• An improved mood was observed in Asia as equity markets shrugged off the weak handover from Wall Street
• Major US indices declined as tech lagged again with regulatory concerns also adding to the selling pressure
• Chinese Caixin Services PMI printed its lowest reading since April last year
• In FX, the DXY languished below 91.00, EUR/USD plateaued below 1.21 and GBP sits on a 1.39 handle ahead of the budget
• OPEC+ is poised to cool down the oil market by raising production. Saudi is said to still be considering how to phase out its voluntary cut
• Looking ahead, highlights include EZ, UK & US services PMIs (final), UK Budget, US ADP, ISM services, DoEs, OPEC JMMC, ECB's Panetta, de Guindos, Schnabel, Fed's Harker, Bostic, Evans, BoE's Tenreyro, supply from Germany

CORONAVIRUS UPDATE

US COVID-19 cases +50,935 (prev. +50,505), deaths +1,283 (prev. +1,062), vaccines administered 78.6mln (prev. 76.9mln). (Newswires)

US President Biden said there will be enough vaccines for every American adult by end-May and that he hopes the US will be back to normal by this time next year. (Newswires)

Texas Governor Abbott said it is now time to open Texas 100% and lift COVID-19-related business restrictions, while he announced to end the state-wide mask mandate although there were later comments from White House COVID adviser Slavitt that he hopes Texas Governor Abbott reconsiders lifting of the mask mandate. (Newswires/Dallas Morning News)

ASIA

An improved mood was observed in Asia as equity markets shrugged off the weak handover from Wall Street where the major indices declined led by ongoing selling in tech amid reopening optimism and regulatory concerns after US Senator Warren commented that we need to break up big tech and that she was more concerned about big tech now than a year ago. ASX 200 (+0.8%) was underpinned by strength across the mining sectors after yesterday’s rebound in metal prices and with participants cheering stronger than expected Q4 GDP data which showed the economy expanded Q/Q by 3.1% vs. Exp. 2.5%. Nikkei 225 (+0.4%) traded with cautious gains as early support from a predominantly weaker currency gradually faded amid expectations of an extension to the state or emergency for Tokyo where officials are considering requesting for the government to maintain the emergency declaration in the capital for an additional two weeks. Hang Seng (+1.6%) and Shanghai Comp. (+1.3%) conformed to the positive tone across the region after Chinese press reported that analysts suggested the PBoC could reduce RRR for certain banks this month, although the advances in the mainland were gradual after the latest Chinese PMI data releases including Caixin Services PMI which printed its lowest reading since April last year. Finally, 10yr JGBs were contained amid the mostly positive risk tone across the region and with demand for bonds also subdued by the lack of BoJ purchases in the market, while the RBA were active today for AUD 1bln of semi government bonds which was inline with last Wednesday’s operation.

PBoC injected CNY 10bln via 7-day reverse repos with rate kept at 2.20% for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 6.4565 vs. Exp. 6.4566 (Prev. 6.4625)

• Chinese Caixin Services PMI (Feb) 51.5 (Prev. 52.0)
• Chinese Caixin Composite PMI (Feb) 51.7 (Prev. 52.2)

UK/EU

UK Chancellor Sunak said the government will need to begin fixing the public finances once we are on the way to recovery and will promise to do "whatever it takes” to support the British people and businesses through this “moment of crisis” including extending the furlough and the Universal Credit GBP 20 uplift for months. Furthermore, Sunak stated that along with business support for struggling pubs and high streets, the Budget will likely see another GBP 30bln added to Britain’s virus fighting tab, according to excerpts from his Budget Speech. (The Sun)

UK Chancellor Sunak is to announce an extension of the furlough scheme until September in which employers will pay 10% of furlough scheme costs in July and 20% in both August and September, according to the Treasury. Furthermore, it stated that a fourth Self-employment Income Support Scheme (SEISS) grant will be available next month worth 80% of up to 3 months trading profits at a maximum GBP 7,500 total, while Sunak will unveil details of a fifth SEISS grant for the self-employed in the budget with the rules of the scheme to be relaxed to help 600k more workers. (Newswires)

