• Sentiment has continued to slip after a tentative APAC session, Euro Stoxx 50 -0.6%, ES -0.5%, after Biden's largely as expected rescue plan announcement
• President-elect Biden unveiled his USD 1.9tln rescue plan which included a boost in stimulus payments to USD 2,000
• Biden will announce his recovery plan in February and cautioned that everyone will need to pay their fair share of taxes
• USTs are firmer this morning with 10yr yield at 1.11% while European yields err higher to the benefit of banking names in the region
• USD remains underpinned but off highs with major peers subdued and EUR/USD eyeing Monday's low
• Looking ahead, highlights include US retail sales, NY Fed manufacturing, industrial production, Uni. of Michigan, earnings from JP Morgan, Wells Fargo and Citigroup

CORONAVIRUS UPDATE

US COVID-19 cases +225,815 (prev. +217,393) and deaths +4,096 (prev. +4,131), while a major newswire tally stated US cases increased by at least 232,064 to 22.15mln and deaths rose by at least 3,986 to 388.5k. (Newswires)

A major New York hospital system NYU Langone Health alerted its physicians that it had not yet been allocated COVID-19 vaccine doses for next week and may have to halt its vaccination program without them. (Newswires)

ASIA

Asian equity markets were subdued as they failed to shrug-off the weak lead from US where the major indices were dragged heading into earnings season and amid discouraging jobless claims numbers, with participants also digesting the US blacklisting of additional Chinese companies and President-elect Biden's stimulus plans in which he announced a two-step rescue and recovery plan. The details of the USD 1.9tln rescue plan had been flagged beforehand which included a boost in stimulus payments to USD 2,000 and called for a USD 15/hour national minimum wage, while the recovery plan will be unveiled next month and he added the vaccination target is for 100mln shots in the first 100 days of his term. Biden also stated that the plan will not come cheaply and made a reference to everyone paying their fair share in taxes which subsequently saw some mild downticks in US equity futures to resume yesterday’s mild declines. ASX 200 (U/C) closed flat as outperformance in tech helped keep the index afloat and amid hopes of further easing of restrictions with the Victoria state government planning to permit international students to re-enter the state, while Nikkei 225 (-0.6%) languished after recent detrimental currency inflows and calls for PM Suga to consider a nationwide state of emergency declaration. Hang Seng (+0.2%) and Shanghai Comp. (U/C) were indecisive despite the PBoC conducting a CNY 500bln 1-year MLF operation, with risk appetite sapped after US added nine companies to the list of firms it considers to be associated with the Chinese military including COMAC and Xiaomi which saw the latter decline by around 10%, while the US also included CNOOC and Skyrizon to its entity list due to threats to national security which subjects them to export restrictions. Finally, 10yr JGBs were steady with prices kept afloat by the uninspired mood in Tokyo and with firmer demand at the enhanced-liquidity auction for longer-dated JGBs doing little to spur prices.

PBoC injected CNY 2bln via 7-day reverse repos and conducted CNY 500bln 1-year MLF operation at 2.95%. (Newswires) PBoC set USD/CNY mid-point at 6.4633 vs exp. 6.4667 (prev. 6.4746)

PBoC Vice Governor says prudent monetary policy in 2021 will be more flexible, targeted and appropriate; two way fluctuations in the Yuan will become more normal going forward; to keep the Yuan basically stable on a reasonable and balanced level. Current interest rate levels are appropriate. (Newswires)

China is said to be mulling permitting some imports of Australian coal cargo, but the broader ban on coal imports remains in place. (Newswires)

• Chinese House Prices (Dec) Y/Y 3.8% (Prev. 4.0%). (Newswires)

BoK kept the 7-day Repo Rate unchanged at 0.50% as expected through a unanimous decision. BoK stated uncertainties to the domestic growth path are high and growth projection is inline with prior forecast, while it added that household debt continued to increase and it will monitor severity of virus spread, changes in financial stability and household debt growth. Furthermore, BoK Governor Lee commented that they are to keep an easing stance until a stable recovery is expected. (Newswires)

