• Sentiment was volatile in APAC hours on the abysmal Chinese PMIs; however, did recover throughout the Asia session before reverting back into negative territory in EU trade
• BoJ said it will closely monitor future developments and offered to buy JPY 500bln of JGBs & reportedly bought a record total of JPY 101.4bln of ETF on Monday
• EU Economic Commissioner Gentiloni says we will be assessing requests for fiscal flexibility under EU rules due to the coronavirus outbreak
• OECD cuts global economic forecast on virus to 2.4% (Prev. 2.9%); China 4.9% (Prev. 6.1%), US 1.9% (Prev. 2.3%), EZ 0.8% (Prev. 1.2%)
• Russia's Energy Minister Novak says Russia did not get a proposal from OPEC to jointly cut production by 1mln BPD, evaluating earlier JTC proposal of 600k BPD cut; Putin has been supportive to working with OPEC
• Looking ahead, highlights include US Manufacturing PMI (Final), US ISM Manufacturing PMI, Construction Spending and ECB’s de Guindos

CORONAVIRUS UPDATE 

OECD cuts global economic forecast on virus to 2.4% (Prev. 2.9%); China 4.9% (Prev. 6.1%), US 1.9% (Prev. 2.3%), EZ 0.8% (Prev. 1.2%)

European Commission President Von der Leyen says the risk of coronavirus in EU has risen from “moderate” to “high”. (Newswires)

Chinese Premier Li says the coronavirus outbreak control remains at a crucial stage, there is a positive trend in areas outside Hubei, but strict prevention and control measures must be maintained. (Newswires)

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 599 more cases of coronavirus and 2 more deaths to bring the total number of cases to 4335 and death toll at 22, while Indonesia confirmed 2 coronavirus cases. (Newswires)

European Commissions' Kyriakides said there are 2100 coronavirus cases in 18 EU members states. as of this morning 38 EU citizens died from coronavirus. (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. 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; cases in Germany now stand at 150. (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)

US House of Representatives members are reportedly 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)

BoE said it’s working with the Treasury as well as international partners “to ensure all necessary steps are taken to protect financial and monetary stability” amid the coronavirus. (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)

EU Economic Commissioner Gentiloni says we will be assessing requests for fiscal flexibility under EU rules due to the coronavirus outbreak; EU is ready to use all policy options to safeguard growth against risks from coronavirus; coordinated response should be timely. It is still too soon to measure the impact from the coronavirus outbreak, probable "V-shaped" recovery cannot be taken for granted. Additionally, will consider Italy's request for fiscal flexibility as part of the spirit of solidarity due to the coronavirus. (Newswires) Follows reports 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. (Newswires)

French Finance Minister Le Maire said that the coronavirus will have a much bigger effect on the domestic economy vs. the 0.1% forecast until now; too early to provide a new growth forecast - will be concerted action between Gov't to support the economy. (Newswires) ECB's Villeroy said so far, the virus outbreak is not having a generalised impact on consumer demand, policy is already very accommodative. (Newswires)

EU Commissioner for Internal Markets Breton said that the coronavirus has impacted European tourism revenue by EUR 1bln per month since the outbreak began. (Newswires)

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 (+1.0%) 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 (+0.6%) and Shanghai Comp. (+3.2%) 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) BoJ reportedly bought a record total of JPY 101.4bln of ETF on Monday. (Newswires) 

UK/EU

UK Trade Mandate for US talks has been published, largely in-line with expectations and prev. reports into this. Prior to this, 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)

Observers in Brussels actually think the UK is 'closer to the Political Declaration and a likely landing zone than No.10 want people to think', according to Express’ Barnes citing sources. (Twitter)

UK Trade Secretary Truss states that we will achieve a trade deal with the EU that does not require selling out of our fishing; will not diminish food safety standards or out the NHS on the table in a US deal. (Newswires)

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; however, the Finance Ministry have stated there is no change needed on the debt brake. (Handelsblatt/Newswires)

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)

EU Markit Manufacturing Final PMI (Feb) 49.2 vs. Exp. 49.1 (Prev. 49.1)

-        German Markit/BME Manufacturing PMI (Feb) 48.0 vs. Exp. 47.8 (Prev. 47.8)

-        French Markit Manufacturing PMI (Feb) 49.8 vs. Exp. 49.7 (Prev. 49.7)

UK Markit/CIPS Manufacturing PMI Final (Feb) 51.7 vs. Exp. 51.8 (Prev. 51.9)

EQUITIES

European stocks have given up their earlier gains [Eurostoxx 50 -1.3%] which initially emanated from Central Bank stimulus hopes given the concoction of dismal PMIs from China coupled with rising worldwide COVID19 cases. The European bellwether rose as much as 2.3% at the open before the optimistic sentiment faded during mid-trade with a lack of any fresh headlines to shadow the ongoing virus narrative. DAX 30 cash and futures briefly reclaimed 12k whilst the FTSE MIB (-3.1%) underperforms the region following another sharp rise in virus cases in the country alongside disappointing manufacturing PMI figures. Sector-wise, dropping yields see financials underperforming whilst defensives remain in firm positive territory amid the turnaround in sentiment. That said, energy and material names continue to benefit from the price action in the respective complexes. In terms of individual movers, Tesco (+2.0%) holds onto a bulk of its gains following a WSJ report that a Thai billionaire has secured USD 10bln in a bid to acquire Co’s Asian assets. SES (-17%) shares slumped to foot of the Stoxx 600 post-earnings despite noting that it sees no meaningful impact from coronavirus. Finally, Nokia (+1.6%) shares opened higher after Lundmark has been appointed as President and CEO of the Co.