• UK BRC Shop Price Index (Feb) Y/Y -2.4% (Prev. -2.2%). (Newswires)

FX

In FX markets, the DXY languished near the prior day’s lows after it slipped beneath the 91.00 level despite the pullback across US equities. There were several comments from FOMC members including Fed’s Brainard who stated that she sees a strong outlook for the US economy with vaccines and fiscal spending all pointing to a steady economic improvement and that the criteria for inflation to moderately exceed the Fed’s target "for some time" is really important in assessing when an interest rate increase might be appropriate, while Fed’s Daly stated the recent rise in bond yields is a sign that investors see a "brighter future" but added the Fed could change the maturity of its bond purchases to push down on the long-end in the event that the yield curve steepens so that monetary policy becomes less accommodative than what it thinks is appropriate. EUR/USD plateaued following its recent ascent to just shy of the 1.2100 handle with ECB rhetoric remaining dovish. GBP/USD was also uneventful as focus shifts to UK Chancellor Sunak’s Budget announcement later although some key details have already been pre-released which includes an extension of the furlough scheme until September and a fifth self-employment income support scheme grant with rules to be relaxed to help 600k more workers. USD/JPY traded higher as the mostly positive risk tone spurred JPY outflows and after BoJ’s Kataoka stuck to an overly dovish tone in which he personally believes the BoJ must strengthen easing via YCC and policy commitment, which is not much a surprise coming from the notorious BoJ dissenter. Antipodeans were also stable as their high beta statuses, firmer CNY reference rate and stronger than expected Australian GDP data provided a floor for prices.

• Australian GDP (Q4) Q/Q 3.1% vs. Exp. 2.5% (Prev. 3.3%)
• Australian GDP (Q4) Y/Y -1.1% vs. Exp. -1.8% (Prev. -3.8%)

COMMODITIES

WTI crude futures were contained beneath the USD 60.00/bbl level after the latest private sector inventory report showed a substantial surprise build in headline crude stockpiles of around 7.4mln bbls and with participants kept tentative as the OPEC+ meetings got underway. The JTC made no recommendations for the oil output decision although source reports have suggested that producers are set to cool down the market with additional output and that Saudi was still undecided on how to phase out its voluntary cuts, while focus now turns to the JMMC later today before tomorrow's OPEC+ meeting. Gold was rangebound as the tailwinds from a subdued greenback were offset by the lack of haven demand for precious metal and copper eased despite the improvement in risk appetite on which prices consolidated around the USD 4.20/lb level.

US Private Inventory Data (bbls): Crude +7.4mln (exp. -0.9mln), Cushing +0.7mln (exp. +58k), Gasoline -9.9mln (exp. -2.3mln), Distillates -9.1mln (exp. -3.0mln). (Newswires)

OPEC+ is poised to cool down the oil market by raising production. Saudi is said to still be considering how to phase out its voluntary cut, according to sources. (Newswires)

OPEC+ JTC made no recommendation for oil output decision for upcoming OPEC+ meeting. Other reports noted that the panel said the recent oil price recovery may be caused more by financial players rather than by improvements in physical fundamentals and that upcoming seasonal refinery maintenance will reduce crude runs during Q2 in many parts of the world. The panel also suggested widening backwardation of major benchmark crudes and increasing net-long positions in the financial markets, while it is to closely monitor the price structure of key petroleum products, some of which are still in contango. Furthermore, it called for "cautious optimism" due to the underlying uncertainties in the physical markets and macro sentiment, including risks from more transmissible and contagious covid-19 mutations that are still on the rise. (Newswires)

Total (FP FP) Port Arthur, Texas refinery (185k BPD) is to begin restarting production units late this week, according to sources. It was also reported that ConocoPhillips is still working to restore Permian oil production after the winter freeze, but its Eagle Ford shale oil production is restored and Bakken output is mostly back. (Newswires)

GEOPOLITICAL

US imposed sanctions on former Russian PM Sergei Kiriyenko, Head of Prison service Alexander Kalashnikov, Prosecutor Igor Krasnov, Security Service's Alexander Bortnikov, as well as Deputy Defense Ministers Krivoruchko and Popov for the poisoning of Russian opposition leader Navalny. There were also comments from Russia's Envoy to the EU that Russia will respond to the latest round of EU sanctions over Kremlin critic Navalny. (Newswires)

