• European equity indices & US futures are negative with RTY the underperformer, -1.0%
• DXY strengthens pre-Powell to the detriment of peers who reside predominantly negative
• Crude has been tempered ahead of the OPEC+ confab whilst precious metals trade lacklustre
• WHO said COVID infection rates have risen in Europe after six weeks of decline
• Looking ahead, highlights include US IJC, Challenger Layoffs & Factory Orders, OPEC+ meeting, Fed's Chair Powell

CORONAVIRUS UPDATE

US CDC reported total COVID-19 cases rose to around 28.51mln from 28.46mln the day before and deaths rose to around 515.3k from 513.1k the day before. (Newswires)

German Chancellor Merkel said they are facing a new phase of the pandemic with hope and need to take action to open up without setting themselves back with vaccinations as the way to exit the pandemic. Furthermore, she wants to use all flexibility to complete vaccinations and wants to extend the interval between vaccines where possible, while she added that the first free COVID-19 tests will be available next week and agreed with state leaders on 5-stage plan to ease virus-related curbs although earlier reports noted that Merkel reached a deal to extend most virus curbs until March 28th. (Newswires)

European Medical Agency has started a rolling review of the Sputnik V vaccine against COVID-19; cannot predict the overall timeline of the review. (Newswires)

Germany has rejected EU executive call to roll back its latest travel and border COVID-related restrictions. (Newswires)

The German Stiko Standing Vaccination Commission now recommends the use of the AstraZeneca (AZN LN) COVID-19 vaccine for people who are 65 years of age or older. (Newswires)

WHO says COVID infection rates have risen in Europe after six weeks of decline. (Twitter)

Milan, Italy to tighten COVID-19 restrictions including school closures, via Corriere. (Newswires)

ASIA

Asian equity markets declined across the board as the region followed suit from the losses on Wall St where tech stocks underperformed and sentiment was pressured by a resumption of selling in the bond market and rise in yields, as well as soft data releases after ISM Non-Manufacturing PMI and ADP Employment missed expectations. ASX 200 (-0.8%) was dragged lower by broad weakness across its sectors aside from real estate and financials which benefitted from strong house prices and a rising yield environment, with sentiment also clouded by mixed data in which retail sales fell short of estimates but the trade balance posted a record surplus. Nikkei 225 (-2.1%) declined from the open to give up the 29k level after the government announced an extension of the state of emergency for the Tokyo region until March 21st and were also considering not accepting overseas spectators to the delayed Olympics this summer. Hang Seng (-2.2%) and Shanghai Comp. (-2.1%) conformed to the losses in the region after another tepid liquidity operation by the PBoC which resulted in a slight net drain from the interbank market and with participants cautious ahead of the NPC where focus will be on the Government Work Report and 5-year plan amid mixed views on whether or not China will set an official growth target, while declines were led by the ChiNext which slumped by more than 4% as it mirrored the rotation out of growth and tech seen stateside. Finally, 10yr JGBs were subdued amid spillover selling from USTs and with demand also hampered after results of the 30yr JGB auction pointed to a weaker auction across all metrics, although the Japanese 10yr benchmark is off its lows as prices then converged back to the 151.00 level.

PBoC injected CNY 10bln via 7-day reverse repos at a rate of 2.20% for a net daily drain of CNY 10bln. (Newswires) PBoC set USD/CNY mid-point at 6.4758 vs exp. 6.4738 (prev. 6.4565)

India's Taj Mahal was evacuated by authorities and searches were conducted following a bomb threat by an unknown caller. (Sputnik International)

US

US House voted 220-210 to pass HR 1 which overhauls campaign finance regulations, voting rules and ethics laws which now goes to the Senate. In other news, the US House scrapped Thursday's session amid warning of a potential plot to breach the building. (Newswires/Washington Post)

Biden Administration has hired Senior aides with a focus on transportation, manufacturing and consumer protection as part of an infrastructure drive. (Newswires)

UK/EU

UK new car sales declined around 36% Y/Y last month which was the worst February since 1959, according to preliminary industry data. (Newswires)

ECB's Knot says that the starting point in the discussion at the ECB is that the increase in rates better reflects growth and inflation prospects. (Newswires)

UK Institute for Fiscal Studies says it is 50/50% at best whether the increase in corporation tax will be imposed without additional concessions. (Newswires)

EU IHS Markit Construction PMI (Feb) 45.0 (Prev. 44.1)

UK Markit/CIPS Construction PMI (Feb) 53.3 vs. Exp. 51.0 (Prev. 49.2)

It is looking likely that the European Commission will take legal action against the UK for its unilateral move on the NI Protocol, according to RTE's Connelly. (Twitter)

The EU has waived Greece's repayment obligations, paving the way for a second early IMF repayment. (Newswires)

