• European equity indices stabilise but US futures are softer with RTY the underperformer, -0.9%
• The DXY has seen upside to the modest detriment of major peers, though off highs/lows respectively, while yields continue to consolidate
• EZ CPI was as expected whilst Germany will reportedly extend its lockdown to March 29th
• Crude remains underpinned ahead of OPEC+ but has drifted off lows while precious metals are somewhat mixed
• US is expected to announce Navalny-related sanctions but is anticipated to allow continued US foreign aid & export licenses for Russia
• Looking ahead, highlights include Canadian GDP, OPEC JTC, ECB's Panetta, Fed's Brainard, Daly & US Redbook

CORONAVIRUS UPDATE

France has changed their usage of the AstraZeneca (AZN LN) COVID-19 vaccine following additional clinical data, now allowing the vaccine in those up to 74 years of age vs prev. 65. (FT)

Germany is to reportedly extend its modified lockdown to 28th March (prev. 7th March). (Business Insider)

Germany to ask citizens to avoid both domestic and foreign travel over the Easter period, via a draft document. (Newswires)

Italy is said to see seek additional COVID stimulus as its virus outlook worsens, according to reports. (Newswires)

ASIA

Asian equity markets whipsawed as risk momentum gradually waned despite the region initially taking impetus from the rally on Wall St, where all major indices notched substantial gains and the S&P 500 posted its best performance in almost nine months amid vaccine developments, impending stimulus, bond market rebound and strong US data. ASX 200 (-0.4%) reversed the early upside with the index dragged by weakness in the commodity-related sectors and after mixed data releases, while Nikkei 225 (-0.9%) also wiped out its opening spoils as participants digested soft data including a continued contraction in quarterly company profits, sales and capex in which the government cited uncertainty regarding the economic outlook for the decline in manufacturers’ business spending. KOSPI (+1.0%) outperformed as it played catch up to yesterday’s rally on return from an extended weekend and with South Korea to draft a KRW 15tln extra budget to support small businesses, protect jobs and purchase vaccines. Hang Seng (-1.2%) and Shanghai Comp. (-1.2%) were pressured after China's banking regulator stated that China will reduce the level of leveraging, as well as curb reckless capital expansion and warned of large bubbles in the property sector, while Hong Kong Financial Secretary also refused to rule out additional duties on stock trades. Furthermore, it was reported that the US administration will engage with allies to combat forced labour including in China and will examine how the Treasury, Commerce Department and USTR can work together to deter currency intervention for trade advantage and is to pursue all available tools to address China's unfair trade practices from excess capacity to coercive technology transfers. Finally, 10yr JGBs were higher and reclaimed the 151.00 level as yields marginally eased and following recent source reports that the BoJ is prepared to defend its yield range prior to the upcoming review and could take action prior to yields attaining 0.2%, while weaker results at the 10yr JGB auction failed to derail the ongoing bond market rebound.

PBoC injected CNY 10bln through 7-day reverse repos at rate of 2.20% for a net daily neutral position. (Newswires) PBoC set USD/CNY reference rate at 6.4625 vs exp. 6.4600 (prev. 6.4754)

China's CBIRC Chairman said China will reduce the level of leveraging and curb reckless capital expansion, while focus will remain on preventing financial risks and he noted large bubbles in the property sector. (Newswires)

Hong Kong Financial Secretary Chan said there is no plan for a dividend tax at this stage and suggested that the increase in stock trading tax is a fraction of costs for high frequency traders, while he noted they are not ruling out additional duty on equity trades. (Newswires)

• Japanese Company Profits (Q4) Y/Y -4.7% (Prev. -28.4%)
• Japanese Company Sales (Q4) Y/Y -4.5 (Prev. -11.5%)
• Japanese Business Capital Expenditure (Q4) -4.8% (Prev. -10.6%)
• Japanese Unemployment Rate (Jan) 2.9% vs. Exp. 3.0% (Prev. 2.9%)

US

US Senator Manchin said that possible changes to the House relief bill were under discussions, while Senator Wyden later stated that Cobra premium provisions and the pension package will remain in the stimulus bill. (Newswires)

UK/EU

UK Chancellor Sunak is to use the Budget to launch efforts to make the City of London more attractive in competition for IPOs and increase focus on SPACs to compete with other financial hubs. (FT)

ECB's de Guindos says we will have to see whether this increase in nominal yields will have a negative impact on financing conditions. If we reach the conclusion that it will, then we are open to recalibrating our programme including the envelope of PEPP. (ECB)

• German Unemployment Chg SA (Feb) 9k vs. Exp. -13.0k (Prev. -41.0k, Rev. -37k) (Newswires)

EU HICP Flash YY (Feb) 0.9% vs. Exp. 0.9% (Prev. 0.9%)

• EU HICP-X F & E Flash YY (Feb) 1.2% vs. Exp. 1.1% (Prev. 1.4%)
• EU HICP-X F, E, A & T Flash YY (Feb) 1.1% vs. Exp. 1.1% (Prev. 1.4%)

