• European bourses are negative at present, but well-off session lows which saw Dax March’20 future drop 400 points at worst
• WTI and Brent tested USD 49/bbl and USD 54/bbl on the EU morning sell-off; though selling has stabilised somewhat ahead of the US’ entrance
• First coronavirus related deaths have been reported in France, as well as the first cases in Poland, Greece and Brazil
• EU's Chief Trade Negotiator Hogan said he hopes to broker with the US a "mini-deal" before US increases tariffs on the European aircraft sector
• South African Public Sector Union Nehawu says if ministers announce wage freezing, we will mobilise all our members to shut down the government indefinitely; ahead of the 12:00GMT/07:00EST budget unveiling
• Looking ahead, highlights include US New Home Sales, New Zealand Trade Balance, ECB’s Lagarde, Fed’s Evans, Kaplan & Kashkari, South African 2020 Budget

CORONAVIRUS UPDATE

WHO's Tederos says using the word 'pandemic' carelessly has no benefit, could amplify unjustified fear and stigma; word might also signal that the virus can no longer be contained, which is not true. (Newswires)

South Korea reported 169 more cases of new coronavirus thus far on February 25 vs. 144 on February 24 and vs. 51 a week ago; total cases now at 1146 and a 12th coronavirus-related death reported. (Yonhap) US soldier stationed in South Korea has tested positive for coronavirus, according to US forces in Korea (Twitter) South Korea said 16,734 people are currently being tested for coronavirus, up from 13,880 last night. Many of them are being tested as a precaution. (Yonhap) Japan is to ban foreigners who have visited Daegu and Cheongdo, South Korea, according to Kyodo. (Newswires). Elsewhere, At least 50 people with coronavirus in Japan are reported to be seriously ill, including 36 people from the Diamond Princess cruise ship, according to BNO Newsroom citing NHK. (Twitter)

China's Hubei province reported 401 new coronavirus cases and 52 additional deaths as of February 25 vs. 499 additional cases and 68 additional deaths on February 24. China reported an additional 406 coronavirus cases and 52 additional deaths as of February 25 vs. 508 additional cases and 71 deaths on February 24; Total China cases 78064 vs. Prev. 77658; Total deaths 2715 vs. Prev. 2663; 2,422 patients discharged. (Newswires/Global Times)

Beijing Health Commission says that people will be quarantined for 14 days if they have travelled to countries seriously impacted by Coronavirus. (Newswires)

PBoC says that small firms will be targeted by CNY 300bln of new re-lending quotas with CNY 100bln for agricultural areas; will increase funding support to key areas such as travel agencies, hotels, restaurants and transportation firms. (Newswires)

Italy has reported an additional 19 new virus cases, death toll stands at 12. French health official announced three new confirmed COVID-19 cases in France, as well as the first death. (Newswires) Spain reports 2 more cases of the coronavirus, according to BNO Newsroom, including the first case in Madrid, with 7 total cases reported in the last 24 hours. (Twitter). While Poland has recorded its first case as has Greece, according to press reports. (Newswires) Britain is to launch mass coronavirus tests amid fears that the spike in numbers in Europe means that there could be far more cases in the UK than are known about. (Telegraph) Brazil's Health Ministry said a man has tested positive for coronavirus in an initial test, with subsequent tests confirming this; in the first case for Latin America. (Twitter) A second coronavirus case has been reported in Africa, tests indicate an Italian adult who arrived in the country on 17 February has tested positive, according to WHO Africa. (Twitter)

Sources noted of some discussions in White House about whether to declare national emergency under Stafford Act to deal with coronavirus, but hasn’t yet been seriously considered, per those close to the discussions, according to Bloomberg News' Jacobs. (Twitter) San Francisco Mayor has declared a state of emergency to prepare for the coronavirus, no confirmed cases of the virus in San Francisco yet, according to SF Chronicles. (San Francisco Chronicles)

US President Trump tweeted that US CDC and the Trump Administration are doing a great job of handling Coronavirus, including the very early closing of US borders to certain areas of the world. (Twitter)

