• European indices began the session on the front-foot, Euro Stoxx 50 +1.3%, ES +1.0%, with sectors predominantly positive and basic resources shining following silver's outperformance
• Chinese official manufacturing, non-manufacturing and Caixin manufacturing PMI data all fell short of estimates but remained in expansion territory; somewhat hindered mainland performance
• A group of 10 Republican senators called for President Biden to consider a smaller COVID-19 relief proposal than his USD 1.9tln package; to meet Biden this afternoon
• The USD recuperated its early downside amid losses in EUR & JPY dropping below/testing 1.21 and 105.00 respectively against the USD; core debt is flat with the US 10yr yield at 1.08%
• Looking ahead, highlights include US final manufacturing PMIs, US construction spending, ISM manufacturing, Fed's Bostic, Rosengren

CORONAVIRUS UPDATE

US CDC reported total COVID-19 cases rose to 25.92mln from 25.78mln the day before and total deaths rose to 438.0k from 435.2k the day before. (Newswires)

Moderna (MRNA) asked the US FDA for permission to fill its COVID-19 vaccine vials with up to five additional doses to ease a bottleneck in manufacturing, according to a person familiar with the matter. In other news, Novavax (NVAX) reportedly could be planning to boost its production of vaccines to 150mln doses a month by May or June. (CNBC/Newswires)

BioNTech (BNTX) could deliver additional 75mln doses of COVID-19 vaccines to the EU in Q2. (Der Spiegel)

EU’s Von der Leyen said AstraZeneca (AZN LN) will increase its European manufacturing capacity and will deliver 9mln additional COVID-19 vaccine doses in Q1 with deliveries to begin a week earlier than scheduled. Furthermore, she stated that it is going to be a difficult situation for vaccines in the next 2 months and that they agreed with UK vaccine output from both sides of the channel would go in both directions, while she wants 70% of adults in Europe vaccinated by end of summer. Separate reports noted that France and Germany are threatening legal action against AstraZeneca after warning that any firm that favoured orders from the UK would be penalised. (Newswires/Telegraph)

German Health Minister Spahn says the domestic age recommendation for the AstraZeneca (AZN LN) COVID-19 vaccine could alter once additional information is obtained. (Newswires)

UK COVID-19 cases +21,088 (prev. +23,275) and deaths +587 (prev. +1,200), France cases +19,235 (prev. +24,392) and deaths +195 (prev. +242), Italy cases +11,252 (prev. +12,715) and deaths +237 (prev. +421). (Newswires)

UK ministers were warned that social distancing rules may remain in place in Britain for the entire year unless a vaccine proves to be 85% effective at stopping transmission of COVID-19, while modelling suggests UK will experience a 3rd large spike in deaths unless vaccines cut COVID-19 transmission significantly. (Telegraph)

Australia’s health minister announced that green zone flights from New Zealand will resume. It was also reported that most of Western Australia including the city of Perth went into a “full lockdown” for 5 days after a hotel quarantine worker tested positive for the UK variant of COVID-19. (Newswires)

Hong Kong Chief Secretary Cheung said that there could be more lockdowns soon, while he stated the goal is reduce the number of COVID-19 cases to zero and that they may launch various operations to impose mandatory tests in the future. (Newswires)

ASIA

A positive tone was observed in the Asia-Pac region with most regional bourses in the green and US equity futures also recovered from the early stumble seen at the reopen where there was some residual pressure after Friday's losses on Wall St which were due to month-end flows, recent overvaluation concerns, large hedge fund losses and fears of tighter regulation amid the main street trading frenzy. ASX 200 (+0.8%) initially underperformed amid fresh COVID-19 restrictions in Western Australia including the state capital of Perth which was placed on a snap 5-day lockdown after a quarantine hotel guard tested positive for the UK COVID-19 variant, although the index then recovered alongside the gradually improving mood in the region and with upside led by miners after silver prices surged again on the Reddit short squeeze play. Nikkei 225 (+1.6%) shrugged off early cautiousness and reclaimed the 28K level with newsflow dominated by earnings results, while the KOSPI (+2.7%) was boosted after better-than-expected trade figures which showed Exports jumped by 11.4% Y/Y for January. Hang Seng (+2.1%) and Shanghai Comp. (+0.6%) were kept afloat as China’s overnight repo rate eased from a 5-year high after the PBoC injected liquidity through open market operations, although the mainland lagged as longer-term money market rates began to creep up again and with participants digested the latest Official Manufacturing, Non-Manufacturing and Caixin Manufacturing PMI data which all fell short of estimates but remained in expansion territory. Finally, 10yr JGBs languished after its recent declines and with demand hampered after risk appetite steadily improved, while the BoJ also reduced its purchase intentions for Rinban operations this month in 1yr-3yr and 3yr-5yr maturities.

