• Asian equity markets declined across the board with sentiment subdued after the flimsy risk appetite amongst global peers
• Italian PM Conte has convened a cabinet meeting for Tuesday to inform ministers he is resigning; will likely seek to form a new government
• In FX, the USD is broadly firmer against major peers with activity currencies lagging against the greenback
• US Senate Democrat Leader Schumer said they will attempt to pass President Biden's COVID-19 bill through the budget reconciliation process if the GOP block the legislation
• Looking ahead, highlights include UK jobs report, US consumer confidence, ECB's Villeroy, supply from the UK and US
• Earnings from Microsoft, Verizon, General Electric, Johnson & Johnson, Lockheed Martin, 3M, Starbucks, Raytheon, LVMH, UBS and Novartis

CORONAVIRUS UPDATE

US coronavirus cases increased by at least 154,367 to 25.16mln and deaths rose by at least 1,852 to 420.8k, according to a major newswire tally. (Newswires)

US President Biden said the US should be able to vaccine 1mln people a day or more in about three weeks and that the 100-day goal on vaccinations may rise to 150mln instead of 100mln, while he added the US should be well on its way to herd immunity by summer and clarified in the Q&A that he is optimistic 1.5mln vaccine shots can be delivered per day. (Newswires)

Moderna (MRNA) is currently examining a 3rd booster shot of its COVID-19 vaccine 6-12 months following the second dose but not sooner and it expect durability of protection from the primary series of its COVID-19 vaccine to last a year or longer. (Newswires)

EU Health Commissioner said AstraZeneca (AZN LN) vaccine delays are not acceptable and stated the Co.’s vaccine authorization is due by the end of the week. There were also separate reports that the AstraZeneca vaccine is unlikely to work for seniors with the German federal government only expecting an 8% effectiveness for older people. However, the Co. later refuted this and stated that these reports were completely incorrect. (Newswires/Handelsblatt)

Italy sent a letter to Pfizer (PFE) warning the Co. to meet contractual commitments over vaccine deliveries and the COVID commissioner will consider further action against Pfizer at national and European levels, according to a statement. (Newswires)

Japan's vaccine programme chief Kono stated that the central government will shoulder all costs regarding COVID-19 vaccines, while it was also reported that the government is likely to extend the state of emergency for 11 prefectures. (Newswires)

ASIA

Asian equity markets declined across the board with sentiment subdued after the flimsy risk appetite amongst global peers including in the US where stocks whipsawed ahead of this week’s FOMC, tech earnings and month-end, as well as ongoing concerns about vaccine effectiveness against the new COVID-19 variants and doubts on the ability of Democrats to pass the USD 1.9tln COVID-19 relief plan in its entirety, while the absence of participants in Australia and India due to holiday closures also contributed to the lacklustre picture. Nikkei 225 (-0.8%) was negative with the index subdued by recent currency inflows. KOSPI (-2.1%) underperformed despite better-than-expected South Korean GDP growth figures for Q4, as this still resulted in a 1.0% annual contraction for 2020 which was the economy’s worst performance since 1998. Elsewhere, Hang Seng (-2.0%) and Shanghai Comp. (-1.3%) declined with the mainland pressured after the PBoC resumed its tepid liquidity operations which facilitated increases in China’s benchmark overnight repo rate to its highest since November 2019 and with MSCI to delete several securities from its indexes including China National Nuclear Power Co., China Shipbuilding Industry and Inspur International. The losses in Hong Kong were also exacerbated by profit taking in the city’s main index which retreated from the 30k level and near 21-month highs as Tencent shares also pulled back from record levels after it recently approached USD 1tln market cap status. Finally, 10yr JGBs tested the 152.00 level to the upside with prices underpinned by the negative mood across stocks and following the bull flattening in USTs which was helped by a solid 2yr auction, while the 40yr JGB auction results were mixed with a slightly higher b/c.

PBoC injected CNY 2bln via 7-day reverse repos at a rate of 2.20% for a net daily drain of CNY 78bln. (Newswires) PBoC set USD/CNY mid-point at 6.4847 vs exp. 6.4826 (prev. 6.4819)

PBoC adviser Ma proposed to drop the GDP target permanently, while it was suggested that stabilizing the job market and controlling inflation should be the major goals for China’s macroeconomic policy. (21st Century Business Herald)

US State Department said the US should hold China accountable for unfair and illegal practices, as well as make sure US tech does not facilitate China's military build-up or human rights abuses. The State Department also commented that President Biden is committed to ensuring Chinese firms cannot misuse US data and that US tech doesn't support China's malign activities, while it added that a comprehensive strategy and more systematic approach is required on US-China competition instead of the piecemeal approach seen in the recent few years. (Newswires)

MSCI said China National Nuclear Power Co (601985 CH), China Shipbuilding Industry (601989 CH) and Inspur International (596 HK) will be deleted for MSCI ACWI Indexes from January 27th, while their securities will also be delisted from the MSCI China All Shares Indexes along with CGN Power (0003816 CH) and China National Chemical Engineering (601117 CH). In separate news, India is to permanently ban TikTok and 58 other Chinese apps. (Newswires)

BoJ Minutes from the December meeting stated that members shared the view that BoJ should ease without hesitation if required with an eye on the pandemic and a few members suggested BoJ must analyse the effect of its policies to see how it can reach its price target. Most members said there was no need to change guidance for policy rates and members said it is appropriate to examine policy measures on the basis it will maintain the current policy framework. Furthermore, several thought the BoJ should seek ways to make ETF purchases more flexible as ultra-loose policy is prolonged, however one member noted ETF buying is already flexible but it is worth looking for more ideas and a member suggested the BoJ should take control of shape of yield curve more meticulously as desirable for curve to steepen moderately. (Newswires)

• South Korea GDP (Q4 A) Q/Q 1.1% vs. Exp. 0.7% (Prev. 2.1%)
• South Korea GDP (Q4 A) Y/Y -1.4% vs. Exp. -1.7% (Prev. -1.1%)
• South Korean Advanced 2020 GDP -1% Y/Y, which is the first full year contraction since 1998.

