• Asian equity markets weakened following the indecisive performance on Wall St where stocks finished relatively flat after a pullback from record highs
• China confirmed 571 total cases of the new coronavirus, the number of deaths from the virus was reported at 17
• The EU withdrawal agreement bill concluded its parliamentary stages and has been sent to the Queen, as expected
• Calls for an RBA rate cut next month have been pared back after the latest jobs report showed a firmer than expected employment change and downtick in unemployment
• Looking ahead, highlights include ECB and Norges Bank policy announcements, US Weekly Jobs, DoEs, EZ Consumer Confidence, NZ and Japanese CPI, supply from Spain and France
• Earnings: Intel, P&G, American Airlines, Union Pacific, Southwest Airlines, VF Corp, Kimberley Clark, KeyCorp

ASIA-PAC

Asian equity markets weakened following the indecisive performance on Wall St where stocks finished relatively flat after a pullback from record highs, and with sentiment spooked amid ongoing coronavirus as the total confirmed cases in China rose to 571 and number of deaths at 17. ASX 200 (-0.6%) was dragged lower by heavy losses in Industrials, with better than expected jobs data dampening calls for an RBA rate cut next month. Nikkei 225 (-0.9%) was pressured by a firmer currency and disappointing trade data including a wider than expected decline in Exports, while Hang Seng (-2.0%) and Shanghai Comp. (-2.7%) slumped with investors reducing exposure heading into the start of the week-long mainland holiday closure and tomorrow’s shortened session in Hong Kong as focus centred on the outbreak concerns, with losses for the mainland bourse exacerbated on a break below the psychological 3000 level. Furthermore, it was reported that China shutdown public transit as well as the airport in Wuhan to contain the spread of the virus and local doctors estimated the number of cases could reach as many as 6000, in which the related jitters kept markets on edge and overshadowed the upward revision to Chinese December trade data, as well as the PBoC’s targeted medium-term lending facility announcement. Finally, 10-year JGBs were higher and tracked similar upside in T-notes with prices supported by the risk averse tone and with the BoJ present in the market today heavily concentrated on 5yr-10yr maturities.

PBoC skipped reverse repos but announced CNY 240.5bln1-year targeted medium-term lending facility as expected, with the rate kept unchanged at 3.15% despite some press speculation China may offer the TMLF at a lower rate. (Newswires) PBoC set USD/CNY mid-point at 6.8876 vs. Exp. 6.8861 (Prev. 6.8853)

US President Trump tweeted praise for the China trade deal in which he stated that it will bring both the US & China closer together in so many other ways and suggested there is much more to come. (Newswires)

China confirmed 571 total cases of the new coronavirus and the number of deaths from the virus was reported at 17, while China's Wuhan closed public transit and its airport to contain the spread of the virus. In separate reports, local doctors in Wuhan were said to estimate the number of coronavirus cases could reach as high as 6000 and the Wuhan Municipal Health Commission is said to prepare at least 5400 hospital beds for potential patients. (Newswires/Caixin)

China Global Times tweeted that the Chinese Embassy in France have contacted a person and informed the local emergency department to handle her case after she had entered France and posted on social media that she had a fever & cough. In related news, there were earlier comments from the WHO that it has not seen third or fourth generation transmission of coronavirus in China or secondary level spread in countries where it has been exported to. (Newswires)

China revised USD-denominated trade figures for December with the Trade Balance surplus revised to USD 47.21bln from USD 46.79bln, Exports Y/Y revised to 7.9% from 7.6% and Imports Y/Y revised to 16.5% from 16.3%. (Newswires)

Japanese Trade Balance Total Yen (Dec) -152.5B vs. Exp. -150.0B (Prev. -85.2B). (Newswires) Japanese Exports (Dec) Y/Y -6.3% vs. Exp. -4.2% (Prev. -7.9%) Japanese Imports (Dec) Y/Y -4.9% vs. Exp. -3.4% (Prev. -15.7%)

UK/EU

EU withdrawal agreement bill concluded its parliamentary stages and has been sent to the Queen, as expected. (Newswires)

