• European indices are firmer following the positive APAC handover; sectors are broadly in the green though oil & gas is among the laggards as BP's update offsets much of the positivity from crude benchmarks themselves
• China top diplomat Yang said they are prepared to work with the US; separately, US Treasury Secretary Yellen is to meet with Democrats today on aid
• The DXY continues to make ground above 91.00 this morning pressuring major counterparts but particularly so against the EUR which is also hindered via EUR/GBP action in-spite of firmer than expected GDP data
• RBA maintained its key rate at 0.10% as expected but unexpectedly announced it is to extend its QE purchases by AUD 100bln
• Looking ahead, highlights include OPEC JTC meeting, Fed's Kaplan, Williams, Mester
• Earnings from Amazon, Exxon, Alphabet

CORONAVIRUS UPDATE

US COVID-19 cases +112,772 (prev. +141,559) and deaths +1,920 (prev. +2,884). (Newswires)

Moderna (MRNA) confirmed it is proposing to fill vials with more COVID-19 vaccine doses to up to 15 doses vs current 10 doses, although the Co. president noted they would need further talks with the FDA to assure it is comfortable with the move before implementation. (Newswires)

UK PM Johnson has instructed ministers to prepare for the reopening of schools after being informed that the UK is now past the peak of the current wave of COVID-19. (Telegraph)

Japanese PM Suga is to extend the state of emergency for 10 prefectures until March 7th. (Newswires) In-fitting with recent reports

ASIA

Asian equity markets advanced after the firm handover from Wall St which rebounded from last week's liquidations as Reddit frenzy fears eased and with the resurgence led by the tech sector heading into Alphabet and Amazon earnings later today. ASX 200 (+1.5%) was positive with the gains spearheaded by tech stocks which found inspiration from the outperformance of their counterparts stateside and with the mood also buoyed after the RBA extended its QE programme. Nikkei 225 (+1.0%) was helped by favourable currency flows although gains were initially restricted amid mixed earnings reports and as participants anticipate an extension to the state of emergency declaration, while KOSPI (+1.3%) was driven alongside an early surge in index heavyweight Samsung Electronics and with South Korea to prepare a 4th round of cash handouts, as well as another extra budget. Indian markets outperformed with the Nifty (+2.6%) boosted again by euphoria from the expansionary budget and both the Hang Seng (+1.2%) and Shanghai Comp. (+0.8%) were also kept afloat after the PBoC provided liquidity which is expected to persist heading into next week’s Lunar New Year holidays. There were also some constructive comments from Chinese top diplomat Yang who suggested China is ready to work with the US to move forward on a track of no conflict, no confrontation, mutual respect and win-win cooperation, although he also added that they expect the US to strictly abide by the One-China principle and that US should stop interference in China's territorial integrity and sovereignty. Finally, 10yr JGBs were flat with havens shunned amid the widespread constructive mood in risk assets and following mixed results at the 10yr JGB auction in which b/c was only slightly than previous but coincided with a decline in accepted prices.

PBoC injected CNY 80bln via 7-day reverse repos at rate of 2.20% for a net daily injection of CNY 78bln. (Newswires) PBoC set USD/CNY mid-point at 6.4763 vs exp. 6.4669 (prev. 6.4623)

China top diplomat Yang said the task for China and US is to return ties to a predictable and constructive development track, while he added that China is ready to work with the US to move forward along the track of no conflict, no confrontation, mutual respect and win-win cooperation. Furthermore, Yang stated that China has no intention to challenge or replace the US' position in the world but added they expect US to strictly abide by the One China principle and that US should stop interference in China's territorial integrity and sovereignty. (Newswires)

Tencent (700 HK) - Bytedance says TikTok has filed a complaint with the Beijing court over Tencent's monopolistic behaviour. (Newswires)

US

Fed's Bostic (voter) noted it is hard to say how much more fiscal aid is required due to uncertainty of the virus and effects of previously approved aid. Bostic stated that focus is on the next 6-9 months and how vaccine diffuses into the economy, while he added focus is also on providing relief to those that are in a hole and suggested we should be open to upside on rates on good developments. (Newswires)

