• European bourses are softer this morning in-line with the knock to risk-tone post AAPL revenue warning
• Apple (AAPL) issued a revenue warning in which it does not expect to meet revenue guidance for the March quarter citing the coronavirus outbreak
• China's President Xi says that China is still able to meet the 2020 economic targets, in-spite of the impact of the coronavirus
• EZ Finance Minister, including German Finance Minister Scholz, have adopted a recommendation for a fiscal boost in the event of a downturn
• Heavy Russian attacks on Ukraine in the Lugansk province have been reported
• Looking ahead, highlights include US NY Fed Manufacturing, Japanese Trade Balance, ECB’s Panetta & Fed’s Kashkari

CORONAVIRUS UPDATE

China's Hubei province reports 1807 new coronavirus cases and 93 additional deaths as of February 17th vs. 1933 additional cases and 100 additional deaths on February 16th; Virus deal toll rises to 1800 vs. Prev. 1770. China reported an additional 1868 coronavirus cases and 98 additional deaths in the Mainland as of February 17, vs. 2048 additional cases and 105 deaths on February 16: Total Mainland cases at 72436 (Prev. 70548) and death toll at 1789 (Prev. 1770), while 1701 cured patients were discharged. China Global Times reported the number of patients infected with Coronavirus will likely peak during the second half of February in southern China; nationwide, the peak is seen in in April, according to the central government’s top medical advisor. (Newswires)

Apple (AAPL) issued a profit warning in which it does not expect to meet revenue guidance for the March quarter citing the coronavirus outbreak. Co. is experiencing a slower return to normal conditions than had anticipated and notes of slower demand in products in China alongside iPhone supply constraints. Co. said it will provide more information during its next earnings call in April and said the Co. is fundamentally strong and any disruptions to business is temporary. (Apple/Newswires) NOTE: Apple has an 11.64% weighting in NASDAQ 100, 7.5% in the DJIA, and 4.8% in S&P 500.

Tests for a coronavirus drug made by Gilead (GILD) are going slower than hoped amid struggles to recruit qualified patients, according to WSJ. (WSJ) Gilead's drug was seen as a promising remedy to tackle coronavirus. Elsewhere, Japanese Government Spokesman Suga said they soon aim to start trials using HIV treatment for coronavirus. (Newswires) Prior recent reports noted that HIV treatments have been showing positive signs against infected patients in China

US State Department official stated the incubation period for the coronavirus ranges from 2 to 14 days, with a median of 5-6 days. (Newswires) CDC has listed 467 people in 42 states in the US under investigation for the novel coronavirus. Of them, 15 have tested positive, 392 negative, and 60 are still pending, (CNN)

Hong Kong Chief Executive Lam said Hong Kong fund to tackle the virus outbreak has increased to HKD 28bln (Prev. HKD 25bln). (Newswires) South Korean President Moon called for 'special' economic policy measures to cope with 'emergency' situations caused by coronavirus, current economic situation is 'more serious' than thought, via Yonhap. (Newswires)

ASIA-PAC

Asia-Pac equities traded with losses across the board following a non-existent lead from Wall Street, but as sentiment was dented following a profit warning by Apple, citing the coronavirus outbreak. At the electronic open, major US equity futures experienced downside, with Nasdaq Mar’20 futures immediately giving up the 9600 mark as Apple carries an 11%+ weighting in the index. ASX 200 (-0.2%) was led lower by broad losses across the majority of its stocks in the index, and with material names pressured amid a pullback in base metal prices and as mining-giant BHP traded lower despite topping Adj. EBITDA and underlying profit forecasts, as the miner anticipates net demand losses in the near term amid the virus outbreak. Nikkei 225 (-1.4%) conformed to the overall risk tone but underperformed the region throughout a bulk of the session amid currency dynamics, and with Nissan shares under renewed pressure after its CEO foresees challenges to earnings and cashflow for the remainder of the FY. Other notable movers from the Apple fallout included Samsung Electronics, Taiwan Semiconductor, SK Hynix and Pegatron whose shares all traded lower by 1.5-3.0%. Elsewhere, Hang Seng (-1.5%) and Shanghai Comp (U/C) joined the downbeat performance across the region, with the former weighed on by its heavyweight financials and oil-giants, whilst the latter fared slightly better following yesterday’s PBoC stimulus injection.

