• Asian stocks traded lower across the board following the bloodbath on Wall Street; Nikkei 225 and Hang Seng fell deeper into correction territory
• South Korea reported 256 more cases of new coronavirus thus far, with the total topping 2000; New Zealand, Lithuania, Nigeria and Belarus also reported their first cases
• Saudi Arabia is reportedly seeking an output cut of 1mln BPD, according to sources, deeper than the 600k BPD proposed by the JTC
• In FX, DXY traded on either side of 98.500, Antipodeans underperformed, USD/JPY fell below 109.00
• Looking ahead highlights include German Import Prices, Unemployment & CPI (Prelim), French GDP (Final), US PCE Price Index, Chicago PMI & University of Michigan, Canadian GDP, Fed’s Mester & Bullard, ECB’s Weidmann & Haldane, BoE’s Cunliffe
• Earnings include BASF, ENI, IAG

CORONAVIRUS UPDATE 

South Korea reported 256 more cases of new coronavirus thus far on February 27 vs. a total 505 on February 26; total cases now at 2022. (Yonhap) South Korea's Vice Finance Minister says will deploy contingency plans to stabilise financial markets if needed, will act against herd-like behaviour in FX markets, will closely be monitoring markets. (Newswires) South Korean Finance Minister says extra budget to tackle the coronavirus will be larger than KRW 11.6tln MERS package, details to be announced next week. (Newswires) South Korea's Health Ministry completed tests for 1299 members of a Church in South Korea who showed symptoms of COVID-19; results will be made available over the weekend, so far ratio of confirmed cases among suspected cases is "very high", reports said. (Newswires) US has also locked down army bases in South Korea. (Newswires)

China's Hubei province reported 318 new coronavirus cases and 41 additional deaths as of February 27 vs. 409 additional cases and 26 additional deaths on February 26. China reported an additional 327 coronavirus cases and 44 additional deaths as of February 27 vs. 433 additional cases and 29 deaths on February 26; Total China cases 78824 vs. Prev. 78497; Deaths 2788 vs. Prev. 2744. (Newswires) China is reportedly to resume road traffic in regions with lower virus risks. (Newswires)

Japanese PM Abe said will take steps if needed to ensure the virus outbreak does not have a huge impact on the Japanese economy, we still have huge reserves to tap for response, no immediate need for additional funding. Japanese Trade Minister says Japan will expand support measures to Japanese firms in response to the virus outbreak. Japanese Health Minister won’t rule out the chance that schools may be shut for longer than 1-2 weeks, contingent on the virus developments. (Newswires) Tokyo Disneyland is to close from Saturday through to March 15th amid coronavirus fears. (NHK) Japan’s MOF senior official says have not decided whether to hold an emergency MOF, BoJ and FSA meeting on Friday. (Newswires)

Italy’s Health Official noted total coronavirus cases have increased to 650. Germany's North Rhine-Westphalia's health ministry announced 14 new cases in the Heinsberg area. France's Health Minister said there are 38 confirmed coronavirus cases in the country, says they are ready for an epidemic with 138 medical facilities ready. (Newswires) The first case of Coronavirus has been diagnosed in Northern Ireland. (BBC) New Zealand, Lithuania, Nigeria and Belarus also reported their first cases of coronavirus, according to BNO Newsroom. (Twitter)

US Surgeon General Adams, US Treasury Secretary Mnuchin and NEC director Kudlow have been added to US President Trump's Coronavirus task force. US VP Pence said the best estimate is that the threat from COVID19 to the public remains low. US Health and Human Services secretary Azar repeats the risk to American from COVID19 is low but that can change. (Newswires) US President Trump tweets that there are only a small number of coronavirus cases in the US and China's numbers look to be going down, "all countries are working well together" (Twitter)

CDC Director said they are aggressively evaluating the virus’ survival time on surfaces; Copper and steel survival time is typically 2hrs, longer on plastic and cardboard surfaces. FDA monitoring supply chains, said it is not aware of any shortages of medical products, including drugs or devices, due to the outbreak; adds outbreak will likely affect medical supply chains in the US. (Newswires) US President Trump administration reportedly discussing utilizing the Defense Production Act to compel companies to increase manufacturing of protective masks and clothing against the coronavirus. (Newswires) Zoono (ZNT AT) said results show that Co's Z-71 microbe shield is >99.99% effective against COVID-19, products have been successfully tested against a variety of pathogens for up to 30 days on surfaces and 24 hours on hands. (Newswires)

