• Upside in European bourses wanes as coronavirus remains a concern
• World Health Organisation states that they have not seen any onward human-to-human spread of coronavirus by travelers returning from China; aside from one case
• China National Health Commission confirmed 4515 cases of coronavirus and total deaths at 106 as of end-January 27th
• OPEC are reportedly discussing extending oil output cuts until at least June, could deepen output cuts if prices & demand falls on spread of the coronavirus
• Looking ahead, highlights include US Durables, Case-Shiller, Consumer Confidence, Richmond Fed, UK Announcement on Huawei, ECB’s Lane, supply from US
• Earnings: Apple, Pfizer, United Tech, Lockheed Martin, Starbucks, 3M Co, Stryker , Advanced Micro Devices, HCA Healthcare, T. Rowe Price, Equity Residential, eBay, Royal Caribbean Cruises, Paccar, Xilinx, McCormick & Company, Boston Properties, Maxim Integrated Products, Nucor, Principal Financial Group, Wynn Resorts, W. R. Berkley, Franklin Resource, PulteGroup

CORONAVIRUS UPDATE

China National Health Commission confirmed 4515 cases of coronavirus and total deaths at 106 as of end-January 27th, while China postponed the spring semester for schools due to the coronavirus although did not provide the exact opening dates. (Newswires)

Hong Kong Government instructed all its employees to work from home until next week and will review the measure at that time, while it urged private companies to follow suit due to the coronavirus. (Newswires) Hong Kong government states that Hong Kong markets will trade as normal on January 29th. (Newswires)

World Health Organisation states that they have not seen any onward human-to-human spread of coronavirus by travelers returning from China, aside from one case in Vietnam; which is good news. (Newswires) Note, it is not entirely clear as to how timely this report is with reference to if it encapsulated the below virus reports out of Japan/Germany

A second case of the virus has been reported in Japan in an individual who has no history of travelling to Wuhan. Note, it does not explicitly state that he has not been to Wuhan or China, just no history of travelling to Wuhan. Separately a man in Germany has reportedly been infected with the coronavirus from a woman who travelled to Wuhan, this is being portrayed as person-to-person transmission, although it is unclear if this is explicitly the case. (Newswires)

Canadian government told its citizens to avoid all travel to the Hubei province. In other news, US FDA announced key actions to advance development of medical countermeasures against the coronavirus in which it is actively working to facilitate the development and availability of diagnostics that can detect the virus. (Newswires)

Twitter reports noted the first coronavirus case in Germany has been confirmed. (Twitter)

ASIA-PAC

Hefty losses were suffered across Asia-Pac bourses as virus-induced fears caught up to several indices on their return from the extended weekend and which followed Wall St’s worst performance in nearly 4 months. ASX 200 (-1.4%) traded subdued as the energy and mining related sectors led the declines due to concerns of the impact to demand and growth from the virus epidemic, although gold stocks bucked the trend after the recent safe-haven bid for the precious metal and defensives were also resilient in the downturn. Nikkei 225 (-0.5%) was pressured by the outbreak jitters as the number of confirmed cases in China rose to 4515 and total deaths at 106, considering that the Chinese account for around 30% of foreign tourists to Japan. KOSPI (-3.1%) and Singapore Straits (-2.5%) slumped in their first trading session after the Lunar New Year in reaction to the increased number of virus cases confirmed in China and their individual countries, while India’s NIFTY Index (Unch.) was indecisive with earnings the main driver for domestic stocks. Finally, 10yr JGBs were flat amid slight fatigue from the recent extended rally and after mixed results at today’s 40yr JGB auction, although downside was also restricted due to the sell-off across regional stocks.