The US Forces of Korea have raised its COVID-19 risk level to "high" in the context of a "strong abundance of caution", according to social media. (Twitter)

China Global Times editor Hu Xijin thinks "now the US is the country with potential large uncertainties. Many doubt that the US has only 57 cases of coronavirus. It can't be ruled out there is problem with the diagnosis."; COVID-19 is probably the biggest variable to the US economy and US presidential election. (Newswires)

ASIA-PAC

Asian equities traded mostly lower, with losses across the board for a bulk of the session after Wall Street experienced another bleak session which saw the DJIA shed almost 900 points, whilst the S&P posted is largest two-day loss since August 2015 and the Nasdaq turned negative for the year - traders were also spooked by the 10yr Treasury yield falling to a fresh record low of ~1.3070%, which came as a function of the rising virus fears. ASX 200 (-2.3%) continued to be pressured by its heavyweight financials and mining sectors, whilst Nikkei 225 (-0.8%) bore the brunt of declines across mining and auto names, but Canon shares rose around 4% at the open on the back of reports that the Co. has started developing a coronavirus testing kit. The index drifted off lows as it tracked the movements in USD/JPY. KOSPI (-1.3%) conformed to the regional declines following its breather session yesterday, as confirmed South Korean cases topped 1000 vs. 51 a week ago. Over in China, Hang Seng (-0.7%) was weighed on by losses across its oil giants, entertainment stocks and financials – which together account for almost 70% of the index, although the index pared some losses upon the unveiling of the Hong Kong budget, which announced a HKD 120bln package of measures to bolster the economy. Shanghai Comp. (-0.8%) opened lower by over 1% but thereafter trimmed losses despite the PBoC skipping OMO for a 7th consecutive day, after the latest China virus numbers showed a slowing rate of new cases and deaths.

Hong Kong government unveiled measures worth HKD 120bln in its annual budget to bolster the economy amid the coronavirus outbreak and after months of social unrest. Hong Kong Government is to hand out HKD 10k to each permanent citizen aged 18 or older. Hong Kong Finance Secretary said Hong Kong is to have a record budget deficit of HKD 139.1bln next FY. (Newswires/SCMP) Click here for the full rolling headline

US

Fed's Kaplan (Voter, Dove) said events are still too fluid around the virus outbreak to say the Fed needs to lower short-term rates, as many in financial markets now think is likely. Kaplan added that it is too soon to make a judgment on how the outbreak would affect monetary policy, the Fed is a number of weeks away from being able to make the judgement. (WSJ) For reference, the next FOMC meeting will take place on March 17/18 where the Summary of Economic Projections will be released.

UK/EU

EU's Chief Trade Negotiator Hogan said he hopes to broker with the US a "mini-deal" before US increases tariffs on the European aircraft sector. (FT)

EU Commissioner Gentiloni says there are clauses for budget flexibility for emergencies in EU budget rules in response to a question about extra spending leeway for nCoV outbreak in Italy. (Newswires)

ECB’s Makhlouf says central banks need to do a better job at communicating and explaining, continues to be uncertainty about exactly what "close to, but below" means. (Newswires)

-        Have to avoid target shortfalls leading to a de-anchoring of inflation expectations from its target

-        Consider whether the current consumer price index is helping to communicate the ECB's objectives in the most effective way

German GDP is to rise by around 0.1% in Q1, according to DIW; Says the industrial recession would likely continue regardless of coronavirus. (Newswires)

UK BRC Shop Price Index (Feb) Y/Y -0.6% (Prev. -0.3%) (Newswires)

GEOPOLITICS 

Turkish President Erdogan says he has been told that the US does not have patriot systems to provide to Turkey at present. (Newswires) Note, Turkey and Russia are conducting talks today over Syria

