• European bourses are firmer this morning, as sentiment improved overnight as the WHO did not declare an international emergency
• UK Flash PMIs beat expectations, though GBP has slipped post-release; January BoE cut expectations are back to near 50/50
• OPEC+ have reportedly discussed an output cut extension until the end of 2020
• US President Trump will sign the USMCA trade deal at the White House on January 29th
• Looking ahead, highlights include US Flash PMI’s

ASIA-PAC

Asian equity markets traded cautiously but eventually edged mild gains following the slight reprieve on Wall St where most major indices rebounded after the World Health Organization refrained from declaring the coronavirus as a Public Health Emergency of International Concern, while Nasdaq futures were also boosted after-hours due to Intel earnings which beat on top and bottom lines. Nonetheless, price action for Asia was restricted amid widespread closures for Lunar New Year’s Eve and with the number of infected and deaths from the coronavirus continuing to rise. ASX 200 (Unch.) remained afloat with outperformance in Healthcare spurred by outbreak fears after further virus cases were reported in both mainland China and abroad, while the largest weighted financials sector benefitted amid the recent pushback in rate cut forecasts and with Macquarie underpinned by reports it is nearing a deal with Bell Financial to outsource the back office of its private wealth management business. Elsewhere, Nikkei 225 (+0.1%) largely reflected the indecision of its currency and the Hang Seng (+0.2%) was contained in today’s shortened trading session as stocks remained dampened by the coronavirus fears including gambling names after Macau Chief Executive Ho said they may close all casinos and have cancelled the Lunar New Year parade after a second case of the virus was recently confirmed in the special administrative region. Finally, 10yr JGBs were subdued following yesterday’s pullback and after the BoJ minutes from the December meeting provided very little to spur demand, while the knee-jerk reaction to stronger demand at the enhanced liquidity auction was only brief.

BoJ Minutes from December 18th-19th Meeting stated Japan's economy had been on a moderate expanding trend although exports, production and business sentiment had shown some weakness, mainly affected by the overseas slowdown and natural disasters. One member suggested BoJ may need to boost stimulus like it did 6 months after the 2014 sales tax increase. (Newswires)

Japanese National CPI (Dec) Y/Y 0.8% vs. Exp. 0.7% (Prev. 0.5%). (Newswires) Japanese National CPI Ex. Fresh Food (Dec) Y/Y 0.7% vs. Exp. 0.7% (Prev. 0.5%) Japanese National CPI Ex. Fresh Food & Energy (Dec) Y/Y 0.9% vs. Exp. 0.9% (Prev. 0.8%)

CORONAVIRUS UPDATE

Total number of confirmed coronavirus cases in China was at 830 as of January 23rd with the death toll at 25 according to state media and China also reported its first death from coronavirus outside the virus epicentre. However, other reports later suggested that there was another death confirmed outside the epicentre which would take the total number of deaths to 26. (Newswires) Further, China Global Times editor notes that almost half of the deaths were of people aged over 80, whilst younger patients are recovering. (Twitter)

China are to take stricter and more targeted measures in an attempt to curb the spread of the coronavirus., according to State TV. (Newswires)

South Korea and Japan both confirmed a 2nd case of coronavirus in their countries, while there were separate reports that a person was quarantined in Sydney and that a patient is being assessed in a hospital in New Jersey for possible coronavirus. (AFP/7 News/Yonhap/Twitter)

Wuhan medical staff are reportedly being infected at a much faster pace than reported according to reports citing sources, which also noted that 15 cases of coronavirus were officially reported among medical staff in Wuhan although doctors say the true number is far higher. (SCMP)

Hong Kong cancelled Cathay Pacific’s New Year Carnival and the Lunar New Year Football Cup, while many Hong Kong residents are cancelling travel plans to the mainland. There were also comments from Macau Chief Executive Ho that they may close all casinos and have cancelled Lunar New Year parade due to outbreak concerns. (Newswires)

US US President Trump will sign the USMCA trade deal at the White House on January 29th, according to an official. (Newswires)

US President Trump said further action is required to prevent foreign producers from circumventing tariff rate quotas on large residential washers, according to a Presidential Proclamation. (Newswires)

UK/EU

UK PM Johnson reportedly wants to agree the UK’s first post-Brexit trade agreement with Japan before year-end to get the bandwagon rolling, while Cabinet ministers are said to have agreed to speedily pursue a UK-Japan trade deal. (The Sun).

Incoming BoE Governor Bailey suggested he has concern over how badly prepared the UK for a crash in stocks or property market. (Times)

ECB's President Lagarde (Neutral) says that completing the strategic review in their timetable (by year-end) is ambitious and we are not currently seeing a transmission from wages to inflation; upward move in inflation is really minor.(Newswires)

EU Markit Manufacturing Flash PMI (Jan) 47.8 vs. Exp. 46.8 (Prev. 46.3); Services Flash PMI 52.2 vs. Exp. 52.8 (Prev. 52.8)

-        Composite Flash PMI (Jan) 50.9 vs. Exp. 51.2 (Prev. 50.9)

-        German Markit Manufacturing Flash PMI (Jan) 45.2 vs. Exp. 44.5 (Prev. 43.7); Services Flash PMI (Jan) 54.2 vs. Exp. 53.0 (Prev. 52.9); Comp Flash PMI (Jan) 51.1 vs. Exp. 50.5 (Prev. 50.2)

UK Flash Services PMI (Jan) 52.9 vs. Exp. 51.0 (Prev. 50.0); Composite PMI (Jan) 52.4 vs. Exp. 50.6 (Prev. 49.3)

-        Manufacturing PMI (Jan) 49.8 vs. Exp. 48.9 (Prev. 47.5)

-        IHS: "It seems likely that the rise in the PMI kills off the prospect of an imminent rate cut by the Bank of England, with policymakers taking a wait and see approach as they assess the performance of the economy in the post-Brexit environment."

