• European equities saw a relatively shaky start to the session before eventually moving back into positive territory (Eurostoxx 50 +1.4%)
• The DXY has regained some composure after Tuesday’s slide in wake of the Fed’s early or emergency March policy easing
• WTI and Brent prices are firmer this morning with further sources reports suggesting the possibility of deeper production cuts in excess of 1mln bpd
• Super Tuesday Update: Joe Biden is said to have won 319 delegates (372 total) so far vs. 242 delegates (302) for Bernie Sanders
• ECB Governing Council held a conference call yesterday on COVID-19 impact and discussed operational issues but decided that a monetary policy response was not on the agenda, according to sources
• Looking ahead, highlights include US ADP & ISM Non-Manufacturing. BoC Rate Decision, BoE’s Broadbent, Bailey & Fed’s Bullard

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 809 additional coronavirus cases and 4 additional deaths to bring total cases to 5621 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 (U/C) 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 (-0.2%) and Shanghai Comp. (+0.6%) 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)

US

US President Trump 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 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: Joe Biden is said to have won 319 delegates (372 total) so far vs. 242 delegates (302) so far for Bernie Sanders, according to NY Times

-        Biden has won Alabama, Arkansas, Massachusetts, Minnesota, North Carolina, Oklahoma, Tennessee, Texas and Virginia

-        Sanders has won Colorado, Utah and Vermont and leads in California

UK/EU

ECB Governing Council held a conference call yesterday on COVID-19 impact and discussed operational issues but decided that a monetary policy response was not on the agenda, according to sources. Call was after the FOMC emergency action. (Newswires) Note, next ECB meeting is March 12th. Additionally, the ECB have postponed all non-monetary policy conferences due to the coronavirus.

French Finance Minister Le Maire says that Europe needs to be ready to use fiscal stimulus, which is stronger than monetary stimulus for boosting the economy; If the virus last for a long period of time and growth is affected then the EZ will have to increase budget spending. (Newswires)

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)

UK Markit/CIPS Services PMI Final (Feb) 53.2 vs. Exp. 53.3 (Prev. 53.3); Composite PMI Final (Feb) 53.0 vs. Exp. 53.3 (Prev. 53.3)

EU Markit Services Final PMI (Feb) 52.6 vs. Exp. 52.8 (Prev. 52.8); Comp Final PMI (Feb) 51.6 vs. Exp. 51.6 (Prev. 51.6)

-        German Markit Services PMI (Feb) 52.5 vs. Exp. 53.3 (Prev. 53.3); Comp Final PMI (Feb) 50.7 vs. Exp. 51.1 (Prev. 51.1)

EQUITIES

European equities saw a relatively shaky start to the session before eventually moving back into positive territory (Eurostoxx 50 +0.5%) as markets attempt to gauge the efficacy of recent and potential upcoming stimulus efforts from global authorities. Stateside, futures markets are indicating the likelihood of a positive open on Wall St., however, it remains to be seen whether this is a result of genuine optimism over recent policy responses or merely a fleeting paring back of some of yesterday’s declines. Furthermore, attention in the US will also partially be placed on the fallout from the Democratic “Super Tuesday” which saw a stellar performance for former VP Biden who now holds a total of 320 delegates (at the latest count) vs. 252 for Sanders. In terms of how this will effect the broader performance for stocks going forward, analysis is mixed. Some argue that Biden is more market-friendly than Sanders and thus his success should be seen as a positive, whereas others argue that even though Sanders would be detrimental for markets (should he enter the White House), Trump would be more likely to beat him, with Trump viewed by most as the overall most market-positive candidate. Sectoral performance in Europe is higher across the board with outperformance for material, healthcare and consumer staples. Individual movers include Eurofins Scientific (+7.8%) at the top of the Stoxx 600 post-earnings, Dialog Semiconductor (+3.6%) shares have been supported after posting favourable revenue guidance, whilst Rio Tinto (+3.6%) trade higher after a broker upgrade at SocGen. To the downside, the clear outlier is Intu Properties (-20%) after abandoning its equity placement, whilst Metro AG (-4.2%) are lower following reports of a potential tie-up with Sysco; reports that were later rebuffed.

Chinese car sales -80% YY, February prelim data, according to PCA. (Newswires)

FX

DXY - The index and Greenback in general have regained some composure after Tuesday’s slide in wake of the Fed’s early or emergency March policy easing, with the former back above the 97.000 handle within a 97.423-104 range vs yesterday’s 96.926 base. However, Usd/major and EM pairs are mostly softer after FOMC Chairman Powell refrained from signalling that the 50 bp inter-meeting rate cut would likely suffice to protect the US economy from nCoV contagion, leaving the door ajar for more stimulus if necessary.

