• USD remains king as 100 comes into focus for the DXY as it outperforms G10 peers, particularly JPY/AUD/NZD
• European bourses have traded largely directionless for the session, as focus remains on geopolitics/virus headline risk
• Concerns mount over the spread of coronavirus outside of China, namely Japan and South Korea
• Chinese PBoC LPR Rate 1yr 4.05% vs Exp. 4.05% (Prev. 4.15%); 5yr 4.75% (Prev. 4.80%)
• Turkey and Russia are in talks regarding joint patrols around Idlib, Syria
• Looking ahead, highlights include US Initial Jobless Claims, EZ Consumer Confidence, ECB Minutes, Supply from US, and EU27 Budget Discussion

CORONAVIRUS UPDATE

China Hubei province reported 349 new cases under revised guidelines* and 108 additional deaths from the coronavirus as of February 19 vs. 1693 additional cases and 132 deaths on February 18, total deaths 2029 vs. Prev. 1921. China reported additional 349 coronavirus cases (under revised guidelines) and 114 additional deaths as of February 19 vs. 1749 additional cases and 136 deaths on February 17th; Total cases 74576 vs. Prev. 74185; deaths 2118 vs. Prev. 2004. (Newswires) *Under the revised guidelines, the "clinically diagnosed" category was dropped - which initially considered a patient a confirmed case with a CT scan and symptoms. These patients now fall under “suspected”.

Two passengers of the Diamond Princess cruise ship have died of coronavirus. (NHK) Furthermore, the number of people in serious condition from the Diamond Princess cruise ship stands at 29, including one who tested negative for the virus, according to Kyodo citing the Health Ministry. (Newswires) Over 700 people in Washington state are reportedly being publicly supervised for coronavirus. The figure includes close contacts of laboratory-confirmed cases, as well as people who have returned from China in the past 14 days, according to WSBT. Separately, US President Trump reiterated that he is "confident China is trying very hard" regarding the handling of the coronavirus. (Newswires)

South Korea have reported 22 additional coronavirus cases, with the total now at 104, reports first death, according to Yonhap. (Yonhap)

China’s smartphone shipment declined 50%-60% during the 2020 Spring Festival holidays due to the coronavirus outbreak. About 60mln smartphones remain unsold, among which Huawei’s devices account for one-third, according to GT citing reports. (Twitter)

China's Hebei government has established a special financing vehicles worth CNY 50bln to restore production and stabilise investments amid the outbreak of the coronavirus. (Newswires)

China's government has asked for an increase in pace of business resumption as soon as possible. (Newswires)

ASIA-PAC

Asian equity markets traded mixed having pared a bulk of earlier gains despite the promising lead from Wall Street which saw the S&P 500 and Nasdaq print fresh record highs. The optimistic sentiment in the region faded following the number of coronavirus cases in South Korea rising by 60%, and amid reports of two deaths from the Japanese cruise ship. Nonetheless, ASX 200 (+0.3%) was buoyed by its large-cap mining and energy sector, following recent gains in the respective complexes. Nikkei 225 (+0.4%) initially posted gains of over 1.5% with upside originally fuelled by a considerably weaker JPY, although the index later pulled back with a chunk of its transport stocks in the red, and amid reports that multinational companies are avoiding travel to and from Japan over fears that the country will be the next hotspot in the outbreak. Elsewhere, Hang Seng (-0.9%) erased opening gains and underperformed as a bulk of its stocks reversed course into negative territory, and with its heavyweight financial sector on the defensive. Meanwhile, Shanghai Comp (+1.0%) rebounded with a vengeance in late trade and topped the 3000 mark for the first time since before the Lunar New Year, after initially swinging between gains and losses despite the expected stimulus measures by the PBoC, as traders were cautious following the case jump in South Korea and deaths on the cruise ship off Yokohama, with the former prompting South Korea’s KOSPI (-0.5%) to trade with losses of almost 1.0% at one point.

