• Sentiment remains subdued after a brief reprieve was insufficient to flip the narrative away from risk-off
• South Korea total cases now at 977 and a 10th coronavirus-related death reported; cases in Italy have increased as well as cases now being reported in Spain
• WHO spokesman says they do not have plans for a 'big announcement', many countries have pandemic plans ready and some may act depending on their situation
• US Trump Administration is sending Congress a budget request for USD 2.5bln to tackle the virus outbreak, according to Politico; Speaker Pelosi regards this as inadequate
• Looking ahead, highlights include US Consumer Confidence, Fed’s Clarida, Kaplan, supply from the US & US Democratic Debate

CORONAVIRUS UPDATE

WHO spokesman says they do not have plans for a 'big announcement', many countries have pandemic plans ready and some may act depending on their situation. (Newswires)

South Korea total cases now at 977 and a 10th 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; with President Moon saying declaring Daegu as a "special disaster zone" is not enough and vows full budget support, via Yonhap. (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)

China State Planner Official says that regions which are deemed to be low risk from the coronavirus should resume normal activity and have their transport bans lifted. (Newswires)

Italy has reported its first cases of coronavirus in Palermo and Florence, according to social media reports; death count remains at 7. (Twitter/Newswires)

-        With cases in, Veneto (6 new) as well as multiple new cases in Northern regions

-        WHO is currently meeting with Italian authorities in Rome, regarding the Italian coronavirus outbreak; the mission to Iran has been delayed, no specific date as of yet, according to a spokesman; measures taken by regional Italian Gov'ts have been strong and most likely will help to contain the coronavirus. (Newswires)

Tests have been carried out by Spanish health authorities on hundreds of tourists in a Canary Islands Hotel after one case of the coronavirus was identified. (Newswires)

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 FDA is not currently conduction inspections in China following the US State Department's China travel advisory. (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 (+1.2%) 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 (+0.3%) and Shanghai Comp (-0.6%) 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)

US

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.

UK/EU

EU27 reportedly adopts EU Chief Brexit Negotiator Barnier's joint mandate for trade negotiations with the UK, according to sources. (Newswires) As expected.

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)

EU will demand that the UK maintains their ban on chlorinated chicken, as a requirement for a trade deal with the EU; via a recommendation from France, Guardian citing a leaked mandate copy. (Newswires)

Italian Deputy Economy Minister says the EU has resources in cases where economic events impact GDP, should offer leeway; when asked about EU budget flexibility around the coronavirus. Subsequently, Italy may seek EUR 2-4bln in budget flexibility due to the coronavirus, Sole (Newswires/Sole)

GEOPOLITICS 

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

EQUITIES

The attempted recovery for European equities from yesterday’s sharp sell-off ran out of steam in early trade with investors unwilling to buy up stocks amidst a backdrop of the increasing coronavirus case count across the globe. Despite prospective aid packages from various global powers, focus remains on the mounting case count as the virus continues to spread throughout Italy, the death toll rises in South Korea and Iran, whilst other nations report their first diagnosis’ of COVD-19. In a note published earlier today, Nomura Quants highlights that although it would be unwise to try and reach conclusions based on a single day’s change in sentiment (yesterday), investors are likely reacting to the increasing prospect that the COVID-19 outbreak could lead to a global economic collapse, compared to the initial belief that it would likely only lead to a momentary depressive impact. As such, European bourses are enduring another session of losses (Eurostoxx 50 -1.0%), albeit to a less extent than yesterday. That said, momentum to the downside for European equities has been accelerating with the DAX Mar’20 future taking out yesterday’s low (12961) and the Feb low (12958) to briefly breach a key double-bottom/fib level at 12880.5. Sectoral performance is negative with not too much in the way of specific underperformance. In terms of stock specifics, Prudential (+1.6%) shares have been supported by Third Point disclosing a 5% stake in the Co. and urging them to sperate its Asian and US businesses, whilst Anglo American (+0.4%) shares have been underpinned by recommendations from shareholder advisory groups ISS and Glass Lewis that Sirius shareholders accept the Anglo’s proposed takeover. To the downside, auto/autoparts makers continue to remain out of favour (Continental -2.9%, Michelin -2.3%, Renault -1.8%), whilst Novartis (-3.4%) shares have been weighed on by concerns over the safety of one of its eye drugs and AB Inbev (-2.9%) are enduring losses in the wake of a broker downgrade at HSBC. Furthermore, Philips (-2.9%) shares are lower after the company warned coronavirus is expected to have a negative impact on Q1 performance (albeit it is too early to quantify at this stage), whilst COVID-19 also forced Mastercard (-4.4% pre-market) to cut Q1 guidance and United Airlines (-3.3% pre-market) withdrew all previously issued 2020 guidance.

