• Asian equities traded with downside bias after a weak handover from Wall Street, Hang Seng and KOSPI lagged
• China reported an additional 889 (Prev. 394) coronavirus cases and 118 (Prev. 114) additional deaths as of February 20
• South Korea’s virus case count rose to 156; two evacuees from the Diamond Princess cruise have tested positive for coronavirus since landing
• Chinese Commerce Ministry is speeding up the study of new measures to provide further support for companies
• In FX, DXY was flat, USD/JPY traded on either side of 112.00, AUD and NZD came under pressure
• Looking ahead, highlights include EZ, UK, US Flash PMIs, EZ CPI (Final), US Existing Home Sale, ECB’s Lane & Wunsch, Fed’s Kaplan, Brainard, Clarida, Bostic
• Earnings include Berkshire Hathaway, Deere, Allianz

CORONAVIRUS UPDATE 

China’s Hubei province reported 631 new cases and 115 additional deaths from the coronavirus as of February 20 vs. 349 additional cases and 108 deaths on February 19; Hubei death toll 2144 vs. Prev. 2029. China reported an additional 889 coronavirus cases and 118 additional deaths as of February 20 vs. 394 additional cases and 114 deaths on February 19; Total cases 75465 vs. Prev. 74576; Total deaths 2236 vs. Prev. 2118. (Newswires)

South Korea reported 52 more cases of new coronavirus, with the total now at 156. (Yonhap) South Korea is to check all pneumonia patients in Daegu as virus cases soars. Furthermore, South Korea is to designate Daegu, Cheongdo as 'special care zones' over infectious disease. (Yonhap) Reports stated that the US military in South Korea has raised its danger level and urgently blocked all bases and facilities in Daegu due to the virus spread, A large-scale cluster of infections was found in Daegu, with 78 confirmed cases reported in a local church. (Global Times)

Two evacuees from the Diamond Princess cruise in Japan have tested positive for coronavirus since landing in Darwin, according to 7News Australia. (Twitter)

China's Vice Technology Minister says the fastest coronavirus vaccine to be submitted for clinical trials will be around late April. Meanwhile, China’s NHC Vice Minister said treatments using plasma from recovered coronavirus patients have shown positive effects on seriously ill patients. (Newswires)

Chinese Commerce Ministry Official said that the government is speeding up the study of new fiscal, tax, financial and insurance measures to provide further support for companies amid the virus outbreak. The official expects Jan-Feb import and export growth to fall back notably. (Newswires)

One of the Chinese factories that’s been hardest hit by the coronavirus appears to be returning to activity, signalling that China’s government is allowing people to return to work there, according to the New York Post. (New York Post) Meanwhile, MOFCOM official sees foreign companies in most places in China to resume production by the end of the month, does not expect large scale layoffs at foreign trade companies in China. Separately Huawei President of 5G product line said there is no impact at all to supply of equipment to its customers from nCoV. (Newswires)

ASIA-PAC

Asian equities traded with downside bias after a weak handover from Wall Street, which saw notable mid-day selling despite a lack of fresh fundamental drivers, with some pointing to technical and algo-related action driving the downside. ASX 200 (-0.3%) conformed to the broad risk tone as the index pulled back further from its recent record high. Nikkei 225 (-0.4%) swung between gains and losses, with downside cushioned to an extent by a predominantly weaker JPY. Meanwhile, index heavyweight Softbank’s shares rose in almost 3% after the Sprint and T-Mobile boards unanimously approved the merger amendments brought up by the latter’s parent company Deutsche Telekom – for reference Softbank owns 84% of Sprint whilst Deutsche Telekom controls 63% of T-Mobile. Elsewhere, Hang Seng (-1.1%) lagged as all stocks resided in negative territory for most of the session, and with gambling name underperforming as Macau casinos continue to cautiously reopen, but with business limited amid the city’s stringent controls on visitor entry and with ferry suspensions from Hong Kong. Meanwhile, Shanghai Comp (+0.3%) traded warily earlier in the session, although the index clambered off lows and rose to session highs after a MOFCOM official stated that the government is speeding up the study of new measures to further support companies from the impact of the virus outbreak. Finally, KOSPI (-1.5%) posted heavy losses amid the rising domestic COVID-19 cases, with President Moon also reportedly considering raising the alert level over the spread in the country.

US Treasury official said US does not expect China to alter its purchase commitments under Phase One of the US/China trade deal due to the coronavirus. (Newswires) Elsewhere, reports noted that China is likely to import 10mln T of LNG from the US in 2020 to fulfil the China-US phase one trade deal, Global Times reports, more than four-fold compared with 2018. (Global Times)

Japanese Finance Minister Aso said the government will respond accordingly to FX moves based of G20 and G7 accord, adding that FX stability is important, although he refused to comment on FX levels. Meanwhile, Japanese Economy Minister Nishimura said he thinks the weak JPY is a reflection of a strong US economy. (Newswires)

BoJ Governor Kuroda said the Japanese economy is to continue gradual expansion ahead, watching effects of virus impact with grave concern. Kuroda reiterated that the Central Bank will not hesitate to take additional easing steps if needed, not yet the time to discuss specific monetary policy measures in response to the virus outbreak. (Newswires)

