• Sentiment remains subdued after yesterday’s sell-off; USD softens as GBP and JPY strengthen
• China's Politburo says the turning point of the virus outbreak in China has not arrived yet, State Media
• South Korea has reported 48 more cases of novel coronavirus, total rises to 204, according to Yonhap
• Libyan Commander Haftar has told Russian press he is ready for a Libyan ceasefire if some conditions are met
• Saudi Air Defence has intercepted and destroyed several ballistic missiles fired at the Kingdom from Yemen's Sanaa
• Looking ahead, highlights include US Flash PMIs & Existing Home Sales, ECB’s Lane, Fed’s Kaplan, Brainard, Clarida & Bostic

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.  (Newswires)

China's Politburo says the turning point of the virus outbreak in China has not arrived yet, State Media. (Newswires)

South Korea has reported 48 more cases of novel coronavirus, total rises to 204, according to Yonhap. (Yonhap)

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.

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%)

US

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

UK/EU

EU Markit Manufacturing Flash PMI (Feb) 49.1 vs. Exp. 47.5 (Prev. 47.9)

-        Services Flash PMI (Feb) 52.8 vs. Exp. 52.2 (Prev. 52.5); Comp Flash PMI (Feb) 51.6 vs. Exp. 51.0 (Prev. 51.3)

German Markit Manufacturing Flash PMI (Feb) 47.8 vs. Exp. 44.8 (Prev. 45.3)

-        Services Flash PMI (Feb) 53.3 vs. Exp. 53.8 (Prev. 54.2); Comp Flash PMI (Feb) 51.1 vs. Exp. 50.8 (Prev. 51.2)

French Markit Manufacturing Flash PMI (Feb) 49.7 vs. Exp. 50.7 (Prev. 51.1)

-        Services Flash PMI (Feb) 52.6 vs. Exp. 51.3 (Prev. 51.0); Comp Flash PMI (Feb) 51.9 vs. Exp. 51.0 (Prev. 51.1)

EU CPI Final YY (Jan) 1.4% vs. Exp. 1.4% (Prev. 1.4%); X F&E Final YY (Jan) 1.3% vs. Exp. 1.3% (Prev. 1.3%)

-        X F, E, A & T Final YY (Jan) 1.1% vs. Exp. 1.1% (Prev. 1.1%)

UK Flash Services PMI (Feb) 53.3 vs. Exp. 53.4 (Prev. 53.9)

-        Manufacturing PMI (Feb) 51.9 vs. Exp. 49.7 (Prev. 50.0); Composite PMI (Feb) 53.3 vs. Exp. 52.8 (Prev. 53.3)

Danish PM Frederiksen says that there will not be a budget deal achieved at this weeks' EU27 meeting, FT's Brunsden. (Twitter)

GEOPOLITICS 

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

Libyan Commander Haftar has told Russian press he is ready for a Libyan ceasefire if some conditions are met; conditions are the withdrawal of Turkish troops and mercenaries

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)

Taliban and Afghan forces have agreed to the reduction of violence in Afghanistan for 7-days as of 19:30GMT, according to a Afghan Official. (Newswires)

EQUITIES

European equities initially kicked the final trading session of the week off with shallow losses before slipping further into negative territory (Eurostoxx -0.3%) as reports of increased coronavirus activity in South Korea continues to weigh on risk sentiment. Downticks in futures were observed alongside reports in Yonhap that South Korea reported a further 48 cases of the coronavirus, bringing the total to 204, before losses were trimmed in the wake of a firmer than expected services PMI from France and a pickup in the manufacturing metric from Germany; bourses remain in negative territory nonetheless. Sectors are broadly lower with energy and material names lagging their peers, whilst IT names are of the only sectors to trade higher, following yesterday’s underperformance yesterday. Individual movers include UniCredit (-3.4%) amid reports suggesting that CEO mustier has emerged as a potential frontrunner for the HSBC top job. Elsewhere, Pearson (-3.4%) are a notable laggard after posting disappointing pretax profit metrics, whilst Renault (-1.3%) shares opened lower amid reports of Nissan production delays in China.

