• Asian equity markets were mostly higher and US equity futures resumed last Friday’s advances on Wall St
• According to a study (due to be published today), the AstraZeneca COVID vaccine does not appear to offer protection against mild and moderate disease caused by the South Africa variant
• In FX, the DXY held on to 91.00 status, EUR/USD and GBP/USD trade on 1.20 and 1.37 handles respectively
• Senate voted to pass budget measures and fast-track the Biden stimulus plan which starts the reconciliation process
• US President Biden doesn’t think his proposal for raising the minimum wage to USD 15 will survive negotiations
• Looking ahead, highlights include Eurozone Sentix, ECB's Lagarde, Fed's Mester

CORONAVIRUS UPDATE

US CDC reported COVID-19 cases increased to 26.76mln from 26.65mln the day before and total deaths rose to 460.6k from 457.6k the day before, while a major newswire tally stated US cases increased by at least 87,344 to 27.07mln and deaths rose by at least 1,347 to 463.9k. (Newswires)

AstraZeneca (AZN LN) COVID-19 vaccine is beginning to arrive in the European Union countries as the bloc tries to speed up its inoculation campaign and put a crisis-ridden period behind it. It was separately reported that the Oxford University/AstraZeneca COVID-19 vaccine reportedly does not appear to offer protection against mild and moderate disease caused by the South Africa variant according to a study due to be published on Monday, while South Africa halted its planned rollout of the AstraZeneca vaccine following trial which found weak efficacy against the new strain. Furthermore, Oxford said that work is already underway to produce a 2nd generation of vaccines which is adapted to target variants of strains similar to the South Africa variant. (Newswires/FT/Sky News)

UK pubs and restaurants could reopen as early as April if they agree not to sell alcohol under options being discussed to relax restrictions after Easter. There were also reports that most UK adults would have received the COVID-19 vaccine by end-May and a senior UK government source said that the end of June was a more likely expectation for all adults to be vaccinated. (Newswires/Times)

UK ministers are mulling a "targeted" COVID-19 vaccine passport scheme to permit those that have been vaccinated to return to a more normal daily life, according to the Telegraph. However, there were also reports citing comments from vaccine deployment minister Zahawi that they are not looking to introduce vaccine passports as part of the vaccine deployment programme, while he also stated that Cabinet Office Minister Gove will meet with the European Commission in the week ahead on resolving Northern Ireland issues. (Telegraph/Sky News)

Israel, which the highest proportion of citizens vaccinated against COVID-19 in the world, found that it took 3 weeks for the Pfizer (PFE)-BioNTech (BNTX) shot to start curbing new cases and hospitalizations. (Newswires)

Sinovac Phase 3 results on COVID-19 vaccine showed efficacy rate of 50.65% for all cases, 83.7% for cases requiring medical treatment, in which the trial included 25k patients across four countries which were Brazil, Turkey, Indonesia and Chile. There were later reports the Co.’s CoronaVac vaccine received conditional market approval from China. (Newswires/Global Times)

South Korea relaxed curfew restrictions on more than 500k restaurants and other businesses outside the capital Seoul, which would permit them to remain open an hour later. (Newswires)

Japan Transportation Minister said there is an option to revive the Go To Travel campaign for a limited area, while other reports stated that Japan is mulling lifting state of emergency in some areas amid an incoming law which allows fining those that violate social distancing rules. (Newswires/Nikkei)

ASIA

Asian equity markets were mostly higher and US equity futures resumed last Friday’s advances on Wall St where the S&P 500 and Nasdaq extended on record levels on stimulus momentum and despite the slight miss in NFP jobs data. ASX 200 (+0.6%) was lifted from the open in which the mining sector spearheaded the gains after recent reprieve in metal prices and as M&A news also contributed to the risk mood after Macquarie Infrastructure made an approach for Vocus Communications which boosted the latter’s shares by around 15%. Nikkei 225 (+2.0%) surged with upside exacerbated after the index broke through the 29,000 level for the first time since 1990 with a deluge of earnings results and corporate updates in focus including SoftBank which announced total dividend from SoftBank Group Capital Limited of USD 4bln. There were also reports that Japan is mulling lifting the state of emergency in some areas amid an incoming law that would permit fines for those in violation of social distancing rules, while KOSPI (-0.7%) severely lagged with heavy losses in Hyundai Motor and Kia Motors after the automakers stated there was no ongoing cooperation talks with Apple regarding electric vehicles. Hang Seng (+0.2%) and Shanghai Comp. (+0.9%) conformed to the positive tone in the region but with upside limited after the PBoC continued with its reserved liquidity efforts heading into this week’s Lunar New Year holidays and opted for a net CNY 10bln injection through 7-day reverse repos although it did conduct CNY 50bln of 14-day reverse repo operations on Sunday, while large tech names were tentative after China issued new anti-monopoly rules targeting its tech giants. Finally, 10yr JGBs were weaker amid a surge in Japanese stocks with the Nikkei 225 at its highest in over 3 decades, while the subdued mood for bonds also coincided with weaker demand at the 10yr inflation-indexed JGB auction and downside in USTs which lifted the US 30yr yield towards 2.00% and the US 10yr yield to its highest since March.

