• Asian stocks traded mixed following a detrimental session on Wall Street; KOSPI outperformed, Nikkei 225 fell 4.5% on its return from its extended weekend
• South Korea reported 60 more cases of new coronavirus thus far, total at 893 and death toll at 9; the country is to draft supplementary budget as soon as possible
• US Trump Administration is sending Congress a budget request for USD 2.5bln to tackle the virus outbreak, House Speaker Pelosi deemed it inadequate
• FX markets were quiet with DXY softer, Antipodeans mostly supported and USD/JPY just below 111.00
• Looking ahead, highlights include German GDP (Detailed), US Consumer Confidence, Fed’s Clarida, Kaplan, ECB’s de Cos, supply from UK and US, US Democratic Debate
• Earnings include Home Depot, HP, Macy’s

CORONAVIRUS UPDATE 

South Korea reported 60 more cases of new coronavirus thus far on February 24th vs. 231 on February 23rd; total cases now at 893 and a 9th coronavirus-related death reported. Furthermore, South Korea is to implement containment policy on Daegu, North Gyeongsang Province, according to a party official cited Yonhap. Separate reports noted that South Korea is to draft a supplementary budget as soon as possible. (Yonhap) Six coronavirus patients are in critical condition, according to KCDC official (Yonhap) A fourth passenger from Diamond Princess cruise ship has died in Japan, reportedly in their 80s. (NHK)

China's Hubei province reported 499 new coronavirus cases and 68 additional deaths as of February 24 vs. 398 additional cases and 149 additional deaths on February 23. China reported an additional 508 coronavirus cases and 71 additional deaths as of February 24 vs. 409 additional cases and 150 deaths on February 23; Total cases 77658 vs. Prev. 77150; Deaths 2663 vs. Prev. 2592. (Newswires) Jiangsu the latest Chinese province to cut its coronavirus warning levels. according to state media. Meanwhile, China's National Health Commission said will continue to take strictest control and prevention measures in the Hubei province, will control outbound with existing traffic controls (Newswires)

Tianjin University has successfully developed an oral vaccine to protect against coronavirus; the professor who led the project, has taken four doses without any side effects. (Global Times) Elsewhere, reports noted that Moderna (MRNA) has shipped the mRNA vaccine against nCoV for Phase I study. (Newswires) Furthermore, Johnson & Johnson (JNJ), Sanofi SA (SNY, SAN FP) and Inovio Pharmaceuticals Inc. (INO) have started to develop COVID-19 vaccines, human studies could start from a few months to about a year. (WSJ)

US Trump Administration is sending Congress a budget request for USD 2.5bln to tackle the virus outbreak, according to Politico; with over USD 1bln allocated for vaccines according to the White House. (Politico/White House) US House Speaker Pelosi, in response, said the budget proposal is "completely inadequate to the scale of this emergency" and added that the House will swiftly advance a strong and strategic funding package that will fully address the scale of the crisis. (Newswires)

US President Trump tweeted that "The Coronavirus is very much under control in the USA. We are in contact with everyone and all the relevant countries. CDC & World Health have been working hard and very smart. Stock Market starting to look very good to me!" (Twitter) NEC Director Kudlow said the US looks well-contained against coronavirus, the economy is fundamentally sound, long-term investors should "seriously consider buying these dips", according to Washington Post. (Washington Post)

US CDC said 14 confirmed COVID-19 cases in the US as of February 24th, 39 cases have been repatriated to the US. (Newswires) US FDA is not currently conduction inspections in China following the US State Department's China travel advisory. (Newswires)

Italian PM Conte says the impact of the coronavirus could be "very strong". (Newswires) US Travel Department consulate in Milan has suspended routine visa services until 2nd March. (Newswires)

Japanese Finance Minister Aso said the government is not yet considering additional economic measures to respond to the virus outbreak. (Newswires)

Hong Kong Government has extended suspension of schools to April 20th (Prev. mid-March) amid the coronavirus outbreak. (Newswires)