US House and Senate Democrats filed a joint budget measure as part of stimulus push and which sets up reconciliation for the USD 1.9trln relief bill, while Senate Democrat Leader Schumer stated that filing the budget resolution on the relief plan allows it to pass quickly and that a resolution process can be bipartisan. Furthermore, once adopted by both chambers, reconciliation instructions will be sent for a COVID aid package to several authorizing committees. (Newswires)

White House said President Biden had a substantive and productive discussion with Republican Senators on COVID-19 relief and President Biden told GOP Senators he hopes his rescue plan can pass with bipartisan support and that a reconciliation package is a path to achieve that end. Furthermore, President Biden added that any changes to his plan cannot leave the US short of its pressing needs and that they will not settle for a package that fails to meet the moment. There were also comments from US GOP Senator Collins that she and other GOP Senators had a productive meeting with President Biden, while she added the meeting was excellent and wouldn't say they came together on a package but agreed to follow up and she is hopeful that they can pass another COVID-19 relief package. In relevant news, Treasury Secretary Yellen is reportedly to meet with Senate Democrats on Tuesday regarding aid. (Newswires)

US Treasury expects to issue USD 274bln in net marketable debt in Q1 21 (Nov estimate USD 1.127trln) and issued USD 597bln in net debt in Q4 20, while it ended the quarter with a cash balance of USD 1.729trln, while the decline is primarily driven by its higher cash balance at start of January. (Newswires)

White House said GameStop (GME) situation is under the purview of the SEC and that important issues raised by recent market volatility and congressional attention is appropriate, while it was also reported that the House Financial Services Committee will conduct a hearing regarding GameStop and volatility on February 18th. (Newswires/FBN)

UK/EU

UK Chancellor Sunak has reportedly ruled out increasing the rate for income taxes, national insurance or VAT to bolster public finances, according to reports citing an unidentified aide. (FT)

EU GDP Flash Prelim QQ (Q4) -0.7% vs. Exp. -1.0% (Prev. 12.5%); YY (Q4) -5.1% vs. Exp. -5.4% (Prev. -4.3%) Above expectations but in-fitting with the view from a number of the recent nationwide reports

EQUITIES

European stocks see another session of gains (Euro Stoxx 50 +1.8%) as the optimism seen in APAC hours echoes into Europe, with the regional sentiment also underpinned amid less severe-than-feared EZ Flash GDP figures; following better than expected releases out of France, Germany etc. This has lead to a mild outperformance in the EZ relative to the US - where futures trade with broad-based gains of around 1% - whilst the UK’s FTSE (+0.8%) and Switzerland’s SMI (+0.9%) tail their Euro-peers. Sticking with the FTSE 100, the index is capped by somewhat unfavourable Sterling dynamics whilst bearing the brunt of losses in heavyweight BP (-3.2%) post-earnings, who missed on adj. net expectations but noted that organic capex last year was in-line with guidance. For reference, BP has around a 3% weighting in the FTSE 100. The downside in the crude giant is also reflected in the Energy sector which underperforms; but, with peers underpinned on the performance of crude itself. Broader sectors are all in positive territory and portray a risk-on bias as cyclicals (ex-oil) outpace defensives – with Auto names leading the gains, closely followed by Travel & Leisure and financial services. Basic resources reside among the laggards as base metal prices pull back before the Chinese Spring Festival and as precious metals unwind a lion’s share of yesterday’s gains. In terms of individual movers, Airbus (+6%) shares soar following an upgrade at Morgan Stanley. On the flip side, Fresenius Medical Care (-13.9%) plumbs the depths as the group anticipates a significant negative impact on 2021 net income from accelerated COVID-19 related mortality of dialysis patients. Fresenius SE (-6%) moves lower in sympathy as it owns some 32% of Fresenius Healthcare – with both companies accounting for around 3% of the DAX (+1.25%).

