• Asian equity markets traded mixed with the region tentative heading into this week's plethora of central bank announcements
• Chinese activity data showed a larger than expected increase in Industrial Production and Retail Sales; supported by base effects
• This week’s high-level meeting between the US and China is not likely to lead to any major diplomatic breakthrough, according to Chinese observers
• In FX, the DXY was steady around 91.70, EUR/USD maintains 1.19 status, GBP/USD sits just north of 1.3900
• German Chancellor Merkel’s CDU party defeat in two regional elections on Sunday
• Looking ahead, highlights include Swedish CPI, ECB asset purchases, ECB's Centeno
• Note, following the US switching from EST to EDT, the time differential between London and New York will be 4-hours instead of 5 up until March 28th

CORONAVIRUS UPDATE

US CDC reported total COVID-19 cases rose to 29.23mln from 29.18mln the day before and total deaths rose to 531.8k from 530.7k the day before. (Newswires)

NIH's Dr. Fauci said single antibody drugs are the most vulnerable to new COVID-19 variants and emphasis for US government research will focus on combinations of antibodies better equipped to resist variants. (Newswires)

Johnson & Johnson (JNJ) Scientific Director Paul Stoffels said the Janssen COVID-19 vaccine will start being distributed in Europe from late April and that 200mln doses will reach the EU by the end of summer. (Le Journal du Dimanche)

AstraZeneca (AZN) is reportedly preparing to file US EUA for its COVID-19 vaccine after reaching its target of 150 cases in trial, with the Co. expected to file for US Emergency Use Authorisation (EUA) this month or early April, according to sources. Irish authorities recommended to temporarily pause the use of the AstraZeneca COVID-19 vaccine amid reports of “serious blood clotting events” from the Norwegian Medicines Agency and the Netherlands also suspended the use of AstraZeneca's COVID-19 vaccine until at least March 29th. However, there were separate comments from the Medicines and Healthcare products Regulatory Agency that it is not confirmed that blood clots were caused by the vaccine and AstraZeneca also stated that safety data of people vaccinated in the UK does not show any evidence for increased risk of blood clots from its vaccine. (Newswires)

UK COVID-19 cases +4,618 (prev. +5,534) and deaths +52 (prev. +121), French cases +26,243 (prev. +29,759) and deaths +140 (prev. +169), while Italian cases +21,315 (prev. +26,062) and deaths +264 (prev. +317). (Newswires)

Every adult in the UK will be offered at least one COVID-19 vaccine jab by around June 10th which would be sooner than the government target of the end-July, while the EU is expected to achieve that by the first week of August, according to research firm Airfinity. (The Times)

Several EU countries including Austria, Czech Republic, Slovenia, Bulgaria and Latvia are demanding an EU Summit on what they claim is uneven distribution of COVID-19 vaccines in the bloc. (Newswires)

A decline in hospitalizations in the Tokyo region has allowed Japan’s government to plan lifting the state of emergency in the capital region by the expiry date of March 21 rather than extending it. (Sankei)

China discovered the first cases of a new COVID-19 variant in the Guangdong province. (SCMP)

UK's ONS has warned that a further wave of COVID-19 infections in autumn is inevitable despite early evidence of protection from vaccines. (Times)

ASIA

Asian equity markets traded mixed with the region tentative heading into this week's plethora of central bank announcements including from the Fed, BoE and BoJ, while the latest Chinese activity data showed a larger than expected increase in Industrial Production and Retail Sales although the tailwinds from the data were short-lived with the surge largely due to base effects. ASX 200 (+0.1%) was choppy as losses in tech and mining names were counterbalanced by strength in energy and defensives, while Nikkei 225 (+0.1%) was kept afloat after machinery orders showed surprise growth Y/Y and with a decline in hospitalizations for the Tokyo region said to allow the government to plan lifting the state of emergency for the capital region instead of extending it when it expires at the end of this week. Furthermore, Rakuten shares rocketed by around 20% in early trade to hit limit up after news the Co. plans a USD 2.2bln share sale to Walmart, Tencent and Japan Post for stakes of 0.9%, 3.6% and 8.3% respectively. Hang Seng (+0.1%) and Shanghai Comp. (-1.2%) were varied with the Hong Kong benchmark led higher by strength in energy names and with Xiaomi the biggest gainer after a US federal judge ordered a temporary halt on enforcing the US investment ban on the Co. The latest activity numbers from China were also encouraging as Industrial Production (35.1% vs exp. 30.0%) and Retail Sales (33.8% vs exp. 32.0%) topped estimates which helped the mainland bourse briefly pare early losses, although the recovery in the mainland was short-lived and the surges in the figures weren’t much of a surprise given the low base from a year ago when China industrial output suffered its sharpest pace of decline in 30 years due to virus-related shutdowns amid the peak of its COVID-19 outbreak. India's Sensex (-0.5%) fell below the 50k mark following disappointing data on Friday. Finally, 10yr JGBs are rangebound amid the tentative mood in stocks and with yields stable overnight, while the lack of BoJ purchases today also ensured quiet trade.

