Futures Rebound Sharply From Overnight Slump US futures and European markets rebounded from a slump that dragged the Emini as low as 3,890 just ahead of the European open, to trade near session highs as investors await progress towards more U.S. fiscal stimulus, while the dollar was set for a weekly loss despite snapping a five-day losing streak on Friday; Bitcoin hit another record high overnight when it briefly traded above $49,000. Markets in China and most of Southeast Asia were closed for the Lunar New Year. At 7:30 a.m. ET, Dow E-minis were down 27 points, or 0.1%, S&P 500 E-minis were down 7.25 points, or 0.2% and Nasdaq 100 E-minis were down 15.25 points, or 0.11%. The overnight weakness was led by energy names as Chevron, Occidental Petroleum and Exxon all dipped between 0.9% and 1.2% in premarket trading as oil prices retreated on demand fears after Australia announced yet another snap 5-day lockdown. Disney rose 1.2% after the company swung to a surprise quarterly profit as “The Mandalorian” and “Soul” lifted its fast-growing streaming business, outweighing pandemic worries about its hobbled theme park operations. After touching records earlier this week, markets have paused among mixed signals and a lack of fresh catalysts. Even as vaccines are distributed to millions, the emergence of new virus variants threaten to extend lockdowns and delay economic recoveries. “Investor exuberance has somewhat waned. The calm belies an underlying uncertainty as investors await a clearer signal on the efficacy of vaccines before committing fully to the reflation trade," according to Lewis Grant, a senior equities portfolio manager at Federated Hermes. On Thursday, markets held near records - with the Nasdaq and S&P 500 rising 0.4% and 0.2%, respectively, while the Dow Jones Industrial Average slipped 0.02% - as investors bet on more government spending, although enthusiasm was tempered when U.S. President Joe Biden said China was poised to “eat our lunch,” raising fears of renewed strains on Sino-U.S. ties. At the same time, the vaccine rollout is making progress. Biden announced on Thursday that the U.S. has finished deals for 100 million additional vaccine doses each from Pfizer Inc. and Moderna Inc. Despite losses on Friday, global stock markets are still on track for a weekly advance, with the MSCI World up 1.1% in the past five days. MSCI’s All Country World index fell 0.15% on the day, shy of record highs reached earlier this week. Europe's Stoxx 600 Index erased earlier declines of as much as 0.5% and was trading flat. Germany’s DAX was down 0.5%. Media and tech stocks lead gains, while miners and travel and leisure are worst performing subgroups in the region. Italy’s FTSEMIB index fell 0.2% on the day, with the country’s bond yields near record lows on hopes of a new government led by former ECB President Mario Draghi. In European stocks, ING Groep NV gained 4.8% on better-than-expected earnings and as it signaled possible buybacks. L’Oreal SA also advanced after reporting an increase on sales in the fourth quarter. Shares in British Airways owner IAG SA and EasyJet Plc slumped with Britons encouraged to put summer holidays on hold. Here are some of the biggest European movers today: ING shares rise as much as 6%, the most since Jan. 6, with Morgan Stanley highlighting a strong performance in the Dutch lender’s core business. Boliden shares jump as much as 6.5%, the most since May 18, after the Swedish copper firm’s profit and dividend beat estimates and RBC said it had an “excellent quarter.” FDJ shares surge as much as 8.5%, to a record high, with Citi saying the French lottery firm’s full-year earnings were “well ahead” of expectations. Schibsted shares gain as much as 4.8% after 4Q earnings beat expectations and JPMorgan said the numbers look “good.” Flow Traders shares jump as much as 12%, the most since February 2018, with Jefferies saying the Dutch exchange-traded products provider’s results topped expectations after a “stellar” quarter. Earlier in the session, MSCI’s broadest index of Asia-Pacific ex-Japan fell 0.2%, trading just shy of a record high reached in the previous session. Australian stocks lost 0.63%. Shares in Tokyo fell 0.14%, pulling back from 30-year highs. Markets in China and most of Southeast Asia were closed for the Lunar New Year. China’s stock and bond markets, foreign exchange and commodity futures markets are closed through Feb. 17 for the holiday. Investors