• European bourses have largely consolidated since the cash open (Euro Stoxx 50 +0.4%) with US futures posting similar gains aside from the outperforming Russell 2000 +0.4%
• US Senate has now formally passed the budget measures to adopt the fast-track Biden stimulus plan; VP Harris cast the tie-break vote
• USD remains under pressure but is off-lows with broader peers only eeking modest gains against the Buck
• Looking ahead, highlights include US and Canadian labour market reports, BoE's Bailey, ECB's Schnabel

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)

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 medicines regulator says data confirms Pfizer (PFE) and Astrazeneca (AZN LN) COVID drugs meets strict safety standards. (Newswires)

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

German Public Health Official says the COVID situation is not under control and is concerned about three variants. (Newswires)

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 (+1.5%) 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 (+0.6%) and Shanghai Comp. (-0.2%) 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%)

US

US Senate has now formally passed the budget measures to adopt the fast-track Biden stimulus plan (i.e. without Republican support). VP Harris cast the tie-break vote in the Senate's procedural vote on the budget, via Wasson who notes that the removal of the amendment on no stimulus checks for undocumented immigrants may save the budget in the upcoming House vote later-on given some members had signalled such an amendment would be an issue. (Newswires/Twitter)

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)

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

Biden administration is considering executive action to forgive student debt. (WSJ)

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)

UK/EU

BoE's Broadbent says that strong growth later in 2021 will be as a function of a lower starting point in 2020; in level terms, the BoE is not more optimistic than it was three months ago. The overall inflation picture is being depressed by temporary factors. Expects inflation to pick up once these temporary factors end. Asset purchases are not necessarily the MPC's first choice for stimulus. (CNBC)

GEOPOLITICS

Russian Kremlin labels comments from US President Biden on Russia as "aggressive" and says such rhetoric is "unconstructive"; counting on continued dialogue with the US on issues that are beneficial for both sides. (Newswires)

EQUITIES

Equities in Europe trade mostly higher (Euro Stoxx 50 +0.6%) as sentiment tilts towards risk-on ahead of the looming US jobs data (full preview available on the Newsquawk Research Suite). US equity futures meanwhile trade with broad-based gains across the ES (+0.4%), NQ (+0.3%), and YM (+0.4%), whilst the RTY (+0.7%) narrowly outperforms. In terms of the broader environment in the midst of earnings season, eyes remain on the rate of vaccinations alongside any vaccine resilience shown by emerging COVID-19 variants, whilst markets also eye policymakers for any hints of recalibration to fiscal or monetary packages as the recovery stage is underway – as US Senate adopted budget measures to fast-track the USD 1.9tln Biden stimulus plan, although the swift passage will depend on any opposition for Democrats. Back to Europe, the FTSE MIB (+1.5%) outperforms following reports that the PD Chief said the party will support a Draghi government and expects Draghi has an 80-90% chance of forming a government, whilst the SMI (-0.3%) continues to be weighed on by Nestle (-1.3%) following yesterday’s report of potential toxic metal levels in its baby food products. Sectors are mostly firmer with a cyclical bias. Travel & Leisure top the charts whilst JNJ submitted an application to US FDA for EUA of its single-shot Janssen COVID-19 vaccine, thus paving the way for another vaccine addition, and recent reports telegraphed the experimental mixing of vaccines in a bid to make distribution and inoculation more flexible. Oil & Gas also resides as a winner amid price action in the crude complex, meanwhile telecoms underperform after T-Mobile (-2.5%) underwhelmed markets post-earnings, in turn denting its largest shareholder Deutsche Telekom (-1%). In terms of large-cap earnings-related movers, BNP Paribas (+3.9%) is supported despite missing on revenue and FICC expectations as the board is to propose a dividend equivalent to 21% of 2020 net income, and is looking into share buybacks contingent on the ECB. Sanofi (+2%) is buoyed as earnings matched forecasts and the group confirmed its target regarding the expansion of business operating income margin.

Regeneron Pharmaceuticals Inc (REGN) Q4 20 (USD): Adj EPS 9.53 (exp. 8.39), Revenue 2.42bln (exp. 2.42bln)

Tesla (TSLA) submits investment proposal for a battery project in nickel-rich Indonesia, Electrek reports

Gilead Sciences (GILD) - Q4 2020 (USD): Adj. EPS 2.19 (exp. 2.15/1.09 reported); Revenue 7.42bln (exp. 7.33bln). (Newswires) Shares rose 2.5% after-market

FX

USD - It could purely be a case of consolidation ahead of the monthly BLS update, but also a function of external factors and perhaps some technical impulses given the fact that the DXY failed to sustain upward momentum towards the next bullish chart target in the form of the 100 DMA (91.839 as of today) having eclipsed Thursday’s peak by a fraction at one stage (91.600 vs 91.581), and is now back below 91.500 nearer a 91.329 low. However, the US Treasury yield backdrop and curve profile is also a tad less supportive, oil remains on the boil and precious metals are trying to find a footing after their fall from grace, with Gold back on the Usd 1800/oz handle, albeit just and Silver straddling Usd 26.50/oz.