California Governor said they are reportedly monitoring 8.5k people for coronavirus in CA, notes they spoke with CDC about testing protocols and was assured they would be advanced with urgency, but CA only has a few hundred testing kits. California Governor Newsom also announced 33 people have tested positive for the coronavirus and 5 have moved out of state. (Newswires) New York State Health Department says 700 people in the state have been asked to voluntarily self-isolate for two weeks due to coronavirus, according to Breaking911. (Twitter) News9 reported that two people are being tested for the virus in Oklahoma. (News9) CDC Director says the CDC revised its case definition for "persons under investigation" for the coronavirus. (Newswires)

Israeli scientists reportedly believe they are on the cusp of developing a vaccine against the coronavirus "in three weeks, we will have coronavirus vaccine.” (Jerusalem Post)

New Zealand is to impose temporary travel restrictions to travellers from Iran and is also to increase health staff presence at airports. Saudi Ministry of Tourism temporarily suspended visa issuing for those coming from China, Italy, Korea, Japan, Malaysia, Singapore and Kazakhstan, according to Saudi News Agency. (Newswires)

ASIA-PAC

Asian stocks traded lower across the board following the bloodbath on Wall Street which saw the Dow plummet almost 1200 points, S&P break below the 3000 mark and the Nasdaq zero in on the 8500 level. Dow and S&P posted their worst day since February 2018 as the three major indices dipped into correction territory. This performance reverberated into APAC markets as ASX 200 (-3.0%) opened sharply lower and held onto the losses, and again with mining and financials posting heavy losses. Nikkei 225 (-4.5%) fell deeper into correction territory and also saw another day of underperformance in manufacturing, autos and financials, whilst also being weighed on by a firmer JPY. KOSPI (-3.4%) bore the brunt of yesterday’s BoK surprise hold coupled with total virus cases in South Korea topping 2k as the index gave up its 2k handle, and with heavyweights Samsung Electronics and Hyundai Motors lower to the tune of 2-5% amid supply chain woes, and with the latter suspending production at its No2 plant in South Korea after a worker tested positive for the virus. Elsewhere, Hang Seng (-2.8%) and Shanghai Comp. (-2.8%) conform to the global stock rout, with the former also in correction zone and again pressured by the usual suspects – oil giants, entertainment and financials stocks, whilst the latter initially scraped off lows before extending losses, as the total deaths in the country showed an increase vs. yesterday, although the rate of new cases continues its recent downtrend. US equity futures extended losses with the E-Mini Mar’20 contract falling below 2950.

PBoC set USD/CNY mid-point at 7.0066 vs. Exp. 7.0095 (Prev. 7.0215) (Newswires) PBoC skipped open market operations for a daily net neutral position

UK/EU

Outgoing BoE Governor Carney said Coronavirus could mean economic growth downgrade for UK, it's too early to tell what it means for the UK, or its magnitude, Sky News Interview. Carney pointed to the stronger labour market, falling household debt and rising real wages but added that UK productivity remained weak. When asked whether Brexit would damage the economy, he said: "I guess it's too early to tell. I think the economy will go through a period of reorganisation. (Sky News)

ECB's Lane (Dove) said more widespread contagion and a longer interruption in normal activity constitute additional downside risks to near-term projections. (Newswires)

Italian PM Conte said we must work side by side to ensure a level playing field in talks between the EU and UK after a meeting with French President Macron. (Newswires)

UK GfK Consumer Confidence* (Feb) -7 vs. Exp. -8.0 (Prev. -9.0) (Newswires) UK Lloyds Business Barometer (Feb) 23 (Prev. 23)