PBoC injected CNY 100bln via 7-day reverse repos at rate of 2.20% for a net daily injection of CNY 98bln. (Newswires) PBoC set USD/CNY mid-point at 6.4623 vs exp. 6.4628 (prev. 6.4709)

Chinese survey vessels are increasing their research in the Asia Pacific region and data shows they have been straying into other nations' EEZs, as Beijing steps up efforts to increase its maritime interests. It was also reported that Chinese PLA warplanes entered Taiwan's self-proclaimed southwestern ADIZ on three occasions on Sunday which means there was only one day in January that Chinese planes were not observed in the region. (Nikkei/Newswires)

Xiaomi filed a complaint in a Washington district court on Friday against the US Defense and Treasury Departments, seeking to remove the Chinese smartphone maker from the list of companies with ties to China's military. (Newswires)

• Chinese Manufacturing PMI (Jan) 51.3 vs. Exp. 51.6 (Prev. 51.9)
• Chinese Non-Manufacturing PMI (Jan) 52.4 vs. Exp. 55.0 (Prev. 55.7)
• Chinese Composite PMI (Jan) 52.8 (Prev. 55.1)
• Chinese Caixin Manufacturing PMI (Jan) 51.5 vs. Exp. 52.7 (Prev. 53.0)
• South Korea Trade Balance (Jan P) 3.96B (Prev. 6.77B)
• South Korea Exports (Jan P) Y/Y 11.4% vs. Exp. 9.8% (Prev. 12.6%)
• South Korea Imports (Jan P) Y/Y 3.1% vs. Exp. 1.9% (Prev. 2.2%)

US

Fed's Kaplan (non-voter, hawkish) said downside risks include vaccine efficacy and virus variants but added that upside risks include a bounce in public confidence and that more fiscal action would create upside risks to the growth forecast.

A group of 10 Republican senators called for President Biden to consider a smaller COVID-19 relief proposal than his USD 1.9tln package which they said would provide more targeted assistance to Americans with the greatest need, while the details of their proposal will be unveiled on Monday. These senators will meet with Biden this afternoon on the matter. Note, one member of the group suggested that their plan would cost around USD 600bln, way short of Biden's USD 1.9trln wish list. (Newswires/Politico)

New York City Mayor De Blasio announced non-essential travel is restricted from 06:00EST and declared a local state of emergency due to heavy snow, while all flights to NYC have been cancelled for Monday due to the incoming nor'easter. (Newswires/Twitter)

Goldman Sachs noted that last week saw the largest hedge-fund position de-grossing since February 2009, while it added that hedge fund exposures remain near records after shorts and longs are covered which indicates ongoing risks of positioning-driven sell offs. (Newswires)

UK/EU

UK Chancellor Sunak will provide a long-term economic blueprint during the budget on March 3rd which will likely mean high state spending for a decade, while it was also reported that Chancellor Sunak was considering an increase in capital gains tax. Other report signalled a potential end to the freeze in fuel duty rises. (Sunday Times/Telegraph) UK Business Secretary Kwarteng said the country cannot spend its way to prosperity, amid increasing debate within the Tory party over state spending in the run-up to the Budget. (Telegraph)

UK will apply to join the CPTPP free trade agreement which involves 11 Asia and Pacific nations on Monday. However, reports added that the immediate impact is likely to be modest as the UK already has free trade deals in place with several CPTPP members, some of which were rolled over from its EU membership. (BBC)

The BoE is expected to reveal its view on whether it thinks that negative interest rates should be part of its policy armoury alongside its rate decision on Thursday. (Times)

Northern Ireland First Minister Arlene Foster called on UK PM Johnson to invoke part of the Brexit agreement to deal with problems in the movement of goods between Great Britain and Northern Ireland. (Newswires)

ECB’s Schnabel said that the central bank was more worried about inflation being low and stated that euro area faces very weak demand which doesn’t look as if it is going to fundamentally change. Furthermore, Schnabel said that a rise in inflation is expected this year but should not be confused with a sustained increase, while she also warned that a rate hike in the current environment would have devastating consequences. (Newswires)

ECB’s Knot said that the continuing increase in global stock markets could be the result of growing hopes for an economic recovery and does not necessarily mean that prices are overly inflated. Knot added that markets could be pre-empting the roll out of vaccines and the reopening of economies, while he added that we might be entering the roaring twenties. (Newswires)

ECB’s Lane said that stocks and bank bond purchases is not in the central bank’s toolkit against the pandemic and that its current toolbox is a mix of short-term rates, asset purchases, targeted lending and forward guidance. (Newswires)

Italia Viva’s Renzi is pushing for Finance Minister Gualtieri to be replaced in discussions to forge a new coalition government led by PM Conte. There were comments on Friday from President Mattarella that the possibility has emerged of a new government backed by the same parties as before and they will launch a fresh initiative to look into this, while he asked the leader of the lower house to mediate in the political crisis and report back on Tuesday. (Newswires)

