• Asian bourses traded somewhat mixed following from the weak rollover from Wall St. where all major indices slumped around 3%
• Participants digested further weak data in which Chinese Caixin Services and Composite PMIs printed record lows
• HKMA lowered its base rate by 50bps to 1.50% following the Fed rate cut and Macau also lowered its discount window rate by 50bps to 1.50%.
• US VP Pence said there are 77 domestic cases of coronavirus, whilst Washington State confirmed 3 more deaths to bring the total death toll in US to 9
• DXY languished after the Fed announced a 50bps emergency rate cut but with downside stemmed after it found support at the 97.00 level
• Super Tuesday Democrat Primary results showed a good performance by Biden (241 delegates won so far) vs. Sanders (174 delegates won so far)
• Looking ahead highlights include German Retail Sales, EZ & UK Services and Composite PMI (Final), US ADP & ISM Non-Manufacturing. BoC Rate Decision, BoE’s Broadbent & Fed’s Bullard; supply from the UK

CORONAVIRUS UPDATE 

China reported 119 additional coronavirus cases and 38 additional deaths on March 3rd vs. Prev. 125 additional cases and 31 new deaths on March 2nd, to bring the total number of mainland cases to 80270 and death toll at 2871. (Newswires)

South Korea reported 516 additional coronavirus cases and 4 additional deaths to bring total cases to 5328 and death toll to 32, while Italy's total cases rose to 2502 from 2036 and death toll increased to 79 (Prev. 52) the prior day. (Newswires/Yonhap)

US VP Pence said there are 77 domestic cases of coronavirus and Washington State confirmed 3 more deaths to bring the total death toll in US to 9, while he added the task force will brief the House on Wednesday. (Newswires)

World Bank announced a USD 12bln immediate financing package to help deal with coronavirus outbreak and said there are many unknowns regarding the economic and health impact, while it also noted far more resources may be needed and that many have requested aid from the World Bank although did not name them. (Newswires) 

ASIA-PAC

Asian bourses traded somewhat mixed following from the weak rollover from Wall St. where all major indices slumped around 3% despite the Fed delivering an emergency rate cut of 50bps, as this failed to alleviate the slowdown concerns from the coronavirus outbreak and the G7 statement on coordinated policy action also provided little in terms of details in which it did not commit to any monetary or fiscal action. Nonetheless, US equity futures partially nursed losses overnight as focus turned to Super Tuesday Democrat Primary results which showed former VP Biden performed well although there was still far to go with the biggest states California and Texas still up for grabs. ASX 200 (-1.7%) and Nikkei 225 (+0.3%) were lacklustre with Australia pressured by underperformance in tech and the top-weighted financials sector due to virus fallout concerns and the lower interest rate environment, while the Japanese benchmark was indecisive amid a choppy currency and uncertainty regarding the Tokyo Olympics after a minister suggested the event could be held back although Chief Cabinet Secretary Suga later reiterated they will continue to move ahead with preparations. Elsewhere, Hang Seng (-0.1%) and Shanghai Comp. (-0.1%) were temperamental despite speculation the PBoC could lower rates this month and after the HKMA moved in lockstep with the Fed through a 50bps rate cut, as participants also digested further weak data in which Chinese Caixin Services and Composite PMIs printed record lows. Finally, 10yr JGBs surged above the 154.00 level as they tracked the upside in T-notes following the Fed’s emergency rate cut and with the BoJ also in the market for over JPY 800bln in up to 5yr JGBs.

PBoC skipped open market operations for a daily net neutral position. (Newswires) PBoC set USD/CNY mid-point at 6.9514 vs. Exp. 6.9503 (Prev. 6.9516)

Chinese Caixin Services PMI (Feb) 26.5 vs. Exp. 48.0 (Prev. 51.8); record low Chinese Caixin Composite PMI (Feb) 27.5 (Prev. 51.9); record low.

HKMA lowered its base rate by 50bps to 1.50% following the Fed rate cut and Macau also lowered its discount window rate by 50bps to 1.50%. (Newswires)

China Securities Journal noted speculation the PBoC may reduce rates on open market operations this month. (Newswires)

China Global Times tweeted that China’s commitment to buy US agricultural products is unlikely to change despite the coronavirus outbreak, which has weakened domestic demand. (Newswires)

UK/EU

UK Chancellor is reportedly ready to signal the end of freezes on fuel duty at next week’s budget and will reportedly levy a 3% tax on non-residents purchasing property. (FT)

A cross-party group of around 40 MPs are set to call on the government to lower Huawei’s participation in the UK’s 5G infrastructure from 35% to zero by 2023. (Telegraph)

ECB’s Villeroy said the bank would stand ready to take appropriate and targeted measures if it is necessary, while he added that governments with fiscal space should use it and growth should remain positive for the Eurozone this year. (Newswires)

German Economy Minister Altmaier said Germany will secure liquidity of companies, especially SME's and will use existing instruments such as state aid in shortened hours, guarantees, liquidity aid to strengthen consumer confidence and companies. (Newswires) 