GEOPOLITICAL

Yemeni drone reportedly attacked Saudi Arabia's King Khalid Airport in Khamis Mushait and Yemen Houthis later stated that they launched a missile at a Saudi Aramco facility in Jeddah, although there reports added there was no immediate confirmation from Saudi. (Newswires)

South Korea and US will scale back joint exercises that are due to start next week. (Yonhap)

Saudi-coalition has destroyed a ballistic Houthi missile fired towards Jazan. (Newswires)

E3 resolution censoring Iran at the IAEA board will now not be tabled, WSJ's Norman. (Twitter)

IAEA Chief tells the IAEA board that it is planning technical discussions with Iran in April, according to diplomats. (Newswires)

Russian Kremlin says it has serious concerns over the mounting tensions in Eastern Ukraine on the contact line between the Ukrainian government forces and pro-Russian separatists. (Newswires)

Iran has accepted the invitation for a technical meeting in April with the IAEA, Sky News Arabia. (Twitter)

EQUITIES

European equities opened the session softer across the board (Euro Stoxx 50 -0.6%), in-fitting with Asia’s negative lead, with downside in equities persisting throughout the morning following earlier choppy price action. Stateside, US equity futures also see lacklustre trade, but have been somewhat choppy within tight ranges, with the RTY (-1.0%) the under-performer. Fresh fundamental catalysts have remained sparse as the equity sphere awaits further direction in the run-up to Powell’s speech at the WSJ Jobs Summit at 17:05GMT/12:05EST. This will be heavily observed against the backdrop of rising yields and chatter of a "Fed twist" in a bid to influence the yield curve - namely the long and short ends. That being said, desks believe that the Fed Chair will likely stick to his guns and put the Fed's policy over bond market woes. Back to Europe, sectors opened in negative territory and traded choppy in early hours before stabilising mostly in the red. The risk aversion across the region is displayed by the better performance in defensive sectors vs cyclical. Food & Beverages sector outperforms, closely followed by Personal & Household goods. To the downside, Basic resources (-4.5%) is the notable laggard and after that Travel & Leisure (-1.2%) and Technology (-2.9%) are experiencing softness. In terms of individual movers, Aviva (+2.1%) trades firmer this morning after the Co. announced it is to generate cash with the sale of Aviva Italy for EUR 873mln. Melrose (+1.7%) is also seeing early morning gains after a beat on FY revenue expectations alongside the surprise proposition of a final dividend. To the downside, Thyssenkrupp (-2.2%) is subdued after the Norwegian Wealth Fund is to undertake active ownership discussions with the Co. due to the concern that they are contributing to or even responsible for gross corruption. Lastly, Just Eat Takeaway (-3.1%) lags after it was announced that one of their direct competitors, Deliveroo, has selected London as its IPO location.

Apple (AAPL) - UK CMA launched an investigation into Apple over suspected anti-competitive behaviour; probe only started and no decision has yet been made on whether Co. is breaking the law. (Newswires)

General Motors (GM) is looking to build a second battery factory in the US with its JV partner LG Chem. (WSJ)

FX

AUD/JPY/DXY - Marked divergence between the Aussie and Yen, but not necessarily as a direct reflection of broad risk sentiment that traditionally drives the cross one way or the other. Instead, Aud/Usd rebounded from just above 0.7750 to circa 0.7815 largely on the back of a record trade surplus swelled by exports rising twice as fast as the previous month, while imports fell at the same pace. However, the Greenback is grinding higher across the board, with the index looking to retest recent highs above 91.000 between 90.970-91.223 parameters, and the Aussie also faces relatively formidable option expiry interest in the form of 1.5 bn at 0.7820-25 assuming it can clear 1 bn expiries at the 0.7800 strike convincingly alongside a pronounced retreat in copper and other base metals. Conversely, Usd/Jpy has made a clean break above 107.00 and breached another technical resistance level in the form of the 100 WMA at 107.24, leaving the Yen with only half round number support at 107.50 to rely on.

CHF - The Franc’s fortunes are going from bad to worse, but the SNB will be cheering from the side-lines as Usd/Chf climbs towards 0.9250 and Eur/Chf scales 1.1100 ahead of Swiss reserves data for February on Friday and this month’s quarterly policy review.

NZD/CAD - Some compensation for the Kiwi as Aud/Nzd holds below 1.0750, but Nzd/Usd is losing more upside momentum having failed to retain grip of the 0.7300 handle, while a dip in oil prices is keeping the Loonie anchored around 1.2650 after its fleeting foray above 1.2600 yesterday.

