• Asian bourses and US equity futures began the week volatile with hefty losses which were later recouped as markets found reprieve  
• China reported 202 additional coronavirus cases; South Korea reported 476 more cases; Italy reported 566 new cases; France noted 30 additional cases; US confirmed the first 2 coronavirus-related deaths  
• White House officials are to discuss emergency measures to tackle virus outbreak; Italy will introduce measures valued at EUR 3.6bln to support the economy; BoJ offered to buy JPY 500bln of JGBs  
• North Korea fired 2 unidentified projectiles from the east coast city of Wonsan into the sea; Turkish drone strikes in Idlib have killed 19 Syrian soldiers  
• Looking ahead, highlights include UK, US, EZ Manufacturing PMI (Final), US ISM Manufacturing PMI, Construction Spending and ECB’s de Guindos

CORONAVIRUS UPDATE 

China reported 202 additional coronavirus cases and 42 additional deaths as of March 1st vs. Prev. 573 additional cases and 35 additional deaths on February 29th. (Newswires)

South Korea reported 476 more cases of coronavirus thus far and 2 more deaths to bring the total number of cases to 4212 and death toll at 22, while Indonesia confirmed 2 coronavirus cases. (Newswires)

Italy reported it now has 1694 confirmed coronavirus cases vs. Prev. 1128 and its death toll rose to a total of 34 from Prev. 29, while it was also reported that Italy will introduce measures valued at EUR 3.6bln to support the economy amid the coronavirus outbreak. For reference, this is on top of EUR 900mln pledged on Friday. In related news, France reported 30 new coronavirus cases to increase the total to 130, while the German government crisis committee called on cancellations of imminent major international events and conferences, as well as intensifying cross-border measures. (Newswires)

US confirmed the first 2 coronavirus-related deaths which were both in Washington State and New York State also confirmed its 1st positive coronavirus test. Furthermore, officials cautioned that more will come and noted increasing indications coronavirus has been spreading undetected in a suburb of Seattle city for weeks, while Florida reportedly declared a public health emergency after 2 people tested presumptively positive for coronavirus. (Newswires)

US President Trump is to meet with drug companies on Monday to discuss progress on coronavirus vaccines, while it was also reported that US VP Pence will hold a briefing regarding coronavirus at 1700EST today. (Newswires)

White House officials are to discuss tax cuts and other emergency measures in hopes of tackling COVID-19 fallout. There were also separate reports that US House of Representatives members are being advised to put plans in place for office operations in the event of widespread COVID-19 infections in the US and House of Representatives could vote on emergency COVID-19 bill as soon as this week. (Washington Post/Newswires)

US Health Secretary Azar said closing some schools is possible but it depends on the circumstances and that they do not yet have a "definitive link" on how California patient contracted the virus but doesn't think it was related to the air base repatriation effort. In related news. Acting White House Budget Office Chief Vought said we will need supplemental funding shortly but have not run out of money. (Newswires)

Australia confirm the first community transmission of the coronavirus, according to the New South Wales State Government. Australian Treasurer Frydenberg said they are prepared economically to deal with challenges posed by the coronavirus and noted that a fiscal response will be considered, responsible and targeted, while it was also reported that New Zealand PM Ardern extended travel restrictions for 7-days on China and Iran. (Newswires)

UK PM Johnson is to chair a Cobra committee meeting later in which Senior Ministers and Health Advisors will be told that the coronavirus outbreak will present a “significant challenge” as the UK’s count reached 36 confirmed cases from 23 a day earlier. (BBC)

Three Public Health Officials have described the coronavirus outbreak as a pandemic. (FT). SCMP article noted that a critically ill Chinese patient with coronavirus was saved by stem cell therapy. (SCMP)

