• Asian equities traded mixed and attempted to shrug off the weak handover from the US where there was a slight negative bias
• A late boost was seen in Nasdaq 100 futures after-hours due to strong results from Microsoft which beat on top and bottom lines
• ECB will reportedly query dollar weakness and is to monitor the impact on FX from ECB vs Fed policies
• Italy's Conte said he wants backing for a government of "national rescue" and is seeking a new pro-Europe government
• In FX, the DXY consolidated above 90.00, EUR/USD lacked firm direction and GBP/USD held on to recent gains
• Looking ahead, highlights include German GFK consumer sentiment, US durables, DoEs, FOMC rate decision & Fed Chair Powell press conference, NZ trade, ECB's Hakkarainen, Lane, supply from Germany & US
• Earnings from Apple, AT&T, Facebook, Boeing, Tesla, Blackstone

CORONAVIRUS UPDATE

US COVID-19 cases +133,913 (prev. +142,259) and deaths +1,891 (prev. +1,926). (Newswires)

US President Biden said that millions more will receive vaccines sooner than expected, while he added it will take months to get a majority of Americans vaccinated and mask-wearing is the best tool against the virus now not the vaccine. Furthermore, President Biden's administration is to purchase a total 200mln new doses of vaccines from Pfizer (PFE) and Moderna (MRNA) with new doses expected to be delivered by summer, and weekly supply to states will to increase to 10mln from 8.6mln doses for next 3 weeks. (Newswires)

US is considering a land border and domestic flight testing needs, while it is evaluating other nations for possible travel restrictions and warning citizens to seriously reconsider travelling abroad. (Newswires)

UK PM Johnson promised a plan to ease the lockdown in the coming days and weeks, which will depend on the infection rate and vaccines. The government is set to announce hotel quarantines today for Britons returning from 30 high-risk countries. (Newswires/Times)

AstraZeneca (AZN LN) CEO said they are two months behind their original schedule on the European vaccine rollout and it had three additional months to fix the issues in UK compared to Europe as the contract was agreed first. CEO also said in the next few days the Co. will ship at least 3mln doses immediately to Europe as soon as it gets EMA approval and that its total capacity globally is now roughly 100mln doses a month. Furthermore, it was reported that the Co. is working with Oxford University on a vaccine that targets the new variant. (Newswires/Die Welt/La Repubblica)

ASIA

Asian equities traded mixed and attempted to shrug off the weak handover from the US where there was a slight negative bias amid pre-FOMC caution and ongoing doubts regarding President Biden’s USD 1.9tln stimulus proposal, although participants also reflected on earnings and a late boost was seen in Nasdaq 100 futures after-hours due to strong results from Microsoft which beat on both its top and bottom lines. ASX 200 (-0.7%) was led lower by weakness across the mining-related sectors and as yesterday’s regional losses caught up with the index on return from its holiday closure, while Nikkei 225 (+0.2%) was kept afloat by recent conducive currency moves but with upside capped amid expectations for an extension to the state of emergency in areas still seeing a high number of infections. KOSPI (-0.2%) swung between gains and losses as early strength in the local tech giants petered out including Samsung Electronics which is planning to increase FY21 chip capex by 20% Y/Y to KRW 35tln and with LG Display turning south despite posting a profit of KRW 620.9bln vs prev. loss KRW 1.8tln Y/Y. Hang Seng (+0.2%) and Shanghai Comp. (+0.2%) were indecisive after another substantial liquidity drain by the PBoC, as well as continued US-China tensions with President Biden’s Commerce Secretary nominee vowing to use the full tool kit to protect US networks from companies such as Huawei and ZTE, while FTSE Russell is mulling whether to eject more Chinese firms from key index listings. However, there were some encouraging developments including a jump in Chinese Industrial Profits for December which grew by 20.1% Y/Y and with Alibaba lifted by recent comments from the PBoC Governor who suggested Ant Group’s mammoth IPO could be revived after its issues are resolved. Finally, 10yr JGBs were lacklustre with price action stalling beneath the psychological 152.00 level as Japanese stocks remained in the green and following similar indecisive trade in T-notes, but with downside cushioned by the BoJ’s presence in the JGB market today for a relatively reserved JPY 600bln total.

PBoC injected CNY 180bln via 7-day reverse repos at a rate of 2.20% for a net daily drain of CNY 100bln. (Newswires) PBoC set USD/CNY mid-point at 6.4665 vs exp. 6.4663 (prev. 6.4847)

US Republican Senator Rubio reintroduced legislation to establish standards and restrictions concerning Chinese and other high-risk foreign apps. (Newswires)

• Chinese Industrial Profits (Dec) Y/Y 20.1% (Prev. 15.5%)
• Chinese Industrial Profits YTD (Dec) Y/Y 4.1% (Prev. 2.4%)

UK/EU

ECB will reportedly query dollar weakness despite the stronger US economy and is to monitor the impact on FX from ECB vs Fed policies. (Newswires)

French Finance Minister Le Maire said the EU recovery fund is too slow and complicated, while he is urging for a review of fiscal regulations to address the blockages in distributing the recovery funds to member states. (FT)

