• European bourses are mixed but have recovered off earlier lows with US futures directionally similar but with magnitudes more modest; ES -0.2%
• DXY remains elevated but shy of recent levels as EUR/USD breaches 1.2100 and USD/JPY through 105.00 where hefty expiries lie
• Italy 5SM members voted to support a Draghi government; potentially to be sworn in this weekend
• Russian Foreign Minister Lavrov says they are ready to break ties with the EU
• Looking ahead, highlights include University of Michigan & Fed's Williams

CORONAVIRUS UPDATE

There were also reports that UK social distancing rules could remain until Autumn. (Newswires/The Times)

UK Government Ministers will today discuss a Cabinet Office proposal to implement vaccine and testing certificates when international travel is allowed to resume. (Sky News)

Australia's Victoria State Premier Andrews announced to impose stage 4 restrictions from midnight for 5 days and said there are currently 19 active COVID-19 cases in the state. Andrews stated the UK strain is challenging the Victoria Stay Open status and they must assume there are further cases in the community, while he also stated that masks must be worn everywhere in the state and this is a short and sharp circuit breaker. (Newswires)

Japanese Economic Minister Nishimura said Japan will maintain the state of emergency in 10 prefectures. (Newswires)

German Health Minister Spahn says that the COVID-19 incidence rate could fall below 60 per 100k this weekend. (Newswires)

EU Commission President von der Leyen says 70% of adults in the EU should be vaccinated by end-Summer; adding, Summer 'usually ends on September 21st'. (Twitter)

European Medicines Agency (EMA) has commenced the rolling review of CureVac's (5CV GY/CVAC) COVID-19 vaccine. (Newswires)

ASIA

Asian equity markets were subdued in extremely thin trade with most regional bourses closed for Lunar New Year and following continued indecision on Wall Street, where stocks finished mixed with a slight positive bias after meandering around record levels once again in the absence of any meaningful catalyst to spur price action. ASX 200 (-0.6%) was lower as underperformance in mining-related sectors and cyclicals pressured the index, with sentiment also dampened by a fresh lockdown in Victoria state where state Premier Andrews announced the imposition of stage 4 restrictions for 5 days after an increase in the cluster of cases at a Melbourne hotel. Nikkei 225 (-0.1%) exhibited some post-holiday blues on return from yesterday’s National Day closure and amid reports of a looming extension to the state of emergency. Participants also mulled over the recent spate of mid-cap earnings although the losses in the broader market were cushioned by a predominantly weaker JPY. India's NIFTY (U/C) fared slightly better with the index kept afloat with mixed corporate results keeping stocks in the balance, while China, Hong Kong, South Korea, Taiwan, Singapore, Philippines, Malaysia, Indonesia, Thailand and Vietnam were all closed for holiday. Finally, 10yr JGBs were rangebound following recent pressure in T-notes which pulled back from a brief incursion into 137.00 territory and with the lack of BoJ purchases in the market today also ensuring price action remained uneventful.

It was reported that Huawei is to seek a court order in UK to access HSBC (HSBA LN) records in an effort to clear its CFO. (Newswires/FT)

US

Fed's Barkin (voter) said the economy doesn't need herd immunity to rebound and sees strong consumer demand for spring and summer even without herd immunity, while he added that business spending on travel and conferences may take longer to recover. (Newswires)

Fed's Harker (non-voter) said he expects a bit of an inflation spike, but not roaring past 2%. (Newswires)

President Biden is expected to conduct a meeting with a bipartisan group of governors and mayors at the White House today for discussion on COVID-19 aid. (Newswires)

UK/EU

BoE's Haldane said UK economic recovery should be one to remember following a year to forget, while he expects a spending boom once COVID-19 restrictions are removed and sees 'accidental savings' to be around GBP 250bln by June. (Daily Mail)

UK Chancellor Sunak was warned that a hike to fuel duty in next month's Budget would be a blow to the north of the country. (The Sun)

