• Asian equities saw a recovery from Friday's losses alongside a rebound in bond markets; US 10yr yield currently ~1.40%
• Johnson & Johnson's COVID-19 single-dose vaccine has received approval from US authorities
• Chinese Official Manufacturing PMI and Caixin Manufacturing PMI missed expectations but remained in expansion territory
• In FX markets, the DXY sits circa 90.80, EUR/USD met resistance at 1.21 and GBP/USD eyes 1.40 to the upside ahead of the UK budget
• UK Chancellor Sunak has suggested that he might need to raise taxes as he attempts to plug a GBP 43bln black hole in the UK's finances
• The US House has passed President Biden's COVID-19 relief bill, which will now be passed onto the Senate
• Looking ahead, highlights include German regional & national CPI, EZ, UK & US final manufacturing PMIs, ECB asset purchase data, US construction spending ISM manufacturing, Fed's Williams, Brainard, Bostic, Kashkari, ECB's de Guindos, de Galhau, Makhlouf, Lagarde

CORONAVIRUS UPDATE

US CDC reported total COVID-19 cases increased to 28.36mln from 28.29mln the day before and total deaths increased to 510.8k from 508.9k the day before, while reports also noted that US hospitalizations fell to below 50k which was the lowest since early November. (Newswires)

US CDC advisory panel voted to recommend the Johnson & Johnson (JNJ) COVID-19 vaccine for those aged 18 years old and above which is the first single-shot COVID-19 vaccine approved in the US and the FDA had also approved the vaccine for emergency use authorization. There were later comments from a US senior official that the US will begin distributing 3.9mln doses of the Johnson & Johnson vaccine from Sunday but added that shipments will be uneven across the first weeks and that the Co. expects to deliver about 16mln doses in March which will mostly be in the second half of the month. Furthermore, other reports stated that Johnson & Johnson’s vaccine supplier Catalent resorted to inspecting vials by hand for two weeks which is one of the production issues that contributed to the US government being set to receive millions of fewer doses than it anticipated this month. (Newswires/FT)

NIH’s Fauci said he would take the newly approved Johnson and Johnson (JNJ) vaccine in an effort to encourage Americans to take any of the 3 vaccines which have been approved, while he stated that high school students could receive the vaccine sometime in the fall and elementary school students could receive the vaccine at year-end or early next year. (Newswires)

UK COVID-19 cases +6,053 (prev. +7,434), deaths +144 (prev. +290) and the number of vaccinated increased to more than 20mln, France cases +19,952 (prev. +23,996) and deaths +122 (prev. +186), Italy cases +17,455 (prev. +18,916). (Newswires)

Public Health England said that as many as 6 cases of the COVID-19 variant first discovered in Brazil, have been detected in the UK. (Newswires)

Italy tightened COVID-19 restrictions in Milan, Turin, their surrounding areas and three other regions, in an effort to curb the spread of COVID-19. (Newswires)

Germany plans to extend a transport ban to March 17th for those entering the country from places where there a high proportion of COVID-19 mutations, while politicians from German Chancellor Merkel’s CDU party are said to be in favor of certain privileges for people who agree to get a vaccination shot and even suggested the idea of making vaccination mandatory at some point. (Newswires/FAS)

The German Government has stated there will be an updated recommendation in the near-term for the AstraZeneca (AZN LN) COVID-19 vaccine, which will make adjustments to the designation of recommended for use in under 65's only. (FT)

China’s COVID-19 vaccination programme is said to be impacted by delays and reluctance which has led to expectations that international travel restrictions could last until next year. (FT)

New Zealand PM Ardern announced a snap 7-day lockdown for Auckland beginning on Sunday after a new local case was discovered. (Guardian)

