• European equities trade mostly firmer (Eurostoxx 50 +0.3%) in what has been a busy morning of corporate updates across the region
• In FX, the DXY is once again firmer vs. peers as EUR/USD loses 1.20 status for the first time this year. GBP eyes BoE
• Fixed income remains rangebound with Gilts focused on NIRP developments from the BoE and the Periphery on Draghi's deliberations
• Looking ahead, highlights include BoE rate decision & MPR, US IJC, factory orders, Fed's Kaplan, Daly
• Earnings from Philip Morris, Merck, Bristol Myers Squibb

CORONAVIRUS UPDATE

US COVID-19 cases +116,915 (prev. +125,735), deaths +3,433 (prev. +1,876), vaccines administered 33.9mln (prev. 32.8mln). (Newswires)

Oxford University will begin trial combining COVID-19 vaccines from AstraZeneca (AZN LN) and Pfizer (PFE) which could enable more flexibility in their use amid scarce global supplies. (Newswires)

Australian PM Morrison said they will purchase an additional 10mln doses of COVID-19 vaccines from Pfizer (PFE), while it was separately reported that Novavax (NVAX) and Switzerland agreed in principle for supply of 6mln doses of the Novavax COVID-19 vaccine candidate and that the sides will negotiate on a final deal. (Newswires)

ASIA

Asian equity markets were mostly lower following a flat lead from the US where participants were tentative amid mixed earnings and as focus remained on stimulus plans with some expectations tempered regarding the stimulus amount after President Biden suggested he is willing to limit the eligibility for stimulus checks but won't budge on the size of payments at USD 1,400 and there were also comments from a Biden adviser who speculated that the final stimulus size could be USD 1.3tln. ASX 200 (-0.9%) was dragged lower by underperformance in defensive sectors and with the mood also soured after fresh COVID-19 measures were announced in Victoria state following 3 new infection cases, while mixed trade data showed a decline in Imports which suggested weaker domestic demand. Nikkei 225 (-1.1%) succumbed to negative mood which overshadowed encouraging blue-chip earnings that lifted Hitachi, Nomura Holdings and Sony shares after they all registered profit growth. Hang Seng (-0.8%) and Shanghai Comp. (-0.4%) were choppy after the PBoC opted for 14-day reverse repos in its open market operation for the first time this year ahead of next week’s Lunar New Year holidays, although this still amounted to a net neutral position on the day. Tensions between US and China also lingered after the US State Department noted it is deeply disturbed by allegations of rape and sexual abuse against women at the Uighur camps in Xinjiang and called for China to allow independent investigations, while there were also comments from Commerce Secretary nominee Raimondo that she sees no reason why Chinese companies including Huawei and ZTE should not remain on the blacklist. Nonetheless, there were a few bright spots with Ping An Insurance the biggest gainer in Hong Kong after it topped earnings forecasts and with Alibaba kept afloat after Ant Financial Services reached an agreement with Chinese regulators on a restructuring plan to become a financial holding company, and large oil names were also boosted following recent upside in the underlying commodity price. Finally, 10yr JGBs were subdued after the continued bear-steepening in USTs but with downside stemmed amid losses in stocks, with JGBs also not helped by mixed results at the MOF 30yr auction which registered a larger b/c due to a decline in accepted prices.

PBoC injected CNY 100bln via 14-day reverse repos at a rate of 2.35% for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 6.4605 vs exp. 6.4569 (prev. 6.4669)

PBoC says benchmark deposit rate should be maintained for a long time. (Newswires)

US State Department said it is deeply disturbed by reports including first-hand testimony of systemic rape and sexual abuse against women in camps for Uighurs and other Muslims in China's Xinjiang, while it added that China should allow independent investigations. (Newswires)

US President Biden's nominee for Commerce Secretary Gina Raimondo said she sees no reason why Chinese companies including Huawei and ZTE (763 HK) should not remain on the entity blacklist. (Newswires)

US

Fed's Evans (voter) said he is optimistic about the outlook although inflation is too low and will not be back to target until mid-2020s, while he sees inflation to increase temporarily this spring but finish the year around 1.50%-1.75% and noted it is vital to look through temporary price increases. Furthermore, he expects the Fed staying on course for a while and is not even thinking about adjusting policy, while he sees GDP growth of 5%-6% this year and 2-3% for 2022 and 2023. (Newswires)