PBoC set USD/CNY mid-point at 6.9826vs. Exp. 6.9832 (Prev. 6.9795) (Newswires) PBoC drained a net CNY 220bln on the day

China's President Xi says that China is still able to meet the 2020 economic targets, in-spite of the impact of the coronavirus, State Media. (Newswires)

China said it is to receive applications for tariff exemptions for certain products from the US, as expected. Products include pork, beef and soybean - effective for one year. (Newswires)

US

Democratic Presidential Candidate Bloomberg has qualified for the Nevada debate this Wednesday after reaching 19% support in new NPR/PBS NewsHour/Marist poll, according to a Bloomberg News journalist on Twitter. (Twitter)

-        The poll referenced in the Tweet is as follows: Sanders 31%, Bloomberg 19%, Biden 15%, Warren 12%, Klobuchar 9%, Buttigieg 8%, Steyer 2%

Top Trump administration officials are in discussions to reassign deputy national security adviser Victoria Coates to the Department of Energy from the National Security Council, according to sources cited by Axios. (Newswires)

UK/EU

UK’s Chief Brexit Negotiator Frost said the central vision for the UK is to be able to set its own laws, to think that UK might accept EU supervision on level playing field is wrong and that the UK would not extend transition period beyond 2020, according to a draft. Frost added that tying UK to EU rules would undermine public backing for UK Government at home and UK expects open and fair competition based on FTA with EU. Frost also said the EU must endorse relationship of equals if it wants sustainable relationship with the UK. (Newswires)

UK PM Johnson and Chancellor Sunak are reportedly mulling cutting the rate of pension tax relief for higher earnings to 20% from 40%, which could raise GBP 10bln per annum, according to the Times. (Times) This also follows recent reports that Sunak is considering abandoning current fiscal rules that control day-to-day spending and ensure the government aims to reduce debt levels. Subsequently, Sunak has confirmed the budget will occur on March 11th. (Newswires)

Number 10 Adviser Andrew Sabisky has resigned after a string of controversial posts were uncovered. (Sky News)

EZ Finance Minister, including German Finance Minister Scholz, have adopted a recommendation for a fiscal boost in the event of a downturn. (Newswires)

UK ILO Unemployment Rate (Dec) 3.8% vs. Exp. 3.8% (Prev. 3.8%); Employment Change (Dec) 180k vs. Exp. 145k (Prev. 208k).

-        Avg Wk Earnings 3M YY (Dec) 2.9% vs. Exp. 3.0% (Prev. 3.2%); (Ex-Bonus) (Dec) 3.2% vs. Exp. 3.3% (Prev. 3.4%)

-        Claimant Count Unem Chng (Jan) 5.5k (Prev. 14.9k, Rev. 2.6k)

German ZEW Economic Sentiment (Feb) 8.7 vs. Exp. 21.5 (Prev. 26.7); Current Conditions (Feb) -15.7 vs. Exp. -10.3 (Prev. -9.5)

GEOPOLITICS 

Heavy Russian attack on the Ukrainian front in the Lugansk province, heavy weapons have been used with deaths reported on both sides. Attack has been occurring for over 4-hours, Ukrainian reinforcements reportedly on the way, Bild's Ropcke. (Newswires)