Italy's Conte said he wants backing for a government of "national rescue" and is seeking a new pro-Europe government to pass electoral, as well as constitutional reforms. (Newswires)

• UK BRC Shop Price Index (Jan) Y/Y -2.2% (Prev. -1.8%)

FX

In FX markets, the DXY consolidated above the 90.00 level after the prior session’s weakness. EUR/USD lacked firm direction with price action mostly influenced by the greenback and amid some mild headwinds in the single currency from the political uncertainty in Italy where PM Conte resigned as expected and after sources suggested concern within the ECB regarding EUR strength, with the central bank to query dollar weakness despite the stronger economy and will monitor the impact on FX from ECB vs. Fed policies. GBP/USD held on to recent gains while UK PM Johnson also promised a plan to ease the lockdown which will be dependent on the infection rate and vaccines. USD/JPY marginally rebounded and JPY-crosses consolidated near yesterday’s highs, while antipodeans were uneventful amid the mixed risk appetite and with mostly firmer than expected Australian CPI data only providing brief support as all measures of inflation remained below the RBA’s 2%-3% target and with data also coinciding with weaker NAB business surveys.

• Australian CPI (Q4) Q/Q 0.9% vs. Exp. 0.7% (Prev. 1.6%)
• Australian CPI (Q4) Y/Y 0.9% vs. Exp. 0.7% (Prev. 0.7%)
• Australian NAB Business Confidence (Dec) 4.0 (Prev. 12.0, Rev. 13.0)
• Australian NAB Business Conditions (Dec) 14.0 (Prev. 9.0, Rev. 7.0)

COMMODITIES

WTI crude futures picked up from yesterday's fluctuations around the USD 53.00/bbl level with mild support seen following a surprise drawdown to the headline crude stockpiles in the latest private sector inventory report but with upside limited by the indecisive risk tone. Gold was contained by a steady greenback and with price action restricted heading into the FOMC meeting later today, while copper prices conformed to tentative picture across risk assets.

US Private Inventories (w/e Jan 22nd): Crude -5.3mln (exp. +0.4mln), Cushing -3.5mln, Gasoline +3.1mln (exp. +1.8mln), Distillate +1.4mln (exp. -0.4mln). (Newswires)

GEOPOLITICAL

US President Biden and Russian President Putin held their first phone call and were both satisfied with the exchange of notes on the extension of the New START Treaty, according to reports citing the Kremlin, while the White House said the leaders discussed the New START Treaty, Ukraine, Solar Winds hack, and alleged bounties in Afghanistan. (Newswires)

US

Treasuries traded sideways on Tuesday, ebbing and flowing modestly to risk environment as the macro environment lacked fresh catalysts. By settlement, the curve was unchanged with 10s at 1.04%; TYH1 volumes were lacklustre; short TIPS yields were lower, while long TIPS yields rose. Treasury yields hit their highest midway through European trade (1.05% for 10s), after recovering from lows seen on the back of the downbeat APAC session, and gradually drifted back down as US trade commenced. The data slate was mixed out of the US, with Consumer Confidence coming in hotter than anticipated, although the Richmond Fed survey underwhelmed; neither swung the dial, nor emboldened directionality for rates. There was little else to draw attention to for USTs aside from the 5-year auction. The USD 61bln offering was lacklustre, where although the 0.426% WI was stopped through by 0.2bps, the internals were less encouraging with dealers taking more than average amid a lack of indirect participation. The auction was not as solid as Monday's 2-year offering amid the added duration risk likely altering the the buying cohort away from the money market funds that came out in size for the 2-year. There is most definitely more noticeable demand in STIRs, however, with several sessions now seen of the greater than USD 1bln in demand at the Fed's RRP facility as the market's general collateral rate flirts with the 5bps floor available at the central bank; today's record low 1-year bill auction also saw solid participation. With the shrinking pool of bill supply, the latest hiccups to stimulus don't provide any solace for those looking for higher yields at the front-end, which is likely accentuating the flooding of cash in funding markets. T-note (H1) futures settled flat at 137-12.

US President Biden is to sign four executive actions on housing, prisons, native sovereignty and xenophobia, while he directs the AG not to renew DoJ contracts with private prisons. (Newswires)

US Senate Democrat Leader Schumer said the Senate can begin work now that Senate Republican Leader McConnell relented and that the budget resolution vote can come as early as next week, while he added that all options are on the table including reconciliation. (Newswires)

Microsoft Corp. (MSFT) (Information Technology/Systems Software) Q2 21 (USD): EPS 2.03 (exp. 1.64); Revenue 43.1bln (exp. 40.18bln). Server Products and Cloud services revenue +26% driven by Azure +50%. CAPEX 4.17bln, +18% y/y (exp. 4.79bln). SEGMENT: Productivity and Business Processes revenue 13.35bln (exp. 12.94bln). Intelligent Cloud revenue 14.60bln (exp. 13.75bln). More Personal Computing revenue 15.12bln (exp. 13.55bln). Q3 21 REVENUE VIEW: productivity and business processes revenue view 13.35-13.6bln, intelligent cloud revenue view 14.7-14.95bln, more personal computing revenue 12.3-12.7bln.