FX

DXY languished after the Fed announced a 50bps emergency rate cut but with downside stemmed after it found support at the 97.00 level and given that markets had priced in 75bps of rate cuts for the March meeting, while the comments from Fed Chair Powell did little to suggest whether a further 25bps reduction was on its way. The Fed move benefitted most of the greenback’s major counterparts in which EUR/USD tested but failed to surmount 1.1200, and GBP/USD was lifted to the 1.2800 handle where it then hit resistance around the 100-Hour Moving Average of 1.2830.  Elsewhere, USD/JPY initially slipped below 107.00 to print a 5-month low but later rebounded in tandem with the risk appetite in Tokyo, and antipodeans were choppy as the initial gains spurred by better than expected Australian GDP were partially offset by the weak Chinese PMI data.

Australian GDP (Q4) Q/Q 0.5% vs. Exp. 0.3% (Prev. 0.4%). Australian GDP (Q4) Y/Y 2.2% vs. Exp. 1.9% (Prev. 1.7%)

Australian Treasurer Frydenberg said working on targeted series of fiscal measures and that the Treasury will detail the estimate of virus impact on Thursday. (Newswires)

RBNZ said we are prepared to ensure a well-functioning financial system, while it is to explain principles regarding unconventional tools on March 10th but will not discuss current conditions or policy. (Newswires)

SNB's Maechler said SNB is in talks with US officials over SNB's negative interest rate policy and readiness to intervene, while she added the SNB cannot undertake measures that are contrary to current SNB monetary policy and is never under pressure but plans to discuss and potentially tweak its current assessment for moderate global economic growth at its next meeting in two weeks. Furthermore, Maechler noted that SNB's policy rests on negative rates and readiness to intervene. (Newswires)

COMMODITIES

Commodities edged mild gains overnight in which WTI crude futures tested the USD 48.00/bbl level with upside supported by a slightly narrower than expected build in headline private crude inventories and following reports OPEC+ panel recommended at least a 600k bps output cut for Q2 ahead of the extraordinary meeting which begins on Thursday. Elsewhere, gold rallied following the emergency Fed rate cut but has since plateaued overnight after hitting resistance at USD 1650/oz, while copper also benefitted by the somewhat improved risk sentiment.

US Private Inventory Crude Stocks +1.7mln vs. Exp. +2.6mln (Prev. +1.3mln). (Newswires)

OPEC+ panel considered a 600k-1mln BPD oil cut and recommended at least a 600k bpd production cut, according to two sources. (Newswires)

Goldman Sachs lowered its oil price forecasts in which it sees Brent to trough in April at USD 45/bbl then recover to USD 60/bbl vs. Prev. forecast of decline to USD 53.bbl then recovery to USD 65/bbl, while Morgan Stanley cut Q2 Brent forecast to USD 55/bbl (Prev. USD 57.5/bbl) and lowered WTI forecast to USD 50/bbl (prev. USD 52.50/bbl). (Newswires)

GEOPOLITICS

Russia Defense Ministry said Turkey has violated international law and failed to meet its obligations by increasing troops in Idlib, while it added that attacks on its Syrian airbase have become daily. (Newswires)

US 

Yields fell across the curve by between 3-12bps at settlement, with most of the declines being seen on the front-part of the curve; the shape of the curve steepened, with 2s30s widening by 9bps. The Fed's emergency 50bps rate cut was the drove most of the price action, and in the aftermath, there were fresh records for 10s and 30s yields, with the former falling beneath 1.00% for the first time ever. There is still pricing for further rate cuts ahead, with markets implying around 30bps of further easing through the end of the year. US T-note futures (H0) settled 23+ ticks higher at 136-00.

US President Trump US President Trump said he is working with congress and expects an USD 8.5bln emergency funding bill for the coronavirus, Trump also commented that the market is in good shape and that he would approve a payroll tax cut for middle income earners in 2020 if the democrats supported it. (Newswires)

Fed's Mester (voter, hawk) said she will make her future decisions on policy in a meeting by meeting basis and look at latest coronavirus information, while she does not feel under political pressure on monetary policy and expects US rates to be on an upward path once we get past the coronavirus situation. (Newswires)

Fed's Evans (Non-Voter, Dove) said he thought the Fed was well positioned but felt a rate cut would help boost confidence given rising risks and potential economic weakening, while he added the possibility of hitting zero rates again means Fed should use its ammunition and that the rate cut shows it is part of a team in crisis response. Evans also stated expectation is coronavirus will have short-lived imprint on US and expects a quarter or half-year of slowing growth as well as a V-shaped rebound. (Newswires)

Super Tuesday Democrat Primary results showed a good performance by Biden (241 delegates won so far) who either won or was projected to win Alabama, Arkansas, Massachusetts, Minnesota, North Carolina, Oklahoma, Tennessee and Virginia vs. Sanders (174 delegates won so far) who led in California, Colorado, Utah and Vermont, while Texas and Maine have not yet been called. (Newswires)