ASIA-PAC

Asian bourses and US equity futures began the week volatile with hefty losses seen at the reopen as markets reacted to the abysmal Chinese Manufacturing PMI data over the weekend which slumped to below GFC levels and its weakest on record. This saw US equity futures drop by as much as 3% although later recouped all their losses as markets found reprieve from the declining pace of China’s coronavirus cases and amid widespread anticipation of Central Bank measures including calls for the Fed to deliver a 50bps cut at this month’s meeting. ASX 200 (-0.8%) and Nikkei 225 (+1.2%) were mixed in which Australia suffered from its heavy exposure to China and with financials also weighed by expectations of a rate cut by the RBA tomorrow, while the Japanese benchmark staged a comeback helped by the BoJ which is to ensure liquidity through operations and offered to buy JPY 500bln of JGBs. Hang Seng (+0.7%) and Shanghai Comp. (+3.1%) were also positive despite the alarming Chinese PMI data in which both China’s Official and Caixin Manufacturing PMIs fell to record lows, as sentiment was underpinned by measures including China permitting SMEs to delay debt repayments and with construction stocks surging on anticipation of China rushing into infrastructure projects to offset the fallout to the economy from the outbreak. Finally, 10yr JGBs traded positive but were off their intraday highs as the turnaround in stocks eventually dampened safe-haven appetite, although JGBs still remained afloat after the BoJ declared it will ensure ample liquidity and received JPY 571bln of total bids for the aforementioned JPY 500bln offer.

PBoC set USD/CNY mid-point at 6.9811 vs. Exp. 6.9808 (Prev. 7.0066) PBoC skipped open market operations for a daily net neutral position. (Newswires)

Chinese Manufacturing PMI (Feb) 35.7 vs. Exp. 46.0 (Prev. 50.0). (Newswires) Chinese Non-Manufacturing PMI (Feb) 29.6 vs. Exp. 50.0 (Prev. 54.1) Chinese Composite PMI (Feb) 28.9 (Prev. 53.0)

Chinese Caixin Manufacturing PMI (Feb) 40.3 vs. Exp. 45.7 (Prev. 51.1)

BoJ Governor Kuroda said they are seeing unstable moves in markets and will strive to provide ample liquidity, while he added they are to ensure liquidity through operations and asset purchases. Furthermore, the BoJ said it will closely monitor future developments and offered to buy JPY 500bln of JGBs for March 3rd-16th. (Newswires) 

UK/EU

UK PM Johnson said he will drive a hard bargain regarding trade talks with US and reiterated that the NHS will not be up for discussion. UK PM Johnson has been warned that he faces a “big choice” between following EU or US standards as Minister will today reveal what they seek in a US/UK trade deal, with talks between the two sides expected to begin this month. (Sky News/Guardian)

UK Chancellor Sunak is planning to scrap a GBP 3bln tax relief in a bid to raise cash for an expected increase in public spending as he sets out the budget on 11th March. (Guardian)

German Finance Minister Scholz stated that the Finance Ministry is looking into ways of loosening the debt brake. (Handelsblatt)

French President Macron has reportedly warned EU leaders that a failure to win a good post-Brexit deal for European fishermen would trigger civil unrest. French Ministers have also been told that protests and blockades of ports would commence 24hrs of European boats being excluded from UK fishing waters. (Times) France’s European Affairs Minister Amélie de Montchalin suggested that trade talks could collapse due to fishing rights. Additionally, reports note that red-lines between the two parties could place the chances of an agreement in question by early-April (Politics Home/Newswires)

ECB's Makhlouf said he would support adjusting the core inflation target of “below but close to 2%” into a range such as 1.8%-2.2%. Makhlouf also called for the cost of housing to be given more weight in the EZ inflation calculation. (FT)

Fitch affirmed Switzerland at 'AAA'; Outlook Stable and Norway at "AAA", Outlook Stable, while it also affirmed Ireland at 'A+'; Outlook Stable. (Newswires)