EU Unemployment Rate (Dec) 8.3% vs. Exp. 8.3% (Prev. 8.3%)

EU Markit Manufacturing Final PMI (Jan) 54.8 vs. Exp. 54.7 (Prev. 54.7)

• German Markit/BME Manufacturing PMI (Jan) 57.1 vs. Exp. 57 (Prev. 57)

UK Markit/CIPS Manufacturing PMI Final (Jan) 54.1 vs. Exp. 52.9 (Prev. 52.9)

GEOPOLITICAL

Myanmar State Counsellor and head of government Aung San Suu Kyi was detained along with other senior officials in raids earlier, while the military later alleged the arrests were due to election fraud and that they have taken control of the country for 1 year, as well as declared a state of emergency. (Newswires)

Russian police reportedly detained more than 5,000 people at protests over the weekend related to the detention of opposition leader Navalny. (Newswires)

Chinese military experts and sources said the extension of the New START Treaty between US and Russia means the gap between China and the two nuclear giants will not widen and Beijing can spend the next five years catching up. (SCMP)

Iran's Foreign Minister says they will not have bilateral talks with the US to return to the nuclear deal, via Sky News Arabia. (Twitter)

EQUITIES

European indices kick the month off on a constructive note with gains across the board (Euro Stoxx 50 +1.5%) as the region picked up a similarly positive APAC baton. State-side futures meanwhile see gains in a similar vein with ES (+1.0%), NQ (+1.1%), RTY (+1.0%) and YM (+0.8%) posting relatively broad-based performance. Fundamental catalysts have been light thus far as participant's head into another earnings-packed week with giants Alphabet and Amazon among some of the highlights. Back to Europe, sectors are mostly higher with the exception of Oil & Gas as crude prices wane off highs, whilst weekend reports via WSJ suggested Exxon (+2.2% premkt) and Chevron’s (+1.7%) CEOs discussed a potential merger – which would form an entity larger than Saudi’s ARAMCO. Elsewhere, the mining sector is faring rather well as the Reddit dash for silver bolsters the precious metal miners Fresnillo (+15.5%) and Polymetal International (7.4%), with optimism also seeping in some base metal miners. In terms of individual movers, Ryanair (-0.6%) is modesty softer after an overall mixed Q3 report which missed on revenue but noted that cash burn has been lowered and recent lockdowns will reduce forecast FY21 traffic to between 26mln and 30mln (previously “up to 35mn”), with more risk towards the lower end of the range. Elsewhere over in the Italian banking sphere, Unicredit (+1.7%) may consider a combination with BMPS (+2.2%) without any political pressure to do so and based on the industrial feasibility and contingent on not too high a social price, with some reports also suggesting the potential for a three-way merger with BPER ( +1.7%).

Ryanair (RYA LN) - Q3 loss after tax EUR 306mln vs exp. loss EUR 274.9mln. Revenue EUR 341mln vs exp. EUR 408.8mln. Since Mar 2020, the Group has lowered cash burn by cutting costs, participating in EU Govt payroll support schemes, cancelling share buybacks and deferring non-essential capex. The Group is well financed as it takes delivery of its first B737-8200 aircraft in Q4 and plans to repay over EUR 1.5bln maturing debt in the next 6-months FY21 will continue to be the most challenging year. Recently announced Covid lockdowns and travel restrictions across the EU & UK will reduce forecast FY21 traffic to between 26mln and 30mln (previously “up to 35mn”), with more risk towards the lower end of the range. (Newswires/Ryanair)

Samsung Electronics (005930 KS) is actively seeking M&A opportunities, industry sources report Cos such as Infineon (IFX GY), NXP (NXPI) and Texas Instruments (TXN) would be suitable targets given they are in the automotive semiconductor area, Korea Times

FX

USD/EUR/CHF - The Dollar was looking relatively fragile amidst an upturn in risk sentiment to kick off the new month, with the DXY only holding above 90.500 by a whisker before a firm rebound to 90.924 at best, as the Franc fell and Euro came tumbling after, albeit with weakness in other majors also helping the Buck withstand pressure from elsewhere, like precious metals where XAG extended its retail-inspired surge to just over Usd 30/oz at one stage. Usd/Chf failed to breach 0.8900 with the aid of a pick-up in Swiss retail sales or stronger than expected manufacturing PMI and has subsequently rebounded to around 0.8957, as weekly bank sight deposits rise again, while Eur/Usd largely shrugged off mostly better than forecast Eurozone manufacturing PMIs on the way down through 1.2100 and Friday’s 1.2093 session low.

