• Asian equities were mostly positive after the stimulus-driven momentum on Wall St. which lifted all major US indices to fresh unprecedented levels
• In FX, the DXY extended its move below 91.00, EUR/USD ventured further above 1.2000 and GBP/USD traded at its best levels since 2018
• Details of the US COVID stimulus plan revealed an extension of unemployment insurance to August 29th, as well as provide USD 1,400 checks at the same income level as prior rounds
• However, payments will start shrinking when income reaches USD 75k for individuals and USD 150k for married couples
• Looking ahead, highlights include German trade balance, US NFIB Business Optimism, EIA STEO, ECB's Lane, Fed's Bullard, supply from Germany & the US, earnings from Total, Cisco & Twitter

CORONAVIRUS UPDATE

US COVID-19 cases +91,762 (prev. +107,489), deaths +1,455 (prev. +2,820) and vaccines administered 42.4mln (prev. 41.2mln), while there were comments from US President Biden who said we are topping the goal of 100mln vaccines in the first 100 days. (Newswires)

WHO is expected to support the use of the AstraZeneca (AZN LN)/Oxford University vaccine in all adults soon and endorse a delay to the 2nd dose for as long as 12 weeks. In separate news, the lead investigator in the AstraZeneca South Africa trial still believes the vaccine has a major role to play and said there is absolutely no reason to turn your back on the vaccine, while South Africa needs to recalibrate its expectations of vaccines this week, decide which groups to target and start rolling out doses out next week. (Telegraph/Newswires)

UK Deputy CMO Van-Tam said there is no reason to think the South African variant will overtake the UK one in the coming months and is confident current vaccines have substantial effect on preventing serious illness from SA variant. In other news, UK government will reportedly announce today that all passengers arriving in the UK will have to be tested for COVID-19 on days 2 and 8 after they arrive, according to ITV's Brand. (Newswires/ITV)

EU finalised a second deal with Pfizer (PFE)/BioNtech (BNTX) for 300mln COVID vaccine doses. (Newswires)

ASIA

Asian equity markets were mostly positive after the stimulus-driven momentum on Wall St. which lifted all major US indices to fresh unprecedented levels and the S&P 500 to above 3900 for the first time ever, but with gains capped as focus in the region shifted to the deluge of earnings releases. ASX 200 (-0.9%) underperformed with the index dragged by defensives and cautiousness in the largest-weighted financials sector after the RBNZ announced to reinstate LVR restrictions from March 1st to curb risks to financial stability from high-risk mortgage lending. There were also varied corporate updates including Macquarie Group which was boosted despite forecasting its FY21 results to be slightly lower Y/Y as it also noted its market-facing businesses’ combined Q3 net profit contribution was significantly higher Y/Y and with Suncorp lifted by an increase in H1 cash earnings, although Challenger slumped after it reported weaker H1 net. Nikkei 225 (+0.4%) was kept afloat amid supportive measures whereby the government announced to spend JPY 1.4tln in emergency reserves for pandemic-related measures and as earnings also provided a tailwind including SoftBank which posted blockbuster results and was helped by record profit in its Vision Fund. However, most of the advances in Tokyo were eventually faded on currency flows and with wage growth at its largest contraction since December 2009. Hang Seng (+0.2%) and Shanghai Comp. (+1.5%) were initially tentative heading closer to the Lunar New Year holiday closures and after the PBoC reiterated its prudent approach, although support was seen in the blue-chip oil names after further gains in the underlying commodity, while Geely Auto outperformed after its sales rose 40% Y/Y to 156.3k units in January. Finally, 10yr JGBs were steady as prices found a platform around the 151.50 level and with the BoJ also present in the market today for more than JPY 1.2tln of JGBs heavily concentrated in 1yr-10yr maturities.