US

US President-elect Biden announced a two-step plan of rescue and recovery in which he unveiled details of the rescue plan and stated the recovery plan involving infrastructure will be unveiled next month, while he will layout the vaccine plan today in which his vaccination goal is for 100mln shots during the first 100 days in office. Biden's rescue plan confirmed USD 2,000 check payments as he stated that USD 600 for Americans isn't enough and suggested the national minimum wage should be USD 15/hour. Furthermore, he noted the plan will not come cheaply and suggested increasing disparity between people at the top and the rest of US, as well as made references to paying fair share in taxes. Details of the plan had been announced hours beforehand in which the USD 1.9tln stimulus package included USD 400bln to bolster virus response, about USD 1tln of direct relief to households, around USD 440bln for business and communities most-affected by the pandemic, with the weekly unemployment benefit to be increased to USD 400 from USD 300 and extended to September. (Newswires)

UK/EU

Dutch PM Rutte’s government could resign in its entirety as early as today, according to local press; due to a 2012-17 scandal regarding childcare subsidies. (Politico) Note, the Netherland’s next election is currently scheduled for mid-March

Italia Viva's Renzi says he does not believe that PM Conte will win the confidence vote and as such he will abstain, La Stampa. (Newswires)

UK GDP Estimate (Nov): MM -2.6% vs exp. -5.7%; YY -8.9% vs exp. -12.1%; 3M/3M 4.1% vs exp. 3.4%. (Newswires)

Swedish CPIF YY* (Dec) 0.5% vs. Exp. 0.2% (Prev. 0.2%); MM* (Dec) 0.7% vs. Exp. 0.6%

GEOPOLITICS

Military-level negotiations between Turkey and Greece are to take place in NATO next week, according to Al Jazeera. (Twitter)

Russia is to begin pulling out of the Open Skies Treaty after the US withdrew, according to the Russian Foreign Ministry. (Newswires)

EQUITIES

Core European indices see modest losses across the board (Euro Stoxx 50 -0.7%) after the region picked up the subdued/mixed baton from the Asia-Pac session. State-side, US equity futures conform to the lacklustre tone after US President-elect Biden announced the widely telegraphed stimulus package overnight which totals some USD 1.9tln - for which full analysis can be found here. Additionally, participants are digesting the latest escalation in US-Sino tensions after Washington added some large-cap Chinese industrial, energy and tech giants to its blacklist - albeit the general view is that China is unlikely to respond to the outgoing Trump administration in the hope tensions can be cooled with the incoming US President. Traders are also on standby for the official start of US earning season, with JP Morgan (11:55GMT), Wells Fargo (12:55GMT) and Citigroup (13:00GMT) all set to report. Sticking with the theme of banks, but in Europe, Exane expects three main themes to dominate the European banking sector this year: 1) the rapid fall in impairments resulting in sizeable EPS and DPS upgrades, 2) cyclical NII headwinds and 3) reflation - likely to matter most near-term. Meanwhile, JP Morgan and Goldman Sachs are bullish on the European stock market outlook, with the former stating "The potential better performance of value cyclicals, especially financials and commodities, is typically a big tailwind for Europe,” and the latter suggesting "It seems likely that markets will be a bit bumpy, but the backdrop is still supportive of equities". Back to the European session, the FTSE MIB (Unch) was the only EZ gainer after PM Conte informed Italian President Mattarella that he has no intention of resigning as things stand - ahead of a reported confidence vote after Conte speaks to the lower house. Sectors meanwhile are mostly lower with no clear risk bias, but gains in the healthcare sector underpinning Switzerland's SMI (+0.1%) due to its large exposure to pharma. Financials are also propped up as Italian banks see tailwinds from the price action in BTPs. The other end of the spectrum sees Basic Resources and Oil & Gas as the laggards amid a pullback of prices in the respective complexes. In terms of individual movers, SAP (+1.5%) is supported after providing an overall positive Q4 update while noting FY FCF significantly exceeding raised outlook. On the flip side, Carrefour (-4.1%) shares yield after French Finance Minister Le Maire said "it is a firm and final no" to the potential acquisition after reports that Couche-Tard is prepared to invest EUR 3bln into Carrefour over the next five years. Finally, British American Tobacco shares (+1%) are kept afloat as the UK SFO discontinued the probe into the group with regards to corruption.

FX

USD - The Dollar remains largely rangebound between 90.500-000 parameters in DXY terms, but appears to have survived another bout of selling pressure after US President-elect Biden essentially delivered what was anticipated on the fiscal front, and Fed chair Powell effectively extinguished the taper debate along with reiterating no lift-off in rates anytime soon. The latest Buck bounce comes amidst a broad downturn in risk sentiment as stock markets retrace in a ‘buy rumour, sell fact’ fashion, and the focus shifts to whether the incoming Democrat leader manages to get his first stimulus bill through Congress after inauguration on January 20. More immediately, data looms in the form of NY Fed Manufacturing, Retail Sales, PPI, IP and Michigan Sentiment and the macro releases could take on more importance after Thursday’s worrying jobless claimant counts.