EQUITIES

European equities (Eurostoxx 50 -0.4%) mostly reside in negative territory as the fallout from Apple’s (pre-market -3.3%), revenue warning reverberates across the marketplace. Apple ‘s warning for Q1 revenue guidance was attributed to the coronavirus with the Co. noting it is experiencing a slower return to normal conditions than had anticipated and noted slower demand in products in China alongside iPhone supply constraints. Given that rival peers will likely be subject to similar supply-chain disruptions, IT names lag this morning with ASML International (-2.0%), Dialog Semiconductor (-4.5%), STMicroelectronics (-3%) and Infineon (-1.5%) all enduring losses. From a more medium-term perspective (referring to the US semiconductor sector), Credit Suisse notes “while we expect Semis to trade lower - we would recommend investors who can look into 2H and beyond should use weakness to accumulate best in class companies with a solid structural outlook”. Elsewhere, given the broader macro implications of Apple’s warning, material names are also softer thus far with uninspiring updates from Glencore (-3.9%) and BHP (-2.6%) pressuring the sector. Financials are falling victim to lower yields and a lacklustre update from HSBC (-5.7%) with the Co. unveiling a 33% decline in profits and a restructuring plan that will lead to a job cull of around 35k. Bucking the trend of the pessimism in Europe is the FTSE MIB (+0.3%), in the wake of Intesa Sanpaolo’s (+2.0%) takeover approach for UBI Banca (+22%), which has also stoked optimism around the prospect of further sector consolidation in Italy.

Apple (AAPL) - Co. does not expect to meet revenue guidance for March quarter citing coronavirus, Co. is experiencing a slower return to normal conditions than had anticipated; notes slower demand in products in China alongside iPhone supply constraints. Citing: worldwide iPhone supply will be temporarily constrained, demand for our products within China has been affected. "The situation is evolving, and we will provide more information during our next earnings call in April." & "Apple is fundamentally strong, and this disruption to our business is only temporary.". (Newswires) Co. are 3.3% lower in pre-market

Walmart Inc (WMT) Q4 19 (USD): EPS 1.38 (exp. 1.44), Revenue 141.7bln (exp. 142.52bln); US Q4 comp sales +1.9% vs. Exp. +2.4%. Net sales USD 140.61bln vs. Prev. USD 137.74bln, Sees FY EPS USD 5.00-5.15, vs. Exp. USD 5.22, Quarterly GAAP & adj. EPS lowered by circa USD 0.05 due to disruptions in Chile as well as a legal matter affecting Sam's Club. (Newswires) Co. have a 2.7% weighting in the DJIA

FX

USD/JPY/CHF/XAU - Although daily updates from China continue to signal that the worst may be over in terms of coronavirus cases and casualties, Apple has joined others issuing warnings about the fallout hitting Q1 production and sales targets with wider repercussions for the tech sector and risk sentiment in general. Hence, the traditional safe haven currencies (and assets) have regained a firm bid after losing some appeal at the start of the week and the DXY is back on track to post higher 2020 peaks as it edges further above 99.000 with only the likes of the Yen, Franc and Gold managing to keep pace or stay ahead of the Greenback. Indeed, Usd/Jpy has eased back a bit further from recent 110.00+ levels, while Usd/Chf is gravitating back towards 0.9800 alongside Eur/Chf on the 1.0600 handle and Usd/Xau is just below Usd1590/oz compared to a low of Usd1579 yesterday. Back to the index, 99.249 resistance has been eclipsed and 99.500 is the obvious next target for bulls ahead of last year’s 99.667 best.

NZD/AUD/SEK/NOK - The Antipodes are vying with their Scandi peers for the unenviable, though largely unavoidable tag of biggest G10 lower, and the Kiwi is shading it as Nzd/Usd slips under 0.6400 and Aud/Nzd holds near 1.0450 even though Aud/Usd has lost grip of the 0.6700 handle in wake of RBA minutes also flagging the Chinese nCoV outbreak as the biggest near term threat and keeping a rate cut on the table. Meanwhile, the Swedish Crown has been undermined by a rebound in jobless rates and its Norwegian counterpart by a sharp retreat in crude prices amidst the broad deterioration in risk appetite, with Eur/Sek up over 10.5600 at one stage and Eur/Nok near the top of a 10.0220-10.1100 range.

GBP - Bucking the overall trend, and seemingly gleaning a belated fillip from encouraging UK jobs data (claimant count and employment change) Cable has recouped all and more of its losses around 1.3000 after testing major technical support at 1.2971 (where the 10 DMA aligns with a 50% Fib retracement), while Eur/Gbp has reversed from circa 0.8350 to just above 0.8300. Note, some selling subsequently noted in the headline pair around the 200 WMA (1.3038).

