• Mass sell-off continues, with all bourses firmly in negative territory and the DJIA future breaching the 25k mark
• Spot gold has failed to benefit from the continued sell-off, while JPY has been the clear beneficiary of haven flows
• WHO Spokesman says the coronavirus outbreak is 'getting bigger' the scenario of it reaching multiple, 'if not all countries' is something that we have warned about for a while
• 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
• Tensions have flared between Russia and Turkey over Syria, with 33 Turkish soldiers killed and Russia sending frigates to the region
• Looking ahead, highlights include US PCE Price Index, Chicago PMI & University of Michigan, Canadian GDP, Fed’s Mester & Bullard, ECB’s Haldane, BoE’s Cunliffe

CORONAVIRUS UPDATE

WHO Spokesman says the coronavirus outbreak is 'getting bigger' the scenario of it reaching multiple, 'if not all countries' is something that we have warned about for a while, Looking into reports of re-infection, need to look into how the testing was done; but, generally an individual with coronavirus would, once recovered, be immune for at least a while; mission into Iran is supposed to begin next week, but this is still being constructed. (Newswires)

South Korea reported 315 more cases of new coronavirus thus far on February 27 vs. a total 505 on February 26; total cases now at 2337. (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)

China's State Planner says they are to create a list of small-companies at risk of bankruptcy from the coronavirus, and encourage larger Co's to offer support. (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) Japan's Hokkaido has declared a state of emergency; Hokkaido is the northernmost of the nation's main islands – due to the coronavirus. (Newswires)

Italy’s Health Official noted total coronavirus cases have increased to 650. 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) 60 cases confirmed in Germany. (Newswires)

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. 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)

News9 reported that two people are being tested for the virus in Oklahoma. (News9)

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 (-3.3%) opened sharply lower and held onto the losses, and again with mining and financials posting heavy losses. Nikkei 225 (-3.6%) 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 (-3.3%) 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 (-2.4%) and Shanghai Comp. (-3.7%) 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 Vasiliauskas does not see that the ECB can do anything in March regarding the coronavirus; In our view, monetary policy has not yet reached the reversal rate, ECB must not lose sight of the exit from loose monetary policy. (Newswires)

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

Germany economy spokesperson says no stimulus is currently planned, but we need to improve the tax framework. (Newswires)

German Saxony State CPI YY (Feb) 2.0% (Prev. 1.8%); MM (Feb) 0.5% (Prev. -0.6%)

-        North Rhine-Westphalia State CPI YY* (Feb) 1.8% (Prev. 1.8%); MM* (Feb) 0.5% (Prev. -0.6%)

German Unemployment Change SA (Feb) -10k vs. Exp. 3.0k (Prev. -2.0k, Rev. -4k)

-        Unemployment Rate SA (Feb) 5.0% vs. Exp. 5.0% (Prev. 5.0%)

GEOPOLITICS 

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)

Subsequently, Russia's Black Sea fleet says that two frigates which are equipped with cruise missiles are being sent to the Mediterranean and Syrian Coast, according to Interfax. (IFX) additionally a Senior Russian Lawmaker says that any full-scale Turkish military operation in Syria's, Idlib would end badly for Turkey. (IFX) In terms of response to the escalating situation, NATO’s Secretary General says they are to meet later under Article 4 to discuss this

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)

EQUITIES

Another grim session thus far for European equities (Eurostoxx 50 -4.2%) as the selling pressure facing global stocks shows no signs of letting up. Since yesterday’s close there hasn’t been much in the way of a notable pickup in coronavirus-related outbreaks with the newsflow running largely at the same clip as it has done for the past few sessions as various nations such as New Zealand, Lithuania, Nigeria and Belarus all report their first cases. The current market narrative is having to contend with many of the same issues it has throughout the week, with the uncertainty surrounding coronavirus clearly top of the list of investor concerns, whilst a lack of meaningful policy response from either fiscal or monetary authorities has only added to the current apprehension. Additionally, geopolitical unrest between Turkey and Russia as well as focus on who US President Trump’s opponent in the 2020 White House race could be (Sanders would naturally be seen as a negative) have added to the bearish impulses. All of this has triggered a serious re-reassessment of valuations (mainly US) that many had questioned on the way up in recent months, however, it remains to be seen how far the current slump will extend as the ongoing drip-feed of disappointing corporate updates continues to suppress investor appetite. In terms of the breakdown for Europe this morning, selling across the 10 key sectors has been relatively broad-based once again, with travel names continuing to be a prime target for selling pressure after IAG (-2.5%) warned that, amid COVID-19 the Co. could not forecast 2020 profits. Furthermore, for the sector, easyJet (U/C) shares are also seen lower after warning of softening demand amid the virus outbreak. Elsewhere to the downside, Lagardere (-10.1%) sit at the foot of the Stoxx 600 post-earnings, Commerzbank (-4.1%) are seen lower in a disappointing yield-environment for the financial sector whilst also being urged to make deep cuts and overhaul its business model. Such is the extent of the selling, despite opening with gains of 3.3%, shares in Thyssenkrupp (-4.7%) eventually fell victim to the bloodbath in Europe. One of the few success stories thus far is Rolls-Royce (+6.1%) after announcing it will be incurring no further costs from the Trent 10000 issues.