UK/EU

Italian PM Conte has convened a cabinet for Tuesday to inform ministers he is resigning, according to the cabinet office. This followed recent reports that PM Conte could meet with President Mattarella amid some speculation that he might resign to form a new government. (Newswires)

FX

FX markets were rangebound for most the session in which the DXY consolidated following the choppy price action during US trade and brief incursion above 90.50, before support was eventually seen as the broad weakness in stocks provided tailwinds for the haven currency. Nonetheless, the gains in the greenback are limited with Citi's model suggesting month-end selling of USD against all major currencies aside from JPY, while there are also doubts regarding whether President Biden’s stimulus plan can garner the 60-vote supermajority needed to pass at the evenly split Senate and with Senate Democrat Leader Schumer stating they will attempt to pass COVID-19 bill through the reconciliation process if the GOP block the legislation, which would mean certain elements of the proposal will likely not make it through the budget reconciliation avenue. EUR/USD was lacklustre but off yesterday’s lows with the single currency not helped by recent softer than expected German IFO data and political uncertainty in Italy with PM Conte set to resign today. GBP/USD retreated to below 1.3650 due to the USD gains. USD/JPY was restricted amid the risk-averse tone and uneventful BoJ minutes release, while antipodeans also lacked vitality alongside the downbeat mood and with Australian participants away for holiday.

New Zealand PM Ardern confirmed they will sign an upgraded FTA with China today, while she added that a travel bubble with Australia looks difficult on a national level but won't rule out a state-by-state approach. (Newswires)

COMMODITIES

WTI crude futures were slightly lower overnight after pulling back from resistance near the USD 53.00/bbl level amid the risk-averse tone, COVID variant concerns and a walk back on some stimulus expectations. Furthermore, Libya's petroleum facility guards ended action at the Ras Lanuf and Es Sider ports which allows for the resumption of exports, while focus turns to the latest inventory reports beginning with the private sector stockpile data due after hours in US. Gold prices were restricted by the slightly firmer greenback and copper prices were pressured due to the downbeat mood across risk assets.

GEOPOLITICAL

US President Biden said the US and Russia can cooperate on the start of a treaty and at the same time, the US can make clear concerns over treatment of Russian opposition leader Navalny, while he added the US will not hesitate to raise concerns with Russia about its behaviour regarding Navalny or bounties on US troops in Afghanistan. (Newswires)

US President Biden held a call with German Chancellor Merkel in which they discussed foreign policy priorities, tackling climate change and COVID-19, while they agreed to work on issued including China, Russia and Iran. (Newswires)

US

The Treasury curve bull-flattened on Monday after a shaky risk tone accentuated the reversal in recent steepening that began last week. By settlement, 2s -0.4bps at 12.1bps, 10s -5.1bps at 104bps, 30s -5.6bps at 180bps; TYH1 volumes were average; 5yr TIPS -1bps at -178bps, 10yr TIPS -4.1bps at -102.8bps, 30yr TIPS -2.3bps at -31.3bps. The strength for duration got going at the Europe open, with EGBs leading the charge higher as Italian fiscal woes, the disappointing Ifo survey and Merck's vaccine trial failures all driving the haven bid; Moderna's update that its vaccines were less effective against the SA virus variant didn't help either. Yields continued to break lower through resistance levels (1.07% on 10s) after the equity complex saw some pressure after the US cash open, and the bid held up until the end of the session, with little consideration for this week's belly auctions. The Treasury sold USD 60bln of 2-year notes today in what was a solid offering: stopped through by 0.2bps, covered more than average, and strong sponsorship from the non-dealer community. The auction bodes well for Tuesday's USD 61bln 5-year notes, and Thursday's USD 62bln 7-year notes. On a technical standpoint, 10s is now approaching the psychologically important 1% resistance level, which it broke through and remained above for the first time post-COVID on January 6th as steepening bets flourished. That tide has now lost its near-term momentum, with a lack of recent recovery catalysts seeing those positions get closed out, and yields now exploring their new trading ranges, moving sideways over the last week or so. T-note (H1) futures settled 11 ticks higher at 137-12.

President Biden said he doesn’t expect we will know whether we have an agreement until we get right down to the very end of this process which will be "in a couple of weeks" and he is open to negotiating regarding his proposed USD 1,400 COVID-19 relief checks. (Newswires)

US Senate Democrat Leader Schumer said they will attempt to pass President Biden's COVID-19 bill through the budget reconciliation process if the GOP block the legislation. There were also comments from Senate Republican Leader McConnell that President Biden's stimulus relief plan misses the mark and reiterated that it must be targeted, while Republican Senator Collins said President Biden and Democrat lawmakers should set aside minimum wage increase from the COVID-19 relief proposal. (Newswires/The Hill)

US Senate voted 84 vs 15 to confirm Janet Yellen as Treasury Secretary, while the Senate Foreign Relations Committee approved President Biden's nomination of Antony Blinken for Secretary of State which sends the nomination to the full Senate. (Newswires)

US House lawmaker carried the article of impeachment charging former President Trump with incitement of insurrection to the Senate for trial, while it was later reported that President Biden said he doesn't believe that there will be enough votes to convict former President Trump in the Senate impeachment trial. (Newswires/CNN)