• Asia-Pac stocks began the week with a sombre tone as the death toll for the Coronavirus has now surpassed that of SARS
• China’s total confirmed cases now stands at 40171 and total deaths at 908 as of February 9th
• Russian Energy Minister Novak stated that Russia is not yet prepared to announce its position on OPEC+ actions
• UK Foreign Minister Raab said a Singapore deal will be one of the first wave of free trade agreements and wants a deal over the line ASAP
• EU member states are reportedly toughening their demands for 'status quo' access to UK fishing waters post-Brexit, according to the Telegraph
• Looking ahead, highlights include Norwegian CPI, Eurozone Sentix Index, Fed’s Daly and Harker

CORONAVIRUS UPDATE

China confirmed 3062 new coronavirus cases and 97 deaths on February 9th vs. 2656 new cases and 89 deaths on February 8th, with the total confirmed cases now at 40171 and total deaths at 908 as of February 9th. (Newswires)

Japan cruise ship has about 60 more coronavirus infections to bring the total to 130. (Newswires)

China is spending at least USD 10bln to control the coronavirus outbreak and is reaching out for medical supplies from other nations, while it was also reported that the World Health Organization is sending an advanced team to China to investigate the coronavirus. (Newswires)

National Institute of Health's Fauci said there have been "no glitches" so far in coronavirus vaccine development with Moderna (MRNA) and if that continues, he expects phase 1 trial in people could start within 2.5 months. (Newswires)

ASIA-PAC

Asia-Pac stocks began the week with a sombre tone due to concerns regarding the ongoing coronavirus epidemic which has surpassed the death toll from the SARS outbreak, and following last Friday’s losses on Wall St where markets pulled back from record highs but still notched the best weekly performance since June last year. ASX 200 (-0.1%) and Nikkei 225 (-0.6%) were subdued with underperformance seen in Australia’s tech and energy sectors although downside in the index was stemmed by resilience in gold miners and defensives, while the Tokyo benchmark recouped some of the opening losses on favourable currency flows. Elsewhere, Hang Seng (-0.8%) and Shanghai Comp. (+0.1%) were cautious due to the rising infected numbers and as some businesses resumed operations, although the mainland showed some early resilience amid continued PBoC efforts including the first round of special re-lending funds for tackling the coronavirus and CNY 900bln of reverse repo operations to sustain liquidity levels. Finally, 10yr JGBs were higher amid the cautious risk appetite in the region and with the BoJ present in the market in which it upped the purchases in 10yr-25yr maturities.   

PBoC injected CNY 700bln via 7-day and CNY 200bln via 14-day reverse repos for a net neutral daily position, while the PBoC announced to offer the first round of special re-lending funds for tackling the coronavirus on Monday and will offer the facility weekly to banks later in the month. (Newswires) PBoC set USD/CNY mid-point at 6.9863 vs. Exp. 6.9829 (Prev. 6.9768)

China Global Times tweeted a good number of Chinese companies will scoop back to business operations although companies need to take the safety of their workers as the top priority, while it later tweeted that many SMEs in China will not restart business today due to shortage of protective supplies. (Twitter)

Chinese CPI (Jan) Y/Y 5.4% vs. Exp. 4.9% (Prev. 4.5%) Chinese PPI (Jan) Y/Y 0.1% vs. Exp. 0.1% (Prev. -0.5%)

UK/EU

UK Foreign Minister Raab said a Singapore deal will be one of the first wave of free trade agreements and wants a deal over the line ASAP, while Raab also stated the UK plans to start trade negotiations with Japan before spring and complete an FTA by year-end. In related news, the UK is reportedly planning to announce locations of as many as 10 freeports this year. (Newswires) EU member states are reportedly toughening their demands for 'status quo' access to UK fishing waters post-Brexit. (Telegraph) Norwegian PM Soldberg has warned Britain that Brexit should not be utilised as an opportunity to shut out other countries from fishing in British waters. (Politico)

UK PM Johnson is expected, on Tuesday, to announce his decision on the HS2 rail line; with UK Sunday Papers reporting that the London to Birmingham section will go ahead, but remaining sections will be under review. Separately, a Cabinet reshuffle is expected to occur prior to the Easter recess on Thursday. (Politico)

UK Chancellor Javid is considering a large tax increase on higher earners in the March budget. (FT) Furthermore, the Chancellor is also considering limiting tax relief on pension contributions to 20% and introducing a “recurring” wealth tax on the owners of expensive homes. (Telegraph)

Senior Conservative’s have written to Conservative MPs highlighting concerns around Huawei’s role in the UK’s 5G network, wanting ‘high risk’ Co’s to be ruled out immediately or alternatively phased out over time. Subsequently, China’s UK ambassador to the UK has criticised these comments, and the 35% cap that has been placed on Huawei’s involvement in the 5G network. (BBC)