Chinese PBoC LPR Rate 1yr 4.05% vs Exp. 4.05% (Prev. 4.15%) (Newswires) Chinese PBoC LPR Rate 5yr 4.75% (Prev. 4.80%)

PBoC set USD/CNY mid-point at 7.0026 vs. Exp. 7.0025 (Prev. 7.0012) (Newswires) PBOC skipped open market operations for a daily net neutral position

Chinese M2 Money Supply YY* (Jan) 8.4% vs. Exp. 8.6% (Prev. 8.7%)

-        New Yuan Loans* (Jan) 3340B vs. Exp. 3000.0B (Prev. 1140.0B)

-        Outstanding Loan Growth* (Jan) 12.1% vs. Exp. 12.1% (Prev. 12.3%)

Japanese Government Monthly Report (Feb): keeps overall economic view unchanged, warns of effects from the coronavirus on Japan. Notes the economy is recovering at a moderate pace. (Newswires)

China has issued a list of US agricultural products that will be eligible for tariff waivers, according to sources in a move that signifies China have re-entered the market for US ags. (Newswires)

Reports of an earthquake in Tokyo, Japan, with the epicentre near Chiba, magnitude 4 out of 7 on the Shindo scale, reportedly ~4.5 on the Richter scale. (JMA)

US

US President Trump has named Richard Grenell as Acting Director of National Intelligence. (Twitter)

UK/EU

There were reports of two shooting in German city Hanau in Hesse, in which 11 people were reported to have been killed. (Newswires/BBC) Hanau is part of the Frankfurt Rhine-Main Metropolitan Region. Its station is a major railway junction and it has a port on the river Main.

ECB's de Guindos says the outlook for global economic activity outside the Euro area has recently begun showing some signs of improvement; notes the strategic review will be comprehensive. (Newswires)

EU's Michel is convinced EU leaders will make progress on the new long term budget. (Newswires)

German GfK Consumer Sentiment (Mar) 9.8 vs. Exp. 9.8 (Prev. 9.9). (Newswires)

UK Retail Sales MM (Jan) 0.9% vs. Exp. 0.7% (Prev. -0.6%, Rev. -0.5%); YY (Jan) 0.8% vs. Exp. 0.7% (Prev. 0.9%)

-        Ex-Fuel MM (Jan) 1.6% vs. Exp. 0.8% (Prev. -0.8%); YY (Jan) 1.2% vs. Exp. 0.4% (Prev. 0.7%)

-        UK CBI Trends - Orders (Feb) -18 vs. Exp. -19.0 (Prev. -22.0)

GEOPOLITICS 

Turkey and Russia are in talks regarding joint patrols around Idlib, Syria, as a potential way to ensure security in the region, according to a Turkish official; Turkey, Russia and Iran are to meet in Tehran next month. A Russian delegation could visit Ankara ahead of that meeting. (Newswires)

EQUITIES

European indices kicked the session off on a relatively directionless footing before seeing modest downticks amid increased fears over the spread of coronavirus outside of China. Focus in recent trade has been placed upon developments in Japan and South Korea with the former reporting two passenger deaths abord the Diamond Princess cruise ship off the coast of Yokohama, whilst the latter announced a marked pickup in coronavirus cases (total now stands at 104 vs. Prev. 51) and its first death. Sectoral performance has been a mixed bag thus far with price action largely dictated by a slew of large cap earnings, which has seen Telefonica (-5.7%), act as a drag on the Telecom sector following disappointing 2019 profit metrics. Elsewhere, to the upside, post-earnings, Smith & Nephew (+8.5%), Schneider Electric (+5.2%), Fresenius Medical (+4.2%), Fresenius SE (+4.2%), Maersk (+3.7%), Lloyds (+3.3%), Bouygues (+2.7%) and BAE Systems (+2.5%) lead the charge for the Stoxx 600. To the downside, Air France (-8.9%), disappointing earnings release has hampered other airline names, including Deutsche Lufthansa (-3.2%) and RyanAir (-1.8%), whilst corporate updates from Swiss Re (-4.9%) and Axa (-3.0%) has triggered losses in their respective shares.

