MNI US Open: Yellen And Conte Face Their Senates

EXECUTIVE SUMMARY:

• YELLEN FACES U.S. SENATE COMMITTEE TO SELL $1.9TRN STIMULUS PACKAGE
• ITALY P.M. FACES SENATE CONFIDENCE VOTE
• U.S. EARNINGS SEASON RESUMES WITH BANK OF AMERICA, GOLDMAN SACHS, NETFLIX
• GERMANY TO EXTEND LOCKDOWN TO MID-FEB ON FEARS OF COVID VARIANTS
• B.O.J. TO CONSIDER INCREASED JGB YIELD FLEXIBILITY (MNI POLICY)

Fig. 1: Italian Spreads Holding In Ahead Of Confidence Vote

BBG, MNI

NEWS:

U.S. (BBG): U.S. Treasury Secretary nominee Janet Yellen on Tuesday steps into a new role following more than a quarter-century in government: salesperson for economic policy after years of defending Federal Reserve thinking and actions. The Senate Finance Committee's 10 a.m. hearing Tuesday is likely to feature topics from foreign-exchange policy to taxes, but it will also serve as the first congressional forum where lawmakers will vet President-elect Joe Biden's $1.9 trillion Covid-19 relief plan. Yellen will tell them that low borrowing costs mean it's time to "act big," according to her prepared remarks.

ITALY (MNI POLITICS): Italian Prime Minister Giuseppe Conte's gov't faces its second confidence vote in as many days, with the Senate due to vote later today.

• Conte has just finished speaking in the Senate chamber, pleading with Senators to keep his gov't going during the time of pandemic. This is being followed by a debate(in Italian) and eventually a confidence vote.
• The timing of the Senate vote is not entirely clear. The vote in the Chamber of Deputies was not called until before 1800CET (1200ET, 1700GMT), with the result not coming through until just before 2100CET (1500ET, 2000GMT). Conte won by a margin of 321 to 259 deputies, relying on support from independents and smaller parties.
• There is a prospect that Conte wins the confidence vote without winning the support of a majority of Senators. Former PM Matteo Renzi's centrist Italia Viva (IV) party is set to abstain in the Senate vote. Based on rough numbers of Senators supportive of the gov't, it could give Conte a 152-151 win (see chart below). This would be enough to keep the gov't in power technically, but the 152 senators would be short of the 161 senators needed to reflect a full majority in the chamber.

US EARNINGS: Quarterly earnings season resumes today after yesterday's public holiday. Highlights Tuesday are:
* Charles Schwab (Pre-market)
* Bank of America (1145GMT/0645ET)
* Goldman Sachs (1230GMT/0730ET)
* State Street (1230GMT/0730ET)
* Netflix (2100GMT/1600ET)
Full schedule with EPS, Rev estimates & timings here: https://roar-assets-auto.rbl.ms/documents/7888/MNI...

GERMANY (RTRS): Chancellor Angela Merkel is set to agree with regional leaders on extending a lockdown for most shops and schools until mid-February as part of a package of steps to rein in the coronavirus, sources said before talks on Tuesday.New infections have been decreasing in recent days and pressure on intensive care units has eased slightly, but virologists are worried about the possible spread of more infectious variants of the virus."It is likely that we will agree on a two-week extension," said one person involved in the talks, confirming a report in Bild daily. The existing lockdown runs until Jan. 31.

GERMAN ZEW: ZEW Expectations rose in Jan, ticking up 6.8pt to 61.8 and coming in stronger than expected (BBG: 57.8).

• This marks the highest reading since Sep and the second successive increase of economic sentiment.
• The ZEW Current Conditions improved marginally in Jan, up 0.1pt to -66.4 - a stronger reading than markets expected (BBG: -68.5).
• "Despite the uncertainty about the further course of the lockdown, the economic outlook for the German economy has improved slightly" says ZEW President Professor Achim Wambach on the current expectations.
• The report notes further that export expectations in particular increased significantly.
• Economic sentiment in the Eurozone improved as well by 3.9pt to 58.3in Jan, while current conditions fell by 3.2pt to 78.9.

BOJ (MNI POLICY): The Bank of Japan could take advantage of the recent stability in the JGB market and consider reducing its purchases of longer-end bonds, widening the range for yields beyond the current tight scope and meeting the need for flexibility, MNI understands. No change is expected at this week's policy meeting, but if decided, would be part of the wider policy review due to be announced in March. For full article contact sales@marketnews.com

U.K./COVID (RTRS): An estimated 1 in 8 people in England had antibodies against the coronavirus during December, suggesting they have had COVID-19 previously, an official estimate based on samples of the population showed on Tuesday. The Office for National Statistics said an estimated 12.1% of people aged 16 years and over in England had antibodies last month. The figure was 8.9% in Scotland, 9.8% in Wales and 7.8% in Northern Ireland, the ONS said.

PBOC: The People's Bank of China's Entrepreneur Macroeconomic Heat Index was at 34.4% for Q4 2020, up 6.7 points from the previous quarter and up 2.6 points on year ago levels, the central bank said on its website Tuesday. The Bankers Macroeconomic Heat Index was at 33.6%, up 8.0 points from Q3, with a higher index indicating the economy is picking up.

IFO: Economic growth will likely see an uptick in many countries following the election of Joe Biden, a recently released Ifo survey of international experts suggests. An increase of 1.16ppt on average to growth in 2021 is expected, according to the survey of 843 experts from 107 countries were asked. US experts on the other hand do not anticipate any change for their own country, leading to an overall effect of +0.98ppt.

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