The “Boris bounce” will be dampened by the disruption caused to the global economy from the coronavirus outbreak, economists have warned. (Telegraph)

EU’s efforts to hammer out a budget deal by the end of February is reportedly at risk of being de-railed by widening divisions between richer and poorer member states, according to diplomats. European Council President Michel is convening an EU leaders’ summit on February 20th in an attempt to negotiate on the seven-year EU budget - which must be settled by year-end. (FT)

Irish PM Varadkar’s Fine Gael party is seen taking 36 seats, while Fianna Fail is seen to win 45 seats and Sinn Fein at 37 seats in Ireland’s snap general election. (Newswires)

ECB’s de Guindos says we have tools and willingness to use them if necessary. We can lower interest rates further, increase the volume of debt purchases or increase liquidity injections, but the side effects are increasingly evident. That is why we continually insist that it is now up to other actors to come into play. (ECB)

Fitch affirmed Italy at 'BBB'; Outlook stable and affirmed Russia at 'BBB'; Outlook Stable. (Newswires)

FX

DXY was rangebound near YTD highs after the recent firmer than expected US Non-Farm Payrolls and Average Earnings data. The greenback also found a floor due to the subdued trade in its transatlantic counterparts with EUR/USD and GBP/USD around 1.0950 and 1.2900 respectively amid continued Brexit anxiety as EU member states were reportedly toughening their demands for 'status quo' access to UK fishing waters post-Brexit, while France is also demanding the UK aligns with EU rules permanently in return for a trade deal. Elsewhere, USD/JPY and JPY-crosses nursed some of their recent losses and antipodeans were slightly firmer heading into this week’s RBNZ meeting where OIS price in 92% chance for rates to be kept unchanged, while AUD/USD attempted a reclaim of the 0.6700 handle after firmer than expected Chinese inflation data and with PPI at its first increase in 7 months. TRY was the outperformer overnight after the nation’s banking regulator reduced limit for banks’ forex transactions which saw USD/TRY gap below the 6.00 handle which later acted as resistance for the pair.

Turkey banking watchdog BDDK said it was lowering the limit for Turkish banks’ forex swap, spot and forward transactions with foreign entities to 10% of a bank’s equity from Prev. 25%. (Newswires)

COMMODITIES

Commodities were mixed with WTI crude futures pressured at the open to below USD 50/bbl following comments from Azerbaijan’s Energy Minister who pushed back against holding an early OPEC+ meeting, while Russian Energy Minister Novak also noted that Russia is not yet prepared to reveal its stance regarding measures. However, prices then gradually recovered throughout the session given the lack of any material change to ongoing narrative with oil prices heading into European open relatively unchanged. Elsewhere, gold was rangebound amid similar price action in the greenback, while copper nursed some of the recent losses despite the risk aversion with prices benefitting as Chinese factories began to resume production.    

Baker Hughes (7th Feb): Oil +1 at 676, Nat. gas -1 at 111, total unchanged at 790. (Newswires)

Russian Energy Minister Novak stated that Russia is not yet prepared to announce its position on OPEC+ actions. In related news, Oman’s Oil Minister said he supports the output cut recommendations from the OPEC+ JTC, while there were separate comments from Azerbaijan’s Energy Minister who expects no early OPEC+ meeting and noted a February meeting was discussed and situation was analysed but the meeting will be held in March as planned. (Newswires)

Saudi Arabia and Kuwait are set to begin oil production in their neutral zone at an initial level of 10k BPD (500k BPD capacity), according to sources. (WSJ)

PetroChina plans to reduce its crude throughput by 320k bpd for February due to the coronavirus. (Newswires

US 

The Treasury curve bull-flattened on Friday, ahead of the weekend, amid coronavirus concerns overshadowing the strong US January jobs report. The T-Note was initially offered on the headline NFP print (+225k vs. exp. +160k), with desks noting an “algo drilled” move lower before real money and CTAs swiftly moving into cover shorts, prompting the reversal higher. Participants are likely eager to reduce their risk exposure over the weekend; a growing chorus of US corporates have been noting potential financial impacts from the coronavirus in their guidance and the number of cases/deaths continues to rise in China, seeing further quarantine measures in the APAC region. One desk highlights the bull flattening particularly interesting ahead of the duration-heavy Treasury issuance next week (3s, 10s and 30s), which, ceteris paribus, would lead to a bear steepener. By settlement, the 10-year yield had fallen by just north of 6bps to 1.58%, with the curve generally flatter: 2s5s -1.3bps, 2s10s -1.6bps, 2s30s -1.8bps. US T-note futures (H20) settled 16+ ticks higher at 131-02+.

NEC Director Kudlow said US companies are flexible and adept when asked how worried the administration is regarding the impact to production from the coronavirus, while he added that this is principally a China problem. (VOA)