China is reportedly considering prolonging electric car subsidies beyond 2020. (Newswires)

FX

USD/JPY - USD began the session on a firmer footing once again after taking out overnight highs of 99.778 to print a session high thus far of 99.875. Once again, there has been little in the way of fresh fundamental catalysts behind the USD move with gains instead largely as a result of weakness elsewhere, namely the JPY. Early doors in Europe, USD/JPY took out the overnight high of 111.59 before taking out 112.00 to the upside (current high of 112.18), which could open up a test of the April 26th high at 112.40. Explanations for the JPY have varied with some leaning on the traditional arguments of selling of JPY by Japanese pension planners to buy US assets; however, others favour focusing on recent disappointing data prints for Japan (Monday’s GDP figures) and concerns over the ramifications of the coronavirus for the nation, something which could impair the Tokyo Olympics this summer. If JPY declines continue to accelerate, 100.00 in the DXY looks a reasonable bet, with 100.50 marking the April 18th 2017 high.

EUR - Price action for the shared currency has largely been dictated by the “King USD” after gains in the greenback knocked the pair below yesterday’s low of 1.0782, with the session trough at 1.0778 (gap support from April 2017) at the time of writing. Should the EUR continue to fall victim to the USD, technicians’ eye 1.0761 which was the 20th April 2017 high, with not much in the way of support until the 1.0700 figure. From a fundamental perspective, the main highlight on today’s docket from the Eurozone comes via the minutes from the January ECB meeting (full preview available via the research suite of the website). That said, participants are unlikely to glean too much in the way of fresh insight from the Bank with the meeting itself providing little in the way of fireworks as policymakers tread water ahead of the upcoming strategic review. Furthermore, greater policy guidance from the ECB since the meeting has come from commentary via President Lagarde who noted that low interest rates and low inflation have significantly reduced the scope for the ECB and other central banks to ease monetary policy in the face of an economic downturn.

GBP - Momentum for GBP early doors was driven by the pick-up in the USD before the pound dug in and reclaimed 1.2900 to the upside after printing a low of 1.2874, just above the multi-week low of 1.2873 seen on February 10th. Sentiment for the GBP was also bolstered by encouraging retail sales metrics, with all four metrics exceeding expectations amid a pickup in clothing and footwear sales, helping to add to the evidence-pile for those championing the so-called “Boris-bounce”. That said, gains for GBP were relatively fleeting with perhaps some in the market apprehensive amid simmering tensions between the UK and EU this week ahead of upcoming trade negotiations at the beginning of next month.

AUD/NZD - Focus for the antipodes has largely fallen on AUD given overnight employment figures which saw modest downside in AUD/USD upon the release despite the headline employment change topping estimates (led by full-time employment), as the unemployment rate rose more than expectations, although money market pricing for a March RBA rate cut was largely unchanged. AUD went on to take out stops at 0.6650 before printing an eventual low at 0.6623 (10yr low!); note there is a large AUD 2.1bln expiry in AUD/USD at 0.6700. NZD has also been weighed on during the APAC and EU session in sympathy with Aussie losses with the NZD/USD pair being dragged from just shy of 0.6400 to take out 0.6350 to the downside and print a low of 0.6335.

CNY/KRW/TRY/ZAR - USD/CNH saw little action on the expected PBoC LPR rate reductions, although the pair saw upside amid a firmer Dollar, and stabilised ~7.0300. China has continued to reassure the market over the fallout of the coronavirus with the Commerce Ministry stating they will roll out targeted support measures in a timely way to mitigate the impact on firms and consumption. However, some in the market have raised concern over newly revised guidelines by Chinese authorities in classifying coronavirus designations, something which could potentially obfuscate matters further. On the coronavirus footing, USD/KRW rose from ~1191.00 and breached mild resistance at 1198.40 (3rd Feb high) before eclipsing 1200.00 to the upside during the APAC session amid increased coronavirus cases in South Korea. Elsewhere, overnight, TRY experienced a spiker higher amid thinned volumes and alongside broad EM FX weakness, USD/TRY immediately rose from ~6.0800 to levels north of 6.1000 before completely paring the move to reside on a 6.09 handle. Finally, ZAR has seen some softness relative to EM peers amid an announcement from ESKOM that rolling blackouts will be impose in South Africa from today until Saturday, something that will act as a further drag on activity ahead of next week’s budget announcement.

