• Asia-Pac stocks traded in a subdued manner with participants cautious ahead of the FOMC announcement later today
• The US doesn't expect specific negotiated deliverables or a joint statement from its meeting with China
• In FX, the DXY has seen mild support with an eye on 92.00, EUR/USD hovers around 1.19 and GBP/USD remains sub-1.39
• Italy and France have signalled that they are prepared to end their suspension of the AstraZeneca vaccine
• Looking ahead, highlights include IEA MOMR, EZ (final) CPI, Canadian CPI, DoEs, FOMC rate decision & Fed Chair Powell press conference, NZ GDP, Dutch General Election, ECB's Elderson, supply from the UK & Germany

CORONAVIRUS UPDATE

US COVID-19 cases +49,867 (prev. +40,428) and deaths +702 (prev. +589), vaccine doses delivered 142.92mln (prev. 135.85mln) and doses administered 110.72mln (prev. 109.08mln). There were also comments from California Governor Newsom that the state administered over 12.6 million vaccines, setting a new record of administering nearly 500k vaccines in 24 hours. (Newswires)

Italy PM Draghi said the initial EMA comments on the AstraZeneca (AZN) vaccine were encouraging, while he spoke with French President Macron and agreed to quickly resume the vaccines if the EMA gives a positive judgement. There were also comments from French PM Castex that the moment has come to think about measures for the greater Paris region with the criteria reached for a possible lockdown in the Paris region. In relevant news, South Korea said there was no reason to stop the use of AstraZeneca's COVID-19 vaccine although it later reported one case of a blood clot following a shot of AstraZeneca (AZN LN) vaccine shot. (Newswires/Yonhap)

Public Health England announced two additional cases of the Brazilian coronavirus variant (P.1) have been found in England and noted that two cases of the variant found in the Philippines are also being investigated. (Newswires)

Hong Kong extended social distancing measures by two weeks to March 31st and it is continuing with active discussions on how to improve control of the virus. (Newswires)

ASIA

Asia-Pac stocks traded in a subdued manner after the similar handover from the US with participants also cautious ahead of a busy schedule of central bank announcements including the FOMC later today. ASX 200 (-0.5%) was pressured amid underperformance in commodity-related stocks and as nearly all sectors suffered losses aside from tech and telecoms. Nikkei 225 (-0.1%) initially bucked the trend after a rebound in USD/JPY and with Japan planning to lift the state of emergency for the Tokyo area on March 21st but then succumbed to the broad cautious mood which was not helped by weaker than expected trade data. Hang Seng (-0.2%) and Shanghai Comp. (-0.2%) opened with losses amid tough rhetoric from the US heading into Thursday’s high-level meeting in Alaska with an official stating they will lay out specific areas where the US believes Beijing needs to take steps to change course and will make clear the concerns regarding China's malicious cyber activity. The official also noted that the US doesn't expect specific negotiated deliverables from the meeting, nor does it anticipate issuing a joint statement, while there were separate comments from Secretary of State Blinken that China is acting more aggressively and more repressively. Nonetheless, Chinese markets briefly reversed their losses spearheaded by a recovery in tech and growth which saw the ChiNext rebound from losses of 1.5% to trade higher on the session by a similar extent. Finally, 10yr JGBs were steady with prices kept afloat by the subdued risk tone and with the BoJ also present in the market for more than JPY 1.3tln of JGBs with 1yr-25yr maturities.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net neutral daily position. (Newswires) PBoC set USD/CNY reference rate at 6.4978 vs exp. 6.4980 (prev. 6.5029)

US Secretary of State Blinken China is acting more aggressively and repressively including in the East and South China Seas, while he also stated the latest update of the Hong Kong Autonomy Act report identified 24 Chinese and Hong Kong officials whose actions lessened the high degree of autonomy in Hong Kong and foreign financial institutions that knowingly conduct significant transactions with them would be subject to sanctions. (Newswires)