PBoC injected CNY 10bln via 7-day reverse repos with the rate maintained at 2.20% for a net neutral daily position and it also announced CNY 100bln marginal lending facility operation with the rate maintained at 2.95%. (Newswires) PBoC set USD/CNY mid-point at 6.5010 vs exp. 6.4999 (prev. 6.4845)

China NBS said China's economic recovery is not solid yet and positive factors for the domestic economy are increasing, while it added the economy is still in the recovery process and that China's economy could show a sharp rebound in Q1 from the prior year but also noted imbalances to the economic recovery. (Newswires)

This week’s high-level meeting between US Secretary of State Blinken and National Security Adviser Sullivan with China Foreign Minister Wang and top diplomat Yang in Alaska is not likely to lead to any major diplomatic breakthrough, according to Chinese observers. There were also comments from National Security Adviser Sullivan that he does not expect the phase one trade deal to be a crucial point at the upcoming meeting but stated the meeting will include Hong Kong issues, the coercion of Australia and the aggression at the border with India. (Newswires)

UK announced that G7 foreign ministers issued a statement to raise concerns regarding China's hindrance of democratic elements of the electoral system in Hong Kong and called on China to act in accordance with the Sino-British joint declaration, as well as other legal commitments. Furthermore, it was later reported that China accused the UK of “groundless slanders” after the British government claimed Beijing’s crackdown in Hong Kong was in breach of the Sino-British Joint Declaration that paved the way for the handover of Hong Kong to China. (Newswires)

US Federal Communications Commission released a list of Chinese companies that pose unacceptable risk to US national security which includes Huawei, ZTE, Hytera, Hangzhou Hikvision and Dahua. In other news, a US federal judge ordered a temporary halt on enforcing the US investment ban on Xiaomi late on Friday and stated the decision to blacklist the company was deeply flawed. (Newswires/WSJ)

• Chinese Industrial Production YTD (Feb) Y/Y 35.1% vs. Exp. 30.0% (Prev. 7.3%)
• Chinese Retail Sales YTD (Feb) Y/Y 33.8% vs. Exp. 32.0% (Prev. 4.6%)
• Chinese House Prices (Feb) Y/Y 4.3% (Prev. 3.9%)
• Japanese Machinery Orders (Jan) M/M -4.5% vs. Exp. -5.5% (Prev. 5.2%)
• Japanese Machinery Orders (Jan) Y/Y 1.5% vs. Exp. -0.2% (Prev. 11.8%)

UK/EU

BoE’s Executive Director for Financial Stability Brazier said the central bank’s QE program to stimulate the economy is not ideal in the long run and gives the message that people should not worry whenever they are struggling for cash as the BoE will come in and buy gilts. (Newswires)

UK and EU are reportedly at loggerheads over post-Brexit fishing rights. People close to the discussions disclosed that both sides hit problems from the start. (Newswires)

A UK trade deal with the US may not happen until at least 2024 as US President Biden prioritises his domestic agenda and the overriding foreign policy challenge of China, according to US sources. (Newswires)

ECB’s Kazaks said the central bank’s faster pace of emergency bond purchases to rein in bond yields is a temporary strategy which will only last until the economy strengthens. (Newswires)

German Chancellor Merkel’s CDU suffered defeats in two state elections in Germany with projections showing the Green Party widened its lead in Baden-Wurttemberg at 32.6% vs. CDU at 24.1% (prev. 30.3% vs 27.0% in 2016) and SPD widened its lead in Rhineland-Palatinate at 35.7% vs. CDU at 27.7% (prev. 36.2% vs. 31.8% in 2016). (Politico)

S&P affirmed Austria at AA+; Outlook Stable and affirmed Norway at AAA; Outlook Stable. (Newswires)

• UK Rightmove House Prices (Feb) M/M 0.8% (Prev. 0.5%)
• UK Rightmove House Prices (Feb) Y/Y 2.7% (Prev. 3.9%)

FX

In FX markets, the DXY was initially steady around the 91.70 level amid the tentative mood in stocks and with yields relatively flat on the session which has got participants looking ahead to this week’s slew of upcoming central bank activity. EUR/USD oscillated around the 1.1950 level before drifting lower ahead of the European open. Italy heads back into a lockdown and following German Chancellor Merkel’s CDU party defeat in two regional elections on Sunday where the party lost further ground against the Green Party in Baden-Wurttemberg and against the SPD in Rhineland-Palatinate in what could be its worst voting result for both states ever. GBP/USD was rangebound with early upside seen amid expectations of faster vaccination progress in the UK, although gains were then reversed after hitting resistance at 1.3950. USD/JPY marginally extended on the 109.00 handle as Japanese stocks remained afloat and antipodeans traded mixed with AUD/USD uneventful after a lack of surprises from RBA Governor Lowe’s latest speech in which he noted that Australia has responded very well to the pandemic and this resulted to a quicker and stronger than expected economic recovery but added this does not hide the fact we still have far to go, while NZD/USD outperformed across Tasman after briefly reclaiming the 0.7200 status. However, ahead of the European open, activity currencies were pressured by a firming of the greenback as the risk appetite further deteriorated.