PBoC states that the Central Bank will offer abundant liquidity after the Lunar New Year Holiday through Open Market Operations. (Newswires)

US Former US National Security Adviser Bolton privately told AG Barr last year that he had concerns President Trump was effectively granting favours to the autocrats of Turkey and China, according to reports citing excerpts from Bolton's unpublished book. (NYT)

US Senator Toomey proposed a ‘one-for-one’ witness deal for the impeachment trial after Bolton’s revelation and Senator Romney is generally supportive of a witness deal but has not yet signed on to a plan, according to Washington Post's Costa. (Twitter)

UK/EU

EU is demanding that its judges have the authority to rule on any post-Brexit agreement with the UK; areas of focus will include trade, fishing and security. (Times)

As a reminder, UK PM Johnson is today expected to announce that Huawei will be allowed to build parts of the nation’s 5G network, despite warnings from the US administration; statement expected after 15:00GMT (Telegraph) Subsequently, EU will not ban Huawei from their telecommuncations network, but will be imposing strict 5G rules., according to AFP citing an Official. (AFP)

GEOPOLITICS

US President Trump's Middle East Plan will offer Palestine a path to statehood according to reports citing leaks of the plan. (Newswires/Washington Post)

US Secretary of State Pompeo tweeted that ruthless actions by Russia, Iranian regime, Hizballah and the Assad regime are directly preventing the establishment of a ceasefire in northern Syria, while he added we condemn the barbaric attacks and call for an immediate ceasefire. (Twitter)

EQUITIES

Overall a mixed session thus far in the European equity space [Eurostoxx 50 +0.1] following on from a predominantly downbeat APAC handover as coronavirus jitters hit multiple bourses on their return from holidays. For reference, Hong Kong confirmed that its stock markets will trade as normal on January 29th, whilst Shanghai and Shenzen return on February 3rd. Back to Europe, FTSE MIB (+0.5%) outperforms its peers amid further tailwinds from the weekend’s regional election which diminished the chance of a snap election in the country. Meanwhile, Netherland’s AEX (-0.2%) modestly lags following earnings from Philips (-2.7%) after reporting sub-par earnings, albeit the company noted that it is reviewing options for its domestic appliances’ business. Philips holds a 6.2% weighting in the Dutch bourse. Sectors are mixed with no clear reflection of the overall risk-tone, although the IT sector (-0.9%) underperforms on account of earnings from SAP (-2.7%), despite what seemed to be positive on the surface. The DAX-giant (accounts for 10.5% of the index) raised profit revenue guidance but narrowed its all-important 2020 cloud sales to the range of EUR 8.7-9.0bln from the prior EUR 8.6-9.1bln. In terms of stock specifics – Airbus (+1.2%) rose in excess of 2% at the open the Co. reached a deal to settle corruption probes. Meanwhile, Bayer (+0.6%) shares remain supported amid a positive broker move at MainFirst Bank. As a reminder, 14 DJIA companies will be reporting this week, with today’s slate including 3M (4.17% weighting), Pfizer (0.95% weighting) and United Technologies (3.59% weighting) before market open followed by Apple (7.3% weighting) after the bell.

FX

DXY/CHF/JPY/XAU - The traditional safe havens are back in vogue following a transitory and tame recovery in risk sentiment, as the Chinese coronavirus continues to unnerve markets amidst reports of the outbreak reaching further beyond the region. The Dollar is in demand almost across the board as a result, with the DXY pivoting 98.000 and briefly crossing Fib resistance just above the big figure at 98.011 before topping out at 98.035 in part due to fractional outperformance in the Franc and Yen that are holding above 0.9700 and 109.00 respectively. Conversely, Gold has handed back some of yesterday’s gains, but remains relatively well bid within a tight Usd1577-1583/oz range and technically bullish around 20 Bucks over last Friday’s circa Usd1566.62 low.

AUD/NZD/GBP - The major losers on a combination of contagion from China and cross flows for month end as the Aussie teeters around 0.6750 and not far from deeper troughs posted last October ahead of 0.6700, Kiwi hovers close to the base of 0.6550-22 parameters and Sterling skirts 1.3000. Aud/Usd and Nzd/Usd are still inversely correlated to moves in Usd/Cnh-Cny on breaking virus updates in the absence of official daily PBoC settings during the Lunar New Year break, with the Yuan inching nearer the 7.0000 mark again having reached peaks beyond 6.8500 only 8 days ago on the crest of the Phase 1 trade deal signing. Meanwhile, Cable is trading cautiously into Thursday’s BoE/MPC rate announcement and Brexit the day after, as market contacts note RHS interest in Eur/Gbp for month end that has lifted cross through 0.8450.