ASIA-PAC

Asian equities traded mixed with the overall risk tone seemingly improved compared to yesterday’s global stock rout. US indices closed with sharp losses on Monday over fears regarding the number of growing coronavirus cases outside of China, causing the S&P and Dow to wipe out their YTD gains, with the latter closing lower by over 1000 points. However, US equity futures have experienced a modest relief rally since the open as the contracts retraced some of their recent losses. Nonetheless, ASX 200 (-1.6%) remained subdued, albeit off lows, as mining and banking names still bore the brunt of the prior session’s decline in base metals and yields. Nikkei 225 (-3.4%) opened with losses of ~4.5% as the benchmark played catch-up to the recent events after its extended weekend, including a firmer JPY. The Japanese index later clambered off lows amid the abating risk aversion, and with Fujifilm Holdings’ shares soaring almost 9% at the open on Japan’s plans to recommend its Avigan drug, produced by a Fujifilm unit, as a coronavirus treatment. That being said, Japanese automakers experienced firm losses on the outbreak’s implications on sales and supply chains; (Nissan -3.9%, Toyota -3.0%, and Mitsubishi -3.4%). Elsewhere, KOSPI (+1.1%) stood as the outperformer after the index consolidated from the prior session’s hefty losses before being bolstered by a declining rate of COVID-19 cases in the country. Furthermore, reports stated that South Korea is to draft a supplementary budget as soon as possible, whilst the government is also taking containment measures in Daegu and North Gyeongsang provinces to prevent further spreading. Over in China, the Hang Seng (Unch) and Shanghai Comp (-1.4%) traded mixed, with the former balancing gains in tech and pharma against losses in financials and oil giants. Meanwhile, Mainland lagged amid a lack of fresh China stimulus and with the PBoC also skipping open market operations for a sixth consecutive day.

Senior BoJ Official noted that the Central Bank will take appropriate steps as needed by looking at FX impact on Japan's economy and long-term price trends; monetary policy is not directly guided by FX. (Newswires)

PBoC set USD/CNY mid-point at 7.0232 vs. Exp. 7.0255 (Prev. 7.0246) (Newswires) PBOC skipped open market operations for a daily net neutral position

US is reportedly still eyeing ways to further curb sales to Huawei, according to sources, despite US President Trump’s tweets and comments last week in support of sales to China. (Newswires)

US President Trump officials are reportedly mulling whether to expel Chinese journalists in response to China’s decision to kick out three WSJ reporters, according to sources. (Twitter)

UK/EU

EU will demand the right to punish Britain if it fails to follow EU’s rulebook in the future, with a final version of the EU’s negotiating mandate – ready for minsters to sign off today – establishing the bloc’s developing standards as a baseline for a trade deal. Brussels would retain the right to apply tariffs or other sanctions if the divergence between UK and the EU over time led to “disruptions of the equal condition of competition”. (Guardian) State aid will be the only area where the EU will ask the UK to dynamically align to its standards, the other areas will be covered by an 'equivalence of outcomes', according to a source cited by the Express. (Express)

BoE's Haldane said reduced uncertainty should help boost investment and that a lot of the political and Brexit uncertainty has dissipated. Surveys suggest there could be "stirring in the undergrowth" in regard to investment plans from UK companies. (Newswires)

FX

DXY traded choppy within a relatively tight range for a large part of the session before dipping below 99.250 to trade on a softer footing. EUR/USD and GBP/USD were uneventful and moved in tandem with the Greenback amid a lack of overnight drivers, with the former meandering on either side of 1.0850 throughout the bulk of the session before advancing north of the level, with some EUR 800mln in options expiring at 1.0875 and just over EUR 500mln at strike 1.0850. Cable held onto its 1.2900 handle as it inched closer to its 100 DMA residing around 1.2955. Elsewhere, Antipodeans remained supported by the overall improved overnight risk sentiment; AUD/USD reclaimed 0.6600 to the upside ahead of mild resistance seen at 0.6620, ahead of a notable AUD 1.4bln option expiry at 0.6675. NZD/USD briefly topped 0.6350 with before encountering touted resistence around 0.6357 (21st and 24th Feb highs). Meanwhile, USD/JPY seemed to be tracking gains in US equity futures for most of the session before the pair found resistance at the psychological 111.00 mark, and Japanese participants back in the market following their extended weekend. Finally, CNH experienced mild strength in light of firmer Yuan fixing by the PBoC vs. expectations for a weaker setting – USD/CNH moved lower from around 7.0300 to test 7.0100 to the downside before stabilising around 7.0200.