weighed some tepid economic data against increasing COVID-19 vaccinations and the prospect that more government spending and continued cheap money from central banks will drive higher growth and, eventually, inflation. "We’re very bullish on equities. Central banks across the world are much more clearer of late that their policies will be accommodative even beyond the current emergency period and this is further supportive for risk assets," said Jeffrey Sacks, head of EMEA investment strategy at Citi Private Bank. Meanwhile, investors will have to follow a “spike train”, monitoring hospital admissions, stimulus, inflation and volatility, said Mark Haefele, chief investment officer at UBS Global Wealth Management, in his monthly letter to clients. “Overall, we retain a favorable view of markets over our tactical investment horizon,” he said. “While the ‘spike train’ may lead to volatility, we don’t think it will derail the bull market.” On Friday, global finance chiefs, including U.S. Treasury Secretary Janet Yellen and members of the Group of Seven (G7) nations, meet vowing to rebuild bridges with allies to steer the world economy out of its deep slump. Elsewhere, largely upbeat earnings update have also supported market sentiment. About 82% of 355 S&P 500 firms have topped analysts’ estimated for fourth-quarter profit, well above the average beat rate of 76% over the past four quarters, per Refinitiv data. Earnings growth for most sectors have improved, with 9 of the 11 sectors reporting positive growth, 6 of which are seeing double-digit growth. Energy and Airlines, however, continue to print weak numbers. In rates, Treasuries were slightly weaker across the curve even as S&P 500 futures edge lower, toward middle of Thursday’s range, and global stocks rally broadly pauses. Treasury 10-year yields ~1.17%, near middle of 1.113%-1.198% weekly range; bunds, gilts lag by ~1bp each while Italian bonds outperform by ~1bp after PM-elect Draghi wins support of the Five Star Movement to form a government. Bunds and gilts lead, under pressure while Italian bonds outperform over European morning. Treasuries price action was muted during Asia session on low volumes on Lunar New Year. In FX, the Bloomberg Dollar Spot Index snapped a five-day losing streak as the greenback advanced versus all of its Group-of-10 peers. Commodity currencies led declines while the euro fell, touching $1.21 and the region’s bonds were a tad higher, with Italian debt outperforming its Spanish peers after large flows were seen in both markets. The Australian dollar fell after a lockdown was declared in the nation’s second-most populous state. Westpac’s call on extension of QE further weighed on the currency. In commodities, Brent crude fell 0.6% to $60.75 a barrel, having dropped half a percent the previous session. U.S. oil fell 0.76% to $57.80 a barrel, after falling 0.8% on Thursday. OPEC cut its demand forecast and the International Energy Agency said the market was still over-supplied, which cast a gloom over energy markets. Bitcoin reached $49,000 before erasing gains. BNY Mellon announced it would help clients hold, transfer and issue digital assets days after Elon Musk’s Tesla said it had bought $1.5 billion worth of the cryptocurrency and would accept it as a form of payment for its cars. Economic data at 10 a.m. ET is expected to show that a reading on the University of Michigan’s consumer sentiment index edged up to 80.8 in February from 79 in January. Market Snapshot S&P 500 futures down 0.3% to 3,899.75 MXAP down 0.2% to 217.84 MXAPJ down 0.2% to 732.69 Nikkei down 0.1% to 29,520.07 Topix up 0.2% to 1,933.88 Hang Seng Index up 0.4% to 30,173.57 Shanghai Composite up 1.4% to 3,655.09 Sensex little changed at 51,496.47 Australia S&P/ASX 200 down 0.6% to 6,806.74 Kospi up 0.5% to 3,100.58 German 10Y yield little changed at -0.46% Euro down 0.2% to $1.2109 Brent futures down 1% to $60.51/BBL Gold spot down 0.4% to $1,819.08 U.S. Dollar Index little changed at 90.42 Top Overnight News from Bloomberg Donald Trump’s lawyers begin their defense of the former president in his Senate impeachment trial on Friday, after House Democrats spent two days portraying him as a lawless, unrepentant inciter of the Jan. 6 insurrection at the U.S. Capitol who shouldn’t hold public office again Betting on a drop in the dollar was one of the most-popular macro trades heading into 2021. But after a painful start to the year, many are wondering