• Mass FTQ as the coronavirus spreads substantially into Italy, South Korea and Iran
• Italy reported that the total number of cases rose to 152, with a fifth confirmed death
• South Korea reported over 200 new case which brings the current total to 833, with seven deaths also confirmed as of February 23
• China has postponed its parliamentary annual meeting, according to CCTV
• European bourses, and US futures are firmly into negative territory with Italian assets amongst those worst hit
• USD remains firm as JPY and XAU outperform on safe-haven allure, while antipodeans and activity currencies slump
• Looking ahead, highlights include BoE’s Haldane, Fed’s Mester

CORONAVIRUS UPDATE

South Korea reported over 200 new case which brings the current total to 833, with seven deaths also confirmed as of February 23 vs. 169 additional cases, total at 602 and five deaths on February 22. South Korea raised virus alert to the “highest” as virus cases spiked. (Yonhap) Further, the South Korean government was asked on Sunday to draw up a supplementary budget for use in effects to contain the virus outbreak; subsequently, President has asked for consideration of an emergency extra budget. (Newswires/Yonhap) South Korean Finance Minister said it will stem any herd-like speculative moves in FX, will soon announce measures to boost exports, investments and domestic demand. (Newswires)

Italy reported that the total number of cases rose to 152, with a fifth confirmed death. The country has implemented measures to try to halt the outbreak of the virus in the country, including around a dozen towns in lockdown. (Guardian) Subsequently, Austria has ceased all train traffic to Italy, although later reports noted that some train traffic has resumed. French and German Gov’ts have stated there is no reason to close their borders at present. (Newswires) Ontario's government has confirmed presumptive positive case of coronavirus in Toronto, Canada. (Newswires) Iran has also confirmed 43 cases and eight deaths. Saudi Arabia, Kuwait, Iraq, Turkey and Afghanistan imposed travel and immigration restrictions on the country. (Newswires) Four more Britons flown back from the Diamond Princess cruise ship tested positive for the virus, bringing UK’s total to 13. (Guardian)

China's Hubei province reported 398 new coronavirus cases and 149 additional deaths as of February 23 vs. 630 additional cases and 96 additional deaths on February 22. China reported an additional 409 coronavirus cases and 150 additional deaths as of February 23 vs. 648 additional cases and 97 deaths on February 22; Total China cases 77150 vs. Prev. 76936; Total deaths 2592 vs. Prev. 2442. Reports also noted that 24734 patients have been discharged as of February 23. (Newswires)

China has postponed its parliamentary annual meeting, according to CCTV, date to be set at a later time; China's top consultative body will also delay its annual meeting. (Newswires)

Chinese provinces Yunnan, Guangdong, Shanxi and Guizhou have lowered their coronavirus emergency response levels, according to local authorities. (Newswires) Furthermore, six provinces in China lowered coronavirus emergency response levels: Guangdong, Shanxi lowered response to level 2. Gansu, Liaoning, Guizhou, Yunnan lowered response to level 3, according to CNBC’s Yoon. (Twitter) China is allowing non-local residents to leave Wuhan city if not under medical observation or quarantine and under some circumstances; subsequently, this order has been revoked as it was done without authorisation. (Newswires/Global Times) China's Hubei Province's Xianning City Mayor says that they are worried about a potential rebound in cases of the coronavirus. (Newswires)

Chinese President Xi said the government will step up policy support measures to help achieve economic and social development targets for 2020. China's MOF said the government will look into further targeted tax cuts, will increase transfers to virus-hit regions. PBoC Vice Governor Chen said the Central Bank is reviewing whether to cut the benchmark deposit rates and added that the impact of the virus outbreak on China’s economy will be short and limited, macro-management tools are ample, the Yuan will not appreciate or depreciate by a large margin. Meanwhile, the PBoC said it will also make use of the inclusive monetary policy tool and adjust policies relating to requirement reserve ratio cuts. (Global Times) PBoC Official says the coronavirus outbreak has impacted the ability of firms to repay bonds, but overall the effect is not huge; expects bond default risks to decline in total for the year  Elsewhere, China has reportedly removed ban on some US imports of beef, this is with conditions. (Newswires)

