CPI (Q4) Q/Q 0.5% vs. Exp. 0.0% (Prev. 0.7%)
• New Zealand CPI (Q4) Y/Y 1.4% vs. Exp. 1.0% (Prev. 1.4%)
• New Zealand RBNZ Sectoral Factor Model Inflation (Q4) 1.8% (Prev. 1.7%)

RBNZ provided an update on the investigation regarding the data breach earlier this month in which it stated that the breach is now understood and resolved with the bank's core functions unaffected, sound and operational. RBNZ will update on the independent review process next week and is to postpone the publication of most statistical releases following the hacking incident, but added no data was lost and no publications will be cancelled, with its new system expected to be available next month. (Newswires)

COMMODITIES

WTI crude futures were pressured on a break beneath the USD 53.00/bbl level and as the energy complex remained subdued. The uninspired risk tone added to the headwinds for oil prices, although Goldman Sachs remained unfazed in its bullish outlook citing the lack of urgency for the US to remove sanctions on Iran and anticipation of greater stimulus measures, while focus turns to the delayed EIA inventory data due later. Gold was uneventful and languished around the prior day's lows but is still set for its biggest weekly gain in over a month amid the recent USD softness and copper prices were on the back foot alongside the cautious overnight mood.

Goldman Sachs said that a lack of urgency from the US government to lift Iranian sanctions and a push for larger fiscal spending support the constructive view on oil and gas prices, while it estimated USD 2tln stimulus over 2021-2022 would increase US demand by 200k bpd and stated that delays in a full return of Iran production would support the bullish oil outlook. (Newswires)

GEOPOLITICAL

US President Biden is seeking a 5-year nuclear arms treaty renewal with Russia, according to reports. (Newswires)

US

Treasuries were on the backfoot heading into the session, seemingly taking their cues from EGBs as participants prepped for the ECB meeting. Ultimately, there was little fanfare from Lagarde et al., although some minor tweaks, despite expected, to language around its PEPP programme put some additional pressure on sovereigns. USTs didn't react much to the Jobless Claim data either, which modestly lower than expected, but still sit relatively high at over 900k new weekly claims; the earlier Fed op didn't provide a lasting bid either. However, as stocks lost their footing, Treasuries caught a bid heading into the US equity open. Furthermore, with TY February options expiring on Friday, it's possible that with the highest open interest at the 137-00 strike, put sellers could have been defending their positions. Elsewhere, the Treasury announced its coupon auction for next week: to sell USD 60bln of 2-year, USD 61bln of 5-year and USD 62bln of 7-year supply (all sizes as expected). T-note (H1) futures settled 2+ ticks lower at 136-28+.

US Treasury Secretary nominee Yellen said she hopes to work with congress to avoid any debit limit harm and will work with the President to fight currency manipulation. Yellen also stated she is committed to multilateral OECD efforts to address tax base erosion and digital tax disputes, while she added that President Biden made clear he will not sign new FTAs before US makes major investments in its workers and infrastructure. Furthermore, she said they will work with congress to improve retirement savings system and that the Biden plan would give almost all workers access to an automatic 401k retirement plan. (Newswires)

US Republican Senator Blunt said he believes President Biden's stimulus plan is a non-starter as a whole and thinks the minimum wage plan is one item not happening. Republican Senator Collins separately commented that more COVID-19 aid may be needed in a couple of months, while she wants to hear the justification for a large stimulus plan and stated it is difficult to see why such a large package is required. (Newswires)

US President Biden advisers are reportedly signalling to Wall Street donors that tax increases will come later in the year and will likely be tied to infrastructure and dependent upon the economic recovery, according to FBN’s Gasparino. (Newswires)

US Senate Republican Leader McConnell proposed that the House presents former President Trump's impeachment charge on January 28th and for Trump to be given 2 weeks after that to prepare for the trial. (Newswires)