PBoC set USD/CNY mid-point at 7.0210 vs. Exp. 7.0129 (Prev. 7.0026) (Newswires) PBOC skipped open market operations for a daily net neutral position

Japanese Jibun Bank Manufacturing PMI Flash (Feb) 47.6 (Prev. 48.8) (Newswires) Japanese Jibun Bank Services PMI Flash (Feb) 46.7 (Prev. 51.0) Japanese Jibun Bank Composite PMI Flash (Feb) 47.0 (Prev. 50.1) Japanese CPI, Overall Nationwide (Jan) 0.7% vs. Exp. 0.7% (Prev. 0.8%) Japanese CPI, Core Nationwide YY (Jan) 0.8% vs. Exp. 0.8% (Prev. 0.7%)

UK/EU

UK PM Johnson and US President Trump spoke on the phone and reiterated their commitment to the UK-US relationship and look forward to seeing each other at the G7 Summit in the US in June. (Newswires/FT)

FX

DXY steadied just off recent highs of 99.915 with price action uneventful throughout the overnight session. EUR/USD and GBP/USD similarly traded sideways amid a lack of overnight news-flow and ahead of flash PMIs, with the former below 1.0800 having tested mild support around 1.0780 and with talks of barriers at 1.0775. Meanwhile, the widening rift between UK and EU on a future trade deal kept Cable under 1.2900, after the pair tested support at the psychological 1.2850 level ahead of the late November base at 1.2822. Elsewhere, USD/JPY fluctuated on either side of 112.00 – with the narrative of a weakening Japanese economy further affirmed by dismal flash PMIs which showed Services and Composite falling into contraction, whilst Manufacturing declined further below 50, thus prompting IHS to note that the odds are stacked heavily against Japanese Q1 growth following the Q4 shrink. Despite the recent string of poor domestic data, Japanese Economy Minister Nishimura believes the recent JPY weakness is more a function of a strong US economy, albeit Finance Minister Aso stated the government will respond accordingly to FX moves based on G20 and G7 accords. Meanwhile, AUD and NZD largely moved in tandem with the USD throughout a bulk of the session before succumbing to downside as the Chinese Commerce Official stated that he expects China’s Jan-Feb import and export growth to fall back notably. AUD/USD breached mild support at 0.6610 and gave up its 0.6600 handle to fall to an 11yr low, whilst NZD/USD declined below touted support at 0.6325 (11th and 12th November lows) ahead of psychological support at 0.6300.

COMMODITIES

WTI and Brent front-month futures traded on the backfoot overnight as prices were pressured by the overall risk aversion in the market, coupled with demand prospects as the virus outbreak seeps more profoundly into other Asian countries. WTI drifted further below USD 54/bbl before finding an overnight base just under USD 53.40/bbl, whilst its Brent counterpart oscillated on either side of USD 59/bbl. Elsewhere, spot gold continued to power ahead, underpinned by the risk tone and with prices printing fresh multi-year highs with every stride. The yellow metal topped USD 1625/oz to post levels last seen on 15th Feb 2013. Elsewhere, copper prices were little changed intraday as losses from the downbeat sentiment were countered by further Chinese stimulus pledges. Conversely, Dalian iron ore futures rose around 3% on supply side issues, with export disruptions from Australia and lower output of the base metal from mining giant Rio Tinto.

Iraqi Oil Minister said the coronavirus impact can lead to an oil surplus in coming months, according to state TV. (Newswires)

Libya's NOC said oil production on Thursday stood at 122.42k BPD (vs. 123.5k BPD on Tuesday) (Newswires)

GEOPOLITICAL 

Saudi Air Defence has intercepted and destroyed several ballistic missiles fired at the Kingdom from Yemen's Sanaa, according to state news agency. (Newswires)

Turkish Defence Minister says it will activate Russian S-400 missile defence systems. (Newswires)

A global terror-finance watchdog agency is set to blacklist Iran, broadening a U.S. effort to isolate Tehran financially, according to WSJ, the blacklisting is expected to take place on Friday. (WSJ)

US 

* US T-NOTE FUTURES SETTLE 11+TICKS HIGHER AT 131-14. The US Treasury curve bull-flattened, with yields down between 4-5bps at settlement, with major curve spreads all narrowing, though by 2bps max. The overarching theme was concerns about the spread of the coronavirus. A decent Philly Fed report raises hopes of good regional Fed manufacturing surveys next week, ahead of 2nd March manufacturing ISM; initial jobless claims for the week coincide with the NFP survey period, and augur very well; both these releases helped risk appetite, seeing 10-year T-Notes sell-off by around 4 ticks or so, although the upside for yields was limited. Into afternoon trade, risk had a wobble, which contributed some upside in the fixed income, though ultimately, the complex was relatively stable compared to the slide in equities, although the 3m/10yr spread narrowed further into inversion (low was -6.7bps), lowest since October 2019.

Fed's Barkin (non-voter) said the US economy is moving at a good pace. (Newswires)

Illinois US Democratic Primary Poll: Sanders 22%, Bloomberg 17%, Biden 14% Buttigieg 13% Klobuchar 8%. (Newswires)