• European equity indices and US futures are firmer on the session with RTY the outperformer, +2.0%
• DXY has seen upside & hovers around the 91.00 handle, with lower-yield peers underperforming while US 10yr yields stabilise
• 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
• UK Chancellor Sunak said there will be further COVID-19 support in the budget & plans to increase income tax revenue by GBP 6bln
• Crude remains underpinned ahead of OPEC but has drifted off highs while precious metals are firmer but contained
• Looking ahead, highlights include Germany national CPI, ECB asset purchase data, US final manufacturing PMIs, US construction spending, US 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 & 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)

The European Medicines Agency is undertaking an audit of the Serum Institute of India's COVID-19 manufacturing site, a necessary step prior to allowing the AstraZeneca vaccine made there to be exported to the EU, according to sources. (Newswires)

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 (+2.4%) 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 (+1.6%) and Shanghai Comp. (+1.2%) 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)

It was 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)

BoJ is reportedly prepared to defend its yield range prior to the upcoming review, according to sources; could take action prior to yields attaining 0.2% and would not allow it to hit 0.3% ahead of that review due to credibility issues. No pre-set level for halting the increase in yields (Newswires) Results of the review are expected on March 19th and the 10yr JGB yield hit a ~5-year high of 0.175% on Friday

US

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)

Fed's Barkin says he would be disappointed if we didn’t see yields rise as the outlook improves. (WSJ)

Democrats have already undertaken some discussions with the White House on a jobs/infrastructure package, of which costs estimate between USD 1.5-3.0trl; though, aides note this is more likely to be a Spring target. (Punchbowl)

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)

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

EZ Markit Manufacturing Final PMI (Feb) 57.9 vs. Exp. 57.7 (Prev. 57.7). (Newswires) UK Markit/CIPS Manufacturing PMI Final (Feb) 55.1 vs. Exp. 54.9 (Prev. 54.9). (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. (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)

EQUITIES

European equities (Eurostoxx 50 +1.3%) have kicked the week/month off on a firmer footing as investors cheer the US approval of the single-dose Johnson & Johnson vaccine, eye stateside stimulus developments and yields stabilise from recent advances in what is a particularly busy week of Fed speak and tier-1 data releases. From a European-specific standpoint, investors will continue to assess commentary from ECB officials given the pushback from various members of the governing council last week with Stournaras of Greece the most explicit in his desire to temper the recent increase in yields. Comments from the ECB, in part stood in contrast to those of the Fed with the latter more sanguine about the recent increase in yields; any further divergence in the assessment of recent moves could lead to differing performances for the two regions. In terms of the broader tone of the market this morning, the market has a slight pro-cyclical feel to it with the e-mini Russell (+2.0%) outperforming the tech-heavy Nasdaq (+1.4%). A similar trend can also be observed in Europe with retail, travel & leisure and basic resources some of the best performers in the region with these sector part of the typical “reopening play”. Stock specific news stories have been on the lighter side this morning; however, in the UK homebuilding names are a clear source of strength amid reports that Chancellor Sunak is set to announce a mortgage guarantee scheme to assist those with small deposits in an attempt to bring back 95% mortgages. Danone (+2.0%) is firmer on the session amid reports the Co. is working on a sale of Mengniu, their Chinese dairy unit, valued at circa EUR 1.8bln and could see a capital gain of EUR 1bln, according to sources. Postal names are also a pocket of strength in Europe after PostNL (+4.5%) reported better-than-expected earnings.

FX

AUD/NZD/DXY/CAD - The Aussie and Kiwi are both off overnight highs vs their US rival, but holding up relatively well given the fact that the Greenback is on the rebound, and in index terms has eclipsed last Friday’s 90.975 peak at 91.127. Aud/Usd is keeping sight of 0.7750 and Nzd/Usd likewise near the 0.7250 half round number against the backdrop of pretty marked debt yield and curve compression that has boosted broad risk appetite, but also capped divergence between US Treasuries and bonds with larger premiums, such as the Aussie 10 year that recoiled 27 bp after RBA intervention via Aud 4 bn+ QE on the eve of Tuesday’s policy meeting. Meanwhile, the Aud/Nzd cross has rebounded to pivot 1.0650 following another snap lockdown in Auckland, NZ, but will likely be capped indirectly as a hefty 2.2 bn option expiries reside in Aud/Usd at the 0.7770 strike before attention switches to NZ Q4 terms of trade tonight. Elsewhere, the Loonie is straddling 1.2700 with assistance from firm crude prices ahead of OPEC+, and awaiting Canada’s Q4 current account and manufacturing PMI for some independent impetus, while the DXY is now eyeing nearest resistance in the form of a 91.228 high from February 8 in advance of US construction spending, the manufacturing ISM and a host of Fed speakers.