BP (BP/ LN) - Q4 Adj. net USD 115mln vs exp. USD 440mln. Sales and other operating revenue USD 44.789bln vs prev. USD 71.109bln Y/Y. Q4 dividend USD 5.25/shr vs prev. USD 10.5/shr. Organic Capex in 2020 was USD 12bln, in-line with guidance. Co. continues to expect to reach its USD 35bln net-debt target around Q42021-Q12022, which will trigger share buybacks. Co. expects proceeds from divestments and other disposals of USD 4-6bln in 2021, weighted towards H2. Q4 costs directly induced by COVID-19 amounted to USD 100mln. Co. says oil demand is expected to recover in 2021. CEO assumes oil prices in the range of USD 45-50/bbl(BP/ Newswires) Co. trades with losses just shy of 3.0%

Volkswagen (VOW3 GY) – CEO Diess is expecting significant market upturn in 2021 after the vaccination program has taken effect. (Newswires) Co. trades with gains in excess of 2.0%

NXP Semiconductors NV (NXPI) Q4 20 (USD): EPS 1.08 (exp. 2.10), Revenue 2.51bln (exp. 2.46bln). Automotive revenue 1.19bln (exp. 1.16bln; +8.8% Y/Y). Industrial & IoT revenue 511mln (exp. 509.4mln). Shares fell 3% after-market; currently, -0.7% in pre-market

United Parcel Service (UPS) Q4 2020 (USD): Adj EPS 2.66 (exp. 2.14/2.09 reported); Revenue 24.9bln (exp. 22.87bln)

FX

AUD/NZD/TRY - Bullish risk sentiment and hefty 1.4 bn option expiry interest at the 0.7600 strike appear to have rescued the Aussie from a steeper decline in wake of an unexpectedly dovish RBA policy meeting where QE was extended pre-emptively beyond April by another Aud 100 bn and guidance on rates indicated no tightening until 2024 at the earliest. However, 1.0600 in Aud/Nzd may not be impenetrable as the Kiwi rebounds from 0.7150 vs the Greenback on the aforementioned positive market tone ahead of NZ jobs data that could rubber stamp the recent removal of NIRP expectations for the RBNZ or rekindle forecasts for further easing this year. Conversely, more hawkish commentary from the CBRT, including the potential for extra front-loaded and decisive tightening if needed to get inflation back on track, gave the Lira sufficient impetus to extend its recovery through 7.2000 and 7.1500 before waning just above 7.1000 awaiting any backlash from Turkish President Erdogan who has reverted to his anti-rate hike standpoint, and as the Dollar rebounds broadly.

USD - As noted above, the recovery in high beta rivals and positive market tone sapped some momentum from the Buck that might otherwise have gleaned traction from the relatively pronounced and ongoing loss of attraction in Silver and its fellow precious metals, as Xag/Usd dips under Usd 27.50/oz vs a fraction over Usd 30 at one point yesterday. Nevertheless, the DXY has derived fresh impetus from renewed weakness in the Euro to surpass 91.100 vs 90.805 at one stage and the index has now been up to 91.123 compared to 91.063 late on Monday and an early EU session best of is now hovering midway between peak and 90.805 trough.

CAD/GBP - Not quite all change, but the Loonie and Pound have pared a chunk of losses against their US counterpart from sub-1.2850 and circa 1.3660 to reclaim the 1.2700 handle and retest 1.3700 respectively, with the former receiving some support from firmer crude prices and latter via improving pandemic and vaccine developments. Moreover, Sterling seems to have survived spill-over RHS demand in Eur/Gbp, albeit with relative Euro underperformance as the cross reverts to type and eyes 0.8800 to the downside.

CHF/EUR/JPY - All choppy vs the Buck, as the Franc hovers within a 0.8979-48 range mindful of latest verbal intervention from SNB chair Jordan, but Euro fails to keep its head above 1.2050 following another hiccup in efforts to form a new Italian Government coalition or get respite from better than feared EZ GDP data and another rise in inflation expectations via the favoured 5 year/5 year long term metric. Meanwhile, the Yen is struggling regroup after the loss of technical support and slip below 105.00 in advance of Japan’s services PMI and an announcement from the PM about COVID-19 restrictions that is anticipated to extend the state of emergency.

SCANDI/EM - More Nok outperformance on chart and oil grounds, while the Sek mulls latest dovish Riksbank inferences and EMs beyond the Try are benefiting from the general appetite for risk, with the Czk also acknowledging Czech Q4 GDP defying lowly expectations to a degree.