EU's Sefcovic said he had a constructive meeting with UK Cabinet Minister Gove. It was also reported that Britain and EU reiterated in a joint statement their full commitment to Good Friday Agreement and proper implementation of the protocol, while they will spare no effort to implement solutions mutually agreed in December. Furthermore, they will intensify work of the specialized committee on the protocol to address all issues and will convene the joint committee no later than February 24th. (Newswires)

ECB's Weidmann said higher taxes should push Germany's inflation to above the ECB's target by year-end and that German harmonized CPI should increase to more than 3%. (Newswires/Augsburger Allgemeine)

Draghi is now expected to meet with President Mattarella and formalise his appointment as PM whilst presenting his list of ministers; government is expected to be sworn in on Saturday. (Newswires/Politico)

GEOPOLITICAL

US Secretary of State Blinken had a call with South Korean Foreign Minister Chung and pledged to enhance strength of US-South Korea alliance, while Blinken also highlighted the need for denuclearization in the Korean peninsula. (Newswires)

Russian Foreign Minister Lavrov says they are ready to break ties with the EU (IFX). Following these comments, Kremlin says Russia has to be prepared for potentially harsh EU sanctions. (Newswires)

EQUITIES

European equities are subdued and relatively mixed (Euro Stoxx 50 -0.1%) on the final trading session of the week after seeing somewhat of a mixed open, with little impetus derived from the APAC region amid a myriad of market closures on account of Lunar New Year, with US players also set for a long weekend due to Presidents' Day Holiday. US equity futures conform to the mild losses seen across Europe as participants await the next catalyst to induce more decisive price action . Sectors in Europe are mixed with more of a defensive bias – materials lag amid losses in base metals as its key player China observes a week-long holiday whilst Healthcare resides as a top performer. Travel & Leisure is also impacted as COVID variants continue to be a source of concern – reflected by Australia’s second largest state entering a brief lockdown period. In terms of individual movers, ING (+5.3%) resides as one of top gainers in the region after firmly topping net income estimates while NII also eclipsed forecasts. The bank also announced a cash dividend of EUR 0.12/shr. Sticking with earnings, L’Oreal (+2%) also cheers optimistic earnings, with LFL sales posting a surprise Y/Y increase and cosmetic sales soaring 30% Y/Y vs exp. +19%. Meanwhile, the weekly BofA Flow Show indicated USD 58.1bln of inflows into equity – the largest ever, with the breakdown pointing to record inflows into US equity of some USD 36.3bln.

Disney (DIS) Q1 2021 (USD): EPS 0.32 (exp. -0.41/-0.76 reported); Revenue 16.25bln (exp. 15.93bln) +1.1% in the pre-market

FX

USD - The Dollar looks set to end a tough week with a final flourish and the rationale for its latest recovery is not crystal clear in terms of a new or definitive factor. Instead, the Buck appears to be benefiting from a combination of short covering, renewed safe-haven demand and waning US Treasury yield/curve retracement from acute bear steepening after a tepid long bond auction. Moreover, the DXY rebound has garnered more gusto since the index breached 90.500 and only faded into the next upside chart resistance level in the form of the 21 DMA (90.683 today vs 90.670 high so far).

NZD/CAD/AUD - All change again for the more risk sensitive currencies, as the Kiwi retreats sharply from 0.7200+ and a couple of attempts to scale 0.7250, while the Loonie has lost its oil prop on the way back down below 1.2750 vs circa 1.2660 at one stage on Thursday, and is now awaiting Canadian wholesale trade before the BoC’s Q4 Senior Loan Officer survey for some independent impetus. However, the Aussie is hanging on to the 0.7200 handle irrespective of more worrying news on the COVID-19 front overnight (Victoria back in Stage 4 lockdown for 5 days), albeit by virtue of stronger Aud/Nzd tailwinds as the cross rebounds towards 1.0750.