COMMODITIES

WTI crude futures climbed back above USD 66.00bbl and Brent crude tested USD 70.00/bbl to the upside but with gains capped amid the tentative risk tone overnight. In terms of the latest pertinent headlines, UK ministers were reportedly considering banning new exploration licenses for North Sea oil and there were further reports of drone launches by Yemen Houthis against Saudi, while reports also noted China ramped up its purchases of Iranian oil during the last year and is expected to reach 856k bpd this month which would be a 129% increase M/M. Gold traded flat amid a steady greenback, while copper declined amid underperformance in its largest purchaser China and alongside pressure in Chinese commodity prices as China's top steel producing city of Tangshan vowed to crackdown on pollution.

Baker Hughes Rig Count: Oil -1 at 309, natgas unchanged at 92, total -1 to 402. (Newswires)

Total Port Arthur, Texas refinery (185k bpd) restarted its gasoline unit and the Shell Deer Park refinery, Texas (340k bpd) is preparing crude units for a restart. (Newswires)

UK Ministers are mulling declaring the beginning of the end for the North Sea oil industry through banning new exploration licenses. (Telegraph)

China reportedly imported an average of 306,000 bpd of crude oil from Iran totalling 17.8 million tonnes whereby 75% of the imports came indirectly through Malaysia, Oman or the UAE, while Chinese imports of Iranian oil are expected to increase 129% M/M in March to reach levels of 856,000 bpd. (OILPRICE.com)

China's top steelmaking city of Tangshan warned it will punish firms that have not adhered to the measures under its emergency anti-pollution plan or have illegally discharged pollutants, after weeks of smog in the northern part of the country. (Newswires)

GEOPOLITICAL

Saudi-led coalition said it intercepted and destroyed a drone launched by Yemen's Houthis towards Khamis Mushait in Saudi Arabia. (Newswires)

UK government is set to increase the number of nuclear warheads that Britain can stockpile, with the announcement expected in an Integrated Review on Tuesday and which is a change of direction on non-proliferation, while the report noted that the UK has around 180 warheads stockpiled. (Telegraph)

Myanmar imposed martial law in the Yangon after violent protests in which activists claimed at least 38 were killed as securities forces fired on protesters, while the Chinese Embassy in Myanmar reported that many Chinese workers were injured as factories in Yangon were looted and destroyed. (Newswires)

US

Duration sold off on Friday as a seemingly out-of-the-blue tumble overnight picked up traction through Europe and failed to recover, seeing long-end yields hit fresh cycle highs. By settlement 2s +0.8bps at 0.151%, 5s +6.7bps at 0.845%, 10s +10.8bps at 1.635%, 20s +13.7bps at 2.317%, 30s +12.1bps at 2.402bps. B/A spreads on cash nominals seem in line with recent averages. Inflation breakevens widened. The sell-off commenced out of APAC, with the rout in Aussie bonds again the spark that lit the fuse. Yields edged higher across sovereign complexes and then caught traction as Europe arrived for the session. The ECB-caused pop on Thursday has ultimately been a red-herring, as had any fresh longs on the back of the "not awful" Treasury auctions. A mixed US PPI data release put a pause on the selling as near-term relation outlooks to a knock, similar to the CPI, although selling soon commenced again heading into the US cash equity open, seeing duration-sensitive stocks underperform. The next leg lower in bonds saw 10s and 30s break above their cycle peak of 1.625% and 2.27%, with IFR noting algo sell programmes being triggered. Note that in cash bonds the 20-year was the underperformer today, and no coincidence either with its reopening auction due next week, with dealers likely making concession for the offering; the 10s20s30s butterfly spread spiked higher today. While duration was hit, front-end rates continue to hold up strong, with the latest SOFR print falling to 1bp from 2bps, now sitting at its lows of the year. The Fed buying USD 12.8bln in the 0- to 2.25-year sector also helped the steepening, where 2s10s continues to move higher, sitting at 148bps currently. T-note (M1) futures settled 26+ ticks lower at 131-25.

US President Biden is to appoint Gene Sperling to lead implementation of COVID-19 relief plan and it was also reported that President Biden will be speaking on implementing the American Rescue Plan at 13:45EDT/17:45GMT. (Newswires)

US Treasury Secretary Yellen suggested inflation risks remain subdued and noted that some prices which fell last year due to the pandemic will likely recover but added that it is a temporary movement in prices, while she doesn’t think there is a significant risk regarding inflation and noted that they have the tools to address it if it materializes. (Newswires/ABC)