FX

In FX, DXY was initially uneventful under the 98.500 mark and around the prior session’s lows after tracking US yields lower, and with markets pricing in ~75bps worth of Fed cuts by year-end. The index later gained some traction and topped 98.500, primarily driven by losses in other G10s. As such, EUR/USD experienced modest weakness and drifted below the 1.1000 mark after having fluctuated on either side of the level in early trade, and with sizeable option expiries scattered ahead of today’s NY cut, including almost EUR 2bln at strike 1.0950, and around EUR 1.4bln between 1.0980-1.1000. GBP/USD flatlined just below 1.2900 throughout the session before succumbing to USD strength. Antipodeans were pressured with the Aussie faring slightly better than its Kiwi counterpart after the AUD/NZD cross rebounded off support at 1.0400 and extended gains to levels north of 1.0450, prompting the NZD/USD to breach 0.6300 to the downside at the time. AUD and NZD saw more pronounced downside thereafter as risk aversion materialised further across the market and with increased talk of dovish RBNZ calls also weighing on the latter. NZD/USD saw some mild support at 0.6250 but the first confirmed coronavirus case in New Zealand took the Kiwi below the psychological level. AUD/USD meanwhile traded choppy above 0.6550 before joining the Kiwi on its downwards trajectory, with some citing the AUD/JPY breach below 72.000 as a potential catalyst. Elsewhere, USD/JPY and JPY-crosses trickled lower as the safe-haven currency remained underpinned by the risk-tone. USD/JPY slipped below 109.50, its 100 DMA (~109.20) and then 109.00 to an overnight base of ~108.90. Finally, KRW came under renewed pressure as the region continues to tackle the economic prospects of rising virus cases and stacking travel advisories against the country.

COMMODITIES

WTI and Brent front month continued to bleed during APAC trade as the coronavirus theme continues to weigh on the demand side of the equation. Prices saw modest fleeting upside on source reports that Saudi Arabia is reportedly seeking a 1mln BPD cut at next week’s meeting, deeper than the JTC-recommended 600k BPD reduction. Nonetheless, WTI Apr’20 futures slipped below USD 46/bbl whilst its Brent counterpart briefly fell under USD 50.50/bbl. Elsewhere, spot gold was choppy but ultimately saw losses despite the risk aversion as the yellow metal drifted below 1650/oz with an overnight base found ~1635/oz, with some highlighting month-end factors whilst others cited profit taking. In terms of base metals, copper prices and Dalian iron ore futures saw significant losses given the bleak risk tone and dampened demand prospects on coronavirus.

Saudi Arabia is reportedly seeking a cut of 1mln BPD, according to sources cited by the FT, Saudi would account for a bulk of the newly proposed cuts. (Newswires) OPEC Secretary General Barkindo said OPEC+ are showing renewed commitment to reaching the accord, noted next week's meeting is to go ahead as scheduled. (Newswires)

Exxon’s 584k BPD Baytown Texas Refinery operations are back to normal. (Newswires)

GEOPOLITICS

Turkey's Foreign Ministry said Turkey emphasized the need to provide a ceasefire in Syria's Idlib with the Russian delegation. 33 Turkish soldiers were reportedly killed in the bombing by the Syrian "regime forces" in north-western Syria. (BBC) Turkish President Erdogan held and emergency meeting before his office said that Turkey will hit “all regime targets” in retaliation. (Newswires) Turkey is to retaliate in kind against Syrian government after Turkish soldiers were killed in Idlib, according to a Turkish official cited by Anadolu. (Newswires) US State Department says they stand by their NATO ally Turkey. (Newswires)

Israeli military helicopters over the Golan Heights have attacked a number of positions near Quneitra in southern Syria, according to SANA cited by ELINT News. (Twitter)

US * US T-NOTE FUTURES (H0) SETTLE 3+ TICKS HIGHER AT 133-14. It was another choppy session for the TPLEX, which has ultimately seen yields in the shorter part of the curve fall by around 4.5bps, while the longer end was down by just under 1bps, at settlement; the shape of the curve, however, was steeper to the tune of 1-3bps. It was, of course, COVID19 headlines that were dictating the action, and the curve was influencing the FX space via the rate differential channel, which subsequently saw the USD come under pressure, particularly against the JPY. The US sold 7-year notes in an unspectacular auction, which tailed by 1.4bps, though cover had firmed versus recent averages. For now, Fed officials seem to be comfortable monitoring the risks, although markets seem to be somewhat less patient, and have priced in nearly three rate cuts through the end of this year. Analysts have said that whether this transpires on not will likely depend on the speed of the normalisation, and what actions US corporates could take in response (cutting guidance has been seen, but some have warned they may be far more worried by job cuts).

Fed's Evans (non-voter, dove) regarding monetary policy, said we only have so much ammunition but if circumstances require additional accommodation, we do have that capacity, adds policy is pretty well positioned for the risks that we have seen coming. Fed's Evans said looking for real economic impact from the coronavirus is the first thing to be considered, it is too early to tell if its growth forecast will be cut, and that it is going to take some time for the effects to show. (Newswires)