China's tourism ministry has issued a warning against traveling to the United States; cites unfair treatment in the US due to excessive epidemic prevention measures and the US security situation. (Newswires)

China's National Medical Products Administration has approved certain drugs for COVID-19 including a reagent that can differentiate between the flu and COVID19, which is a critical find, said renowned epidemiologist. (Global Times)

IMF Director Georgieva said the current baseline scenario for China’s economy is a return to normal levels in Q2 with a relatively minor and short-lived impact on the global economy, China’s 2020 GDP is seen at 5.6% (Prev. 6.0%) whilst global GDP is seen dropping by 0.1ppt due to the coronavirus outbreak. (Newswires)

Australian Treasurer Frydenberg said the Australian economy is resilient despite the impacts coronavirus is having on China. (Newswires) Australia raised travel advisory to South Korea and Japan amid the coronavirus outbreak. (Newswires) New Zealand PM Arden said New Zealand is to extend travel ban for foreigners arriving from China. (Newswires)

ASIA-PAC

Asian equities traded with steep losses across the board following Wall Street’s decline on Friday, amid the rapid rise in the number of coronavirus cases outside China - which prompted the Dow to post its worst daily performance since February 7th, S&P recorded its largest one-day loss since late-January, whilst the Nasdaq notched its worst session since January 27th. Furthermore, weekend development caused US equity futures to open the week with notable downside, with S&P Mar’20 dipping below 3300, Nasdaq Mar’20 declining over 1.5% and DJ Mar’20 slumping over 300 points. ASX 200 (-2.3%) was pressured by its large-cap financial stocks and some mining stocks as yields and base metal prices fell, instigating a breach below the key 7000 mark in the index. South Korea’s KOSPI (-3.8%) opened with detrimental losses following the spike in the number of cases in the country alongside seven confirmed deaths and the country’s alert level raised to the “highest” over the weekend, resulting in the index dipping below the 2100 psychological level. Furthermore, Samsung Electronics’ shares slid over 3% after the Co. shut its operations plant in Gumi City in South Korea after an employee was reported to be infected with the COVID-19 virus. As a reminder, Japanese markets were shut as participants observe Emperor’s Birthday holiday. Elsewhere, Hang Seng (-1.8%) and Shanghai Comp. (-0.3%) joined the stock rout, with the former heavily pressured by its large-cap energy names as prices in the complex plumb the depths. Meanwhile, Mainland was initially resilient in comparison amid further pledges by China to support impacts of the virus, with President Xi over the weekend stating that the government will step up policy support to help achieve economic and social development targets for 2020. Conversely, Shenzhen Comp. (+1.3%) fared better after Guangdong, the province in which the tech hub resides in, lowered its coronavirus response level from the first level to the second level, subsequently, Shenzhen traffic saw an uptick today. Finally, UST Mar’20 futures and Bund Mar’20 futures retained an underlying bid overnight amid the risk aversion in the market.

China state planner said it is to cut electricity prices for firms by 5% between the first of February to June 31st. (Newswires)

PBoC set USD/CNY mid-point at 7.0246 vs. Exp. 7.0230 (Prev. 7.0210) (Newswires) PBoC skipped open market operations for a net daily drain of CNY 300bln

US

Nevada caucus results vote split (88% reported): Sanders 47.1%, Biden 21%, Buttigieg 13.7%, Warren 9.6%, Klobuchar 3.9% (Associated Press)

US Treasury Secretary Mnuchin says he does not expect a material impact on the US-China phase 1 deal from the coronavirus. As the situation develops, the impact on the trade deal from the coronavirus could change. A better assessment will be possible in a few weeks. (Newswires)

UK/EU

EU27 are anticipated to adopt its negotiating mandate for talks with Britain tomorrow and then commence trade talks as soon as next week. (Newswires)

UK PM Johnson is poised to kick start trade negotiations with the US within the next two weeks, on March 2 the “red lines” for its US negotiations will be published, expected to push back on US demands drug and health firms to have greater access to the British market. (Telegraph) US Treasury Secretary Mnuchin said the main focus for 2020 is a US-UK trade agreement. (Newswires)

