• Asian equity markets traded negatively following a weak handover from Wall St where the major indices declined
• House Speaker Pelosi said the House will vote on the USD 1.9trln stimulus bill at the end of next week
• Senior Democrats discussed proposing as much as USD 3tln of additional spending on a jobs and infrastructure package
• In FX markets, the DXY hovers around 90.50, EUR/USD eyes 1.21 and GBP/USD remains on a 1.39 handle
• US official said the US would agree to meet with Iran on returning to the nuclear deal in a broader meeting along with the P5+1
• Looking ahead, highlights include UK retail sales, EZ, UK & US flash PMIs, Canadian retail sales, US existing home sales, BoE's Vlieghe, Fed's Barkin, Rosengren

CORONAVIRUS UPDATE

US COVID-19 cases +69,165 (prev. +57,970), deaths +2,601 (prev. +1,396); vaccines administered 57.7mln (prev. 56.3mln). (Newswires)

NIH's Dr Fauci expects Johnson & Johnson's (JNJ) vaccine production will catch up in April or May, while he stated that JNJ vaccine single-dose is on target for 100mln doses and the Co. is also developing a two-dose version. Furthermore, Fauci said the winter storm in Texas is a significant problem for vaccine distribution and later commented that he does not expect normality until around Christmas. (Newswires)

Vaccines appear to lower COVID-19 infections and transmissions by 2/3, according to data from Public Health England (set to be published later this month), as disclosed by The Telegraph in which it labels the study as the first to use "real world data". (Telegraph)

Pfizer (PFE) is in intensive talks with regulators over plans to test a booster shot of its COVID-19 vaccine for the South African variant although it was not determined if a booster is necessary to protect against the variant. (Newswires)

ASIA

Asian equity markets traded negatively following a weak handover from Wall St where major indices declined as markets remained in consolidation mode and following discouraging releases including higher than expected jobless claims. ASX 200 (-1.3%) was dragged lower by underperformance in the commodity-related stocks, especially energy names due to the pullback in oil prices and after Woodside Petroleum was forced to delay talks to sell LNG to China amid ongoing trade frictions, with a miss on Retail Sales adding to the glum mood. Nikkei 225 (-0.9%) retreated beneath the 30k level with large automakers suffering from recent disruptions due to chip supply issues and Toyota also warned its Mexico operations will be impacted by a natgas shortage. Hang Seng (-0.9%) and Shanghai Comp. (Unch.) adhered to the uninspired tone across the region with Chinese tech names conforming to the losses in global counterparts, but baby-related stocks were underpinned by reports China is considering lifting birth restrictions in the northeast part of the country. The PBoC continued with its liquidity drains and Chinese press reports stated that the central bank may keep its open market operations at a limited scale, although PBoC-affiliated media suggested not to mistake the recent liquidity withdrawal as a policy signal. Finally, 10yr JGBs were subdued after failing to benefit from the widespread risk aversion and despite the presence of the BoJ in the market for nearly JPY 1.2tln of JGBs in 1yr-10yr maturities, while the 10yr JGB yield hovered around 0.10% to reach its highest since November 2018.

PBoC injected CNY 20bln via 7-day reverse repos at rate of 2.20% for a net daily drain of CNY 80bln, while it sold CNY 10bln of 3-month bills in Hong Kong at coupon of 2.70% and CNY 15bln 1-year bills at coupon of 2.74%. (Newswires) PBoC set USD/CNY at 6.4624 vs. Exp. 6.4669 (Prev. 6.4536)

White House said President Biden will discuss economic challenges posed by China at the G7 summit and will seek to focus on the global response for the pandemic at the G7. Furthermore, it was later reported that President Biden directed the administration to conduct a review of key supply chains including semiconductors, high-capacity batteries and rare earths but did not mention China. (Newswires)

• Japanese National CPI (Jan) Y/Y -0.6% vs. Exp. -0.7% (Prev. -1.2%)
• Japanese National CPI Ex. Fresh Food (Jan) Y/Y -0.6% vs. Exp. -0.7% (Prev. -1.0%)
• Japanese National CPI Ex. Fresh Food & Energy (Jan) Y/Y 0.1% vs. Exp. 0.0% (Prev. -0.4%)

UK/EU

UK Chancellor Sunak has reportedly delayed the review on business rates until Autumn, whilst also opting to extend the furlough scheme until summer. (FT)

Lord Frost has been given the task of taking on the EU over its "heavy-handed" approach to the Northern Ireland protocol, according to insiders. (Telegraph)

ECB President Lagarde said 2021 will be the year of recovery and warned that countries must not brutally remove stimulus which instead should be eased gradually and carefully. (CNN)

ECB's Villeroy said France should progressively end financial support for the economy in the year head as health restrictions are removed, while he added that there is no risk of the economy overheating or for a sustained rebound of inflation in Europe. (Newswires)

German Finance Ministry expects a subdued economy in the weeks ahead due to COVID-19 restrictions, while it added that tax income fell 11.1% Y/Y in January due to the pandemic. Furthermore, it sees inflation to stay near the January level of 1.0% in the months ahead and stated that leading indicators suggest industry is supporting the economy but services are impacted by the lockdown. (Newswires)

• UK GfK Consumer Confidence (Feb) -23 vs. Exp. -27.0 (Prev. -28.0); highest since March. (Newswires)