Fed's Mester (non-voter) said we're currently in a good spot with monetary policy and that fiscal policy is tool needed to direct relief through this period until things come back. Mester also stated that structural issues in the Treasury market need to be addressed to make them more resilient, while she is not worried the Fed will be late to tighten policy if inflation picks up and said that a lot of structural pressures keep inflation down. (Newswires)

US House voted 218-212 to pass the budget plan which is a step forward in the budget reconciliation process and fast-tracks President Biden's stimulus proposal, as expected. (Newswires)

US Treasury Secretary Yellen is to convene a meeting today with heads of SEC, Fed, NY Fed and CFTC to discuss market volatility, according to the Treasury Department. In related news, FBN's Gasparino noted Capitol Hill chatter on possible post-Robinhood and Reddit stock-trading frenzy legislation includes curbs on so-called payment for order flow and short selling. (Newswires/Fox Business)

UK/EU

UK Chancellor Sunak has been warned by leaders of Britain’s most influential business groups and the trade union movement that he could trigger a period of mass unemployment unless he extends the furlough scheme. (Guardian)

Italia Viva's Renzi says a vote of confidence in a new Draghi-led Government could occur as soon on next week. (Newswires)

EU IHS Markit Cons PMI (Jan) 44.1 (Prev. 45.5)

• UK Markit/CIPS Cons PMI (Jan) 49.2 vs. Exp. 52.9 (Prev. 54.6)

EU Retail Sales MM (Dec) 2.0% vs. Exp. 1.6% (Prev. -6.1%, Rev. -5.7%); YY* (Dec) 0.6% vs. Exp. 0.3% (Prev. -2.9%, Rev. -2.2%)

GEOPOLITICAL

South Korean President Moon said that they pledged to further upgrade the alliance between South Korea and US in a call with President Biden, while the leaders also discussed preparing a comprehensive strategy regarding North Korea. (Newswires)

EQUITIES

European equities kicked off the session mostly firmer (Eurostoxx 50 +0.1%) in what has been a busy morning of corporate updates across the region. From a macro perspective, focus remains on the progress of vaccinations and subsequent impact on reopening efforts, whilst US stimulus talks have taken an increased focus in recent sessions as the euphoria surrounding last week’s WallStreetBets short squeeze dissipates. Focus for stimulus will in the large-part centre around the overall price tag of the legislation, however, a more nuanced view of the matter will consider what concessions the Biden camp is willing to make (e.g eligibility criteria for stimulus checks) in order to navigate Congressional obstacles presented by the GOP and from within certain parts of his own party. Back to Europe, the modest divergences in the performance of regional indices is largely attributable to corporate updates with the AEX (-0.3%) softer on account of disappointing earnings from Unilever (-4.6%) who sit at the foot of the Stoxx 600 and has prompted underperformance in the Personal & Household Goods sector. Elsewhere, from a sectoral standpoint, telecom names are also lagging peers amid post-earnings losses from Nokia (-2.0%) with the Co. unable to counter some of the retail-led swings in its share price despite a relatively positive report. Additionally for the sector, opening gains in BT (now flat) shares proved to be short-lived. Deutsche Bank (-1.6%) also staged a turnaround despite opening higher to the tune of 3.5% after reporting its first profit since 2014. Further pressure for the banking sector has also been presented by losses in Commerzbank (-2.8%) after the Co. reported a FY20 net loss of EUR 2.9bln and finalised plans for a reduction in 10k full time jobs. Elsewhere in Germany, Bayer (+5.1%) have lent a helping hand to the DAX after striking a USD 2bln agreement to resolve future legal claims over future Roundup cancer claims. Shell (-1.3%) shares are modestly lower on the session after announcing a 71% decline in profits for 2020 as the impact of the pandemic sapped global energy demand.