EUR/CAD - Both succumbing to widespread Usd strength, with the single currency also weighing up divergent independent factors in the form of a worrying ZEW survey in contrast to reports that all Eurogroup Finance Ministers are on board with apportioning some budget finances in the event of an economic downturn, whatever that is deemed to be in terms of severity and how much cash will be allocated. Eur/Usd skirting last week’s 1.0821 base vs around 1.0837 at one stage, while Usd/Cad straddles 1.3250 ahead of Canadian manufacturing sales and with the Loonie also hampered by the aforementioned recoil in oil.

EM - Further depreciation vs the Dollar across the board, but the Rand also wary about more Eskom load-shedding, while the Lira and Rouble are still embroiled in Syria-related issues, and the latter also undermined by heightened conflict in the Ukraine.

RBA Minutes (Feb) reiterated that the Board discussed the case for further easing, chose to hold given that rates are already low and repeated that the Board remained prepared to ease further if needed. The minutes also highlighted that Coronavirus is a “material” risk to the Chinese economy and hence Australia, whilst reiterating that there was uncertainty around estimates of the effects of the bushfires and the coronavirus outbreak and it’s too early to judge virus impact. The release noted that economic drag from bushfires to be felt in Q4 and Q1, full recovery expected by year-end and it’s reasonable to expect that an extended period of low-interest rates would be required in Australia to reach full employment and achieve the inflation target. Finally, the minutes repeated that the outlook remained for the Australian economy to improve due in part to housing pick-up. (Newswires)

FIXED INCOME

Core debt has pared gains across the board, partly in recognition of an inverse bounce in equities from worst levels, but also as Bunds digest news that Eurozone Governments are willing to loosen fiscal policy if economic developments worsen and Schatz digest a decent if not downright solid Eur5 bn auction. The 10 year EU benchmarks are all off peaks that came in at 174.92, 133.87 and 131-12+ on Eurex, Liffe and overnight UST trade respectively, albeit still holding up relatively well ahead of the return of Treasury cash markets after Presidents’ Day and eyeing the Empire State survey before NAHB and a late speech from Fed’s Kashkari for further inspiration.

COMMODITIES

WTI and Brent front month futures are subdued this morning with losses just shy of USD 1/bbl at present in-line with the general risk sentiment. Newsflow has picked up on the geopolitical front, although not enough to dictate price action at present; with focus returning to the ongoing dispute between Russia and Ukraine which has flamed up once more on reports of heavy fighting in the Lugansk province. Ukraine has one of the largest gas transmission systems in the world, which is heavily linked to Russian, Belarus, Poland and other surrounding nations; the region in question does contain a number of gas pipelines but it is unclear as to whether they are currently in use as a bypass has been constructed. Focus will remain on how this escalates, and if it leads to disruptions to gas supply. Sticking with Russia, the Kremlin this morning noted that Energy Minister Novak is still considering his position with reference to the recommended JTC production cuts. In terms of outlook, given the coronavirus ING have revised down their price forecasts as the virus causes consumption to drop; with cuts of USD 5/bbl for Q1 Brent (from USD 60/bbl to USD 55/bbl), although their forecasts are unchanged by 2021. Note, given the US holiday the weekly API and EIA metrics will be released one day late on Wednesday and Thursday respectfully. Turning to metals, where spot gold is firmer this morning on the aforementioned geo-political tensions and as the coronavirus begins to impact US tech giants; albeit, the metal has dipped marginally from session highs in recent trade ahead of the US’ entrance to market. Elsewhere, copper prices are little changed but were hit overnight in-line with general risk sentiment.

Libya’s NOC said its oil production stood at 135,745 BPD on Monday 17th vs. 163,684 on Thursday 13th. (Newswires)

China Trade Body said some customers in Russia, Turkey, Middle East and North Africa have stopped accepting China metals products deliveries amid the virus outbreak. (Newswires)