PBoC injected CNY 110bln via 7-day reverse repos at rate of 2.20% for a net daily injection of CNY 10bln. (Newswires) PBoC set USD/CNY mid-point at 6.4678 vs exp. 6.4691 (prev. 6.4710)

US Secretary of State Blinken told top Chinese diplomat Yang Jiechi in a phone call on Friday that the US will stand up for human rights and democratic values in Xinjiang, Tibet and Hong Kong. Furthermore, China’s Global Times suggested that the Biden administration should bring the US policy on China back down to pragmatic ground and that if the Biden administration really wants to handle the US' domestic affairs well first, maybe their only option is to reduce the current tension and ease conflicts between China and the US. (Newswires/Global Times)

US, Japan, Australia and India are working to set up the first meeting of their leaders under the Quad framework amid China's growing influence in the region. (Nikkei)

China issued new anti-monopoly rules targeting its tech giants which will not permit companies to use data or algorithms to abuse market dominance. The new guidelines are expected to put pressure on the country's leading internet services such as Alibaba's Taobao and Tmall marketplaces or JD.com, while they will also cover payment services like Ant Group's Alipay or Tencent Holding's WeChat Pay. (Newswires)

China started to receive hundreds of thousands of tons of coal and a full shipload of iron ore from Sierra Leone, which reportedly demonstrates how easy it is for China to replace Australia with alternative import sources. It was later reported that China will unload some stranded Australian coal although the import ban remains in place. (Newswires/Global Times)

Fitch affirmed Japan at A; Outlook Negative and said sees the Japanese economy to have contracted 5.3% for 2020, while it retained a negative outlook due to continued downside risks to the macroeconomic and fiscal outlook from the pandemic shock. (Newswires)

India placed many northern districts on high alert due to risk of flooding after part of a Himalayan glacier broke and swept away a hydroelectric dam, while 14 have been confirmed dead and over 120 are said to be missing. (Newswires)

UK/EU

UK Chancellor Sunak is to extend the furlough and business support measures in the March 3rd Budget, while it was also reported that Amazon and other companies that have flourished in the pandemic are facing a double tax raid under plans being drawn up by the UK government to bolster Britain’s finances. (Sunday Times)

The volume of exports passing through British ports to the EU fell by 68% Y/Y in January, which was mostly as a result of problems caused by Brexit. Irish Foreign Minister Coveney stated that Ireland is open to modest extensions of waivers on the movement of certain goods from Britain to Northern Ireland or grace periods where appropriate. (Newswires/The Observer)

BoE Governor Bailey suggested that the central bank could move away from purchasing bonds of fossil fuel companies as it seeks to make its balance sheet greener. (Observer)

ECB President Lagarde suggested that the recovery in the euro zone was delayed but anticipates the economic recovery will pick up in the summer and stressed that public authorities will have a difficult job weaning the economy off from emergency support. (Newswires)

ECB's Rehn said the pandemic is more likely to weigh on inflation for years to come and suggested the need to tweak the inflation target to make it genuinely symmetric, while he added they should let inflation overshoot the target after periods of persistently low price growth. (Newswires)

ECB's Visco said they see an increase in economic output in the Spring despite fears of COVID-19 infections weighing on a recovery in consumer spending. (Newswires)

Italy's League and 5SM, signalled over the weekend that they could support former ECB chief Mario Draghi as the head of a new government. Draghi will begin a second round of talks with parties today and is expected to meet trade unions and business lobbies. (Politico/Newswires)

Moody’s affirmed Czech Republic at Aa3; Outlook Stable, while Fitch affirmed Russia at BBB; Outlook Stable. (Newswires)

FX

FX markets were uneventful ahead of this week's mass holiday closures for the Lunar New Year. Nonetheless, the DXY held on to the 91.00 status and dusted itself off after Friday’s selling pressure post-NFP and as stock markets extended to unprecedented levels. On the stimulus front, both the House and Senate voted late last week to pass the budget measures and fast-track the Biden stimulus plan which starts the reconciliation process and there were also recent reports Democrats are to unveil child benefits of USD 3,000 per child as part of the USD 1.9tln stimulus package on Monday. EUR/USD was slightly softer after the greenback steadied and following recent comments from ECB President Lagarde who noted the recovery has been delayed but anticipates a pick-up in the summer and stressed that public authorities will have a difficult job weaning the economy off from emergency support, while GBP/USD was also rangebound after the recent slew of mixed rhetoric on the outlook from BoE officials and with Chancellor Sunak reportedly to extend the furlough and business support measures in the March 3rd Budget. USD/JPY and JPY-crosses were little changed with only minimal support seen despite the substantial rally in Tokyo stocks and antipodeans consolidated with both AUD/USD and NZD/USD somewhat kept afloat by their high-beta statuses and marginally firmer PBoC reference rate setting.