EQUITIES

Stocks in Europe (Eurostoxx -1.2%) have once again fallen victim to the fallout of COVID-19 as the virus shows no sign of abating outside of China. The velocity of the selling pressure in Europe has been noteworthy with interim support levels proving to be futile (e.g. FTSE MIB has now entered correction territory from last week’s highs). That said, ahead of the US entrance to market, indices have nursed some losses as markets paused for breath following recent selling. In terms of the case count, reporting for the purposes of a written report is particularly difficult given the fluidity of the situation (as such we will refer you to the headline feed of the website), however, from a European perspective, Italy is continuing to announce further coronavirus diagnosis’, France has announced two deaths, Spain’s case tally continues to rise, Britain has stepped up preventative measures, Poland and Greece have announced their first cases. Again, this is just a small snapshot of where we currently stand and the situation is consistently evolving on an hour-by hour basis. Losses are relatively broad-based across sectors with defensive names unable to insulate themselves from the selling pressure. Notable specific laggards include, LSE (-2.7%) with Co. shares have been weighed on by FT reports that the Co.’s purchase of Refinitiv is facing increasing scrutiny by the EU, whilst travel names once again are a source of heavy underperformance with TUI (-2.1%), easyJet (-2.3%), RyanAir (-4.3%). Furthermore, corporate updates in the UK from Metro Bank (-17%) and Taylor Wimpey (-3.5%) have been poorly received with the latter hampering some of its UK peers. To the upside, Weir Group (+6.5%) top the Stoxx 600 post-FY earnings update, whilst Saipem (+3%) shares were lifted after exceeding 2019 financial targets and Danone (Unch) has been able to avoid negative territory despite cutting sales guidance. 

China January vehicle sales -18.7% Y/Y to 1.9mln vehicles, according to the Chinese Industry Association. (Newswires)

Google (GOOG) and Microsoft (MSFT) are increasing efforts to move production for phones, PCs and other devices from China to Southeast Asia amid the Coronavirus outbreak (Vietnam and Thailand are expected to benefit), according to the Nikkei. (Nikkei)

Panasonic announced it will exit solar cell production at Tesla's (TSLA) New York factory in May but will retain its joint automotive battery business with Tesla in Nevada

FX

CHF/EUR/JPY/XAU - All off best levels, but retaining a firm underlying bid as broad sentiment remains bearish on the ongoing spread and accumulation of COVID-19 cases/deaths further beyond mainland China. The Franc is probing above 0.9750 against a relatively depressed Dollar, though unwinding some gains vs a perkier Euro that has breached Fib resistance against the Greenback around 1.0887 and tested 1.0900, while reclaiming big figures at 1.0600 and 0.8400 in Eur/Chf and Eur/Gbp cross terms. Note, market contacts suggest the latter may have rebounded on month end factors and the usual RHS demand, while Eur/Usd could have derived some upside impetus from option expiries skewed towards the top of a 1.0850-1.0900 range (1.8 bn at the base, 1.2 bn from 1.0860-70 and 2.5 bn between 1.0890-1.0900). Elsewhere, the Yen has been meandering within 110.57-14 parameters and mindful of comments from Japanese PM Abe underlining a watching brief on nCoV and market moves in response to unfolding developments, while Gold has settled down after another bout of heavy selling to straddle Usd1650/oz again.

GBP/AUD/NZD/CAD/NOK/SEK - As noted above, the Pound has lost traction partly due to Eur/Gbp positioning for Friday, while Cable has retreated from 1.3000+ peaks amidst speculation of seasonal US selling on top of Brexit uncertainty that is hampering Sterling before UK-EU trade talks begin. However, the Aussie is underperforming in outright terms following much weaker than forecast construction data overnight, as Aud/Usd falls to fresh decade+ lows circa 0.6570 in contrast to a more resilient Kiwi clinging to 0.6300 ahead of NZ trade later. Another decline in crude has undermined the Loonie and Norwegian Crown, with Usd/Cad hovering just shy of 1.3300 and Eur/Nok up to 10.2300 at one stage, while the Swedish Crown is keeping its head afloat of 10.6000 vs the single currency after more Riksbank attempts to downplay weak inflation and Sek itself.