The US believes it is going into this week's talks with China in Alaska with an increasingly strong hand with the Biden administration unified in its approach to China and Beijing attempts to divide us will not work, according to reports citing a senior US official. The official added that what we hear in talks will be important for where we go regarding the China strategy and are looking at deeds not words although the US doesn't expect specific negotiated deliverables from the meeting and a joint statement is also not expected following the meeting. Furthermore, they will lay out specific areas where the US believes Beijing needs to take steps to change course and will make clear the concerns regarding China's malicious cyber activity. Furthermore, US anticipates robust and very frank discussions with China but is realistic regarding expectations of changing China's behaviour, while the US is asking China to adhere to international rules but their actions are falling short in many respects. (Newswires)

Japan is planning to lift the state of emergency in the Tokyo area on March 21st and PM Suga is to brief the media today regarding lifting the state of emergency, while it was also reported that PM Suga agreed to hold the Olympics without foreign spectators. (Yomiuri/Sankei/FNN)

• Japanese Trade Balance (JPY)(Feb) 217.4B vs. Exp. 420.0B (Prev. -323.9B, Rev. -325.4B)
• Japanese Exports (Feb) Y/Y -4.5% vs. Exp. -0.8% (Prev. 6.4%)
• Japanese Imports (Feb) Y/Y 11.8% vs. Exp. 11.9% (Prev. -9.5%)

UK/EU

ECB's Kazimir said bond yields must reflect economic fundamentals and that Euro-area yield gains are not dramatic for now, while he added that the EU fiscal response is lagging behind the US. (Newswires)

ECB's Schnabel has cautioned that the EU's EUR 750bln recovery fund could prove to be insufficient, adding that what matters now is spending money as quickly as possible. (Newswires)

FX

In FX, the greenback traded flat during US hours as yields consolidated, with the currency also lacking conviction amid soft data releases and a looming FOMC announcement. However, the DXY has since found some mild support to edge closer to the 92.00 level amid the flimsy risk appetite and with the US House also voting to extend PPP loans for an additional two months. EUR/USD was lacklustre with the single currency contained around the 1.1900 level; ECB's Schnabel has cautioned that the EU's EUR 750bln recovery fund could prove to be insufficient. GBP/USD was marginally softer on a pullback from the 1.3900 handle. USD/JPY remained in 109.00 territory owing to a slightly firmer buck, as well as weaker than expected Japanese trade data where exports fell by 4.5% vs exp. 0.8% decline and antipodeans were lacklustre amid the uninspired risk tone, soft current account data from New Zealand and with RBA's Kent sticking to the central bank's dovish script.

RBA Assistant Governor Kent said he doesn't think monetary policy can or should try to control asset prices and that it would be a concern if asset prices are increasing due to deteriorating lending standards or increased financial risks. Kent reiterated the RBA will not raise the cash rate until inflation is sustainably within 2%-3% target band and that we are at the effective lower bound for the policy rate, while he doesn't think NIRP is helpful in Australia and would impede banks' ability to lend. (Newswires)

• New Zealand Current Account (NZD)(Q4) Q/Q -2.7B vs. Exp. -2.9B
• New Zealand Current Account (NZD)(Q4) Y/Y -2.5B vs. Exp. -2.6B (Prev. -2.6B)
• New Zealand Current Account % GDP (Q4) -0.8% vs. Exp. -0.8% (Prev. -0.8%)

COMMODITIES

WTI crude futures eked minimal gains with the May contract eventually reclaiming the USD 65.00/bbl level following a surprise drawdown of headline crude stockpiles in the latest private sector inventory report, while there were also reports that Saudi Arabia destroyed a Houthi explosive boat near the Sulaif Port. Gold prices were kept rangebound amid a slightly firmer greenback ahead of today's FOMC and copper prices attempted to nurse some of yesterday's losses but with the rebound limited by the lacklustre risk tone and recent weak activity data stateside.