FX

USD - The DXY has retreated even further amidst broad Greenback losses and growing speculation that the Fed will follow/front run other global Central Banks with decisive action to counter the nCoV epidemic. Indeed, expectations were stoked further by unexpected and unscheduled comments from Powell on Friday pledging to use ‘tools’ as required to support the US economy given risks posed by the aforementioned coronavirus outbreak. Rate cut pricing duly ramped up to 50 bp for the upcoming March FOMC and the index has now slipped below the 200 DMA (97.840) to a 97.693 low compared to 98.087 at best with little in the way left in terms of chart support ahead of 97.500.

AUD/EUR/CAD/CHF/NZD/JPY - Although the RBA is widely tipped to shave its OCR by ¼ point overnight, the Aussie is benefiting from US and NZ underperformance, while gleaning extra traction from relative Yuan strength on the premise that Chinese PMIs were so bad that more stimulus is almost certain to be forthcoming. Indeed, Aud/Usd has rebounded strongly from even deeper sub-0.6500 lows to 0.6550+ at one stage, while Usd/Cnh is back down around 9.9600 and Nzd/Usd is hovering just under 0.6275 as Aud/Nzd pivots 1.0450. Elsewhere, the Loonie has pared losses from circa 1.3445 to around 1.3340 ahead of Canada’s manufacturing PMI, the Franc is eyeing 0.9600, but waning against the Euro ahead of 1.0625 as the single currency forges more pronounced gains across the board, Eur/Usd towards 1.1100 and Eur/Gbp approaching 0.8700. Last, but by no means least the Yen is holding within a wide 107.00-108.57 range after the BoJ’s own considerable efforts to combat the adverse economic impact of COVID-19.

GBP/NOK/SEK - Sterling is bucking the overall trend, with Cable losing grip of another big figure handle at 1.2800 on the cusp of UK-EU trade talks that are not expected to go smoothly given well documented differences of opinion on key post-Brexit terms and conditions. However, a downgrade to the manufacturing PMI has also dented sentiment, in contrast to Norwegian and Swedish prints that both picked up pace from previous levels. Nevertheless, Eur/Nok and Eur/Sek are trading on a mixed footing circa 10.3800 and 10.5800 respectively.

EM - In keeping with the divergence noted above, regional currencies are somewhat betwixt and between as euphoria over the prospect of concerted and/or coordinated action to spur global growth fades, while the Lira is still anxiously eyeing events in Syria where Turkish President Erdogan renews calls for Government forces to withdraw or face more military attacks.

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) 

FIXED

An extremely lively start to the new week/month for debt markets, but ultimately more upside for Bunds, Gilts and US Treasuries, with the former also deriving momentum from another downturn in BTPs following Italy’s fiscal package to offset the damage from nCoV. The 10 year benchmarks have been up to 178.38, 136.22 and 135-24+ respectively, as expectations continue to build for multi-pronged stimulus, but fail to sustain riskier assets and keep curves on a steepening trajectory overall. Ahead, final US Markit manufacturing PMI provides the appetiser for ISM.

COMMODITIES

WTI and Brent font-month futures have rebounded with a vengeance on the first trading session of the week as sentiment was bolstered amid hopes of monetary and fiscal intervention to deal with the fallout of the virus. Furthermore, OPEC will publish its latest output policy decision on March 6th as planned as per sources – with Russia seemingly on board for a unison response following comments from Russian President Putin. That being said, Putin caveated that the current oil prices are acceptable for Russia’s budget, whilst Kremlin stated the meeting with Russian oil companies were not aimed at taking any specific decision. Russia's Energy Minister Novak stated that Russia did not get a proposal from OPEC to jointly cut production by 1mln BPD and are evaluating the earlier JTC proposal of 600k BPD cut. Futures opened lower to the tune of over 2.5% amid dismal Chinese PMI figures coupled by surging nCoV cases, in which WTI found a base at ~USD 44/bbl before recoiling to a high of USD 46.70/bbl, whilst the Brent contract bounces from an intraday low of around USD 49.50/bbl and tested USD 52/bbl to the upside, although the contracts encountered some selling pressure in recent trade but remain in solid positive territory thus far. Ahead of the OPEC confab, ING believes that “anything that falls short of the OPEC+ Joint Technical Committee recommendation of 600Mbbls/d of additional cuts over 2Q20, and extending the current deal through to year-end, will be taken as bearish.” Meanwhile, BofA Global Research lowered their 2020 WTI and Brent price forecasts by USD 8/bbl each to USD 49/bbl and USD 54/bbl respectively. Elsewhere spot gold drifts higher as the original optimism seen around the market-place fades, with the yellow metal back on a 1600/oz handle from an intraday low of ~1575/oz. Elsewhere copper initially spiked higher on further hopes of China stimulus, with prices briefly topping 2.60/lb before waning back below the figure.

Russia's Energy Minister Novak says Russia did not get a proposal from OPEC to jointly cut production by 1mln BPD, evaluating earlier JTC proposal of 600k BPD cut. (Newswires)

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.

The Austrian foreign ministry is scheduled to have a conference call with the UN in Geneva and NY to further assess the risks of the OPEC meeting, according to Energy Intel's Bakr; subsequent reports states this meeting will go-ahead but a potential back up option of a teleconference has been discussed. (Newswires)

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. The missiles are believed to be short-ranged. (Newswires/Yonhap) South Korea holds urgent meeting on North Korean test launch of 'short-range projectiles' suspected to be missiles, according to CNN's International Correspondent Ripley. (Twitter)

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) Turkish President Erdogan will visit Russia on March 5th, according to Turkish presidency. (Newswires) 

US 

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)