USD - The Buck remains prone to more pronounced demand for safer-havens and soft US Treasury yields, but the DXY is holding around 99.000 by virtue of bigger net advances vs the more high-beta, risk or cyclical currencies ahead of housing metrics.

EM - Aside from the overall negative tone, the Lira awaits news from Turkey’s first meeting with Russia on Syria to see if positive sentiments from the latter about finding an Idlib solution come to fruition, while the Rand is eagerly eyeing the SA budget at noon and Mexican Peso more macro news in the form of retail sales.

South African Public Sector Union Nehawu says if ministers announce wage freezing, we will mobilise all our members to shut down the government indefinitely. Additionally, South Africa's Public Servants Association will not accept moves to lower or freeze wages of public sector employees, according to the union President (Newswires) Comes ahead of the 2020 budget announcement at 12:00GMT/07:00EST

Notable FX Expiries, NY Cut:

-        EUR/USD: 1.0800 (1BLN), 1.0825 (455M), 1.0850 (1.8BLN), 1.0860-70 (1.2BLN), 1.0890-1.0900 (2.5BLN)

-        USD/CHF: 0.9745 (1BLN), 0.9885 (625M)

-        USD/JPY: 110 (800M), 110.45-50 (1.3BLN), 110.75-85 (1.4BL), 111.00 (2.6BLN)

FIXED INCOME

It remains to be seen if the latest equity rebound is sustainable or whether US participants pounce on better levels to sell/hedge against further Chinese virus fall-out, but EU bourses are showing signs of maintaining recovery momentum. Indeed, the current bout of consolidation has already exceeded recent episodes in length and magnitude, albeit from increasingly weak and arguably oversold depths to leave Bunds back below 176.00 and parity vs 176.30, Gilts at 135.43 compared to 135.82 at best and the 10 year UST note at 132-285+ from 133-09 at one stage. Ahead, US housing data, more global Central Bank orators, EIA crude stocks and US supply.

COMMODITIES

WTI and Brent remain under pressure this morning, as another bout of wide-spread selling commenced as European players entered the market. At present, WTI and Brent front month futures are just off of session lows which are around the USD 49/bbl and USD 54/bbl marks respectively as downside pressure appears to have abated slightly as we approach the US’ market entrance; albeit, they are still down in excess of USD 0.50/bbl on the day. Focus this morning has been firmly on the coronavirus, with reports of additional cases in multiple countries just after the European cash open as well as the first death in France. Coronavirus contagion aside, next week brings the OPEC+ meeting and, as we continue to await Russia’s stance to the JTC’s recommended cuts, ING posit that OPEC+ will extend the current cuts and Saudi will continue to over-comply to offset the virus’s demand-side impact; it’s worth noting that doing so may be made modestly easier in the event that Libyan ports remain closed for the foreseeable future. Looking ahead, we have the release of the weekly EIA report, which is expected to print a headline crude build of 2.467mln; almost double last nights smaller than expected 1.3mln build via the API’s. Turning to metals, where spot gold is around USD 12/oz firmer on the day, but has retreated from highs at USD 1655/oz; a level which is comfortably below yesterday’s USD 1663.78/oz peak and the YTD’s USD 1689.29/oz mark. Copper prices remain subdued this morning, and within proximity to the USD 2.48/lb low for the year thus far; base metals more broadly remain similarly hampered on demand concerns from the virus.

US Private Inventory Crude Stocks +1.3mln (w/e 21st Feb) (exp. +2.0mln, prev. +4.2mln) (Newswires) - Cushing +0.4mln (prev. +0.4mln) - Gasoline +0.1mln (exp.-2.2mln, prev. -2.7mln) - Distillates -0.7mln (exp. -1.7mln, prev. -2.6mln)

Kuwait said all Kuwaiti ports will not be allowed to receive ships from China, Korea, Italy, Singapore, Thailand, Japan and Iraq, in order to prevent coronavirus from spreading - ships from the oil sector are excluded from the port ban. (Newswires)