• Asia-Pac stocks traded higher as regional bourses took their cues from the fresh all-time highs on Wall St
• RBI kept rates unchanged as expected and retained an accommodative stance, which it will keep for as long as necessary
• In FX, the DXY has maintained yesterday's gains around 91.50, EUR/USD remains sub-1.20 and GBP held onto BoE gains
• Italy's PD Senate Chief expects Draghi has an 80-90% chance of forming a government
• US House Speaker Pelosi has been asked by swing-district members to break up the COVID-19 relief bill
• Looking ahead, highlights include US and Canadian labour market reports, BoE's Broadbent, Bailey, ECB's Schnabel
• Earnings from BNP Paribas, Intesa Sanpaolo, Sanofi & Carlsberg

CORONAVIRUS UPDATE

FDA said that available information suggests vaccines remain effective against currently circulating strains of the virus. (Newswires)

Johnson & Johnson (JNJ) submitted an application to US FDA for EUA of its single-shot Janssen COVID-19 vaccine candidate and intends to distribute the vaccine to the US government immediately when it gets approval, while it expects to supply 100mln doses in H1 of this year. FDA later announced that its advisory committee will meet on February 26th to discuss Johnson & Johnson's Janssen COVID-19 vaccine candidate. (Newswires)

WHO said it is currently reviewing AstraZeneca's (AZN LN) vaccine and the outcome is expected soon, while it added that the roll out of the vaccine through CoVax is subject to it being listed for emergency use by the WHO. There were also separate comments from French PM Castex that the first delivery of AstraZeneca vaccine is expected in France by the end of the week. (Newswires)

Pfizer (PFE) withdrew EUA application in India after understanding what additional information is required, but will continue to engage with regulators and will resubmit a request with additional information. (Newswires)

UK government is reportedly planning COVID-19 vaccine passports to permit foreign holidays. (Times)

ASIA

Asia-Pac stock markets traded higher as regional bourses took their cues from the fresh all-time highs on Wall St where focus remained on earnings releases and stimulus hopes, with risk appetite stateside also stoked by encouraging data. ASX 200 (+1.1%) and Nikkei 225 (+1.4%) gained from the open with the broad constructive mood spurring outperformance among cyclicals in Australia and after the RBA reiterated its supportive tone, as well as upgraded its 2020 GDP forecast to -2.0% from -4.5%, while sentiment in Tokyo was underpinned after better-than-expected Household Spending data which showed surprise growth of 0.9% (exp. -1.9%) and as earnings updates also provided a catalyst with SoftBank Corp lifted after it raised FY net guidance. Hang Seng (+0.5%) and Shanghai Comp. (+0.6%) benefitted from the rising tide across stocks but with upside capped by a continued tepid liquidity effort by the PBoC which remained net neutral in today’s open market operations. Nonetheless, Kuaishou Technology stole the limelight on its Hong Kong debut as its shares surged to triple the IPO price which also benefitted its backer and index heavyweight Tencent Holdings, while CNOOC was buoyed after the Chinese oil giant posted a record preliminary production for last year. Finally, 10yr JGBs were subdued with demand sapped by the gains across stocks but with downside stemmed following a recent rebound in USTs and with the BoJ present in the market today for a total of JPY 640bln of bonds mostly concentrated in 5yr-25yr maturities.

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 6.4710 vs exp. 6.4680 (prev. 6.4605)

RBI kept rates unchanged as expected through unanimous decision with the Repurchase Rate, Reverse Repo Rate and Cash Reserve Ratio kept at the current levels of 4.00%, 3.35% and 3.00% respectively, while it retained an accommodative stance which it will keep for as long as necessary. RBI Governor Das stated that the outlook on growth improved significantly, the latest inflation outruns have been better than anticipated and list of normalizing sectors is expanding. Furthermore, he later added that the government is reviewing inflation target and announced a 2-phased normalization of the Cash Reserve Ratio which they will gradually restore to 3.50% in March and 4.00% in May. (Newswires)

• Japanese All Household Spending (Dec) M/M 0.9% vs. Exp. -1.9% (Prev. -1.8%)
• Japanese All Household Spending (Dec) Y/Y -0.6% vs. Exp. -2.4% (Prev. 1.1%)

UK/EU

Italy's PD Senate Chief said the party will not back a Draghi government if it includes the League party, although it was later reported that the PD Chief said the party will support a Draghi government and expects Draghi has an 80-90% chance of forming a government. (Newswires)

FX

In FX markets, the DXY held on to yesterday’s gains around the 91.50 level with recent momentum helped by strong data with focus now shifting to the looming Non-Farms Payrolls data. There were several comments from Fed speakers including regional presidents Bostic, Bullard, Kaplan and George although they mostly stuck to the same message of continued accommodation and outlook for a stronger economy. EUR/USD remained pressured as the USD held steadfast with the single currency languishing at 2-month lows amid the overhang from ongoing uncertainty in Italian politics. GBP/USD retained its post-BoE spoils. USD/JPY sat above 105.50 on the USD-strength and JPY-crosses traded mixed in reflection of their base currencies, while antipodeans were subdued by the firmer greenback, weaker reference rate setting by the PBoC and after the RBA reiterated its view for rates to remain low for quite a while which it does not expect to increase until 2024 or possibly later.