FX

GBP/JPY - Notwithstanding heightened hard Brexit prospects heading into trade talks between the UK and EU, Sterling has recouped more lost ground vs the Euro and Dollar to sit on top of the G10 table ahead of the CBI’s Distributive trades survey and Brussels unveiling its mandate for the impending negotiations. The Pound’s revival looks partly technical and perhaps as a bi-product of cross positioning, as Cable held above 1.2900 before breaching the 100 DMA (circa 1.2955) and is now testing the 21 DMA (1.2988) that stands in the way of 1.3000, while Eur/Gbp has pulled back from 0.8400+ towards 0.8350. Similarly, the Yen has regained momentum after containing declines against the Buck to 111.00 or thereabouts, and with more depth in the market following the return of Japanese participants from Monday’s Emperor’s Birthday holiday. However, the main catalyst is another downturn in sentiment amidst a growing number of confirmed COVID-19 cases and fatalities stretching further across the globe, with Usd/Jpy inching closer to yesterday’s safe-haven lows and stops said to be sitting down to 110.25.

CHF - Also firmer vs the Greenback and back above 0.9800, while Eur/Chf is eying 1.0600 again on the back of renewed risk aversion and with the Franc largely unfazed by a marginal decline in Swiss payrolls. Meanwhile, GOLD looks a bit more stable after suffering a rather sharp and abrupt fall almost as sudden and large as its spike to almost Usd1690/oz amidst the aforementioned deteriorating risk tone.

NZD/EUR/AUD/CAD - The Kiwi has retreated from 0.6350+ levels against its US counterpart and near 1.4000 vs the Aussie to prop up the major ranks even though the latter has lost grip of the 0.6600 handle against the Usd and potentially has more to lose from China’s nCoV outbreak and fallout. Elsewhere, the Euro has also handed back gains vs the Buck after failing to sustain 1.0850+ territory and the Loonie is pivoting 1.3300 again as crude prices slip ahead of API inventories. All this helping to keep the DXY afloat within a 98.120-392 range.

SCANDI/EM - Somewhat conflicting commentary from the Riksbank for the Sek to digest, as Floden continues to discount soft inflation, but Jansson sounding more concerned especially given the coronavirus and perhaps almost intimating that a reservation should have been entered again. Elsewhere, it’s back to general depreciation, albeit off the troughs seen at the height of aversion on Monday, as the Mxn awaits GDP and IGAE at noon, while the Brl gets current account data 30 minutes later.

Notable FX Expiries, NY Cut:

-        EUR/USD: 1.0800 (1BLN), 1.0810-15 (630M), 1.0825-35 (1.1BLN), 1.0850-60 (900M), 1.0875-80 (1BLN), 1.0910 (400M)

-        AUD/USD: 0.6635 (380M), 0.6675 (1.4BLN), 0.6700 (250M), 0.6720 (280M)

FIXED INCOME

It’s been much more measured, but perhaps just as telling given the fact that the bout of consolidation and respite for equities and fellow risk assets only lasted a short while. Nevertheless, aversion has resurfaced to the benefit of safe-haven bonds, and with Bunds getting extra impetus from the latest demise in BTPs against the backdrop of more cases of COVID-19 in Italy. Spanish Bonos not immune, but holding up better as demand for 30 year paper builds and guidance tightens, albeit not to the extent of the recent record syndication. The 10 year German benchmark has drifted back from 176.02, though remains bid and outperforming Gilts at 135.17 at best and USTs reaching 132-30 before topping out. Ahead, more Central Bank speakers, the EU’s Brexit trade mandate and 2 year US supply.

COMMODITIES

The crude complex is relatively flat at present, but has fallen significantly from its session highs of circa USD 52/bbl and USD 56.40/bbl respectively for WTI and Brent as there was a brief reprieve in the downside during APAC hours given yesterday’s sell-off; but this reprieve was not enough to flip overall sentiment as markets are firmly back into a risk-off/ FTQ state. Newsflow specifically for the crude complex has been relatively light, with the only specific flow thus far being Libyan oil production at 122.4k BPD which is down marginally from the prior 123.5k BPD, whilst IEA Director Birol warned the body may need to lower its oil demand growth forecast, with the oil demand growth estimate at its lowest in the Prev. 10-years. Looking ahead, the crude complexes fortunes today are likely to remain firmly affixed to the corona-driven demand side; unless we get a statement from Russia on their stance to the recommended OPEC cuts, but so far nothing new. Additionally, we get the weekly API inventory report which previously saw a build of 4.2mln for headline crude. Turning to metals where spot gold experienced a similar reprieve overnight and early EU hours where prices dropped as low as USD 1634/oz, but has turned around in-line with overall sentiment. Having printed a session high of USD 1663.91/oz at present, which is some way off yesterday’s USD 1689.29/oz peak. Elsewhere, base metals remain under pressure, but did experience some mild relief overnight as the sell-off’s momentum dissipated.

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)