Infineon (IFX GY) - Q1 Revenue EUR 2.63bln vs exp. EUR 2.6bln. EPS EUR 0.28 vs prev. EUR 0.20 Q/Q. Segment result EUR 489mln vs exp. EUR 416.8mln. Segment operating margin 18.6% vs exp. 16.8%. Co. sees FY21 at the mid-point of the guided revenue range, Segment Result Margin is predicted to come in at around 17.5%. Investments of around EUR 1.6bln are planned. Free cash flow is predicted to exceed EUR 800mln. (Newswires/Infineon)

Royal Dutch Shell (RDSA LN) - Q4 adj. profit USD 393mln vs exp. USD 655mln. Cash flow from operating activities USD 6.287bln vs prev. USD 10.267bln Y/Y. Adj. EPS USD 0.05/shr vs prev. USD 0.37.shr. Shell forecasts a Q1 dividend increase of around 4%. The shutdown of the Convent Refinery in the US led to further post-tax charges of USD 661mln. Due to demand or regulatory requirements and/or constraints in infrastructure, Shell may need to take measures to curtail or reduce oil and/or gas production, LNG liquefaction as well as utilisation of refining and chemicals plants and similarly sales volumes could be impacted. Such measures will likely have a variety of impacts on our operational and financial metrics. (Newswires/Shell)

eBay (EBAY) - Q4 2020 (USD): Adj. EPS 0.86 (exp. 0.83/0.64 reported), Revenue 2.9bln (exp. 2.7bln); expands share repurchase authorization by additional USD 4bln. -9.9% in pre-market trade

PayPal (PYPL) - Q4 2020 (USD): Adj. EPS 1.08 (exp. 1.00), Revenue 6.12bln (exp. 6.08bln); Adj. OM 24.7% (exp. 23.7%). Total Payment volume 277bln (exp. 264.87bln) +5.0% in pre-market trade

QUALCOMM (QCOM) - Q1 2021 (USD): Adj. EPS 2.17 (exp. 2.10/1.84 reported), Adj. Revenue 8.23bln (exp. 8.27bln) -7.0% in pre-market

FX

DXY, EUR - The broader Dollar and index continues to gain ground above 91.000 in early European trade after experiencing defensive inflows overnight, whilst notching the current peak just shy of 91.500 as EUR/USD dipped under the 1.2000 mark for the first time this year before trundling lower. Fundamental news-flow has been scarce in the European morning thus far. On the State-side stimulus front, as expected the House voted to pass the budget plan in a bid to fast-tracks President Biden's stimulus proposal, but some see a more moderate final package. Looking ahead for the Dollar, barring any major fundamental catalysts, the BOE is likely to take centre stage in the run-up to the weekly IJCs – although these metrics could be overlooked as it falls outside the survey period for tomorrow’s jobs report. From a technical standpoint, upside levels include the psychological 91.500 mark ahead of the 100 DMA at 91.852, whilst to downside levels see yesterday’s 90.988 low alongside the 21 and 50 DMAs at 90.491 and 90.478 respectively. Over to the single currency, EUR/USD ebbs further sub-1.2000 after earlier tripping some stops below the figure as it inches closer towards the 100 DMA (1.1965) as eyes remain on the Italian political limbo, whilst some also note of increased demand for EUR/USD downside protection via shorted-dated put strikes, with many reportedly at 1.1900. Note, the pair eyes some EUR 1bln in OpEx between 1.2000-05 alongside EUR 2.7bln between 1.2035-50.

GBP - Sterling succumbs to the Buck in the run up to the BoE policy announcement (full preview available on the Newsquawk Research Suite) where eyes will be fixated on commentary on the feasibility of NIRP for the banking sector if required, although the immediacy of such policy is likely to be downplayed by the MPC. Meanwhile, markets currently pencil in incremental negative rates for August. Cable has descended from its 1.3683 high, through its 21 DMA (1.3645) to trade sub-1.3600 as keeps its 50 DMA (1.3540) on the radar.

AUD, NZD, CAD - The non-US Dollars portray varying degrees of resilience vs the Dollar amid possible impetus/cushioning stemming from the commodities complex. AUD/USD outpaces its peers despite lacklustre trade data overnight, with some also citing a retracement of the RBA-induced downside earlier in the week, although firmer copper and iron ore prices could be underpinning the currency. AUD/USD resides just above 0.7600 after finding mild support at its 50 DMA (0.7614), with clean air seen on either side aside from the psychological figures. The Loonie has dipped probes 1.2800 but the Dollar headwinds have been diminished as crude prices remain elevated. The Kiwi straddles around 0.7200 as the AUD/NZD cross hovers around 1.0600. Technicians will be eyeing the a couple of downside DMAs in the NZD/USD including the 21 DMA (0.7185) and the 50 DMA (0.7140).

