• Asian equity markets advanced after the firm handover from Wall St with the resurgence led by the tech sector
• In FX markets, the DXY marginally pulled back after advancing above 91.00, EUR/USD and GBP/USD remain below 1.21 and 1.37 respectively
• Talks aimed at reviving Italy's collapsed ruling coalition were blocked on Monday over policy issues
• RBA maintained its key rate at 0.10% as expected but unexpectedly announced it is to extend its QE purchases by AUD 100bln
• Looking ahead, highlights include Eurozone GDP, OPEC JTC meeting, Fed's Kaplan, Williams, Mester, supply from the UK and Germany
• Earnings from Amazon, Exxon, Alphabet, Pfizer, BP

CORONAVIRUS UPDATE

US COVID-19 cases +112,772 (prev. +141,559) and deaths +1,920 (prev. +2,884). (Newswires)

Moderna (MRNA) confirmed it is proposing to fill vials with more COVID-19 vaccine doses to up to 15 doses vs current 10 doses, although the Co. president noted they would need further talks with the FDA to assure it is comfortable with the move before implementation. (Newswires)

German Chancellor Merkel said we have certainty about delivery volumes for all quarters this year and that Johnson & Johnson (JNJ) and CureVac (CVAC) are expected to deliver in Q2, while she added that in both minimum and maximum supply scenarios, we can offer every citizen a vaccine by end of summer and the prescribed interval between doses will be kept to. (Newswires)

UK PM Johnson has instructed ministers to prepare for the reopening of schools after being informed that the UK is now past the peak of the current wave of COVID-19. (Telegraph)

UK public health official said he expects all vaccines to be effective against the South Africa variant, especially in reducing hospitalisations. (Newswires)

ASIA

Asian equity markets advanced after the firm handover from Wall St which rebounded from last week's liquidations as Reddit frenzy fears eased and with the resurgence led by the tech sector heading into Alphabet and Amazon earnings later today. ASX 200 (+1.5%) was positive with the gains spearheaded by tech stocks which found inspiration from the outperformance of their counterparts stateside and with the mood also buoyed after the RBA extended its QE programme. Nikkei 225 (+0.8%) was helped by favourable currency flows although gains were initially restricted amid mixed earnings reports and as participants anticipate an extension to the state of emergency declaration, while KOSPI (+0.6%) was driven alongside an early surge in index heavyweight Samsung Electronics and with South Korea to prepare a 4th round of cash handouts, as well as another extra budget. Indian markets outperformed with the Nifty (+2.1%) boosted again by euphoria from the expansionary budget and both the Hang Seng (+1.2%) and Shanghai Comp. (+0.6%) were also kept afloat after the PBoC provided liquidity which is expected to persist heading into next week’s Lunar New Year holidays. There were also some constructive comments from Chinese top diplomat Yang who suggested China is ready to work with the US to move forward on a track of no conflict, no confrontation, mutual respect and win-win cooperation, although he also added that they expect the US to strictly abide by the One-China principle and that US should stop interference in China's territorial integrity and sovereignty. Finally, 10yr JGBs were flat with havens shunned amid the widespread constructive mood in risk assets and following mixed results at the 10yr JGB auction in which b/c was only slightly than previous but coincided with a decline in accepted prices.

PBoC injected CNY 80bln via 7-day reverse repos at rate of 2.20% for a net daily injection of CNY 78bln. (Newswires) PBoC set USD/CNY mid-point at 6.4763 vs exp. 6.4669 (prev. 6.4623)

China top diplomat Yang said the task for China and US is to return ties to a predictable and constructive development track, while he added that China is ready to work with the US to move forward along the track of no conflict, no confrontation, mutual respect and win-win cooperation. Furthermore, Yang stated that China has no intention to challenge or replace the US' position in the world but added they expect US to strictly abide by the One China principle and that US should stop interference in China's territorial integrity and sovereignty. (Newswires)

Japanese PM Suga is to hold a press conference today at 10:40GMT amid speculation of an extension to the state of emergency. There were also comments from Chief Cabinet Secretary Kato that the length of the state of emergency will be determined based on experts' opinions and virus situation, while he added that infections are declining but still need caution. Furthermore, it was also reported that Japan is to suspend its travel campaign past February 7th. (Newswires)

UK/EU

UK Chancellor Sunak has reportedly ruled out increasing the rate for income taxes, national insurance or VAT to bolster public finances, according to reports citing an unidentified aide. (FT)

Talks aimed at reviving Italy's collapsed ruling coalition were blocked on Monday over policy issues even before any discussion on who the PM should be, while reports added the speaker of the lower house of parliament, Fico, had been mediating efforts and is due to report to President Mattarella today although little progress has been made. (Newswires)