Google (GOOG) are pushing back on demands from US state investigators to provide documentation in the ongoing digital-ad probe, according to WSJ. (WSJ)

Deere & Co (DE) Q4 19 (USD): EPS 1.63 (exp. 1.25), Revenue 6.53bln (exp. 6.41bln); FY earnings forecast unchanged

FX

USD/JPY - After a recent series of gains, the USD has paused for breath during today’s session and pulled back from the recent high of 99.915 to a current low of 99.593. The dollar’s decline has partially been a result of the firmer EUR, but also a resurgence in JPY as USD/JPY moves back below 112.00 to make a session low of 111.50 thus far. In terms of fundamental factors, not a great deal has changed in terms of the narrative surrounding Japans outlook since yesterday’s JPY declines. However, overnight saw commentary from the Japanese Finance Minister who said the government will respond to FX moves as needed, whilst the economy minister attributed recent JPY softness to the strength in the US economy. That said, Q4 growth metrics earlier in the week and concerns about the coronavirus-related drag on the Q1 outturn, remain in place. As such and as per inferences from ING yesterday, today’s move is more likely a by-product of exhaustion in the recent USD/JPY rally, with 100.00 in the DXY still yet to be crossed.

EUR - After finding support during yesterday’s session at 1.0778, EUR was lent a helping hand by aforementioned USD softness and encouraging PMI metrics from the Eurozone. Gains were stoked in early EU trade by French PMI metrics, which, although saw the manufacturing sector slip into contractionary territory (49.7 vs. Exp. 50.7, Prev. 51.1), was offset by a firmer services reading (52.6 vs. Exp. 51.3, Prev. 51.0) and therefore provided some pushback to concerns over potential cross-sector spillovers (i.e. manufacturing weakness into services). Gains for the EUR were cemented thereafter with EUR/USD reclaiming 1.0800 to the upside after a jump in the German manufacturing metric to 47.8 from 44.8 with the pair topping out at 1.0820 with the April 24th 2019 low of 1.0821 kicking in as resistance. In recent trade momentum for EUR has stuttered with the pair slipping back below 1.0800. Overall for the PMIs, the EZ-wide composite figure rose to 51.6 from 51.3 (Exp. 51.0) with Markit concluding that the data points were consistent with a quarterly GDP growth rate approaching 0.2%. As a note of caution, analysts at Pantheon Macroeconomics concludes that despite the strong headline, the release is effectively warning that the supply side is being choked, and if that continues, growth and employment eventually will take a hit.

GBP - Ahead of PMI metrics, GBP was granted some reprieve by declines in the USD as the pair reclaimed 1.2900 to the upside as investors awaited confirmation/rejection of the post-election ‘bounce’ in the UK economy. Upon the release, GBP was granted some further upside to breach 1.2925 (fib resistance and post-retail sales highs) as a marginal miss in the services component (53.3 vs. Exp. 53.4) was offset by an unexpected expansionary manufacturing print (51.9 vs. Exp. 49.7). Should gains for the GBP accelerate, technicians’ flag 1.2949 (Feb 13th low) as the next potential source of resistance. Overall Markit concluded that "the recent return to growth signalled by the manufacturing and services PMIs provides a clear indication that the UK economy is no longer flat on its back”. That said, as the EU squabbles over its negotiating mandate in trade talks with the UK, focus for the UK narrative, will at some stage, begin to tilt more towards trade talks at the beginning of next month.

AUD/NZD - AUD and NZD largely moved in tandem with the USD throughout a bulk of APAC 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, with the session trough currently at 0.6587; a break below this level could open up a test of the March 11th 2009 low of 0.6567, with further support below at 0.6513 (March 13th 2009 low). Its antipode counterpart, has suffered a similar fate with NZD/USD slipping below touted support at 0.6325 (11th and 12th November lows) ahead of the all-important psychological support at 0.6300; a move below this level could open up a test of the 17th October 2019 low of 0.6281.