UK PM Johnson’s Brexit team are reportedly working on a secret proposal to ensure of no checks on goods passing from Britain to Northern Ireland. (Times) French President Macron said he is unsure an EU-UK trade deal will be struck by December 31st 2020, stating that negations will be “tense”, with fishing rights a key sticking point. (BBC)

UK Chancellor Sunak could relax fiscal rules to either; 1) raise GBP 26bln by allowing the government to go 1% above or below a balanced current budget or 2) raise GBP 11bln by allowing the government to achieve a balanced budget in 5 years vs. current 3. (Telegraph)

Germany’s Hamburg election prelim final party vote results: SPD 39% (vs. 45% in 2015), Greens 24.2% (vs.12.3%), CDU 11.2% (vs. 15.9%), Left Party 9.1% (vs. 9.0%), AfD 5.3% (vs. 4.9%) and FDP 5.0% (vs. 5.0%). (Europe Elects)

German Ifo Business Climate New (Feb) 96.1 vs. Exp. 95.3 (Prev. 95.9, Rev. 96.0)

-        German Ifo Current Conditions New (Feb) 98.9 vs. Exp. 98.6 (Prev. 99.1, Rev. 99.2)

-        German Ifo Expectations New (Feb) 93.4 vs. Exp. 92.2 (Prev. 92.9)

GEOPOLITICS 

Israeli Defence Forces confirm it has attacked Palestinian Islamic Jihad (PIJ) targets in the Gaza Strip and Syria, via ELINT News. This follows reports noting of rocket barrages from Gaza on Sderot town and surrounding communities in southern Israel, whilst strikes on PIJ bases in Gaza continue. (Twitter) Palestinian Islamic Jihad (PIJ) announced two of its members were killed in Israeli airstrikes in Damascus, Syria (Twitter)

New rockets fired towards Israel by Islamic Jihad, according to AFP citing the group, and army officials. (Newswires)

Libya's legitimate government will not participate in any further peace talks in Geneva, the head of the country's High Council of State said on Saturday.

EQUITIES

European equities (Eurostoxx 50 -3.7%) have kicked the week off with substantial losses as the lack of containment of the coronavirus grips investor sentiment. Over the weekend, despite efforts by Chinese authorities to assuage concerns over the domestic fallout of the virus, focus instead has been on the pick-up in reported cases external to China. The case count in South Korea has continued to rise with Yonhap’s latest tally amounting to 833 infected, whilst closer to home, fears in Europe have been elevated by Italy reporting 152 cases and a third death from COVID-19; FTSE MIB (-4.7%). Momentum for selling has continued since the cash open with the DAX cash moving ever closer to 13,000 to the downside, whilst futures Stateside paint an equally sobering picture with the e-mini S&P lower by 94 points thus far. From a sectoral basis, airline names stand out as a notable laggard given the travel implications from the increasing case count with easyJet (-12.5%), RyanAir (-10.6%), Tui (-8.8%), Air France (-10%), Deutsche Lufthansa (-6.7%) all showing heavy losses. Elsewhere, the luxury space continues to be a prime target for sellers with Swatch (-5.3%), Richemont (-5.9%), LVMH (-5.3%) all suffering, whilst ongoing concerns over car production has weighed on auto/autoparts manufacturers (BMW -4.7%, Daimler -5.4%, Continental -4.6%, Volkswagen -4.9%) and exacerbated selling pressure for the DAX (-3.8%). In-fitting with price action in the respective complexes, energy and material names are also feeling the squeeze in early European trade, whilst chip manufacturers/IT names are also getting sold aggressively as the e-mini NASDAQ (-3.3%), lags its peers ahead of the Wall Street open.

FX

JPY/XAU - Although Japan’s market holiday may be crimping volumes and supply, heightened concerns about the spread and impact of China’s coronavirus are helping the Yen forge gains vs an otherwise broadly bid Dollar around 111.50 compared to recent lows below 112.00. However, Gold is really shining as a safe-haven beacon and outperforming after accelerating towards Usd1700/oz and setting a fresh multi-year peak around Usd1689.30, with technicians now eyeing a Usd1715 Fib if the psychological barrier is breached.