European Commissioner Gentiloni says the bloc is working to allocate 13% of the EU Recovery Fund to each country by the Summer break. (Newswires)

GEOPOLITICAL

US Treasury Deputy Nominee Adeyemo said they will focus on any efforts by Iran to evade US sanctions and abuse the global banking system, while they are committed to rigorously enforcing sanctions targeting Russian actors and other threats to US national security. (Newswires)

US is expected to announce Navalny-related sanctions on Russian individuals as early as this Tuesday but is anticipated to maintain waivers allowing continued US foreign aid and export licenses for Russia, according to sources. (Newswires)

Russia's Foreign Minister Lavrov says Russia will retaliate against fresh US sanctions, according to RIA. (Newswires)

EQUITIES

European equities (Euro Stoxx 50 +0.3%) opened the session softer across the board following a mixed APAC handover, but European indices now trade modestly firmer. Stateside, US equity futures are softer with RTY (-0.9%) the underperformer, whilst the other contracts take a breather after yesterday’s rally. Back to Europe, sectors kicked off trade predominantly negative but have since flipped to see the majority in the green. To the upside, Banks, Construction and Autos are the biggest gainers with upside of around +0.7%. Conversely, cyclically exposed sectors are faring worse off – indicating potential risk aversion, with Oil & Gas (-0.6%) the laggard as the sectors tracks losses in crude complex – with both BP (-1.3%) and RDSA (-1.4%) in firm negative territory. In terms of individual movers, Taylor Wimpey (+2.2%) saw better than expected earnings with FY revenue a beat on expected, GBP 2.79bln vs exp. GBP 2.76 and posted a record UK forward order book. Elsewhere, travel names are unwinding some of their recent gains, with reports also noting the EU is said to plan digital vaccine passports in a bid to boost travel. Ryanair (-3.4%) underperforms in the travel sector as the group stated February traffic was -95% Y/Y. Infineon (+0.2%) failed to sustain much strength despite reports it is to replace Nokia (+0.1%) in the Euro Stoxx 50. Meanwhile, from a portfolio standpoint, Goldman Sachs notes that balanced portfolios have suffered with the combined sell-off of equities and bonds. The bank suggests long-duration equities might continue to suffer from a real rate increase. This is shown as a 60/40 portfolio with Nasdaq & US 10y bonds recorded one of its largest biweekly losses since 2010. “For this reason, we continue to like value sectors and commodity assets which are levered to stronger-than-expected growth and have a less negative sensitivity to higher real rates,” GS notes.

Alibaba's (BABA/9988 HK) - Ant Group is hopeful regarding the resumption of its IPO; sources said the Co. plans to offer a short-term liquidity solution to staffers starting April, according to SCMP. (Newswires)

Target Corp (TGT) Q4 20 (USD): EPS 2.67 (exp. 2.54), Revenue 28.3bln (exp. 27.42bln), SSS 20.5% (exp. +16.4%). (Newswires)

FX

USD - No fresh fundamental news or driver, but the Dollar extended its recovery gains from recent sub-90.000 lows in index terms against all major and EM counterparts, plus oil and precious metals on a mixture of short covering and increasingly bullish technical momentum. Indeed, the DXY has established a firmer platform having taken out a recent peak at 91.228 (from February 8) and the 100 DMA (91.282) on the way up to 91.396, thus far, to clear a path to 91.500 and a prior high from early last month at 91.600 (February 8). Ahead, light US data docket, but 2 more Fed speakers on tap in the guise of Brainard and Daly who are both 2021 FOMC voters and considered to be neutral.

NZD/EUR/AUD - The Kiwi is lagging in the 0.7250 zone vs its US peer and under 1.0725 against the Aussie after relatively dovish/downbeat remarks from RBNZ Assistant Governor Hawkesby overnight (repeated more room for easing and upping QE if needed as the economic recovery is fragile and uneven), while the RBA rolled out almost identical policy guidance with the addition of acknowledging the fact that it bought bonds recently to reinforce YCT and will continue to as required in response to market conditions. Hence, Aud/Usd is holding near 0.7775 ahead of Q4 GDP and a component breakdown having digested mixed building approvals, current account and net export data. Elsewhere, the Euro is scrambling to retain grip of the 1.2000 handle after a dip below in wake of sub-forecast German data and more pledges from the ECB that more policy recalibration is possible if financing conditions are adversely impacted by the recent spike in nominal yields. For the record, preliminary Eurozone inflation prints were broadly in line with consensus, and from a chart perspective Eur/Usd could retreat further on a close beneath the 100 DMA (1.2033), while decent option expiry interest between 1.2045-65 (1.5 bn) may keep rebounds in check.

GBP/CHF/CAD - Also losing out amidst the Greenback revival, with Cable losing 1.3900+ status, the Franc extending declines towards 0.9200 and Loonie closer to 1.2700 than best levels above 1.2650 against the backdrop of a deeper retracement in crude prices. However, Usd/Cad should derive some additional impetus/direction from Canadian GDP in the absence of competing US releases at the same time even though the updates are somewhat old (Q4 and December).