US Private Inventory Data (bbls): Crude -1mln (exp. +3mln), Gasoline -0.93mln (exp. -3mln), Distillate +0.90mln (exp. -3.4mln). (Newswires)

GEOPOLITICAL

The US intelligence report is to say Russia and Iran used misinformation during the 2020 election and that foreign hackers may have stolen data but did not alter destroy it, while it will allege that Cuba, Venezuela, and Hezbollah all attempted influence campaigns, according to sources. Furthermore, the US report found that Russian President Putin authorized the pro-Trump election influence campaign and it was concluded with high confidence that China did not attempt to alter 2020 election. Separate reports note that the US is expected to announce sanctions on Russia, Iran and China as early as next week for election meddling. (Newswires/CNN/FT)

IAEA report stated Iran began enriching uranium at the underground Natanz plant with cascade of IR-4 centrifuges and indicated it plans to install another cascade of IR-4 centrifuges although installation has not started yet. (Newswires)

Explosions were heard over Damascus in Syria as air defences responded to an Israeli attack in the Damascus countryside. (Newswires)

Saudi-led coalition said Yemen's Houthis continue to threaten maritime traffic and international trade and it was also reported that Saudi Arabia destroyed a Houthi explosive boat near the Sulaif Port. (Newswires)

North Korea could be preparing its first weapons test under the Biden administration, according to several US officials citing an assessment by US intelligence. There were also comments from US Airforce General Vanherck that North Korea has up to three missiles that could strike the US but added the US has a good posture for deterrence. (Newswires/CNN)

US

The Treasury curve was slightly steeper ultimately after a decent 20yr auction failed to keep sellers at bay. By settlement, 2s -0.4bps at 0.149%, 5s -0.7bps at 0.823%, 10s +1.3bps at 1.620%, 20s +1.9bps at 2.295%, 30s +1.8bps at 2.386%; TYM1 volumes were low. Inflation breakevens widened. It was quite a choppy day for the TPLEX. Duration had been rallying in the morning amid disappointing US retail sales and industrial production data. However, the tide soon turned as participants looked towards the 20yr auction and the Fed's belly buyback out the way, with dealers and fast money type accounts reportedly on the offer as the 20yr maturity led the move higher. But, a successful 20yr auction saw a spike lower in yields: stopping through the 2.310% WI by 2bps, covered 2.51x (vs six-auction avg. 2.32x), while both directs and indirects took down a large share than average. The move lower in yields didn't last for too long, however, with a chunky TY/Ultra steepener supporting the return to the highs. Furthermore, there were additional reports from IFR of real money accounts duration hedging by selling future in the long-end, those flows also coincided with investor Bill Gross talking about how he was short duration, for what it's worth. T-note (M1) futures settled unch. at 131-30+.

US Treasury Secretary Yellen spoke with EU's McGuinness and discussed the importance of a close transatlantic financial regulatory cooperation and Yellen also spoke with South Korean Finance Minister Hong regarding the importance of economic cooperation to overcome the pandemic. (Newswires)

US House voted 415-3 to approve a 2-month extension for Paycheck Protection Program loans to May 31st. (Newswires)

US Senate Republican Leader McConnell said the GOP will not back tax increases in an infrastructure plan, while GOP Senator Barrasso commented that Republicans are not going to partner with Democrats on the Green New Deal nor on raising taxes to pay for it. In other news, US Democrats are reportedly drafting legislation to expand US semiconductors production. (Newswires/Politico)

S&P affirmed US at AA+; Outlook Stable and stated that the sovereign rating is based on strong institutions, a diversified and resilient economy, flexibility of monetary policy and due to status as issuer of the leading global reserve currency. However, it added that the rating is constrained by high government debt and fiscal deficits which worsened last year, while the outlook reflects expectations of rapid economic growth for 2021 and 2022 as the pandemic subsides. (Newswires)