SEK - Little traction in the Krona following the release of the account of the February meeting with EUR/SEK maintaining its 10.5777-10.61 range post-release. In terms of the content of the account, the Bank ultimately resides in a “wait-and-see” mode, as opined by Governor Ingves. That said, commentary from December dissenters Breman and Jansson drew some attention with the former noting that domestic and international factors and their impact on the Swedish economy could be underestimated, whilst the latter suggested it is currently highly improbable that a tighter monetary policy will become appropriate. Ultimately, several members were of the view that positive inflation surprises would not necessarily involve rates being raised earlier than forecast. Furthermore, as highlighted by Nordea, the account also suggests that the Riksbank would be more likely to turn towards the balance sheet as a course of stimulative action, as opposed to lowering rates.

Riksbank minutes: Several members said that positive inflation surprises would not necessarily involve rates being raised earlier than forecast. Governor Ingves says that policy has entered into a wait-and-see situation and there is no need to rush rate rises if economic activity picks up. SEK was largely unreactive to these remarks as they didn’t change the dial too much

South Africa's Eskom says the Stage 2 rotational loadshedding is to continue until 06:00 on Sunday. (Newswires)

FIXED INCOME

Post-central EU hours yesterday saw a rally in the debt complex on a broad spread stock sell off, sparking a mild flight-to-safety, reasons for this move vary with coronavirus, retracement and technical factors all amongst those touted. APAC hours saw an ongoing grind higher in USTs and Bunds, with focus stateside once again on the yield as it breached the 1.50 mark to the downside; particularly of note as December’s PCE was 1.6% with November’s at 1.5% so this move takes us into negative real rates by either of the most recent measures. Turning to European hours, where the Gilt open saw a gap-up to encapsulate the overnight price action at 134.42 and subsequently peaked just after the cash open at 134.60. A high print which was part of a broader move higher bonds at the cash open as some further wide-spread risk-off was seen; possibly just on European players catching up to yesterday’s action but also exacerbated by reports of 48 more coronavirus cases in South Korea. Focus today has been on the Flash PMI slate, with little move seen on the initial French numbers but Bunds dragging their peers down on the German print as manufacturing beat expectations; note, IHS’ Williamson has caveated that supply issues are generating a false health signal for the PMI. A release which sent Bunds down to just above the 175.0 mark, which was subsequently breached to a low of 174.94 – ahead of near-term support at 174.80 and 174.50. The mornings remaining data release drew little reaction, with Gilts largely unfazed by the in-line flash services number and manufacturing moving into expansionary territory in the UK. Looking ahead, attention stateside will be on the 10-year yield and if it continues to deteriorate; particularly if today’s flash PMIs are weak or if their entrance to mark prompts another downturn in sentiment; support for the yield lies foremost at 1.46 which is the September 2019 low.

COMMODITIES

WTI and Brent prices are once again in the red, as sentiment has failed to recover from the broad sell-off in US hours; with multiple reasons for this being touted. Crude specific newsflow has been light this morning, focus for the complex has returned to demand concerns on reports of further virus cases in South Korea as well as the first few in Italy. As well as the demand narrative, attention is on geopolitical headlines emanating from Libya as Haftar has reportedly said he is prepared for a ceasefire under the condition of Turkish troops and mercenaries leaving the region. Turning to spot gold, which has continued its grind higher to fresh YTD highs of USD 1636.5/oz on the aforementioned deterioration in sentiment. From a technical perspective, there is little in the way of firm resistance until USD 1696.20/oz, which is the 22nd January 2013 high; as the yellow metal also derives support from a softer USD this morning. Elsewhere, base metals have failed to stage a firm recovery on the USD’s weakness this morning as the downside in sentiment overrides any potential gains.

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