whether they wrote off the greenback too quickly The frenzy of trading in U.S. equities is showing no signs of abating and looks set to surpass levels seen during the worst of the pandemic panic in March The U.K. economy grew at double the pace expected in the fourth quarter, capping a year that delivered the worst slump since 1709. Gross domestic product rose 1% from the third quarter, fueled by a boom in construction and government spending. That averted the risk of a second recession early this year but left a 9.9% contraction for the whole of 2020 The EU’s Stability and Growth Pact was suspended when the coronavirus hit, and few believe it can ever return in the same form. It was already set to be rewritten before the pandemic started, with the rules frequently breached and little evidence that it was contributing to either stability or growth. Officials say talks will likely resume in the second half of this year Norway’s economy grew much faster than expected at the end of last year, underpinning bets its central bank will be the first in the rich world to raise interest rates this year. Mainland gross domestic product, which adjusts for Norway’s offshore industry, grew 1.9% in the fourth quarter, the Oslo- based statistics office said on Friday. Economists surveyed by Bloomberg had expected a 1.3% expansion rate, on average A more detailed look at global markets courtesy of NewSquawk Top Asian News Japan Post Bank Ramps Up CLO Investment to $20 Billion Coronavirus Weakens Netanyahu’s Staunchest Ally Ahead of Polls 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. Top European News ING Signals Share Buybacks After Beating Estimates on Profit Russia Warns EU It’s Ready to Break Off Ties Over Sanctions Sanctions Risk Means Russia Will Hold Rates: Decision Day Guide Sampo Creates $29 Billion Asset Management Unit Within Mandatum In FX, 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. In 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. US Event Calendar 10am: Feb. U. of Mich. Sentiment, est. 80.8, prior 79.0; Current Conditions, est. 89.0, prior 86.7; Expectations, est. 76.0, prior 74.0 DB's Jim Reid concludes the overnight wrap As a public service announcement I wanted to remind you all its Valentine’s Day on Sunday. I panicked yesterday when I remembered and bought some artisan chocolates for my wife that I suspect on a cost per gram basis was more expensive than caviar. It’s fascinating how certain chocolate has become a Veblen good (I had to look it up). If I bought my wife a box of “Celebrations” now I’d be up for the chop but get her some fancy, high-end, arty box that happens to have a few squares of sugar coated with chocolate and I can gain a number of future golf passes. Well at least I hope so. Risk assets resumed their own love affair with record highs yesterday with the S&P 500 gaining +0.17% after two days of slight declines. Technology stocks outperformed and also took the NASDAQ (+0.38%) to all time highs following Wednesday’s declines. Semiconductors (+3.45%) in particular led US stocks higher as the Biden administration announced they were working on addressing the global shortage in chips. Sentiment overall was supported by the continued pledges from the Fed to keep monetary policy loose during the recovery, as well as the building momentum behind the Biden stimulus plan, as House Speaker Pelosi said that they hoped to have it done by the end of the month. The energy sector lagged as oil prices fell back from their post-pandemic highs the previous day with Brent crude falling -0.54% and WTI dropping -0.75%. It was the first daily loss for the commodity in nearly two weeks. Brent and WTI are down another -0.62% and -0.70% respectively this morning as the International Energy Agency forecasted a bleaker outlook for global oil demand. Outside of the US, there was continued buoyancy in financial markets, with the MSCI World index rising for a 9th straight session yesterday, a run not replicated since October 2017. Meanwhile Bloomberg’s index of US financial conditions eased just off Wednesday’s post pandemic high. Financial conditions in the US are currently easier than they were for the entire 2009-12 GFC period and aftermath. Staying on this buoyant liquidity theme, Bitcoin hit an all-time high yesterday intraday before closing up +4.20% to $46,931, and is again trading back at a new record high overnight (up c1%). In our survey you can answer whether you