COMMODITIES

WTI crude futures lifted above the USD 57.00/bbl level amid the heightened risk appetite and stimulus momentum which also underpinned Brent crude to breach the USD 60/bbl where further upside was then capped. Newsflow for the complex was light although hopes of improving demand continued to support oil prices and there were also recent comments from Vitol which suggested "the market is getting ahead of itself in terms of a post-vaccine euphoria but also continued belief in the ability of OPEC to manage supply”. Gold traded flat due to a steady greenback and with havens shunned amid the rally in stocks, while copper was kept afloat by the constructive mood but with gains limited in anticipation of holiday-thinned demand from the upcoming mass closures due to the Lunar New Year.

Baker Hughes US Rig Count (w/e Feb 5th): Oil rigs +4 at 299, Nat Gas +4 at 92, Total rigs +8 at 392. (Newswires)

GEOPOLITICAL

US President Biden said the US won't lift sanctions to bring Iran to talks and an official noted that President Biden had previously meant to convey that Iran must halt enriching uranium beyond the deal’s limits. There were also separate comments from Iranian Foreign Minister Zarif that compensation was never a pre-condition to revive the 2015 nuclear deal and called for US to show some tough love to Saudi Arabia and tell them to stop the war in Yemen, while Iran denied any knowledge about a cargo of oil the US is attempting to seize amid claims it was exported covertly by Iran. (Newswires)

French Foreign Minister said he held in depth and important talks with UK, Germany and the US on Iran to handle the nuclear and security challenge. (Newswires)

US

Treasuries were choppy amid the lacklustre NFP report, although ultimately duration was offered on the session with yields testing new cycle highs. By settlement, 2s -0.8bps at 0.107%, 10s +3bps at 1.169%, 30s +4.2bps at 1.974%; TYH1 volumes were chunky at 2mln; TIPS curve continued to steepen while breakevens inverted further. Yields were already on the ascension out of Europe after the US Senate passed the budget to advance Biden's COVID-19 relief aid plan, with spillover selling pressures from continued pressure in UK Gilts. However, with NFP printing a lacklustre +49k, and the priors revised lower, yields knee-jerked lower from the highs, only to swiftly reverse amid reports of dealers and tech-based accounts hitting the bid, seeing the 10-year yield fractionally beat its January peak of 1.187%, at the "new high" of 1.188%; 30s made a high of 1.986%, just shy of the 2% support level. As the dust settled, yields traversed back down near to session lows seen overnight amid desks noting short covering from hedge funds and CTAs, in addition to buying from real money. Nonetheless, reflation style trades ultimately prevailed into the afternoon, with cyclicals rising and yields again approaching their cycle highs. It's also worth considering that there are likely some concession factors at play as we head into next week for the 3s, 10s, and 30s Treasury new issues after this week's quarterly refunding announcement. T-note (H1) futures settled 3+ ticks lower at 136-22.

US Senate voted (51 vs 50) to pass the budget measures to adopt the fast-track Biden stimulus plan and which starts the reconciliation process, while the House voted (219 vs 209) to pass the budget resolution as expected. (Newswires)

US President Biden doesn’t think his proposal for raising the minimum wage to USD 15 will survive negotiations to pass his broader coronavirus-relief bill. In other news, it was reported that US Democrats are to unveil child benefits of USD 3,000 per child as part of the USD 1.9tln stimulus package on Monday. (Newswires/Washington Post)

White House Adviser Bernstein said the phase-out level for COVID-19 relief checks in Biden's stimulus plan is open to negotiation, while he added the White House economic team is not dismissive of inflation concerns and that all agree on need for COVID relief. There were also separate comments from a House Democrat lawmaker that the COVID-19 relief bill will not provide relief to airlines but will provide relief for airline workers. (Newswires)

US House Speaker Pelosi hopes the house can send COVID relief package to the senate within two weeks and stated that it is not obvious that an increase in the minimum wage will not be included in the COVID-19 relief bill, while she added infrastructure would be next priority following the passage of COVID-19 relief bill. There were also commented from House Leader Hoyer that there is a chance the stimulus vote could be earlier than February 22nd. (Newswires)

US Treasury Secretary Yellen said it is too early to say if fresh regulations are required to address recent volatility and that a decision can be made once the facts behind the market moves are known. (Newswires)