AUD/NZD/CAD/CHF/SEK/NOK - The Aussie appears to be building a firmer base on the 0.6600 handle vs its US peer on the back of firmer than forecast Q4 GDP data that will feed the notion of no back-to-back or follow up action from the RBA after its ¼ point reduction even though Deputy Governor Debelle warns that the bushfires and coronavirus will have more of an adverse impact on the economy in Q1. This has also lifted Aud/Nzd back above 1.0500 as the Kiwi continues to trail behind awaiting the RBNZ’s response to the COVID-19 outbreak later this month, with Nzd/Usd still struggling to advance beyond 0.6300. On that note, the Loonie is deriving some traction from another rebound in crude prices ahead of the BoC, albeit not as much as the Norwegian Crown given Eur/Nok rooted towards the base of a 10.3045-3730 band, as Usd/Cad pivots 1.3350. In terms of market pricing, -25 bp is baked in, but the probability of a like-for-like Fed move is also high at around 80%, hence options assigning a wide 75 pip break-even for the event. Elsewhere, while the SNB sits tight pending its quarterly review next week, Usd/Chf is holding circa 0.9550 and hardly acknowledging Swiss CPI slipping below zero y/y again, but the Swedish Krona has gleaned support from another upbeat PMI to straddle 10.5500 vs the Euro.

GBP/EUR/JPY - All on the back foot as the Buck regroups, with Cable still unable to sustain gains above 1.2800 and respecting the 200 DMA (1.2830) amidst heightened BoE policy stimulus calls, while Eur/Usd has faded ahead of 1.1200 and hefty option expiries between 1.1200-05 in 1.6 bn as the coronavirus spreads and especially in Italy. Lastly, the Yen has pared gains around 107.00 following comments from BoJ Governor Kuroda indicating a higher level of vigilance for Chinese epidemic effects and a potentially lower bar for a policy response.

EM - Broad recoveries across the region, and with the Lira also acknowledging positive comments from Turkish President Erdogan contending that a ceasefire can be forged at Thursday’s meeting with Russia to try and resolve the ongoing stand-off in Syria.

RBA's Debelle we have the capacity to cut once more, after that will have to consider QE; does not think that negative rates are something that should be contemplated; bushfires did not have much of an impact on Q4 2020 GDP, but will have a larger impact in Q1 2020, according to his testimony to lawmakers. (Newswires)

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)

Notable Option Expiries, NY Cut:

-        EUR/USD: 1.1060 (1.7BLN), 1.10775 (430M), 1.1100 (940M), 1.1150 (1.5BLN), 1.1180 (470M), 1.1200-05 (1.6BLN)

-        NZD/USD: 0.6275 (510M), 0.6400 (375M), 0.6450 (561M)

-        USD/CAD: 1.3300 (1BLN), 1.3350 (710M)

FIXED

Gilts continue to edge it alongside Eurozone peripheral bonds in contrast to Bunds that have reversed all and more of their post-Fed gains to trade below parity and Tuesday’s close (-15 ticks vs +61 ticks at one stage). However, trade remains volatile and somewhat erratic as debt futures continue to eye stocks as a proxy for broad risk appetite while weighing up or attempting to second guess what the rest of the global Central Band community has in store to combat the economic fall-out from COVID-19. Meanwhile, US Treasuries are holding firm, though off best levels seen since the FOMC took bold action, as the 10 year yield sits sub-1% awaiting a busy US docket in terms of data and more pre-NFP pointers.

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)

Russian Defence Ministry says that Militants have attempted to use chemical weapons in Syrian, Sraqeb, according to Tass. (Tass)

Turkish President Erdogan expects a ceasefire to be achieved quickly in Syria's Idlib following discussions with Russian President Putin tomorrow. (Newswires)

Tokyo 2020 announces that measures such as limiting the number of entrants to celebration venues could be imposed. (Newswires)

COMMODITIES

WTI and Brent prices are firmer this morning, following yesterday’s emergency stimulus action by the Fed as markets are firmly on the look-out for action elsewhere, but more pertinently for the complex itself is reports pertaining to OPEC, as the JMMC meeting gets underway today. Comments this morning point towards Russia and Saudi holding bilateral discussions but reports note that Russia are likely to make their decision on cuts at the last moment. In terms of the magnitude of cuts sources point towards a cut around the 1mln mark, but that any figure above the 600k BPD initial JTC recommendation must be considered. These reports have coincided with upside in the crude complex, which saw WTI briefly surpass the USD 48/bbl mark; however, this upside has occurred alongside a general grinding higher in risk sentiment so its unclear how much of the move can be directly attributed to the OPEC commentary. Indicative scheduling for this week’s OPEC events saw the JMMC commence from around 11:00GMT today, with OPEC set to meet tomorrow before the entire OPEC+ committee convenes on Friday. As well as a decision on any additional cuts, focus will be placed on remarks around compliance as countries such as Russia are still not meeting their quota. Looking ahead, today sees the EIA weekly release, which is expected to see a build of 3.333mln barrels which, if correct, is just shy of double yesterday’s API crude build at 1.7mln. In terms of metals, it has been a relatively steady day for spot gold that is currently just shy of the USD 1650/oz mark, which appears to be capping price action and is in proximity to yesterday’s high; after the metal was supported on the emergency FOMC cut.

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

OPEC Commentary:

-        Iranian oil minister believes that Russia will resist until the last moment before agreeing to lower output, according to Shana. Based on JTC recommendations, oil production cut should be at least 500k bpd.

-        Russian Energy Minister Novak and Saudi Energy Minister Abdulaziz are to hold bi-lateral talks ahead of the JMMC OPEC+ meeting, Tass. (Tass)

-        Some OPEC+ members reportedly pushing for a cut of 1.2mln BPD, according to Energy Intel analyst, citing sources. (Twitter)