PBoC injected CNY 50bln via 7-day reverse repos at rate of 2.20% for a net daily drain of CNY 30bln. (Newswires) PBoC set USD/CNY mid-point at 6.4533 vs exp. 6.4501 (prev. 6.4678)

US President Biden and Indian Prime Minister Modi agreed to promote a free and open Indo-Pacific region that includes support for freedom of navigation and territorial integrity. (Newswires)

UK/EU

UK BRC Retail Sales Like-For-Like YY (Jan) 7.1% (Prev. 4.8%). However, BRC said total retail sales were down 1.3% Y/Y in January vs. 1.8% increase in December. (Newswires)

Barclaycard said UK consumer spending fell 16.3% Y/Y in January which is the largest drop since May, while it added that only 40% of people in UK feel secure in their jobs which is down 10ppts from January 2020. (Newswires)

EU is poised to reject UK's calls for a 2-year extension to Northern Ireland grace periods and instead likely to agree to a 3- to 6-month extension. It was separately reported that diplomats said there is a “willingness” among EU members and the European Commission to look at what flexibilities are possible “within the framework of the protocol” but there will not be a renegotiation of the protocol and a diplomat stated there is no guarantee the EU will agree to further grace periods, according to RTE's Connelly. (Telegraph/RTE)

UK Ambassador to the US Pierce said the UK wants a comprehensive trade agreement instead of a quick trade deal with US and Britain is very willing to resolve digital services tax concerns in the OECD, while she stated Britain is encouraging the Biden administration to negotiate on tax issues and that the prior administration was less willing. (Newswires)

EU Dombrovskis said the economy is to return to pre-crisis levels in 2022 and vaccinations will accelerate significantly in the coming weeks, while he added the EU economy is to rally in Q2 as more vaccinations help lift lockdowns. (Newswires)

EU Ambassador to the US Lambrinidis said the dispute regarding aircraft subsidies has been going on for far too long and that an agreement on aircraft subsidies would bolster markets, as well as send a strong message to workers. The Ambassador also stated that climate challenges will require a large amount of investment and support, while he added that Brussels is heartened by Treasury Secretary Yellen's comments on willingness to return to OECD discussions and that it is obvious digital companies have to pay larger taxes. (Newswires)

EU lawmakers reportedly want to follow suit to Australia in seeking to force the big tech companies to pay for news. (FT)

Spain's government is to outline new support measures to bolster business solvency by the end of February, according to sources, while the government is in talks with banks on implementing haircuts on state-guaranteed loans to firms and banks would potentially share part of the cost with the government. (Newswires)

FX

In FX markets, the DXY softened and continued its retreat beneath the 91.00 level with spillover selling stemming from the US session where Wall St extended on record highs as focus centred on stimulus measures. The House Ways and Means Committee released the initial text of the COVID-19 relief plan which comprises of half the USD 1.9tln COVID-19 relief package and would extend unemployment insurance to August 29th, as well as provide USD 1,400 checks at the same income level as prior rounds but with payments to start shrinking when income reaches USD 75k for individuals and USD 150k for married couples. The softer greenback underpinned its major counterparts with EUR/USD breaking out of yesterday’s range to scale further into the 1.2000 territory although a recent note from Credit Suisse suggested a potential cap at 1.2088/1.2104 zone, while GBP/USD extended on recent gains to trade at its best levels since 2018. USD/JPY gave up the 105.00 status although JPY-crosses were just about kept afloat with price action predominantly influenced by their base currencies and antipodeans were underpinned with NZD/USD helped by firmer 2yr inflation expectations and after the RBNZ announced to reimpose LVR restrictions.

RBNZ announced to reinstate LVR restrictions from March 1st at pre-pandemic levels to curb risks to financial stability from high-risk mortgage lending but added that LVR restrictions do not apply to new residential construction. RBNZ also stated it is concerned about the risk of a sharp correction in the housing market on financial stability and it will further tighten investors' restrictions effective on May 1st. (Newswires)

• New Zealand 2-year Inflation Expectations (Q1) 1.9% (Prev. 1.6%)
• Australian NAB Business Confidence (Jan) 10 (Prev. 4)
• Australian NAB Business Conditions (Jan) 7 (Prev. 14)

