• FOMC left rates unchanged and maintained the size of its asset purchase programme, as expected
• FOMC noted that the pace of US economic activity and employment moderated in recent months
• Asia-Pac indices were negative on spillover selling from the US where stocks had their worst day since October
• Better-than-expected earnings from tech giants Apple and Facebook failed to provide any meaningful reprieve
• In FX, the DXY held firm as the risk-aversion accentuated its haven appeal, EUR/USD trades sub-1.21, GBP/USD sits on a 1.36 handle
• Looking ahead, highlights include German CPI, US GDP (Q4), PCE, IJC, Japanese unemployment, ECB's Schnabel
• Earnings from Comcast, American Airlines, Visa, Southwest Airlines, McDonalds, Mastercard, STMicroelectronics

FOMC

FOMC left rates unchanged at 0-25bps as expected and maintained its purchases at USD 80bln in USTs and USD 40bln in MBS, while it stated the pace of US economic activity and employment moderated in recent months, with weakness concentrated in sectors most adversely affected by pandemic (previously it said “economic activity and employment have continued to recover but remain well below their levels at the beginning of the year”). Fed added that the weaker demand and earlier declines in oil prices are holding down consumer inflation, while it added that it will no longer offer one-month term repo operations after February 9th and remains ready to adjust repo operations as appropriate.

Fed Chair Powell stated during the press conference that household spending on goods has moderated, labour market participation remains below pandemic levels and that the path ahead remains highly uncertain, with the recent COVID resurgence weighing on economic activity and job creation. Powell reiterated that policy is expected to remain accommodative until employment and inflation goals are achieved, that the economy is a long way from goals which will take some time for substantial further progress to be achieved and that if progress were to slow, guidance would convey intention to increase policy accommodation. Furthermore, Powell stated policy stance is just right and they clearly could do more with bond purchases if appropriate, while he suggested it is too soon to be thinking about an exit and too early to be talking about dates regarding tapering which will be signalled well in advance. (Newswires)

CORONAVIRUS UPDATE

In vitro studies showed the Pfizer (PFE) / BioNTech (BNTX) COVID-19 vaccine elicits antibodies which neutralize SARS-CoV-2 with key mutations present in UK and South African variants, while the Co.'s are encouraged by the early findings. (Newswires)

Norway PM Solberg announced that it will close the country to all but essential visits from midnight Friday. (Newswires)

ASIA

Asia-Pac indices were negative on spillover selling from the US where stocks had their worst day since October. There wasn't a specific headline catalyst for the downside; analysts had cited some forced hedge fund liquidations, covering shorts in some of the stocks subject to 'retail activism', forcing desks to cut profitable longs elsewhere. Better-than-expected earnings from tech giants Apple and Facebook failed to provide any meaningful reprieve in either index futures or their respective stocks during extended trade. ASX 200 (-1.3%) was dragged lower in which tech led the broad declines and with miners also subdued following weaker quarterly production updates from the likes of Fortescue Metals and Newcrest Mining. Nikkei 225 (-1.9%) suffered alongside the widespread risk aversion and as earnings season picked up in Japan, while the KOSPI (-1.7%) was predominantly influenced by corporate results including index heavyweight Samsung Electronics which disappointed on its Q4 net. Hang Seng (-1.9%) and Shanghai Comp. (-1.3%) also weakened after the PBoC continued to drain liquidity and amid mixed signals from the US as the White House reaffirmed the view that telecom equipment from untrusted vendors such as China's Huawei was a threat to security, although it was also reported that the US issued a General License 1A which authorizes transactions involving securities of certain Communist Chinese military companies and that MSCI reversed its decision on index deletions for Chinese firms. Finally, 10yr JGBs were uneventful and failed to take advantage of the subdued risk appetite with prices constrained within this week’s tight range beneath the 152.00 level and which follows a mixed 2yr auction.

PBoC injected CNY 100bln via 7-day reverse repos at a rate of 2.20% for a net daily drain of CNY 150bln. (Newswires) PBoC set USD/CNY mid-point at 6.4845 vs exp. 6.4802 (prev. 6.4665)

US President Biden spoke with Japan PM Suga and discussed US commitment to Japan's defence and deterring North Korea, as well as security issues including China. Furthermore, PM Suga said he agreed with President Biden the US-Japan security treaty applies to the Senkaku Islands which is disputed with China. (Newswires)

US Secretary of State Blinken said in call with the Philippines Foreign Minister that the US will stand with southeast Asian countries against pressure from China in the South China Sea. (Newswires)

US Treasury Department's Office of Foreign Assets Control issued General License 1A which authorizes transactions involving securities of certain Communist Chinese military companies, while it was also reported that MSCI reversed its decision regarding index deletions for Chinese companies. (Newswires)