GBP/EUR - Both conceding ground amidst the latest Dollar upturn, as Cable meanders mostly in the low 1.3900 area in the UK Budget aftermath and not really reacting to a firmer than forecast construction PMI. Similarly, mostly better than expected Eurozone construction surveys have not really lifted the Euro’s spirits, while a big retail sales miss was largely flagged by member state data and partly offset by a steady jobless rate following a downward revision to the previous month. Hence, Eur/Usd is still straddling 1.2050 and also capped by decent option expiry interest as 1.3 bn rolls off at the NY cut from 1.2085-1.2100 before attention turns to Fed chair Powell at a WSJ event on the labour market and US economy.

SCAND/EM/PM - The aforementioned downturn in crude is hampering the Nok a bit more than Sek as the market tone sours in general, while most EM currencies have clawed back losses in relief that bond yields are topping out again and Gold is still managing to soak up offers into Usd 1700/oz.

• Australian Retail Sales (Jan F) M/M 0.5% vs. Exp. 0.6% (Prev. 0.6%)
• Australian Trade Balance (AUD)(Jan) 10.1B vs. Exp. 6.5B (Prev. 6.8B)
• Australian Exports (Jan) M/M 6% (Prev. 3%)
• Australian Imports (Jan) M/M -2% (Prev. -2%)

Major FX expiry options for today's NY cut

• EUR/USD: 1.2000-10 (819M), 1.2075 (518M), 1.2085-00 (1.3BLN), 1.2150 (554M), 1.2250 (558M)
• GBP/USD: 1.3900 (550M), 1.4090-00 (708M)
• AUD/USD: 0.7700 (614M), 0.7750 (780M), 0.7775 (580M), 0.7800 (1BLN), 0.7820-25 (1.5BLN), 0.7900 (885M)
• USD/JPY: 106.30-50 (1BLN), 106.90-107.00 (535M)

FIXED

There could be a multitude of factors behind the latest loss of recovery momentum in bonds beyond the lack of follow-through buying and/or short covering, and probably more than one catalyst in combination as Bunds drift back from 174.36 towards 174.00, Gilts from 174.51 and closer to their 128.25 Liffe low, while the T-note is hovering marginally above 130-00 compared to 133-06 at best. Technically, the core Eurozone debt future topped out exactly at a 50% Fib retracement of Wednesday’s range, while its UK counterpart has had supply to contend with and Treasuries are relying on Fed chair Powell to provide further direction after another pre-NFP proxy from Challenger lay-offs and the latest jobless claims release.

COMMODITIES

WTI and Brent front-month futures are both softer on the session and just below overnight lows during early European trade. The initial positive price action seen this morning could potentially be derived from the Yemen Houthis launching a missile at a Saudi Aramco facility, in Jeddah, - on the day of the OPEC+ meeting, albeit the attack was thwarted. Nonetheless, back to OPEC+, it is suggested that oil prices were supported in part due to the prospect OPEC+ may stick with supply cuts and may decide against increasing output. It is clear that there are diverging views among members - with variables plentiful in terms of any potential final outcome - with Russia reportedly vying for a 125k increase for itself, according to sources. However, the broader sentiment among traders is for a return of Saudi's unilateral cuts in phases, alongside an ease of the output curbs - again, the magnitude of any potential easing and Saudi's oil return will garner the most focus. WTI resides around USD 61.00/bbl mark (vs high USD 61.98/bbl) and Brent trades in the upper-63/bbl region (vs high USD 64.88/bbl). Aside from OPEC+, other notable risk events on the table today include the US Initial Jobless Claims and Fed Chair Powell's speech. Elsewhere, precious metals were softer on the session which is in cause by USD strength but are now mixed. Spot gold trades just north of USD 1700/oz, 0.2% higher, and spot silver sees itself 0.6% lower at the time of writing. Overnight spot gold hovered near a nine-month low as rising US Treasury yields kept the non-yielding commodity under pressure. Moving on to base metals, LME copper fell over 4% in early trade amid the soured risk tone and firmer Buck. China stainless steel slumped 6% as nickel prices dropped, however, analysts at Huatai Futures said supply and demand for stainless steel in H1 2021 was not weak and prices could rebound after the sentiment-driven disruption. Leading on from this, nickel prices in Shanghai are set for their biggest fall in nine months after a major deal by Tsingshan curbed worries of battery-grade nickel supply shortage; LME nickel is -7.5% presently and on course to drop to a ten week low.

Exxon stated its facilities are progressing through a restart at its Baytown, Texas refinery complex (584k bpd). (Newswires)

Some aluminium purchasers in Japan have agreed Q2 premiums at USD 148-149/tonne (+14-15% from Q1), according to sources. (Newswires)

Russia’s representative on the OPEC+ JTC, cited by JP Morgan, said that Russia saw some rationale in raising output because the oil market was in a 500k bpd deficit. (Newswires)

Russia reportedly wants an oil output increase of 125k for itself, according to sources cited by Energy Intel's Bakr; while Kazakhstan's oil output cuts are to reportedly be eased by 20k BPD. (Twitter)