JPY - The Yen continues to tread water near 107.00, but Japanese data was somewhat disappointing aside from a steady jobless rate vs expectations for a marginal uptick, and JGBs spiked despite a weak auction to unwind some convergence to USTs. So, 1.5 bn option expiries from 106.50-30 are exerting less gravitational pull before February’s services PMI.

EM/PM - Broad depreciation vs the Buck irrespective of comparatively stable risk sentiment as WTI and Brent recoil further from best levels to probe Usd 59.50 and Usd 62.50 respectively before paring some losses and Gold got to within single digits of Usd 1700 before finding underlying bids as the Dollar lost some momentum.

RBA kept its Cash Rate Target and 3yr yield target unchanged at 0.10% and maintained QE at AUD 100bln, as expected. RBA stated that it does not expect a tight labour market and high wage growth until 2024 at the earliest and that significant gains in employment, as well as a return to a tight labour market is needed to reach its goals. RBA reiterated that the domestic economic recovery is well underway and stronger than earlier expected, while it remains committed to maintaining highly supportive monetary conditions until goals are reached and that it will not increase the Cash Rate until inflation is sustainably at 2%-3% target. Furthermore, it is committed to the 3yr yield target and recently purchased bonds to support the target which it will continue to do so as needed and is prepared to make further adjustments to its buying in response to market conditions, with bond purchases brought forward this week to assist with a smooth functioning of the market. (Newswires)

RBNZ Assistant Governor Hawkesby said the central bank will be more patient on policy changes and its least regrets strategy is to keep stimulus in place for too long instead of removing it quickly, while he added the economy may require more stimulus and that there is less space ahead of us regarding LSAP. (Newswires)

• Australian Building Approvals (Jan) -19.4% vs. Exp. -3.0% (Prev. 10.9%, Rev. 12.0%)
• Australian Current Account Balance (AUD)(Q4) 14.5bln vs. Exp. 13.1bln (Prev. 10.0bln)
• Australian Net Exports Contribution to GDP (Q4) -0.1% vs. Exp. -0.3% (Prev. -1.9%)

Major FX Option Expiries:

• EUR/USD: 1.1900-20 (843M), 1.2045-65 (1.5BN), 1.2085-90 (572M)
• USD/JPY: 105.75-90 (1.7BLN), 106.00-10 (1.2BLN), 106.30-50 (1.5BLN), 107.00 (522M), 107.50 (600M)

FIXED

It would be too early to douse flames or dampen hopes of further restorative price and yield action in bonds, but the pull-back in futures is arguably more pronounced today than it was at this time on Monday. Bunds are now just off a new 174.22 Eurex low vs 174.84 at best, and perhaps crucially from a technical standpoint have dipped below the 50% Fib retracement of yesterday’s rebound, at 174.26, while Gilts have reversed from 128.62 to 128.15 regardless of what appeared to be a reasonable 2026 DMO auction. However, the looming 2061 offering could be a quite different proposition on the eve of the UK Budget. Elsewhere, US Treasuries are being dragged back down from overnight session highs alongside EU peers, with the curve re-steepening again before Redbook, the Empire State survey and 2 Fed speakers.

COMMODITIES

WTI and Brent front-month futures have been somewhat choppy throughout the morning briefly moving into positive territory but have since retraced the marginal upside. The complex saw overnight pressure amid the risk sentiment and with some potential jitters due rising expectations that OPEC+ will raise oil supply from April (full preview available in the newsquawk Research Suite). Moreover, an additional component potentially pressuring prices could be due to ongoing concerns regarding a slowdown in demand in China. On that note, it’s also worth mentioning reports suggesting Germany is set to extend its already modified COVID lockdown restrictions to March 28th from March 7th. Nonetheless, the fundamentals remain the same heading into the JMMC and OPEC+ meeting on Wednesday and Thursday respectively, while mass vaccinations continues move ahead and eyes turn to the Brazilian variant of the virus and any potential resilience to vaccines. WTI now resides around USD 60.60/bbl (vs low USD 59.50/bbl) and Brent circa USD 63.50/bbl (vs low USD 62.50/bbl). Notable risk events on the table today surrounds the OPEC JTC meeting, albeit the technical committee is to gather data to present to the JMMC, who tomorrow will review the data and make recommendations ahead of the policy-setting OPEC+ confab. Elsewhere, precious metals trade largely in tandem to the firmer Buck and have both been softer. In terms of forecasts bank, Citi cut their XAU average price to USD 1,800/oz from USD 1,900/oz. Spot gold is currently only modestly firmer at USD 1,730/oz but spot silver is lower by just under 1.0% intraday at USD 26/oz. Turning to base metals LME copper is seeing gains despite Shanghai copper falling for a third straight session in top consumer China as there appears to be signs of weakening demand. Shanghai stainless steel futures fell down as much as 2.6% after traders witnessed higher inventories with stockpiles jumping according to the latest data.

Citi lowers its 2021 average gold forecast from USD 1900/oz to USD 1800/oz. (Newswires)