RBA Statement on Monetary Policy said the board is committed to maintaining highly supportive monetary policy and does not expect to reach unemployment nor inflation targets until 2024 at the earliest, while it is committed to making further progress in lowering unemployment and having inflation return to target range. RBA stated the central scenario is for an upswing in the Australian economy to continue with above-trend growth over the next couple of years and it expects the level of GDP to return to the end-2019 level by middle of this year which is 6-12 months earlier than anticipated. Furthermore, it raised GDP growth forecast for 2020 to -0.2% from -4.5% and cut unemployment forecasts out to 2020 with its estimates assuming no change in the Cash Rate and stimulus is inline with the February statement. (Newswires)

RBA Governor Lowe said Australia is in a much better place than most countries and the economic recovery started earlier and is stronger than anticipated, while he added that many economic outcomes were better than our upside scenarios. Governor Lowe reiterated that rates will be low for quite a while and does not expect to increase rates until 2024 or possibly later and stated the ultimate goal is to get people into jobs which is the reason the central bank is conducting QE, while he also stated there was zero appetite for buying bank bonds or corporate bonds as part of QE. (Newswires)

• Australian Retail Trade (Q4) 2.5% vs. Exp. 1.9% (Prev. 6.5%). (Newswires)
• Australian Retail Sales (Dec F) M/M -4.1% vs. Exp. -4.2% (Prev. -4.2%)

COMMODITIES

WTI crude futures were propped up by the heightened risk appetite to lift prices above the USD 56.50/bbl level. Price action was mild amid a lack of pertinent headlines for the energy complex and with Saudi ARAMCO maintaining OSP to Asia for March but raised prices for US and Europe, while there were also comments from Goldman Sachs which expects LNG demand to moderate sequentially due to the Lunar New Year holidays. Gold saw some reprieve from the recent USD-induced pressure although still remains beneath the USD 1800/oz level with the recovery limited by a firmer greenback and heading into today's NFP jobs data, while copper gained after the record highs in stocks on Wall St. and with Chinese commodity prices also buoyant in early trade.

GEOPOLITICAL

US President Biden said the US is ready to work with Beijing when it is in America's interest to do so and told Russia's Putin that the days of the US "rolling over" in the face of Russian activities are over, while he added the US will continue to support and help Saudi Arabia to defend its sovereignty and territory. (Newswires)

White House National Security Adviser Sullivan said the US will end support for operations in Yemen and that Defense Secretary Austin will lead a global troop posture review and freeze any troop redeployment from Germany. He also said they will be holding Russia accountable for a range of malign activities and that it is the US's job to end China's abuses. (Newswires)

US Secretary of State Blinken discussed with Russian Foreign Minister Lavrov the need for a new arms control that addresses all of Russia’s nuclear weapons and growing threat from China, while Blinken also called for the release of Americans detained in Russia. It was also reported that Russian Foreign Minister Lavrov told US Secretary of State Blinken that Russia is open for normalising bilateral relations. (Newswires)

US, UK, France, and Germany's Foreign Ministers to hold virtual meeting on Iran soon, according to sources. (Newswires)

US

Duration sold off slightly on Thursday as yields pared from highs after the risk appetite and BoE-induced sell-off out of Europe. By settlement 2s -0.2bps at 11.5bps, 10s +0.7bps at 113.8bps, 30s +1.8bps 193.0bps; TYH1 volumes were average; short TIPS richer, long TIPS cheaper. Treasuries were offered out of Europe, with particular impetus after the BoE left rates unchanged and pushed back on expectations of a move to NIRP, with heavy selling seen in the UK Gilt complex, and spillover selling pressures to EGBs and USTs. Bonds continued to sell on the back of the lower than expected Jobless Claims print in the US (the bump in unit labour costs was an added pressure); reports noted that domestic real money accounts and hedge funds added to steepeners. Yields found their peaks not long after commencement of US cash equity trade: 1.16% in 10s (edging close to its Jan, cycle peak of 1.18%) and 1.95% in 30s (another cycle high and within distance of the 2% round figure). The pare back from highs coincided with the Fed buying in the long-end, and also Europe closing out for the session; yields traversed sideways to the close. Yields in the long-end have now moved higher for five consecutive days, where traders will look to test key support levels into Friday's NFP report. T-note (H1) futures settled unchanged at 136-25+.

Fed's Bullard (non-voter) said he will look for leadership from Chair Powell about when to start QE tapering discussion and reiterated it is too early to start this now, while he added the recovery already looks strong without further fiscal spending. Bullard also suggested if we play the cards right, the Fed might be able to move inflation above target during a post pandemic boom and that he is not seeing financial stability risks rising from Fed policy. (Newswires)

Fed's George (non-voter) said economic progress is encouraging and that the virus will shape the recovery, while she sees the economy picking up as people resume mobility and added it is too soon to talk about tapering bond purchases. (Newswires)

Fed's Kaplan (non-voter) reiterated the economy will be stronger and more resilient in years ahead if extraordinary measures are weaned off and stated we will see short-term inflation pressures as the economy reopens but will be transitory. (Newswires)

US President Biden formally withdrew the nomination of Judy Shelton to the Fed board and can now nominate someone else for the position. (Newswires)

White House said President Biden's COVID-19 proposal already includes his priorities when asked if he would back more aid for airlines and that he supports efforts by members of Congress to pursue additional steps on student loan debt, while reports later noted the Biden administration is considering executive action to forgive student debt. (Newswires/WSJ)

US House Speaker Pelosi has been asked by swing-district members to break up the COVID-19 relief bill and moderate Democrats want a vaccine package before Biden's stimulus. (Newswires)

US Treasury said the SEC and CFTC are reviewing whether trading practices are consistent with investor protection and fair and efficient markets. It also stated that Treasury Secretary Yellen met with the heads of the SEC, CFTC and Fed to discuss market volatility and believes that core infrastructure was resilient during elevated volatility and heavy trading volumes, while Yellen also thinks it is imperative to uphold the integrity of financial markets and ensure investor protection. In relevant news, Robinhood stated that there were currently no temporary limits to raising positions on stocks and options. (Newswires)