CAD/NZD/AUD/GBP - Almost all change for the so called cyclical currencies as the make way for the Greenback rebound and deterioration in risk appetite rather than anything major or new in terms of independent negative of bearish factors. The Loonie has recoiled towards 1.2700, perhaps in line with weaker crude prices even though the correlation has been sporadic of late, while the Kiwi is back below 0.7200 after little traction from a recovery in NZ food prices and the Aussie has retreated from the high 0.7700 area through 0.7750 irrespective of reports that China may lift its ban on some coal imports and COVID-19 restrictions in the state of Victoria could be eased further, or a marked pick-up in mortgage financing. Elsewhere, an end of week UK data dump after slim pickings so far was probably too conflicting or old to provide the Pound with much direction, as Cable continues to meet resistance around 1.3700 and find support into or circa 1.3600.

JPY/CHF/EUR - The Yen and Franc are marginally outperforming after paring declines vs the Dollar from sub-104.00 and 0.8900 lows on Thursday, with the former now eyeing its wtd peak just shy of 103.50 and latter looking at 0.8870 before 0.8850, both hit on January 15. Moreover, Eur/Chf is back below 1.0800 due to more localised or regional risk surrounding Italian politics as PM Conte looks set to face a confidence vote next Monday. Indeed, this is also keeping the Euro tethered/capped elsewhere, albeit not impeding a firm bounce in BTPs, as Eur/Usd fails to reclaim 1.2150+ status and Eur/Jpy reverses from 126.20 to 125.65.

SCANDI/EM - Highlighting the less upbeat tone, Eur/Sek has actually bounced from beneath 10.1000 in wake of firmer than forecast Swedish inflation data and Eur/Nok is over 10.3000 following a significant widening in Norway’s trade surplus. Meanwhile, EMs are largely lagging the Usd for the same rationale, and with the Try only deriving partial support from reports that Turkey and Greece are set to hold military talks at NATO next week. Conversely, the Cnh/Cny are still holding up well in the face of growing China-US angst, as the PBoC injects more short and long term liquidity and set a firmer on-shore reference rate.

FIXED

Core EU bonds have decoupled from stocks as a gauge of overall risk sentiment in recent trade, with Bunds extending their reversal from Eurex peak to a new 177.51 trough (-31 ticks vs +10 ticks at one stage), while Gilts have retested their 134.17 Liffe low (-27 ticks compared to +4 ticks at best), in contrast to BTPs that remain in recovery mode and ‘comfortably’ above the 151.00 handle even though Italian PM Conte is in danger of a no confidence vote early next week. However, the divergence looks mainly a retracement and combination of short covering/profit taking on longs ahead of the weekend, regardless of the rebound in USTs and curve re-flattening before a data blast. For the record, Biden’s basically matched market expectations in terms of fiscal aid and Fed chair Powell rammed home the far too premature to contemplate normalising policy message.

COMMODITIES

WTI and Brent Mar futures trade with losses of almost USD 1/bbl apiece heading into the US market entrance amid the lacklustre mood in the markets alongside a firmer Dollar and as news flow remains light. That being said, prices remain in within recent ranges with WTI now sub-USD 53/bbl (vs. high USD 53.81/bbl) while its Brent counterpart gave up USD 56/bbl status (vs high 56.50/bbl). In terms of price forecasts, JP Morgan remains bullish on crude and sees prices overshooting USD 60/bbl in the near term as the market moves into a deficit. Elsewhere, precious metals eke mild gains following the announcement of the Biden stimulus package and as real yields are modestly softer - with spot gold oscillating on either side of USD 1850/oz and spot silver eyeing USD 27.50/oz to the upside. Meanwhile, base metals prices pull back amid the market tone, firmer Buck and US-China tensions, with LME copper below USD 8,000/t after reaching a weekly high of USD 8,115/t.

ANZ Bank expects global oil demand to increase by 4mln-5mln bpd and sees Brent to reach USD 60/bbl in H2, while it sees Brent averaging USD 57.90/bbl in 2021 and USD 61.80/bbl in 2022 and forecasts WTI averaging USD 55.30/bbl in 2021 and USD 59.70/bbl in 2022. (Newswires)

German Maritime Authority says it has granted permission for the completion of the Nord Stream 2 pipeline in the German Exclusive Economic Zone. (Newswires)