GBP - In contrast to all the above, Sterling has made a solid start to February with Cable probing 1.3750 for a 3rd time since last Wednesday, and Eur/Gbp reverting to its downtrend to test stops below prior 2021 lows circa 0.8810. However, this was all before an upward revision to the final UK manufacturing PMI and courtesy of weakness in the Greenback and Euro rather than any real Pound positive aside from some decent developments on the coronavirus front as the number of infections and fatalities slowed over the weekend and the EU relented on the passage of vaccines flowing both ways across the channel.

NOK - The other major outperformer, as Eur/Nok pulls back below 10.4000 on the first day of significantly higher Norges Bank daily FX action, eyeing a bounce in crude prices instead of a slowdown in Norway’s manufacturing PMI.

JPY/CAD/AUD/NZD - All giving way to their US counterpart’s broad revival, with the Yen testing support and underlying bids ahead of 105.00, Loonie trying to contain losses under 1.2800 in the run up to Markit’s Canadian manufacturing PMI, the final US version and ISM, Aussie pivoting 0.7650 post-softer than anticipated Chinese PMIs and pre-RBA (preview on the Headline Feed at 10.24GMT and in the Research Suite), and Kiwi hovering midway between 0.7203-0.7150 parameters in advance of NZ jobs data on Tuesday.

SEK/EM - Somewhat negative impulses for the Sek to digest as its straddles 10.1500 vs the Eur, with Sweden’s manufacturing PMI and Q4 GDP coming in below consensus, but the Try has been boosted Turkey’s manufacturing PMI gathering pace above 50.0 and perhaps President Erdogan’s latest personnel changes in the Finance Ministry via the replacement of 2 deputies, as it approaches 7.2000 against the Usd.

Turkish President Recep Tayyip Erdogan replaced two deputy finance ministers in another reshuffle of policy. (Newswires)

FIXED

Core bonds have been rather overshadowed by the bullish start to February in equities and the ongoing ascent in precious metals lead by Silver, but the Dollar’s revival relative to most G10 rivals and knock-on price action is also keeping debt somewhat side-lined. Nevertheless, Bunds, US Treasuries and even Gilts have regained some poise after succumbing to another flurry of offers that pushed the respective 10 year benchmarks down to 177.05 (-20 ticks vs +17 ticks at best), 137-02 (+1/32 vs +7/32 at the overnight high) and 133.87 (-20 ticks vs +3 ticks) awaiting the return of US participants and a relatively busy pm agenda before late speeches from Fed’s Bostic and Rosengren. However, Italian BTPs are still outperforming irrespective of the political void in Rome and stand-off between coalition parties over the position of Economy Minister Gualtieri.

COMMODITIES

Focus since the open has been on spot silver’s upward price action, fuelled by retail flocking into the precious metal and its ETFs as it trends on Reddit’s WallStreetBets. Spot prices have risen from a base around USD 27/oz and briefly eclipsed USD 30/oz to the upside. Furthermore, bullion brokers have started to issue warnings of transaction delays amid the surge in silver demand. That being said, some reports on the blog site caution into money inflows into silver as this helps the long-silver hedge-funds and that participants should not expect a short squeeze as seen in some single stocks. Technicians highlight the next potential point of resistance could be around the USD 30.30-70/oz which marks the 50% fib of the correction during 2011-20. A breach of that could open the door towards USD 33/oz. This surge in silver prices has also provided spot gold with some impetus, albeit to a much milder magnitude – with the yellow metal eyeing its 100 DMA (1876/oz) to the upside as it straddles around its 21 DMA around 1864/oz (vs. low 1847/oz). Base metals are conversely lacklustre amid a firmer Buck and lack of fresh fundamental news flow and underwhelming Chinese PMI data, with LME copper relatively flat intraday just above 7,800/oz. That being said, import premiums of the red metal into China have risen to their highest in over five months amid expected disruptions from Chile. Crude markets meanwhile have kicked off the week on a firmer footing with the ongoing reflationary hopes and OPEC+ flexibility themes keeping prices underpinned, although today’s price action seems to be in conjunction with the current constructive risk tone across markets. WTI resides around USD 52.50/bbl after waning from its 52.69 /bbl high, while its Brent counterpart trades on either side of USD 55.50/bbl in the runup to this week’s JMMC meeting.

Goldman Sachs forecasts a tighter oil market in H1 2021 with an average deficit of 0.9mln BPD (prev. 0.5mln BPD deficit) and it sees 5.3mln BPD increase (prev. 6.8mln BPD) in world oil demand between end-2020 and July 2021. Goldman Sachs added that still forecast global oil demand to reach pre-COVID levels of 100mln bpd in August citing higher Q4 2020 consumption, while it stated incoming oil tightness will help prices weather financial market uncertainty and that it sees Brent prices at USD 65/bbl by July. (Newswires)

Russian oil and gas condensate increased by 120k BPD to 10.16mln BPD in January, according to sources. (Newswires)