GEOPOLITICS

US President Trump said he plans to release the Middle East Peace Plan before Israel PM Netanyahu's visit on January 28th, while he suggested Palestinians may react negatively at first to the plan but there is a lot of incentive for them to do it and noted that it is a great plan. (Newswires)

US has sanctioned four companies related to Iranian petroleum and petrochemical trading in an attempt to further tighten Iranian revenue sources. (Newswires)

EQUITIES

European bourses are firmer across the board [Eurostoxx 50 +1.3%] as bourses in the region welcomed the World Health Organisation’s current assessment of the virus, in which it refrained from labelling it a PHEIC. Further, bourses react to a number of earnings – with the IT sectors outperforming and bolstered by Intel’s stellar earnings after the bell, with shares seen higher by 6% pre-market. Other sectors are experiencing broad-based gains with no clear reflection of the current risk sentiment. In terms of individual movers: Bayer (+3.0%) extended on its opening gains amid reports that the Co. is edging towards a possible settlement regarding the glyphosate scandal. Carrefour (+4.3%) sits at the top of the Stoxx 600 after reporting a 3.1% YY rise in group sales in Q4. On the flip side, Ipsen (-24%) plumbed the depths after it paused dosing in Palovarotene drug trials. Meanwhile, Nokian Tyres (-8.7%) rests near the foot of the pan-European index amid a guidance downgrade, with Pirelli (-3.9%) and Continental (-2.3%) lower in sympathy.

FX

GBP - Price action post-UK PMIs could be construed as a classic case of ‘buy the rumour/sell the fact’, but the sheer scale of Sterling’s fall from grace smacks of something else, or coincidental. Indeed, Cable collapsed from 1.3170+ to 1.3085 having rallied ahead of the IHS surveys to circa 1.3155 even though the headline reads for manufacturing, services and composite all beat consensus comfortably and the compiler contended that this this would likely keep the BoE on hold next week. However, market pricing is still close to 50-50 and the Pound’s sharp reversal came alongside a broader Dollar buying spree amidst reports that China’s coronavirus has now spread to all but just 2 of the country’s 31 regions. Usd/CNH rebounded towards weekly peaks in response and the DXY extended gains beyond 97.800.

EUR - The Euro has also felt the weight general Greenback demand having derived scant bullish momentum from preliminary Eurozone PMIs that were better than expected on balance, and not really reacting to more ECB rhetoric from President Lagarde plus GC members that were largely reiterations of yesterday’s post-policy meeting statements and the official strategic review launch text. Eur/Usd is now just off a marginal new sub-1.1035 low, but Eur/Gbp has rebounded through 0.8400 on the back of Sterling’s much deeper pull-back.

NZD/AUD/JPY/CAD/CHF - The Kiwi remains relatively firm/resilient in wake of NZ CPI data overnight that marginally surpassed forecasts, and the Aussie is also benefiting to a degree from another bank rolling back its RBA easing call to April from next month previously. Nzd/Usd is holding above 0.6600, while Aud/Usd keeps tabs on 0.6850 and the Yen pivots 109.50 after easing back from Thursday’s peaks near 109.25 and the 50 DMA. Elsewhere, the Loonie continues to regain composure after the BoC’s shift towards a looser policy stance, with Usd/Cad back down below 1.3150 and now looking towards Canadian retail sales data as the first release post-Wednesday’s meeting. Conversely, Usd/Chf has bounced further post-SNB verbal intervention to 0.9700+, but the Franc is still outperforming the Euro as the cross meanders between 1.0709-23.

New Zealand CPI (Q4) Q/Q 0.5% vs. Exp. 0.4% (Prev. 0.7%). (Newswires) New Zealand CPI (Q4) Y/Y 1.9% vs. Exp. 1.8% (Prev. 1.5%) RBNZ Q4 Sectoral Factor Model Inflation Index 1.8% (Prev. 1.7%)

FIXED

Off best levels presently, but UK bonds have recouped all and a fair bit more of their initial/fleeting post-IHS survey losses in stark contrast to Sterling and unwinding underperformance vs 3 month futures that are now on the defensive. Gilts are hovering around 134.00 vs 134.28 at best (+20 ticks), while Bunds remain ¼ point adrift and US Treasuries are broadly flat awaiting the flash Markit PMIs and more news about China’s coronavirus that is spreading, but not to the point of being declared a major international health risk.

COMMODITIES

OPEC+ have reportedly discussed an output cut extension until the end of 2020, may review quotas in June, according to Tass citing sources, adding that they are unlikely to ease cuts in March as markets are still bearish. (Tass)

WTI and Brent futures continue to retrace some of yesterday’s losses, albeit upside in the complex remains capped by the implications of the coronavirus outbreak – which could dampen global growth and further weaken the demand side of the equation. The contracts have faded about half the upside seen from yesterday’s more constructive DoE report, albeit the data remains overshadowed by the epidemic woes. WTI front month futures meander around 55.50/bbl ahead of mild support seen at 55/bbl, whilst Brent Mar’20 futures dipped below the USD 62/bbl mark, with mild support seenat 61.50/bbl. Energy prices saw fleeting gains amid source reports that OPEC+ have reportedly discussed an output cut extension until the end of 2020, may review quotas in June, according to Tass, adding that they are unlikely to ease cuts in March as markets are still bearish. Elsewhere, spot gold has remained relatively sideways ~1560/oz and largely in tandem with the Buck, whilst copper continues its downwards trajectory as is poised for its sharpest weekly drop, with global growth concerns cited as a factor. Copper eyes 2.7/lb to the downside having tested the level during the prior session.