think bitcoin is more likely to double or halve over the next 12 months. The comments from Powell on Wednesday, in which he struck a decidedly dovish tone when talking about labour market issues, meant that 2yr Treasury yields fell to an all-time low following the open in London yesterday, trading beneath the 0.1% mark at one point. That said, they’d moved off their record lows by the close, ending the session up slightly (+0.2bps) at 0.11%, and the yield curve steepened further as 10yr Treasury yields rose +4.1bps to 1.163% around a weakfish 30yr auction. A big outperformer in sovereign bond markets were Italian BTPs once again as investors looked forward to a Draghi-led government, with 10yr yields falling a further -4.8bps to an all-time low of 0.456%. In terms of the latest developments, yesterday saw members of the Five-Star Movement, which is the largest group in the Italian parliament, vote to support Draghi. He is now expected to unveil his list of ministers to President Mattarella later today, before sharing his policy program to parliament next week. Other sovereign bonds across the continent rallied too, albeit not to the same extent as Italy’s, with yields on 10yr bunds (-2.1bps), OATs (-2.2bps) and gilts (-1.9bps) all moving lower. Overnight in Asia markets are trading somewhat mixed as the Nikkei is down -0.28%% after reopening from a holiday, while India’s Nifty is up +0.25%. Australia’s ASX closed down -0.63% after a snap lockdown was imposed in Victoria state for five days due to concerns around the spread of a Covid-19 variant. Chinese, Hong Kong and South Korean markets are all closed for a holiday. Futures on the S&P 500 are down -0.17% and its European counterparts are also pointing to a weaker open. In terms of the latest on the pandemic, there was further positive news as a UK trial found that the arthritis drug tocilizumab was found to cut the chance of death from Covid-19, as well as the probability of progressing to invasive mechanical ventilation. According to the trial results, it would mean that for every 25 patients treated with the drug, an additional life would be saved, which adds to hopes that along with vaccinations, other medicines will be able to help us navigate the way back to normality. In Germany, Chancellor Merkel noted that covid-19 mutations are likely to become dominant in the country and may affect the overall progress made there. Her and the 16 state premiers have thus agreed to keep tight restrictions in place until at least March 7. The largest European economy is also planning to restrict travel from Austria and the Czech Republic given the state of virus spread in those countries, with further restrictions against other neighboring countries being considered. France’s Health Minister announced that the epidemic there may be plateauing or even declining slowly even as recent testing over the past week showed that 4-5% of all cases are linked to the South African variant and 20-25% are tied to the UK variant. In the US, Dr Fauci predicted that an increase in supply over the next two months will make it possible for “a mass vaccination approach” in the US by April, whereby anyone who would want a shot would be able to receive one. He couched that the logistic demands may mean that it may take another few months to meet the full demand. Overnight, Japan’s public broadcaster NHK has reported that a health ministry panel is likely to approve the Pfizer-BioNTech vaccine today with the Nikkei reporting that Japan’s first shipment of Pfizer has already arrived and contains 400,000 doses. Japan is likely to start vaccinations from mid next week. Wrapping up with yesterday’s data, the number of weekly initial jobless claims in the US for the week through February 6 fell to 793k (vs. 760k expected), though the previous week’s total was revised up by +33k. Meanwhile the number of continuing claims for the week through January 30 fell to a post-pandemic low of 4.545m, but this was higher than the 4.420m reading expected. Elsewhere, the European Commission downgraded their 2021 growth forecast for the Euro Area to +3.8% (vs. +4.2% in November), though they upgraded their 2022 forecast to +3.8% (vs. +3.0% previously). In terms of the day ahead, there isn’t a great deal scheduled, though data releases include the UK’s Q4 GDP reading, as well as the University of Michigan’s preliminary consumer sentiment index for February. Tyler Durden Fri, 02/12/2021 - 08:03