ASIA

Asian equity markets gained with the regional bourses picking themselves up from Friday’s losses as the bond market rebounded from last week's turmoil and with sentiment encouraged by an improving COVID-19 situation after JNJ's vaccine approval and a slower pace of infections over the weekend. ASX 200 (+1.7%) was led higher by notable outperformance in tech after the easing of yields spurred flows back into the sector and into growth stocks, with property names also boosted after CoreLogic data showed the sharpest increase in house prices since 2003. Nikkei 225 (+2.2%) coat-tailed on the rebound in JPY-crosses and after PM Suga announced the removal of the state of emergency in 6 prefectures effective yesterday, with the emergency declaration set to be lifted for the Greater Tokyo area on March 7th. Hang Seng (+1.0%) and Shanghai Comp. (+0.7%) were also positive but with gains tempered after Chinese Official Manufacturing PMI (50.6 vs. Exp. 51.1) and Caixin Manufacturing PMI (50.9 vs. Exp. 51.5) both missed expectations but remained in expansion territory and as tensions continued to linger with the US set to impose Trump-era rules aimed at threats from Chinese tech, while NYSE will delist CNOOC’s American depository shares on March 9th to comply with an executive order that was issued during the prior US administration. There were also comments from Secretary of State Blinken who condemned the detention and charges against pro-democracy advocates in Hong Kong and called for their immediate release, while focus in Hong Kong turns to the outcome of the public consultation for reconstruction of the Hang Seng Index which are due today and could result in an increase of constituents, cap on weightings for individual companies and a fast-track of new listings with the press briefing set for 08:30GMT/03:30EST. Finally, 10yr JGBs traded higher as yields cooled off from last week’s surge but with upside capped by the lack of haven demand and with the BoJ present in the market today for just JPY 470bln, mostly concentrated in the 3yr-5yr maturities, while the Australian 10yr yield declined around 20bps due to a proactive RBA which announced to purchase AUD 4.0bln of government bonds.

PBoC injected CNY 10bln via 7-day reverse repos at a rate of 2.20% for a net daily drain of CNY 10bln. (Newswires) PBoC set USD/CNY mid-point at 6.4754 vs exp. 6.4727 (prev. 6.4713)

US is set to impose sweeping rules aimed at China tech threats in which it plans to let Trump-era rule on tech purchases and deals take effect despite business objections, while it was also reported that NYSE will delist CNOOC’s American depository shares on March 9th to comply with Executive Order 13959 which was issued during the Trump administration. (Newswires/WSJ)

Hong Kong police detained 47 democracy advocates on Sunday that had been previously arrested in operations in January. There were later comments from US Secretary of State Blinken that the US condemns the detention and charges against pro-democracy advocates in Hong Kong, while he called for their immediate release. (Newswires/Twitter)

• Chinese Manufacturing PMI (Feb) 50.6 vs. Exp. 51.1 (Prev. 51.3)
• Chinese Non-Manufacturing PMI (Feb) 51.4 vs. Exp. 52.0 (Prev. 52.4)
• Chinese Composite PMI (Feb) 51.6 (Prev. 52.8)
• Chinese Caixin Manufacturing PMI (Feb) 50.9 vs. Exp. 51.5 (Prev. 51.5)

UK/EU

UK Chancellor Sunak said there will be more COVID-19 support in the budget and that government debt will continue to increase if the government does nothing, while he responded that he is committed to doing whatever it takes to support the economy and will keep supporting the people as the economy reopens when asked about an extension to the furlough scheme. Chancellor Sunak also noted that businesses do not want a stop-start approach to lifting COVID-19 restrictions and stated that he has already proposed a digital services tax when questioned about an online sales tax. (Newswires)

UK Chancellor Sunak is to layout plans to increase income tax by GBP 6bln as he outlines a “pathway” to finding an additional GBP 43bln annually to plug a black hole in the nation’s finances, while Sunak is said to be plotting a new tax on online deliveries next month and on the self-employed later in the year, although entrepreneurs could avert an expected increase in corporation tax in next week's Budget with a lower rate introduced for small businesses. Furthermore, other reports noted that Chancellor Sunak is set to announce a new GBP 5bln “restart” grant scheme in the Budget to support shops, pubs, hotels and other businesses impacted by the pandemic, while the government is considering a plan to extend the business rates holiday for the hospitality industry and freeze all alcohol duties. (Times/Telegraph/FT)

UK MPs urged Chancellor Sunak not to increases taxes in the budget and the Treasury select committee warned against undermining the rebound in the economy. There were also separate reports that an increasing group of Tory rebels said they would be prepared to vote against attempts to raise taxes although Downing Street warned that they could lose the party whip if they refuse to support the budget. (FT/Sky News)

ECB President Lagarde said that accommodative policy support is needed, with monetary and fiscal policies continuing to work hand-in-hand. (Newswires)

ECB's Visco said there was no G20 discussion on exiting support measures and that they are fully focussed on need for support, while he added that inflation expectations are on the rise and that they must wait for a substantial recovery before exiting easy policy conditions. (Newswires)

Fitch affirmed Ireland at 'A+'; Outlook Stable, affirmed Denmark at AAA; Outlook Stable and affirmed Ukraine at B; Outlook Stable. (Newswires)