COMMODITIES

WTI crude futures extended above the USD 58.00/bbl level and Brent crude broke above USD 61.00/bbl after returning to pre-pandemic levels with upside spurred by the heightened risk appetite as focus remained on stimulus and amid hopes of improving demand in the energy sector. Furthermore, reports noted a decline in Libyan oil output citing disruptions from the guards' strike at the Hariga Port and there were also reports Qatar Energy Minister warned importers to secure long-term contracts to protect against the risk of a spike in gas prices, while focus for the complex shifts to the latest inventory numbers beginning with the private sector data later today. Gold prices were underpinned by a weaker greenback and copper also gained alongside the gains across commodities and the broad constructive risk tone after Wall St extended on record levels.

Qatar Energy Minister warned importers could face a spike in gas prices if they do not sign long-term contracts citing a slowdown in US shale industry and with financial challenges forcing some oil companies to put global projects on hold. (FT)

Libya oil production has reportedly fallen to 1.04mln BPD due to the ongoing guards strike at the Hariga Port, according to a Libyan oil source. (Newswires)

GEOPOLITICAL

White House said that if Iran comes into full compliance with the nuclear deal, then the US would do the same. (Newswires)

US

Duration was ultimately firmer on the session after the hit of 2% on 30s was reversed into latter trade; duration supply looms. By settlement, 2s +0.4bps at 0.111%, 5s +0.8bps at 0.475%, 10s -1bps at 1.16% and 30s -2.8bps at 1.946%; TYH1 volumes were average; real yields were lower by around 2bps across the TIPS curve. Yields, stocks and commodities were on the up coming out of Asia, with desks citing the optimistic labour market outlook, on the back of stimulus, provided by Treasury Sec Yellen, in addition to a continuation of the curve steepening seen at the tail-end of last week despite the lacklustre jobs report. 10s and 30s hit new cycle highs of 1.20% and 2%, before baring back amid touted short-covering, particularly profitable 5s30s. The bid into the afternoon coincided with some comments from Fed's Barkin (voter) and Mester (non-voter), who both affirmed the accommodative stance of the Fed will remain as not enough progress has been made on achieving its goals; note, with Brent hitting over USD 60/bbl and inflation breakevens continuing to richen, the market is increasingly pricing in confidence that those goals will be reached. Meanwhile, Dealers were said to be absorbing somewhat of the bids amid preparation for the refunding auctions (3s, 10s, 30s) this week. T-note (H1) futures settled unchanged at 136-22.

Fed's Barkin (voter) sees the need for continued support despite fiscal aid and sees any price rises as temporary with broader trends in tech and globalisation working to keep prices supressed. Barkin added that the overall economy would have to come back "quite significantly" alongside inflationary pressures to justify rate increases and that bond purchase tapering is not an option currently as not enough progress has been made towards Fed's goals. (FT)

Fed's Bostic (voter) said we need to be sure we don't wave the flag of success too soon and need relief to be there through the entire uncertain period. (Newswires)

Fed's Mester (non-voter) said the economy is in a slow recovery and that vaccinations could lead to a strong increase in activity. Mester added some sectors of the economy are doing much better than others and reiterated that the Fed will be accommodative for a very long time because the economy needs it. (Newswires)

White House expects the US House mark-up of the COVID-19 relief legislation will track closely to President Biden's plan but will have tweaks and it was also reported that President Biden will meet with business leaders today regarding aid proposals. (Newswires)

US House Ways and Means Committee released initial text of the COVID-19 relief plan which comprises half of the USD 1.9tln COVID-19 relief package and would extend unemployment insurance to August 29th, while the plan offers USD 1,400 checks at the same income level as prior rounds although payments are to start shrinking when income reaches USD 75k for individuals and USD 150k for married couples. (Newswires)

Goldman Sachs raised its assumption for additional fiscal measures to USD 1.5tln and increased its US Q2 growth forecast to 11% (prev. 10%), while annual growth forecast for 2021 and 2022 was raised by 0.2ppts each to 6.8% and 4.5% respectively. (Newswires)