UK Downing Street is reportedly discussing whether the UK should, at the March WTO meeting, sit independently from the EU; which would defy the ‘duty of sincere co-operation’ that all EU states adhere to and which the transition period sees continuing until year end, according to sources. (City AM)

EU Commission President von der Leyen may visit Washington early next month according to EU head of delegation. (Newswires)

FX

DXY was relatively unchanged and remained near 97.50 amid mixed trade in its major counterparts including the extended weakness in CAD following a dovish hold by the BoC. EUR/USD and GBP/USD were lacklustre and have retreated from resistance at 1.1100 and 1.3150 respectively, although the latter still held onto most of the recent gains spurred by the strong UK CBI Trends release. USD/JPY extended further below 110.00 on safe-haven flows, while antipodeans traded higher with AUD/USD boosted by better than expected Employment data which despite being solely fuelled by Part-Time jobs, still resulted to a surprise decline in the Unemployment Rate to 5.1% from 5.2%. This subsequently dampened calls for the RBA to resume its easing cycle next month with markets now pricing around an 80% chance of the RBA to remain on hold vs. Prev. probabilities of a near coin-flip, while ANZ Bank also dropped its forecast for a 25bps cut at the upcoming meeting and CBA pushed back its rate cut projection from February to April.

Australian Employment Change (Dec) 28.9k vs. Exp. 15.0k (Prev. 39.9k)

Australian Full Time Employment Change (Dec) -0.3k (Prev. 4.2k)

Australian Unemployment Rate (Dec) 5.1% vs. Exp. 5.2% (Prev. 5.2%)

Fitch affirmed New Zealand's foreign currency IDR at AA: Outlook revised to Positive from Stable. (Newswires)

SNB's Maechler says being put on the US' currency watchlist will not change SNB policy; will end negative interest rates as soon as possible. (Newswires)

BoC Governor Poloz said the door is obviously open to an interest rate cut but noted that calculations on such would have to be data dependent and that interest rates are still really low. Furthermore, Poloz commented that some of the downside risks identified in October have clearly landed and the sense of whether we need easing are obviously present in the analysis, while he added if we had a cut in the future it would not be against a hypothetical or a possibility. (Newswires)

COMMODITIES

Commodities were mostly subdued amid the risk averse tone in which WTI crude futures extended on the prior session’s losses that were attributed to coronavirus concerns and the likely impact on travel as well as energy demand, while oil prices were further pressured by a bearish private inventory report which showed a surprise build in headline crude stockpiles to drag Brent and WTI crude futures below USD 63.00/bbl and USD 56.00/bbl respectively. Elsewhere, gold was rangebound and failed to benefit from the safe haven bid amid a steady greenback, while copper was kept lacklustre from the broad risk averse tone and sell-off in China.

US Private Inventory Crude Stocks (w/e 17th Jan) +1.6mln vs. Exp. -1mln (Prev. +1.1mln). (Newswires)

Goldman Sachs said the main headwind for gasoline and distillates this year will be from high available refining capacity, while it added that recent weakening in fundamentals amid near-record high net speculative positioning points to further downside risk. (Newswires)

GEOPOLITICS

US special representative to Iran Brian Hook warned that new Islamic Revolutionary Guards Corps Commander Ghaani will face the same fate as his predecessor Soleimani if he follows in the same path. (Al Arabiya)

US 

A rather lacklustre session for the TPLEX regarding price action, where the T-Note came off its lows modestly from the earlier session; by settlement, yields were little changed with the 10-year at 1.77%. Participants have had little data to dig into out of the US ahead of Friday’s PMIs, with the ECB meeting (on Thursday) and Fed meeting next week expected to be mainly non-events, whilst US earnings have not set off any alarm signals on the strength of the US economy. Meanwhile, the 10-year yield has been drifting lower for the past few weeks closer to its multi-month, key support level of approximately 1.7%, this week’s outbreak of coronavirus has only supported the move. US T-note futures (H0) settled 1 tick lower at 129-17+.