FX

JPY/CHF/EUR/XAU - It’s seems when push really comes to shove and risk aversion intensifies to the point of full blown mass exodus levels, the Yen becomes the default destination and accordingly Usd/Jpy alongside crosses are collapsing at pace. The headline pair is now probing bids near 108.50 and a break could expose the 200 DMA (circa 108.42) with inverse bearish repercussions for the DXY that is already looking increasingly precarious a fraction above the 98.000 handle having already breached a 50% retracement level on the charts at 98.134. Meanwhile, the Franc is also attracting capital fleeing from high beta, activity and cyclical counterparts, as Usd/Chf hovers closer to the bottom of a 0.9695-10 range and Eur/Chf retreats through 1.0650 even though the single currency continues to proffer from the Dollar’s demise amidst ever declining US Treasury yields and curve flattening. However, Eur/Usd has run in to some resistance around 1.1050 where option expiry interest in 1.4 bn resides and extends to 1.1060. Elsewhere, Gold has not benefited from the safety-flight perhaps oddly or perversely, as Xau/Usd consolidates below Usd1650/oz and holdings are liquidated to free up cash over month end and for other funding needs.

GBP - The Pound is not renowned for any safe-haven properties and still has residual RHS month end Eur/Gbp demand to contend with as the cross straddles 0.8550, but Cable is clinging to 1.2900 due to Buck underperformance and braced for the UK-EU trade off to begin.

CAD/AUD/NZD/NOK/SEK - Having displayed varying degrees of resilience in the face of an escalating FTQ, the Loonie, Aussie and Kiwi have all succumbed to the inevitable or reality, with Usd/Cad topping 1.3450 ahead of Canadian GDP and PPI, Aud/Usd struggling above Fib support circa 0.6513 protecting 0.6500 and Nzd/Usd now south of 0.6350 amidst renewed calls for RBA and RBNZ easing in response to nCoV. Similarly, the Scandi Crowns are sinking as sentiment sours and local data is shrugged off, such as Swedish Q4 GDP that was bang in line with consensus anyway, and Norwegian Krona falls additionally in sympathy with crude. Eur/Nok hit fresh record highs over 10.4300 and Eur/Sek almost touched 10.7000 before some paring back.

EM - Deeper declines and depreciation de rigour, but the Rouble and Lira are still prone to inverse moves on oil prices while anxiously eyeing events in Syria’s Idlib where attempts to mediate between Turkey and Russia are ongoing following a further escalation in military strikes. Elsewhere, intervention is becoming more commonplace in an effort to stop runs on various currencies that have plunged to all-time lows

Notable FX Expiries, NY Cut:

-        EUR/USD: 1.0900 (2.2BLN), 1.0920-35 (1.1BLN), 1.0950 (1.6BLN), 1.0975-80 (1.1BLN), 1.1000 (732M), 1.1050-60 (1.4BLN)

-        EUR/JPY: 119.95-120.05 (1.3BLN)

FIXED INCOME

It would be far too premature if not profligate to even venture the notion that the tide may be turning given recent history, but some element of calm amidst the risk storm has evolved over the course of the EU am session. Indeed, Bunds, Gilts and US Treasuries are all off lofty safe-haven peaks of 177.75, 135.92 and 134-20+ respectively in 10 year futures, while the Dax is almost 250 points off its trough that appeared extremely fragile earlier when aversion was bordering on capitulation. However, it could yet prove to be a freaky Friday and final trading day of February with a raft of data scheduled and USTs still underpinned by a lengthy month end extension.

COMMODITIES

WTI and Brent prices are once again experiencing a significant sell-off this morning with WTI having breached the USD 45/bbl mark and crude well below USD 50/bbl at worst, with losses just shy of USD 2/bbl at present. Focus does, as has been the case all week, remain almost exclusively on the coronavirus with multiple new cases being reported as well as the implementation of emergency or lockdown procedures in some regions. Overnight, prices did briefly see support of reports that Saudi Arabia are looking for a 1mln BPD production cut, and they would be responsible for the majority of such a reduction; while the price support was fleeting, these comments are notable given that such a level would be almost double the figure recommended by the JTC (600k BPD) (Note, similar reports were echoed ahead of the US entrance to market). Next week sees the OPEC meeting where all eyes will be on firstly if production cuts are announced and then, assuming they are announced, the magnitude of reductions; ING posit that 600k would likely be sufficient to maintain market balance at present into Q2 but, in the event that Libyan supply returns earlier than expected cuts of the 1mln magnitude would be required. Elsewhere, geopolitical tensions over Syrian between Russia and Turkey have significantly flared up during the session, with Russia sending frigates to the area and the UN to host an emergency meeting, at Turkey’s request, on this later. While not currently appearing to have an impact on commodity prices, it could well become a focus point if the situation deteriorates further. Moving to metals, where spot gold isn’t able to benefit from the continued sell-off markets are seeing, as such the yellow metal is down by circa USD 10/oz at present; however, it is worth caveating that spot gold prices are still well-elevated vs. recent levels and it does appear that today’s lack of support for the metal is at the expense of a significantly bolstered JPY.

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. (FT) 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)

Multiple OPEC members including Saudi Arabia are leaning in favour of a deeper oil output reduction with discussions of a 1mln bpd cut vs. Prev. suggestion of 0.6mln bpd, according to sources. (Newswires) Note, this is relatively similar to the above FT report.

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