FX

In FX markets, risk aversion provided some mild reprieve for the USD although the DXY remained firmly below the 91.00 level after yesterday’s selling pressure with the currency not helped by soft jobless claims data. On the stimulus front, House Speaker Pelosi said the House will vote on the USD 1.9trln stimulus bill at the end of next week and other reports suggested that senior Democrats discussed proposing as much as USD 3tln of additional spending on a jobs and infrastructure package under a “Build Back Better” program. EUR/USD held on to most the prior day’s gains but with further advances stalled by resistance at 1.2100 and as the greenback attempted to nurse losses. Italy’s Draghi-led government confidence vote win in Parliament was widely anticipated after easily winning support at the Senate. GBP/USD was rangebound, whilst CAD was pressured by the overnight declines in crude prices. USD/JPY was contained amid further speculation regarding the BoJ’s March review with sources suggesting policymakers could replace some numerical guidelines for ETF purchases with a pledge to ramp-up buying in volatile conditions although added that no final decision has been made, while antipodeans were initially flat with price action constrained by the lacklustre risk appetite and following a miss on Australian Retail Sales data, before picking up strength alongside a rise in Chinese commodity prices.

• Australian Retail Sales (Jan P) M/M 0.6% vs. Exp. 2.0% (Prev. -4.2%). (Newswires)

COMMODITIES

WTI briefly declined below the USD 59.00/bbl level in a continuation of the prior day's pullback amid several bearish narratives including a potential improvement of US-Iran ties as an official noted the US would agree to meet with Iran on returning to the nuclear deal in a broader meeting along with the P5+1 and recent reports of increasing Iraqi exports in the first half of January which raises questions regarding its compliance, while Citi also suggested potential book squaring in March WTI ahead of Monday’s contract expiration. Additionally, reports note that the likes of Marathon Oil, Devon Energy and Verdun oil have started using restored power to resume output throughout the Eagle Ford shale basin. Gold prices remained dejected from its recent declines with the precious metal languishing around 7-month lows and copper was choppy but eventually benefitted amid resilience in Chinese metal prices.

Goldman Sachs said it expects the weather shock to support petroleum cracks in the short-term and that industrial and shale disruptions will reduce refinery gas (-50k bpd) and diesel consumption (-150k bpd), while it adds travel disruption will impact gasoline (-250k bpd) and jet fuel (-60k bpd) demand. (Newswires)

CME raised COMEX copper futures maintenance margins by 8.7% to USD 5,000/contract. (Newswires)

GEOPOLITICAL

White House said Iran is a long way from compliance on the nuclear deal. However, there were later comments from a US official that the US would agree to meet with Iran on returning to the nuclear deal in a broader meeting along with the P5+1 and stated it is difficult to contemplate a renewed JCPOA being sustained if regional issues are not resolved. Furthermore, the official warned it would be a dangerous move if Iran suspends additional protocols and blocks access to IAEA inspections, while the official added that there is an opportunity for the first time in years to end maximum pressure on Iran and return to diplomacy and that US will also ease travel restrictions on Iranian diplomats. (Newswires)

US imposed visa restrictions on 43 Belarusians including justice officials and government personnel, while Secretary of State Blinken commented that the US remains alarmed by the crackdown on peaceful protestors, activists and journalists in Belarus. (Newswires)

US State Department may release its report on the Nord Stream 2 as early as today which will name companies believed to be involved in building the pipeline although sanctions could take time and reports noted US is not expected to include German companies in the sanctions list. (Newswires/RIA)

US

After rising to fresh cyclical highs on Tuesday, Treasury yields have been well behaved on Wednesday and Thursday, with the complex consolidating within narrow trading ranges (10s around 1.3%, and 30s above 2.05%). The complex ignored a stellar retail sales report on Wednesday, and equally ignored a poor weekly initial jobless claims report on Thursday, a report whose survey date coincides with the BLS February employment situation report. As the complex consolidates, players are reportedly waiting for fresh updates on fundamental catalysts (read: stimulus); Treasury Secretary Yellen will be speaking before the close, although it is unlikely that she will say too much to shift the dial, and will likely cheerlead the case for a bumper fiscal stimulus package, brushing-off concerns around inflation and deficits – like Biden did earlier in the week. For Treasury traders, the key figure to focus on is USD 1.5trln, as we have noted before – any package beneath that amount would likely be easily absorbed by the Treasury’s current issuance plans, according to Morgan Stanley, while any amount above USD 1.5trln would likely result in increased issuance over the coming quarters, adding more supply into the market and likely pushing yields up further, all being equal. Meanwhile, the Treasury sold USD 9bln of 30-year TIPS, in a lacklustre showing, and the auction tailed by 3.5bps. T-note futures (H1) settle 3+ ticks higher at 135-27+.

US Treasury Secretary Yellen reiterated that the benefits of stimulus will outweigh the costs and she hopes to see progress on the bill in the next two weeks, while she added the Fed has the tools to deal with inflation and she wants to make sure stimulus cheques are appropriately targeted. Yellen also stated that details of the infrastructure plan have not yet been provided but noted a tax increase would likely be used to pay for part of Biden's infrastructure package which will be proposed later this year and suggested that the US could return to full employment by next year. (Newswires)