RBA kept the Cash Rate Target and 3yr yield target unchanged at 0.10% as expected, although it announced to purchase AUD 100bln of bonds when current program expires in April with the additional purchases to be at the current AUD 5bln per week. RBA reiterated that it will not increase the cash rate until actual inflation is sustainably within 2%-3% target range and it remains committed to maintaining highly supportive monetary conditions until goals are achieved and that given the current outlook for inflation and jobs, this is still some way off. Furthermore, it stated that GDP is now expected to return to end-2019 level by middle of this year and its central scenario is for GDP to grow by 3.5% this year and next, while unemployment is expected around 6% at year-end and 5.5% by end-2022. (Newswires)

SNB President Jordan said the US designation of Switzerland as a currency manipulator will not affect Swiss monetary policy and stated that Switzerland is anything but a currency manipulator, while he added that SNB is not a fan of negative rates but currently sees no alternative. Subsequently, adds the CHF remains a safe-haven and the domestic economy was a bit more resilient than expected; outlook remains uncertain. (Newswires)

FIXED

Demand for Germany’s Schatz was certainly subdued in relation to the UK DMO’s 2026 offering, but the lack of a meaningful recovery in core EU bonds highlights that supply is not really the primary or even secondary issue at the current juncture. Instead, Bunds, Gilts and USTs are conceding ground to the ongoing revival in stocks after their retail inspired tribulations and a rising bid in crude prices ahead of any API, EIA and OPEC sub-committee impetus. Note also, the latter may be fanning inflation flames for some that were especially alert to the fact that the prices paid component in Monday’s US manufacturing ISM shot up even though the headline slowed. The 10 year benchmarks are all rooted near intraday lows of 176.79, 133.65 and 136-30+ respectively, awaiting Redbook, NY ISM and 2 Fed speakers.

COMMODITIES

WTI and Brent front month futures trade firmer as the complex tracks gains seen across the stock markets as sentiment remains constructive following the EZ flash GDP figures and heading into the US entrance. The broader environment remains unchanged as participants weigh COVID variants’ impacts against vaccines and OPEC+ supply balancing. On that note, the JTC meeting will take place today ahead of tomorrow’s JMMC confab, with no change expected to current policy given that the producers came to an accord for Q1 in January, whilst fundamentals also remain largely the same since the prior meeting. In terms of commentary, BP expects oil demand to recover this year, but the speed and degree will depend on government policies and individual activity as vaccines are rolled out, “From the oil supply side, limited growth from non-OPEC+ countries coupled with active market management from OPEC+ means that for 2021 we anticipate a normalization of the currently high inventory levels.”, the energy giant says. Looking ahead to today, the weekly Private Inventories after the US close may induce price action ahead of tomorrow’s EIA release – until then, sentiment will likely drive price action barring any major crude catalysts. WTI resides just above USD 54/bbl (vs low USD 54.50/bbl) while its Brent counterpart probes USD 57/bbl (vs low USD 56.20/bbl). Elsewhere, previous metals reverse a bulk of yesterday’s gains, with spot silver losing its shine as it declined from yesterday’s USD 30/oz+ best levels to sub-28/oz in early European trade, with some citing a margin hike by the CME as one of the catalysts. Spot gold meanwhile is slightly more composed on an intraday basis around USD 1850/oz (vs high USD 1862/oz). Base metals meanwhile are trending lower with LME copper eyeing USD 7,750/t to the downside heading into anticipated holiday-induced demand drops as China heads into the Spring Festival.

CME raised COMEX 100 gold futures initial margins for speculators by 10% to USD 12,100/contract, raised COMEX 5000 silver futures maintenance margins by 17.8% to USD 16,500/contract, raised NYMEX platinum futures initial margins for speculators by 11.1% to USD 4,400/contract and raised COMEX copper futures maintenance margins by 9.5% to USD 4,600/contract. (Newswires)

UBS expects the oil market to be undersupplied by 1.5mln BPD; forecast Brent at USD 63/bbl in H2-2021 and USD 65/bbl in Q1-2022; anticipate investor interest in gold will wane in 2021, but broad USD softness will support prices at USD 1800/oz. (Newswires)