White House said telecoms equipment made by untrusted vendors like China's Huawei is a threat to the security of the US and its allies, while it will ensure US networks do not use equipment from untrusted vendors. (Newswires)

Samsung Electronics (005930 KS) Q4 net KRW 6.6tln vs exp. KRW 7.5tln, oper. profit KRW 9.1tln vs prelim. KRW 9.0tln, rev. KRW 61.6tln vs prelim. KRW 61.0tln, Co. is to pay year-end dividend of KRW 1932/shr, while it stated that mobile market demand is likely to recover to pre-pandemic levels this year and it may conduct a meaningful sized M&A between 2021-2023. (Newswires)

UK/EU

UK's next free trade deal is set to be with Australia. (City AM)

UK 2020 car production declined 29% Y/Y to 920,928 which is the lowest level since 1984, according to SMMT. (Newswires)

German Foreign Minister Maas commented after talking with US Secretary of State Blinken in which he stated that they formed a basis for a step-by-step improvement in transatlantic ties and that they should consider whether transatlantic sanctions make sense in regards to Nord Stream 2. (Newswires)

FX

In FX markets, the DXY held firm as the risk aversion accentuated its haven appeal and despite the bearish undertones from the FOMC. Nonetheless, the greenback maintained its upward momentum despite the downbeat Fed with price action also a function of the declines in EUR/USD which fell below the 1.2100 handle after dovish rhetoric/source reports from the ECB. GBP/USD gave ground to the USD and languished near its 200-hour MA at 1.3665. USD/JPY was driven higher by strength in the base currency which helped the pair launch off a platform at 104.00 and antipodeans remained pressured by the broad risk aversion and lacklustre picture in the commodities complex.

COMMODITIES

WTI crude futures were choppy around the USD 52.50/bbl level following yesterday's fluctuations whereby support from the substantial surprise draw of more than 9mln bbls in the latest DOE crude stockpiles, gradually faded due to the broad risk aversion and with Saudi planning to increase oil exports by using less domestically. Gold was flat overnight with the precious metal constrained by a firmer greenback, while copper languished amid the global stock sell-off.

India gold demand fell 35% in 2020 to its lowest in 26 years amid COVID-related lockdowns, but India's gold consumption could improve this year on pent-up demand, according to the World Gold Council. (Newswires)

GEOPOLITICAL

US Secretary of State Blinken said he will review a number of steps taken towards the end of the Trump administration including actions involving Yemen's Houthis and is reviewing all of Russia's actions that are of deep concerns to the US, while his view has not changed that genocide was committed against Uighurs in China. (Newswires)

The brother of Kremlin critic Navalny has reportedly been detained after an apartment search, according to Navalny's team. (Newswires)

US

USTs were firmer on Wednesday after the risk off wave reversed weakness; FOMC had no effect. By settlement, 2s -0.4bps at 12.1bps, 10s -2bps at 1.02bps, 30s -1.5bps at 178.7bps; TYH1 volumes were strong; real yields were unchanged. Treasury yields began descending as the risk tone declined out of Europe, and then really crescendoed into the NY equity open as investors dashed for dollars and sovereigns. Those flows (there was chunky volume going though at the time) brought the 10-year cash yield to the key resistance 1% level - which it hasn't been beneath since it rose above it earlier in January - but failed to move below such, respecting the round figure; yields moved slightly off their lows as the stock rout bottomed out. Note, there had also been some spillover strength from the EGB complex as ECB sources reported that the central bank was not happy with market participants underpricing the likelihood of a rate cut. As the dust settled and Europe departed, USTs hovered sideways up into the close. The FOMC made next to no changes in its statement (it adjusted its outlook to say that the pace of activity and employment has moderated in recent months), and Fed Chair Powell didn't provide any fanfare in his presser/Q&A. Note, the 7-year note auction will take place on Thursday. T-note (H1) futures settled 5 ticks higher at 137-17.

Chairman of House Budget Committee Yarmuth said the plan is to bring the FY21 resolution to the floor next week to begin the reconciliation process for stimulus and will skip the committee mark-up. (Newswires)

• Apple (AAPL) Q1 2021 (USD): EPS 1.68 (exp. 1.41); Rev: 111.4bln (exp. 103.28bln), iPad: 8.4bln (exp. 7.4bln), iPhone: 65.6bln (exp. 59.3bln), Mac: 8.7bln (exp. 8.5bln), Wearables, Home, Accessories: 13bln (exp. 12bln), Services: 15.8bln (exp. 14.9bln)
• Facebook (FB) Q4 2020 (USD): EPS 3.88 (exp. 3.21); Revenue 28.1bln (exp. 26.41bln); Advertising: 27.18bln (exp. 25.8bln)
• Tesla (TSLA) Q4 2020 (USD) Adj. EPS 0.80 (exp. 1.01); Revenue 10.7bln (exp. 10.32bln)