AUD/CAD/GBP - The Aussie is back on the 0.7600 handle with independent impetus from firmer than forecast retail sales data and a relatively upbeat RBA SOMP, albeit underlining the likelihood that ultra-accommodative policy will be maintained for the next 3 years at least, while the Loonie remains anchored around 1.2800 with one eye on crude prices and the other on the upcoming Canadian labour report. Elsewhere, Sterling is still elevated in wake of the BoE’s emphatic not now if at all NIRP message, with Cable probing 1.3700 and Eur/Gbp under 0.8750 even though the Euro is trying to claw back losses against the Buck and other peers. Note, little reaction to latest comments from BoE’s Broadbent – see 9.08GMT post on the headline feed for details – or weaker than expected Halifax house prices, as the Pound awaits more from Governor Bailey around the same time as NFP, but in cross terms 1.2 bn option expiries between 0.8760-70 could either cap rebounds or keep bears at bay.

CHF/EUR/NZD/JPY - Also firmer vs the Dollar or clawing back recent losses, as the Franc draws encouragement from hold just above 0.9050 again, the Euro recovers from a slightly deeper pullback from 1.2000 where 1.1 bn option expiry interest resides, the Kiwi bounces from under 0.7150 and Yen through 105.50 after hitting a sub-105.60 trough.

SCANDI/EM - Similar theme of Nok outperformance relative to the Sek, almost irrespective of Norwegian and Swedish fundamentals, like a decline in manufacturing output vs pronounced pick-up in Swedish new industrial orders, as the former continues to track oil in the main and latter run into resistance circa 10.1000 against the Eur. Conversely, the Try has breached 7.1000 vs the Usd following yet more hawkish statements from the CBRT as Governor Agbal pledges to take action before any rise in inflation beyond the forecast path, noting upside risks via January CPI and adding that policy will have a strong inflationary bias. All this in contrast to an unchanged RBI with guidance to maintain and accommodative stances as long as requited, and the PBoC staying neutral in terms of daily liquidity operations ahead of China’s Lunar New Year holidays, keeping the Inr and Cny/Cnh steady 72.9000 and 6.4700 respectively.

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%)

CBRT Governor Agbal says it does not seem possible to consider a rate reduction for a long-time in 2021, prepared to tighten policy before any movement in inflation above the forecast path; no intention to begin FX swap deals with other central banks. January has shown upward risks to the inflation forecasts; policy will feature a strong disinflationary bias, expects further capital inflows. (Newswires)

FX Expiries, NY Cut:

• EUR/USD: 1.1960-75 (729M), 1.2000 (1.1BLN), 1.2040-50 (934M), 1.2115-20 (586M)
• EUR/GBP: 0.8760-70 (1.2BLN), 0.8850 (780M)
• USD/JPY: 104.95-105.00 (1.5BLN), 105.45-55 (760M), 105.75-80 (500M)

FIXED

Although core bonds are sliding in unison, Gilts are suffering heftier losses than peers in the aftermath of Thursday’s clearer and official message from the BoE that it is not considering negative rates for at least 6 months, if at all. The 10 year future has now been down to 132.20 vs 132.75 at best and its prior 132.81 settlement price, while the corresponding cash yield is flirting with the psychological 50 bp mark. Meanwhile, Bunds are holding a fraction above 176.00 (at 176.02 so far, -30 ticks on the day) having resisted earlier competition from Italian BTPs that are still riding high on prospects of Draghi becoming the new PM, and ironically the spread has arguably narrowed more than it did when he saved the Eurozone as ECB President. Elsewhere, USTs are being dragged down too in the run up to payrolls, with the T-note at 136-21+ before regrouping, and perhaps also acknowledging Senate approval of the budget measures needed to adopt Biden’s fiscal stimulus without GOP support.

COMMODITIES

WTI and Brent front-month futures trade on a firmer footing with gains of some USD 0.5-0.6/bbl seen across the benchmarks as WTI eyes USD 57/bbl to the upside (vs low USD 56.43/bbl) and Brent meanders on either side of USD 59.50/bbl (vs. low USD 50/bbl). The complex is seemingly garnering strength from the stock market performance, whilst also being underpinned on vaccine hopes and OPEC+ flexibility. Fresh catalysts have remained light during early European hours, with markets awaiting the Jan US jobs report for the next scheduled impetus. Elsewhere, spot gold and silver trade in positive territory in what seems like a breather from the recent volatility and losses seen in the complex, whilst a softer dollar helps keep prices afloat, with spot gold marginally north of USD 1800/oz after rebounding from yesterday’s USD 1784/oz low – and spot silver trades on either side of USD 26.50/oz after briefly dipping below USD 26/oz yesterday. In terms of base metals, LME copper is back on the rise and steadily making its way towards USD 7,500/t as the softer Dollar and risk-on tilt in the markets support the sentiment-influenced metal. Meanwhile, industrial metals overnight saw gains heading into the Chinese Lunar New Year, with Dalian iron ore futures ending the session over 4% higher as higher demand expectations after the Chinese New Year propped up prices.