FX

In FX markets, the DXY marginally pulled back from yesterday’s advances after having briefly reclaimed the 91.00 level to print its highest in nearly two months with the pressure in the greenback resulting from the upbeat risk tone. Focus was also on COVID-19 relief discussions after the group of 10 Republican Senators unveiled their proposal for USD 618bln stimulus which is a lot less than President Biden’s USD 1.9tln stimulus plan but serves as a starting point for negotiations, while the meeting between President Biden and the group of GOP Senators was said to be substantive and productive with Senator Collins even suggesting the meeting was excellent and that she wouldn't say they came together on a package but agreed to follow up. The weakness in the greenback provided some reprieve for its major counterparts in which EUR/USD nursed some of the prior day’s losses although the recovery was limited with the single currency remaining beneath the 1.2100 handle, mired by ongoing COVID-19 restrictions for the bloc and political uncertainty in Italy where talks aimed at reviving the collapsed ruling coalition were blocked on Monday over policy issues. GBP/USD was lifted and briefly eyed a retest of the 1.3700 level to the upside due to the softening USD and following reports PM Johnson instructed ministers to ramp up preparations to reopen schools after he was reportedly told by Chief Medical Officer Whitty that the peak of COVID-19 infections was passed last week. Elsewhere, JPY-crosses were mostly driven higher by their base currencies and with haven outflows spurred by the risk appetite which also initially underpinned antipodeans although AUD/USD then gave back the gains following the RBA meeting in which the central bank maintained its key rates at 0.10% as expected but announced it is to extend its AUD 100bln QE purchases which was somewhat of a surprise as they weren't expiring until April and some desks had even speculated that the central bank could halt QE amid the rapid recovery in the labour market.

RBA kept the Cash Rate Target and 3yr yield target unchanged at 0.10% as expected, although it announced to purchase AUD 100bln of bonds when current program expires in April with the additional purchases to be at the current AUD 5bln per week. RBA reiterated that it will not increase the cash rate until actual inflation is sustainably within 2%-3% target range and it remains committed to maintaining highly supportive monetary conditions until goals are achieved and that given the current outlook for inflation and jobs, this is still some way off. Furthermore, it stated that GDP is now expected to return to end-2019 level by middle of this year and its central scenario is for GDP to grow by 3.5% this year and next, while unemployment is expected around 6% at year-end and 5.5% by end-2022. (Newswires)

SNB President Jordan said the Swiss economy could contract in Q4 and Q1, while he added that FX interventions remain very important. Furthermore, Jordan later said the US designation of Switzerland as a currency manipulator will not affect Swiss monetary policy and stated that Switzerland is anything but a currency manipulator, while he added that SNB is not a fan of negative rates but currently sees no alternative. (Newswires)

COMMODITIES

WTI crude futures were underpinned by the positive risk appetite to lift prices above the 54.00/bbl level and which saw Brent crude briefly reclaim USD 57.00/bbl in tandem. Attention for the complex turns to the private sector inventories later today followed by the EIA data and JMMC meeting tomorrow, although EnergyIntel have noted that no recommendation for changes to the current OPEC+ output deal is expected. Gold prices were subdued as tailwinds from the overnight pullback in USD was offset by the lack of haven demand, whilst silver scaled back gains overnight. copper prices also languished despite the constructive risk tone, amid pressure in Chinese commodity prices in which Dalian iron ore futures slumped over 3% in early trade.

CME raised COMEX 100 gold futures initial margins for speculators by 10% to USD 12,100/contract, raised COMEX 5000 silver futures maintenance margins by 17.8% to USD 16,500/contract, raised NYMEX platinum futures initial margins for speculators by 11.1% to USD 4,400/contract and raised COMEX copper futures maintenance margins by 9.5% to USD 4,600/contract. (Newswires)

GEOPOLITICAL

US President Biden said the US will review sanction policies and take appropriate action on Myanmar, while the White House added that the statement on Myanmar is a message to all countries in the region. (Newswires)

Iranian Foreign Minister Zarif stated there can be a mechanism to coordinate and synchronize US and Iranian actions to return to the nuclear deal and it was also said that the EU coordinator of joint commission could choreograph a US and Iranian return to the nuclear deal. (Newswires)