EUR/CAD/SEK/NOK - The Euro has survived another test of bids/support into the 1.1000 level, partly on the purported orders for January 31 noted above, but perhaps also benefiting from the common currency’s semi-safe haven status, while the Loonie has extended losses alongside the Norwegian Krona amidst yet another decline in crude prices. Usd/Cad has absorbed more offers at 1.3200, though not all and supply is said to be stacked up to 1.3210, while Eur/Nok has been up to 10.1155 and higher than Eur/Sek in percentage terms after mixed Swedish data in the form of retail sales, trade and ppi saw the latter briefly breach a Fib (10.6121), but not really threaten the 200 DMA (circa 10.6400).

Notable FX Expiries, NY Cut:

-        USD/JPY: 108.75-80 (1.2BLN)

FIXED

It took another few attempts and appeared to be driven by a stop-chase in US Treasuries, but all core bonds did eventually breach Monday’s intraday peaks to set fresh nascent wtd peaks, at 131-06, 174.48 and 135.28 respectively. However, a lack of follow-through buying after the buy orders were filled and some better news on the China virus front via the WHO alongside more reports that OPEC+ could well extend its production caps have seen 10 year T-notes, Bunds and Gilts slip back, with the latter also absorbing DMO supply and the core Eurozone debt future conceding ground to renewed BTP outperformance. Just out, UK CBI trades (missed consensus and disappointing given a much more upbeat trends survey) then several US data points and more issuance via 2 year FRNs and 7 year paper (Usd 20 bn and Usd 32 bn).

COMMODITIES

Another subdued European session for WTI and Brent font-month futures, as the benchmarks pare overnight gains amid the overhang of the coronavirus outbreak. WTI Mar’20 futures have given up their 53/bbl+ status (vs. overnight high of 53.25/bbl) and drifts towards mild support at 52.70/bbl. Meanwhile, its Brent counterpart hovers around 58.75/bbl (vs. overnight high of 59.35/bbl) ahead of yesterday’s low of ~58.50/bbl. OPEC sources noted that Russia has been keen to exit from the agreed upon OPEC+ cuts, but they would be prepared to stay on-board in the event that prices drop below USD 60/bbl. Heading into tonight’s weekly API private crude inventory release, desks note that the complex will likely focus more on the virus developments. Nonetheless, the release is expected to show a build of 300k barrels in crude stocks, gasoline a build of 1.5mln and distillates a draw of 1mln – according to some data vendors. For reference, Barclays note that the further virus woes could see a USD 2/bbl impact on oil process on the potential economic fallout, meanwhile, UBS retains its positive outlook on oil prices in H2 2020, with Brent recovering to USD 64/bbl - recommends investors with high-risk tolerance to sell downside in Brent from USD 50/bbl. Elsewhere, spot gold trades relatively lacklustre around the 1580/oz mark ahead of mild support ~1577/oz - ABN AMRO warn investors of a possible price correction in the coming weeks, while remaining bullish on the lustrous metal in the longer-term. Copper prices have continued bleeding amid the global-growth implications of the virus outbreak – as prices remain sub 2.60/lb (vs. Jan high of 2.87/lb) and around levels seen last October.

OPEC are reportedly discussing extending oil output cuts until at least June, could deepen output cuts if prices & demand falls on spread of the coronavirus., OPEC sources; Moscow has been keen to exit from the cuts, they would be prepared to stay on-board in the event that prices drop below USD 60/bbl according to sources. (Newswires)

Barclays suggested that if the 2003 SARS outbreak is any indication, the market has likely overreacted to the coronavirus partly due to stretched positioning and the lacklustre global macroeconomic backdrop, while it expects transitory oil demand erosion of about 0.6-0.8mln BPD in Q1 or 0.2mln BPD for FY20 and sees USD 2/bbl downside to their FY forecast for WTI and Brent of USD 57/bbl and USD 62/bbl respectively in which it cited compounding effects of spillover