FX

In FX markets, the DXY weakened to below the 98.00 level as participants took their cue from recent comments by Fed Chair Powell that the Fed will use its tools and act as appropriate to support the economy which subsequently saw markets price in a 50bps cut at the March 18th meeting and Goldman Sachs now forecasts a total of 100bps of cuts by the Fed this year. As such, the greenback’s major counterparts have benefitted from the increased dovish Fed bets in which EUR/USD tested its 100-Day Moving Average of 1.1056 but with upside capped by a significant option expiry of EUR 1.7bln at 1.1050 for today’s New York Cut, while GBP/USD was relatively flat with the currency biding its time ahead of the UK and EU kick-starting post-Brexit trade talks today. Elsewhere, USD/JPY fluctuated back and forth of the 108.00 level owing to the JPY-risk dynamic and antipodeans also recovered due to their high-beta properties with fireworks anticipated at tomorrow’s RBA meeting due to the recent shift in calls with OIS now pricing in a 100% probability of a 25bps cut.

Goldman Sachs sees 50bps cut from the Fed by March 18th and another 50bps cut in Q2, while it also sees most other G10 central banks lowering rates as well. (Newswires) 

COMMODITIES

Commodities eventually traded higher as price action mirrored the fluctuations seen in stocks which initially saw crude prices drop over 2.5% to below the USD 44.00/bbl level and print its weakest since December 2018. However, prices then recovered in tandem with the risk sentiment to trade higher by nearly 3% as participants now look ahead to the OPEC+ meeting this with several producers including Saudi Arabia said to be leaning towards a larger cut of 1mln bpd for Q2 vs. Prev. proposed 600k bpd cut. Elsewhere, gold prices were lifted by the initial risk averse tone and was kept elevated by the weakness in the greenback despite the turnaround in risk sentiment, while copper conformed to the recovery across the commodity complex and stocks amid stimulus hopes.

Russian President Putin has stated that Russia is prepared to work with OPEC+ in support of the oil market, adding that current oil prices are acceptable for Russia’s budget and economy. (Newswires) Note, while these comments are supportive ahead of this week’s OPEC meeting, they do not explicitly endorse the JTC’s recommended production cuts.

GEOPOLITICS 

South Korea Defence Ministry said North Korea fired 2 unidentified projectiles from the east coast city of Wonsan into the sea, while Japan noted it has no information that the projectiles landed in its territory or EEZ. (Newswires)

Reports noted 2 rockets landed in the ‘Concert Square’ near the US Embassy in the Baghdad green zone. (Newswires)

Turkish drone strikes in Idlib have killed 19 Syrian soldiers, meanwhile Turkey also shot down two Syrian fighter jets on Sunday. (BBC) There were prior reports that a Turkish soldier was killed and two were wounded from the shelling in Idlib, Syria. (Newswires) 

US 

US T-Note futures (H0) settled 1 point & 13 ticks higher at 134-27. Another big rip higher in the TPLEX was led by the short end as virus concerns move the market’s expectations towards Fed accommodation, in addition to haven and month-end flows. The move higher came across the whole session, and found some additional pressure in the tail-end on the back of Powell’s remarks that the virus is an “evolving risk”, which some are alluding to as a shoe-in to a potential “material change to the outlook”. The rates market certainly believes the Fed won’t hold back, with 95bps of rate cuts now priced in for 2020, with 50bps expected for the March FOMC meeting – accompanied by excessive volume in rates futures. Additionally, desks draw attention to month-end rebalancing likely exacerbating the bid into duration from index buyers. While in the background, the virus continues to spread, impacting global supply chains and continuing investor appetite for Treasuries. At the US equity cash close the entire curve had bull steepened significantly, the 2-year yield was down 19bps and the 30-year a relatively “meagre” 10bps, with the 10-year yield down 13.5bps to 1.165%, off its all-time-low of 1.116%.

NEC Director Kudlow said he expects a rebound in the stock market citing "sound" fundamentals of the economy and does not think people should panic, while he suggested that stocks look pretty cheap and that people should "buy the dip" in stock markets. (Newswires)

Joe Biden won the South Carolina Democrat Primary with 48% of the votes to win 35 delegates and Bernie Sanders finished second with 20% of the votes for 13 delegates, while Pete Buttigieg has announced to suspend his presidential campaign. (Newswires)