COMMODITIES 

Commodities largely consolidated from the prior day’s substantial price action, with WTI and Brent front-month futures finding bases around USD 50.50/bbl and USD 55.20/bbl respectively before advancing over a USD 1/bbl each from those levels. Overnight news-flow has been light, and markets seemed to be taking more of a breather. From a technical standpoint, both benchmarks encountered resistance at their respective 21 DMAs, at ~51.71 for WTI and c.56.70 for Brent. Analysts note that time spreads have come under renewed pressure, with ING highlighting that ICE Brent May/June spread has fallen to flat levels from a backwardation of USD 0.22/bbl in a day, albeit the bank caveats the move by stating that this is still far away from the deep contango seen earlier in the month. Elsewhere, spot gold was choppy within a USD 20/oz range but ultimately traded with a downside bias after briefly dipping below USD 1650/oz at the futures open. Thereafter, the yellow metal piggy-backed on the softening Dollar to reclaim the level. Copper prices felt some reprieve from the calmer risk sentiment following the prior session’s substantial decline, in which prices found support at ~2.55/lb. Finally, Dalian iron ore prices fell 3% at one point before ending the session 1.5% lower, snapping a 10-day winning streak amid renewed demand woes having side-lined recent supply concerns.

Saudi Aramco CEO only expects a short-term impact on oil demand from the coronavirus, noting he is confident oil demand will improve in H2, particularly in China. (Newswires)

US Special Envoy to Venezuela Abrams said US President Trump has decided to increase its oil sanctions campaign on Venezuela to pressure Maduro. Abrams noted that it will warn before sanction those involved in the Venezuelan oil sector in the coming weeks or months. US is looking at customers of Venezuelan oil, primarily in Asia. Abrams stated it is tracking ship to ship transfers of Venezuelan oil, and if companies do not stop doing so they will be sanctioned. (Newswires)

Iranian Oil Minister said he will attend the OPEC meeting in March, according to Shana. (Newswires)

Crude output from the offshore Khafji field (300K BPD) in the Neutral Zone has reached 10K BPD, but the onshore Wafra field (250K BPD) has yet to resume output, according to Argus. (Twitter)

GEOPOLITICS

A ceasefire was reached between Israel and Palestinian factions in Gaza, according to Foreign Affairs Editor of Walla News. (Twitter) This comes after Israeli Defence Forces yesterday confirmed it has attacked Palestinian Islamic Jihad (PIJ) targets which killed two PIJ members.

US Defence Secretary Esper said the US and South Korea are mulling scaling back joint military exercises amid coronavirus outbreak. (Newswire)

US 

US-T-NOTE FUTURES (H20) SETTLE 25+ TICKS HIGHER AT 132-21. The TPLEX was bid throughout the session, in fitting with the wide risk aversion. Curve spreads were more modestly changed, however. Growing expectations of sooner than previously expected Fed policy easing is likely supporting the front-end (market pricing has more than 50bps of cuts through year-end) just as much as growth concerns/haven flows keep duration supported. The front-to-belly is also being strongly supported in face of large Treasury supply this week (USD 113bln across 2s, 5s, and 7s), clearly not something that is dissuading investors. By settlement 10-year yield had fallen 9bps to 1.379%, while the 2-year had fallen 8.5bps, leaving the 2s10s spread at 11.5bps.

Fed's Mester (Voter, Hawk) reiterated monetary policy in the US is well calibrated and added there are risks to US outlook including the impact of nCoV but expects US economy to continue to perform well. 2020 outlook is for the expansion to continue with growth around trend, a solid labour market, and low and stable inflation. Mester sees PCE inflation returning to 2% target gradually over the next year or two and does not at this time support cutting rates to spur a faster return to its inflation goal. Mester also noted that it is very difficult to assess the risk to the US economy of the coronavirus. (Newswires)

NBC/Maris US South Carolina Democratic Primary Poll: Biden 27%, Sanders 23%, Steyer 15%, Buttigieg 9%, Warren 8%, Klobuchar 5%. (NBC) This comes ahead of the South Carolina Democratic primary on Feb 29th.