Iran's President Rouhani reportedly ordered a temporary halt to the controversial production of uranium metal, according to Iranian press cited by BBC Persia. In relevant news, French President Macron held a call with Iranian President Rouhani and stated that Tehran must make clear and immediate gestures to allow dialogue to resume on the nuclear deal. (Newswires/BBC)

US

The belly of the curve outperformed again as the Treasury market makes further progress on recovering its liquidity conditions. By settlement, 2s -0.2bps at 0.121%, 5s -3.9bps at 0.672%, 10s -3.4bps at 1.412%, 30s -1.2bps at 2.209%; traders noted USTs saw further recovery in market depth; TYM1 volumes were still above average, but cooler than the turmoil in the most recent sessions. In TIPS/BEIs, real yields bull-steepened, seeing 5yr BEI rise above 2.38%, while 30yr BEI rose modestly to just above 2.12%. Bonds had been paring APAC gains as European trade developed, seemingly ignoring weaker retail sales data out of Germany, perhaps with European supply playing its part. However, the lows were in for the day on both sides of the pond as US traders arrived. Desks noted real money was an avid buyer, particularly in the belly, ahead of Fed speak as steepeners got re-engaged; Fed purchases in the long-end was added support for duration. Although as Europe departed for the day, yields more or less traversed sideways. Dealers were likely on the offer amid a continued deluge of corporate supply, with Siemens pricing a seven-part USD 10bln M&A bond ranging from 2-year to 20-year maturities; desks noted continued deal-tied receiving flows, tightening swap spreads, particularly in the long-end amid the Commonwealth of Australia's 10- and 30-year deal. Meanwhile, there was some initial UST block sales on Brainard's initial text release - which made no direct mention of yields/rate hike pricing - although recovered within the hour as later headlines saw the Fed Governor note that the rise in yields last week caught her eye. Perhaps a precursor to Fed Chair Powell's (newly scheduled) remarks in the WSJ on Thursday, which will be the key event of the week for rates participants ahead of Friday's NFP report. T-note futures (M1) settled 11+ ticks higher at 133-17+.

Fed's Brainard (voter) said she sees a strong modal outlook for the US economy and that vaccines and fiscal spending all point to a steady economic improvement, while she is paying the closest attention to market valuations and the speed of changes in bond markets last week caught her eye. Brainard added the criteria that inflation needs to moderately exceed the Fed target "for some time" is really important in assessing when an interest rate increase might be appropriate. (Newswires)

Fed's Daly (voter) said patience is the most important virtue for policy and that getting on track to achieve Fed goals will require accommodative policy for some time but stated that inflation is well below target and millions are out of work. Daly noted that weak links between unemployment, wages and prices are likely to persist in the coming years and that a long period of below-target inflation is costly, while she added it will likely be some time before inflation is sustainably back to 2% and the recent rise in inflation compensation is encouraging and in line with Fed goals. Furthermore, Daly stated the recent rise in bond yields is a sign that investors see a "brighter future" and that should monetary policy become less accommodative than appropriate, this could be addressed with tools like changing the maturity of bond purchases to put downward pressure on the long-end. (Newswires)

White House was reportedly planning to withdraw Neera Tanden's nomination to head the OMB as soon as Tuesday evening, while President Biden later confirmed that he accepted Tanden's request to withdraw her nomination and stated that Tanden will serve in another role within the administration. In relevant news, the US Senate voted 95-4 to confirm Cecilia Rouse as Chair of the White House Council of Economic Advisers. (Newswires)

Senior Senate Democrats including Schumer, Murray and Wyden are said to be joining with Sanders and are expected to offer an amendment to Biden's relief bill identical to Raise the Wage Act to raise minimum wage to USD 15/hour, while there were separate comments from GOP Senator Crapo that another COVID-19 relief package may be appropriate. (Newswires/Washington Post)

US Senator Warren said we need to break up big tech and she is more concerned about big tech now than a year ago. (Newswires)