Australian Employment (Jan) 13.5k vs. Exp. 10.0k (Prev. 28.9k) (Newswires) Australian Unemployment Rate (Jan) 5.3% vs. Exp. 5.2% (Prev. 5.1%) Australian Participation Rate (Jan) 66.1% vs. Exp. 66.0% (Prev. 66.0%) Australian Full Time Employment (Jan) 46.2k (Prev. -0.3k)

FIXED INCOME

Core debt kicked off the European session on a relatively uneventful front, after an action packed APAC session saw a gradual grind higher in UST’s and Bunds; with this perhaps emanating after the PBOC’s cut which was largely as expected albeit some participants were looking for more via the 5-year LPR. However, ING have caveated that this smaller cut for the longer term rate may well be to prevent excess spending from low borrowing costs as happened in 2007/08. Returning to European hours, where the complex was bolstered on reports of a first coronavirus death in South Korea; remarks which sent Bunds to session highs just shy of the 175.0 handle at 174.91, however, the move was relatively short lived. From a technical perspective, resistance above 175.0 lies at 175.07, before 175.10 and January’s high of 175.30. Across the channel from their European peers Gilts were similarly lifted on the virus headlines but the majority of their price action is data driven. Strong retail sales figures initially sparked a test of 134.0 to the downside, a handle which subsequently broke to a low print for the session a 133.91; downside which was felt in sympathy across core peers. However, the dip was short-lived as focus for the UK economy remains on tomorrow’s Flash PMI’s; particularly as the BoE have begun placing additional emphasis on activity data. Looking ahead, the main European highlight is the ECB minutes although not too much is expected ahead of the strategic review. Stateside, a number of data prints will draw interest as will remarks from Fed’s Barkin (Non-Voter) after Kashkari departed somewhat from his usually firmly dovish tone yesterday; acknowledging the potential for the next move to be a hike. UST focus remain firmly on the 10-year yield, which is continuing to creep away from, but remains in proximity to, the key 1.50 area.

COMMODITIES

WTI and Brent prices are essentially unchanged on the day with less that USD 0.15/bbl of variation from flat at present. Newsflow specific to the complex has been slow for much of the session, with price action initially moving in tandem with the overall risk picture as main equity bourses are similarly little moved overall. Focus overnight was on the ongoing demand concerns stemming from the coronavirus, with reports this morning of a death in South Korea prompting some mild weakness; as well as the private crude inventories which printed a larger than expected headline build. Although, the internals did feature surprise/bigger draws for gasoline and distillates respectively. As we await Russia’s stance on the JTC’s recommendations interest was piqued by remarks from Energy Minister Novak but to no avail on the production cut recommendations; although, he did firmly push back on the need for an early meeting which, alongside the short proximity to the original March date, means a early meeting is all but off the table. Looking ahead, today sees the release of the EIA weekly crude report at the slightly later time of 16:00GMT/11:00EST; expectations are for a build of 2.49mln which would be just over half of the API’s 4.2mln build last night; while internal estimates are in proximity to those forecast for last nights numbers. Moving to metals, where spot gold is currently little changed but is comfortably above the USD 1600/oz mark, with a YTD high of USD 1612.93/oz yesterday which takes us back to levels not seen since 2013.

US Private Inventory Crude Stocks (w/e 14th Feb) +4.2mln (exp. +2.5mln, prev. +6mln) (Newswires) - Cushing +0.4mln (prev. +1.3mln) - Gasoline -2.7mln (exp.+0.4mln, prev. +1.1mln) - Distillates -2.6mln (exp. –1.5mln, prev. -2.3mln)

Russian Energy Minister Novak says we continue to discuss the market, not expedient to hold OPEC+ meeting ahead of schedule should meet in March as planned; does not say if Russia will support deeper oil output cuts. (Newswires)

Exxon's 503k BPD Baton Rouge refinery is reportedly to take at least a month to restart, according to sources. (Newswires)