US

Yields were lower on Monday amid disappointing data, stimulus woes, and latest lowball Treasury refunding estimates maintaining the bid post-settlement. In the wake of the refunding announcement, 2s -0.6bps at 11.1bps, 10s -2.2bps at 107.2bps, 30s -1.6bps at 184.3bps; TYH1 volumes were below average; short TIPS yields were modestly lower and the rest of the curve flat. Treasuries gained strength as the US session got underway, with traders casting doubt on chunky stimulus amid the declining likelihood that Biden's USD 1.9trln COVID package will get enough support without the budget reconciliation process (even then there are doubts), which if used now, would limit the fiscal largesse in the anticipated recovery/infrastructure bill. Furthermore, US ISM Manufacturing disappointed expectations, although Prices Paid rocketed to its highest in 10 years. Yields began ascending again in later trade with thanks to some chunky duration offerings from corporates, including Apple (AAPL) which priced USD 14bln (upsized from 12bln) across six parts (5Y, 7Y, 10Y, 20Y, 30Y, 40Y), as well as a sizeable USD 5.5bln from Altria (MO). Those selling pressures were reversed in late trade after the Treasury announced it expects to issue USD 274bln in net marketable debt in Q1 21 (well below the Nov estimate USD of 1.127trln), and announced it would be flooding the market with reserves as it expects to drawn down the TGA from USD 1.729trln to USD 500bln by the end of June. STIRs will be eyed in the weeks/months ahead as the planned release of reserves will further pressure front-end yields towards zero lower bound - LIBOR printed its first sub-20 handle ever today - and barring Fed action (an IOER hike looks increasingly likely, and perhaps other measures) looks set to continue. T-note futures (H1) settled 5 ticks higher at 137-06.

Fed's Bostic (voter) said a lot of relief is still required because there are a lot of people out of work but at the same time, there has been a considerable amount of recovery and later noted it is hard to say how much more fiscal aid is required due to uncertainty of the virus and effects of previously approved aid. Bostic stated that focus is on the next 6-9 months and how vaccine diffuses into the economy, while he added focus is also on providing relief to those that are in a hole and suggested we should be open to upside on rates on good developments. (Newswires)

Fed's Kaplan (non-voter) is concerned about downside risks of virus variants and believes mobility will improve this year if vaccines get rolled out and are effective, while he added that they will want to see real evidence they have weathered the pandemic in regards to any change to asset purchases and that once it is clear the pandemic has been weathered, it would be much healthier to be weaning from extraordinary measures. (Newswires)

Fed's Kashkari (non-voter) suggested they will do whatever they can to boost recovery and that it is also up to fiscal policymakers to do their part, while he added that the key now is for the Fed to keep its foot on the monetary policy gas and continued fiscal support. (Newswires)

US House and Senate Democrats filed a joint budget measure as part of stimulus push and which sets up reconciliation for the USD 1.9trln relief bill, while Senate Democrat Leader Schumer stated that filing the budget resolution on the relief plan allows it to pass quickly and that a resolution process can be bipartisan. Furthermore, once adopted by both chambers, reconciliation instructions will be sent for a COVID aid package to several authorizing committees. (Newswires)

White House said President Biden had a substantive and productive discussion with Republican Senators on COVID-19 relief and President Biden told GOP Senators he hopes his rescue plan can pass with bipartisan support and that a reconciliation package is a path to achieve that end. Furthermore, President Biden added that any changes to his plan cannot leave the US short of its pressing needs and that they will not settle for a package that fails to meet the moment. There were also comments from US GOP Senator Collins that she and other GOP Senators had a productive meeting with President Biden, while she added the meeting was excellent and wouldn't say they came together on a package but agreed to follow up and she is hopeful that they can pass another COVID-19 relief package. In relevant news, Treasury Secretary Yellen is reportedly to meet with Senate Democrats on Tuesday regarding aid. (Newswires)

US Treasury expects to issue USD 274bln in net marketable debt in Q1 21 (Nov estimate USD 1.127trln) and issued USD 597bln in net debt in Q4 20, while it ended the quarter with a cash balance of USD 1.729trln, while the decline is primarily driven by its higher cash balance at start of January. (Newswires)

US Federal Watchdog is reportedly probing former Treasury Secretary Mnuchin's ending of the Federal Reserve 13-3 facilities. (Newswires)

White House said GameStop (GME) situation is under the purview of the SEC and that important issues raised by recent market volatility and congressional attention is appropriate, while it was also reported that the House Financial Services Committee will conduct a hearing regarding GameStop and volatility on February 18th. In relevant news, Robinhood plans for an IPO are on hold to focus on surviving the current stock trading and settlement issues, while it said it has access to even more capital than additional amounts raised on Monday and held talks with bank about raising USD 1bln in debt so it can continue to fulfil orders for heavily shorted stocks, according to sources. (Newswires/FBN)