CHF/JPY/GBP/EUR - Little sign of support for the Franc or Pound via fractionally firmer than forecast, though still deflationary, Swiss CPI or not quite as dire as feared UK GDP, as the former falls further below 0.8900 and latter loses grip of 1.3800. Similarly, the Yen has finally slipped beneath 105.00 following successful defences of the round number, but could yet glean traction from hefty option expiry interest at the strike (2.8 bn). Elsewhere, the Euro remains betwixt and between having narrowly failed to hurdle a Fib retracement or the 50 DMA (both just beyond 1.2150 at 1.2151 and around 1.2156 respectively) and subsequently surviving a scrape with 1.2100 that aligns with the 21 DMA precisely today.

SCANDI/EM - The Nok hardly derived any traction from stronger than expected Norwegian mainland growth in Q4 as the aforementioned downturn in crude prices keeps the Krona contained within a 10.3150-2775 range vs the Euro, while the Sek continues to consolidate off pre-Riksbank peaks around 10.1000 in keeping with the Rub that is still on a weaker footing sub-74.000 after the CBRT maintained rates as widely expected – see 10.30GMT post on the headline feed for more on the accompanying statement – and the Mxn under 20.000 in wake of Banxico’s anticipated 25 bp ease. Conversely, the Try is mounting another assault on 7.0000 on the back of Turkish ip topping consensus and a CBRT survey revealing loftier inflation and repo projections, while the Czk is underpinned following Czech CPI data coming in above expectations and hawkish CNB minutes.

Russian Federation Central Bank Key Rate (Feb) 4.25% vs. Exp. 4.25% (Prev. 4.25%); Monetary conditions remain accommodative and have not changed substantially since the previous meeting of the Bank of Russia Board of Directors. (Newswires)

FIXED

It’s been gradual rather than stop-driven or frenzied as was the case at times on Thursday, but core debt futures have managed to find a base and extend rebounds to 176.53, 132.56 and 136-30 before Bunds, Gilts and the 10 year T-note all ran out of steam. Hence, not quite as lofty as yesterday’s recovery highs that were also best levels w-t-d and bonds could be subject to more consolidation ahead of the weekend and the US joining a host of other nations already shut for market holidays, as Presidents Day falls on February 15. More immediately, preliminary Michigan Sentiment for the current month is scheduled alongside Fed’s Williams and both in between Canadian wholesale trade and the BoC’s Q4 SLOS.

COMMODITIES

WTI and Brent front month futures continue to pull back from recent highs as the complex tracks the stock market and as news flow remains light with Chinese players take a week off due to NY, whilst US participants also look forward to a long weekend. WTI meanders around the USD 57.50/bbl mark having had printed a recent peak at USD 58.88/bbl, whilst its Brent counterpart trades on either side of USD 60.50/bbl after waning from its USD 61.70/bbl weekly and YTD high. The fundamental narrative remain little changed with OPEC+ support, vaccine and reflationary hopes keeping prices elevated. That being said, it’s important to remember the blips that could arise from targeted lockdown measures – with Australia’s Victoria state poised to enter a Stage 4 lockdown due to a flare-up of variant cases. Eyes also remain on geopolitical developments as countries keep tabs on Iranian nuclear activity, whilst elsewhere Russian Foreign Minister Lavrov warned that Russia is ready to break ties with the EU. Precious metals meanwhile fall victim to the firming Dollar, with spot gold falling despite the dip in real yields, with the yellow metal inching closer to USD 1800/oz from its USD 1827/oz overnight high. Spot silver meanwhile trades in a narrower parameter on either side of USD 27/oz. Turning to base metals, LME copper is softer as the red metal tracks risk sentiment but remains a comfortable distance above USD 8,000/t.

BofA Global Research says oil consumption will increase by 5.3mln BPD in 2021, 2.8mln BPD in 2022 & 1.4mln BPD in 2023. (Newswires)