FX

In FX markets, the DXY consolidated near last week’s highs around 90.80 after further upside was capped by the cooling of yields and amid the broad positive mood across equities, with participants also looking towards this week’s key data releases beginning with US ISM Manufacturing PMI later today and culminating with the NFP jobs report on Friday. The greenback’s major counterparts attempted to nurse their recent losses but with the rebound in EUR/USD hampered by resistance at 1.2100 and after comments late last week from ECB officials reiterated that accommodative policy support is needed and that they must wait for a substantial recovery before exiting easy policy conditions. GBP/USD briefly tested 1.4000 as it found encouragement from vaccination progress and with the Budget due mid-week in which Chancellor Sunak is expected to announce an extension of pandemic support measures, as well as a potential increase in corporation tax. USD/JPY and JPY-crosses were mostly firmer due to the heightened risk appetite which also underpinned cyclical currencies with AUD/USD and NZD/USD among the FX outperformers despite mixed data releases from Australia and New Zealand PM Ardern announcing a snap 7-day lockdown in Auckland where a new local case was discovered.

COMMODITIES

WTI crude futures reclaimed the USD 62.00/bbl level with prices helped by the vaccine developments and improved virus situation, including lower infection numbers with US hospitalizations declining to below 50k which was the lowest in about 4 months. The latest Baker Hughes rig count showed an increase in oil rigs and there were additional resumptions of operations for a couple of Texas refineries including Motiva's Port Arthur refinery, which is the largest in the US by capacity, although it was also reported that Exxon's Baytown refinery (3rd largest in US) will need an extra 2 weeks for a restart. Gold prices gradually gained overnight as the USD and yields eased, while copper also rebounded amid the broadly constructive overnight mood.

Baker Hughes US Rig Count: oil rigs +4 at 309; natgas +1 at 92; total rigs +5 to 402. (Newswires)

Exxon (XOM) Baytown, Texas refinery (584k bpd) restart will take an additional 2 weeks and the Exxon Beaumont, Texas refinery (366k BPD) was reported to restart its crude units, gasoline and diesel units, while the Motiva Port Arthur, Texas refinery (637k bpd) restarted its crude and gasoline units, according to sources. (Newswires)

GEOPOLITICAL

Iran rejected the idea of conducting talks with US and EU to revive the 2015 nuclear deal in which it stated that the time is not appropriate, while an Iranian Foreign Ministry spokesperson stated that US should lift sanctions and return to the nuclear deal. The White House stated that the US is disappointed by Iran’s move on nuclear talks but remains ready to engage in meaningful diplomacy and will consult with P5+1 on a way forward on Iran talks. (Newswires)

Syrian air defences responded to an Israeli attack in the vicinity of Damascus on Sunday. In other news, White House said last week’s US air strikes in Syria were aimed at sending a message that President Biden will act to protect Americans and that the strikes were necessary to reduce threat of further attacks, while Iran condemned the US air attacks in Syria which it claimed was "illegal aggression", according to its state media. (Newswires)

US released a report which stated that the Saudi Crown Prince approved the operation to capture or kill journalist Khashoggi and the US Treasury is set to impose sanctions and visa restrictions against Saudi security and ex-Saudi security officials. There were also comments from Secretary of State Blinken that the US remains invested in its relationship with Saudi Arabia but added that the US will not tolerate threats and assaults against activists, dissidents and journalists, while the Saudi government rejected the US report on Khashoggi killing. (Newswires)

US national security adviser Sullivan said US is preparing additional actions in coming days against those in Myanmar responsible for a violent crackdown and coup. (Newswires)

US

Treasuries enjoyed a bounce on Friday amid month-end rebalancing flows and healing from Thursday's market breakdown. By settlement, 2s -1.9bps at 0.147%, 5s -3.7bps at 0.763%, 10s -6.4bps at 1.451%, and 30s -11.8bps at 2.191%; TYM1 volumes were strong again with the roll now complete, month-end, and generally higher than usual trading activity. Inflation breakevens at the longer-end continued to move lower, with the 30yr BEI at around 2.00% - a level it has not been below 2% since the end of Dec. While the 5yr BEI holds firm around 2.35%, somewhat consistent with the Fed's AIT framework in that it is looking to let near term inflation run hotter to make up for underperformance. T-note futures (M1) settled 4+ ticks higher at 132-23.

US President Biden’s administration was urged by 8 US governors to push semiconductor firms to temporarily reallocate a modest portion of their production to auto grade wafer production. (Newswires)

The US House has passed President Biden's COVID-19 relief bill, which will now be passed onto the Senate. (CNBC)

Senior US Senior Democrats are abandoning a backup plan for a USD 15/hour minimum wage through a corporate tax penalty, after finding practical and political issues when drafting their proposal over the weekend. (Washington Post)

Robinhood is reportedly seeking to quietly file for an IPO in the next month. (Newswires)