USD - As noted above, the Greenback is also benefiting from risk-off flows and the DXY has bounced further from Friday’s post-US preliminary PMI base to reclaim 99.500+ status as a result, even though Treasury yields are collapsing and the curve is significantly flatter. Nevertheless, the index remains some distance from last week’s 2020 best and the elusive 100.00 mark within a 99.405-657 range.

NOK/CAD/NZD/AUD - The clear G10 laggards, as sharp declines in crude prices compound Chinese nCoV losses for the Norwegian Crown and Loonie, while the Kiwi and Aussie are undermined by their closer geographical location and economic ties to China. Eur/Nok is hovering near 10.1500, Usd/Cad is a whisker shy of 1.3300, with Nzd/Usd struggling to keep hold of 0.6300 and Aud/Usd unable to retain 0.6600 as the YUAN remains sub-7.0000.

SEK/GBP/EUR/CHF - Also suffering from the China health outbreak, Eur/Sek trades north of 10.5500 and Cable is struggling to stay in touch with 1.2900 ahead of UK-EU trade talks, while Eur/Gbp is at the upper end of 0.8345-93 parameters after a better than expected German Ifo survey that has helped the single currency stave off attempts to test support/underlying bids at 1.0800. Meanwhile, the Franc is still somewhat betwixt and between, with Usd/Chf straddling 0.9800 and Eur/Chf dangling just above 1.0600 after another blow for Germany’s CDU party at the Hamburg election.

EM - Widespread and steep declines in many cases vs the Usd, with the Krw extending losses for obvious reasons and Rub also feeling the heat as Brent drops over Usd2/brl, while the Try hardly derived any traction from an improvement in Turkish manufacturing confidence given the spread of COVID-19 and ongoing geopolitical issues. Last but not least, the Zar is on the defensive ahead of Wednesday’s SA budget and Mexican Peso even more cautious before mid-February inflation metrics.

Fitch affirmed Turkey at 'BB-'; Outlook “Stable”. S&P affirmed Switzerland at “AAA”; outlook “Stable”. (Newswires)

FIXED INCOME

It remains to be seen whether the risk-off bandwagon keeps rolling or whether US participants deem that enough China coronavirus premium and hedging has been factored in, leaving core debt too rich and stocks ripe for some respite. However, for now safe-havens are still firmly underpinned and risk or sensitive assets under pressure, with Bunds around ¾ point ahead, Gilts circa 60 ticks above par and their UST equivalent +22/32 and the corresponding yield sub-1.40%. Conversely, Italian BTPs are deep in negative territory, albeit off worst levels as the number of deaths from nCoV reaches 5.

COMMODITIES

WTI and Brent front-month futures are posting significant losses at present, in-line with the general risk sentiment as they are both down by circa USD 2.0/bbl. Focus for the crude market is firmly fixated on the demand-side, as the coronavirus’ spread, particularly its marked jump in Italy over the weekend, is heavily impacting sentiment in the auto and travel sector; and as such is increasing concerns of a marked demand impact outside of China as well. Moving to the supply side, where Friday’s reports of Saudi and others looking for a circa 300k BPD addition to production cuts if Russia does not come on-board, which would be instead of the 600k BPD cut the JTC has recommended, did add to the downward price pressures; subsequently, these remarks have been denied by Saudi. Looking ahead, the OPEC+ meeting is now in theory just a matter of days away and focus remains heavily on the official stance from Russia as to whether they will support additional cuts at all, if so to what extent. Turning to metals, where spot gold has galloped ahead overnight with a new YTD high at USD 1689.29/oz on the mass FTQ we are experiencing today – technically, resistance inevitably lies at the psychological USD 1700/oz mark before a fib at USD 1715/oz. Elsewhere, basemetals are firmly in negative territory on the aforementioned sell off and departure from risky-assets; particularly as the virus’ spread outside of China is exacerbating demand concerns for such commodities.

Libya's Foreign Minister says he is astonished that the international community has not stepped in regarding the re-opening of oil fields. (Newswires)