GBP - Sterling is also displaying a degree of resilience against its US counterpart around 1.3950 in wake of an upward tweak to the final UK manufacturing PMI and mixed BoE data, but the Pound has started the new month back in the ascendency vs the Euro after the late February technical correction as the cross pulls back sharply from circa 0.8731 to sub-0.8650.

CHF/EUR/JPY - Somewhat conflicting impulses for the Franc, as Swiss retail sales dipped in January after an upward revision to the previous month, but February’s manufacturing PMI beat expectations and accelerated through 60.00. Meanwhile, latest sight deposit balances infer no intervention from domestic banks on behalf of the SNB, but IMM data shows that specs re-established long positions last week. Usd/Chf is hovering above 0.9100 and Eur/Chf is meandering between 1.0988-64 even though the Euro has lost 1.2050+ status vs the Dollar after testing 1.2100, but failing to breach the psychological level or derive much traction from broadly better than expected Eurozone manufacturing PMIs and firmer German state CPIs. Perhaps Eur/Usd is conscious about more dovish guidance from the ECB pre-comments via several GC members including President Lagarde, and the same goes for Usd/Jpy following sourced reports suggesting that the BoJ could defend its YCC ranges before 10 year cash gets to 0.2% and cap any further spike to 0.3% ahead of its strategic review. Note also, the Yen may have option expiry interest in mind as it trades within a 106.37-74 range and mostly below 2.3 bn at 106.55-45, as an additional 1.8 bn lie from 106.25-20.

SCANDI/EM - The power of oil is clear via Eur/Nok and Eur/Sek divergence, but Norway’s manufacturing PMI also converged with its Swedish peer to offset an unexpected dip in retail sales. However, the Try is significantly outperforming irrespective of Turkish GDP and manufacturing PMI misses, as its month end plunge paused into 7.5000 and subsequent restorative price action lifts the Lira back over the 200 DMA (7.3886 vs the Usd).

Notable FX Expiries, NY Cut:

• USD/JPY: 105.55-57 (2.1BN), 106.20-25 (1.8BN), 106.45-55 (2.3BN), 106.85 (510M)
• AUD/USD: 0.7770 (2.2BN)

FIXED

Several factors may have contributed to the fade in debt futures after earlier rebound extensions to 174.25, 128.32 and 133-16+ in Bunds, Gilts and the 10 year T-note respectively, including technical resistance and aligning support at psychological levels in cash yields, like -30 bp, 75 bp and 1.40%. However, the bullish start to March in equities could have sapped some strength from bonds too, while Fed’s Barkin is the latest to show little concern over recent developments in rates, or in fact welcome the moves as a positive sign of the situation and outlook. Ahead, decent pm agenda as the new month begins and more Fed/ECB speakers get chance to comment, while the latest ECB stats on asset purchases may reveal any tweaks to address the recent ramp in yields and rewidening in spreads.

COMMODITIES

WTI and Brent front-month futures are firmer on the session but off best levels during early European trade. The complex has seen upside this morning which is in-fitting with the overnight APAC session and broader market sentiment. Moreover, oil prices may have derived support from the US House passing a USD 1.9trln stimulus bill which has lifted investors risk appetite. Alongside this, the approval of Johnson & Johnson’s one shot COVID-19 vaccine has buoyed the economic outlook. Overall, the fundamentals surrounding commodities remains the same with vaccine progress and the OPEC+ meeting, on Thursday, the focusses. Regarding price action, it is anticipated that prices will follow the general market sentiment until the OPEC+ meeting, where a plethora of viewpoints are held and discussions into whether as much as 1.5mln BPD of crude will go back in the market are expected to be conducted. Analysts at OCBC have stated, “if the combined OPEC+ increase does not exceed 500,000 bpd, that will be bullish for prices” and ING analysts said “OPEC+ will need to be careful to avoid surprising traders by releasing too much back into the markets” as there is a large amount of speculative money in oil, so they will want to avoid any action that will see looking for an exit. WTI resides towards the low USD 62/bbl mark (vs high USD 62.92/bbl) and Brent low USD 65/bbl (vs high USD 65.93/bbl). Elsewhere, precious metals are modestly firmer in-spite of ongoing USD strength but remain in proximity to recent lows given last week's sell off; spot gold +0.6%, just below USD 1,750/oz and spot silver USD 26.90/oz. Turning to base metals, they aptly abide by the same sentiment and see gains across the board with LME copper +1.3%. On copper, the head of the world’s biggest listed producer, Freeport, has stated the rise in price is no temporary spike and expects it to persist; due to its mass use and the expected 'greening' of the economy.

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 gasoline and diesel units, while the Motiva Port Arthur, Texas refinery (637k bpd) restarted its crude and gasoline units, according to sources. (Newswires)

Russian oil product exports from the Black Sea Port of Tuapse seen at 1.531mln tonnes in March vs. Feb scheduled 1.442mln tonnes. (Newswires)