CHF, JPY - Again another Dollar story with USD/JPY edging further above 105.00 after surpassing this week’s prior high of 105.17 with the 200 DMA 105.57 up ahead. For reference, the pair sees around USD 1.4bln in OpEx at strike 105.00 heading into today’s NY cut. Subsequently, USD/CHF has reclaimed a 0.9000+ handle and topped the 100 DMA (0.9013).

• Australian NAB Quarterly Business Confidence (Q4) 14 (Prev. -10, Rev. -8)
• Australian Trade Balance (AUD)(Dec) 6.8B vs exp. 8.8B (Prev. 5.0B)
• Australian Exports (Dec) M/M 3% (Prev. 3.0%)
• Australian Imports (Dec) M/M -2% (Prev. 10.0%)
• New Zealand ANZ Business Confidence (Dec F) 11.8 (Prev. 9.4)
• New Zealand ANZ Activity Outlook (Dec F) 22.3 (Prev. 21.7)

Notable FX Expiries, NY Cut:

• EUR/USD: 1.2000-05 (1BLN), 1.2035-50 (2.7BLN)
• USD/JPY: 104.35-40 (1.3BLN), 105.00 (1.4BLN), 105.60 (476M)
• AUD/USD: 0.7550 (828M), 0.7600 (546M)

FIXED

Core counterparts saw a modest tick higher in early European trade following subdued APAC equity trade, since then the morning has been dominated by stock-specifics as earnings season gets fully underway in Europe; as such, core counterparts are rangebound awaiting fresh catalysts. Beginning with USTs, where the 10-year is unchanged on the day and the yield is ~1.13%, modest steepening is present on the curve in a continuation of yesterday’s bear-steepening action following upbeat US data. Technically, focus will likely continue to revolve around the 10-year yields position relative to the recent highs printed in January just shy of 1.20%. The session includes weekly US data and Fed speak which is perhaps of interest after voter-Evans remarked yesterday that he only looks for a temporary inflation increase in Spring; a view which is notable, but perhaps too early to definitively comment on, following a strong outing for the ISM Manufacturing price component earlier in the week. Speaking of yields, the EZ periphery remains the outperformer where BTPs lead the way as Draghi begins negotiations to form a fresh coalition, on which a possible confidence vote could occur as early as next week. If Draghi secures a vote of confidence desks look for the BTP-Bund spread to drop below the 100bp mark compared to recent 115-125bp ranges, for reference the current 52-week low is 102bp; conversely, if Draghi does not secure a mandate and Italy goes to the polls then the spread could quite easily exceed recent ranges given the inherent volatility and real possibility of Salvini securing a majority. Finally, and focus for the session ahead, we have the BoE Rate decision followed by the reintroduction of press conferences, for now anyway, with Governor Bailey due at 13:00GMT/08:00EST and thereafter Chief Economist Haldane on business television from 14:00GMT/09:00EST onwards. Currently, Gilts are in tight ranges pivoting the 133.50 mark and seemingly unfazed or detached from broader action at present as we await a verdict on NIRP (with Short Sterling currently implying sub-zero rates in Jun, Jul & Sep this year) and fresh economic forecasts.

COMMODITIES

WTI and Brent front month futures remain somewhat uneventful as the complex takes a breather following its recent run higher as vaccine hopes and OPEC+ proactivity keep prices elevated. On the OPEC front, the meeting and outcome were as planned and no decision was made for next month's output. The key date to watch would be the March 3-4th confabs as producers re-diagnose the crude market and decide on the next step – although, this risks forming another rift among the producers as higher prices tempt more output whilst the near-term outlook remains clouded. WTI and Brent both reside in tight ranges around USD 56/bbl and USD 58.75/bbl respectively. Elsewhere, spot gold and silver continue to see losses as the firmer Dollar weighs on precious metals. Spot gold hovers just above USD 1800/oz (vs high USD 1834/oz) whilst spot silver trades sub-26.50/oz (vs high. 26.92/oz). Turning to base metals, copper prices were firmer overnight amid US stimulus hopes, with Shanghai copper closing higher by some 1.2%. However, LME copper waned off best levels as the firmer Dollar and indecisive risk tone hampered upside. Meanwhile, Dalian iron ore futures soared around 5% amid tailwinds from Brazil’s Vale stating its 2020 output was subdued.