• Asian equity markets slumped across the board as the sell-off rolled over from Wall St. where all major indices declined over 3%
• DXY extended its decline heading into today’s NFP data to test the 96.50 level after the 10yr yield fell to a fresh record low
• US Senate voted 96-1 to pass the USD 8.3bln coronavirus bill and sent it to President Trump to sign into law
• WTI crude futures declined firmly below the USD 46.00/bbl in a resumption of the weakness ahead of today’s OPEC+ meeting
• Looking ahead, highlights include German Industrial Orders, US and Canadian Labour Market Reports, US and Canadian Trade, Baker Hughes, OPEC+ meeting, Fed’s Evans, Kashkari, Bullard, Williams, George

CORONAVIRUS UPDATE 

Mainland China reported 143 additional cases of coronavirus and 30 additional deaths on March 5th vs. Prev. 149 additional cases and 31 additional deaths on March 4th, to bring the total cases in China to 80552 and death toll is now at 3042. (Newswires)

South Korea coronavirus cases increased by 518 to take the total to 6284 with 7 additional deaths for a total of 42, and Italy’s total cases rose to 3858 from 3089 with the death toll at 148 vs. Prev. 107. Elsewhere, France confirmed cases rose by 138 to a total of 423 and the death toll increased by 3 to a total of 7, while French President Macron said it is inevitable that COVID-19 will develop into an epidemic in France. (Newswires)

UK PM Johnson was briefed on the high likelihood of COVID-19 spreading in a significant way, although he stated the UK is still in the "contain phase" with business as usual. (BBC/Sky)

US Senate voted 96-1 to pass the USD 8.3bln coronavirus bill and sent it to President Trump to sign into law, while VP Pence commented that US President Trump will sign the coronavirus funding bill on Friday. Furthermore, VP Pence noted there is at least 150 cases of coronavirus in the US, while there were separate reports that 2733 people are under quarantine in New York City. (Newswires/NYT) 

ASIA-PAC

Asian equity markets slumped across the board as the sell-off rolled over from Wall St. where all major indices declined over 3%, led by a near 1000-point drop in the DJIA amid coronavirus fears which spurred a mass flight to safety and pressured US 10yr  yields to fresh record lows. ASX 200 (-2.8%) fell deeper into correction territory as tech and financials resumed their recent underperformance although defensives and gold miners showed some resilience on the safe-haven play, while Nikkei 225 (-3.0%) was the worst performer and retreated below the 21000 level to a 6-month low with losses exacerbated by detrimental currency flows and contractions in Household Spending. Elsewhere, Hang Seng (-2.7%) and Shanghai Comp. (-1.0%) were also heavily pressured alongside the global stock rout and continued PBoC liquidity inaction. On the coronavirus front, the pace of additional confirmed cases and deaths in mainland China continued to show a mild improvement, although this failed to spur markets as attention was also on the increasing number of cases in other countries leading to fears of a global pandemic. Finally, 10yr JGBs were higher amid the bloodbath in stocks and as bond prices tracked their US counterparts higher against the backdrop of record low US 10yr Treasury yields, while the JSCC noted an emergency margin call was triggered for long-term JGB futures and China’s 10yr yield also slipped to its lowest since 2002.  

PBoC skipped open market operations for a daily net neutral position. (Newswires)

PBoC set USD/CNY mid-point at 6.9337 vs. Exp. 6.9274 (Prev. 6.9403)

South Korea said Japan's quarantine plans for South Korean visitors is extremely regrettable and urged immediate revocation, while it announced to summon the Japanese Ambassador to lodge a complaint on the decision and is reportedly considering retaliatory measures against Japan's restrictions on travellers from South Korea. In other news, Japan and South Korea are expected to conduct discussion on export controls on March 10th via teleconference. (Newswires) 

UK/EU

UK government reportedly spent at least GBP 4.4bln on preparations to exit the EU, according to the National Audit Office. (Newswires)

Outgoing BoE Governor Carney said the Bank will take all necessary steps to support the UK economy and financial system, while he added that our tools include monetary policy instruments, special liquidity facilities and macroprudential tools. Carney also stated the bank is coordinating with the Treasury to ensure any initiatives are complementary and will collectively have a maximum impact. (Newswires)

UK Tory grandees are planning an amendment for next week to ban Huawei equipment from the UK telecoms network until after 2022. (FT)

FX

DXY extended its decline heading to today’s NFP data to test the 96.50 level after the 10yr yield fell to a fresh record low and with Fed Fund Rate futures pricing in a near coin-toss between a 25bps and 50bps cut at this month’s FOMC. There were several Fed speakers overnight who all seemingly kept their options open with Kaplan unwilling to presume what the Fed would do and suggested the path of coronavirus cases is to be factored into the March meeting. In addition, Kashkari viewed the recent rate cut as insurance and suggested that Fed actions could depend on how the virus plays out, while Williams noted the Fed remains flexible and is ready to make adjustments to ensure monetary policy is implemented effectively. EUR/USD and GBP/USD were flat overnight and held on to the prior day’s spoils against the greenback but with further advances in the single currency stalled by resistance at 1.1250 and with GBP/USD also stuck around 1.2950 following mixed rhetoric from post-Brexit negotiations in which the sides held constructive and good-natured talks but serious divergences remained. Elsewhere, USD/JPY retreated below the 106.00 handle amid safe-haven flows which also underpinned the CHF, while antipodeans traded lacklustre due to their high-beta statuses, CNY weakness and a contraction in Australian Retail Sales data.

BoC Governor Poloz said the bank is ready to cut rates further if needed to support growth and keep inflation on target, while he added lower rates will help stabilize the housing market rather than contribute to froth. Poloz also noted that Canada is heading for another quarter of very weak growth and Q2 could also take a hit. Poloz also stated the bank felt that downside risks to the economy were more than sufficient to outweigh continuing concern about financial vulnerabilities and that the Bank was considering a rate cut even without taking the virus into account. Furthermore, he noted that large scale asset purchases are part of the bank's toolkit but is fortunate not to have had to use them. (Newswires)

Australian Retail Sales (Jan) M/M -0.3% vs. Exp. 0.0% (Prev. -0.5%, Rev. -0.7%)

COMMODITIES

Commodities were mixed in which WTI crude futures declined firmly below the USD 46.00/bbl in a resumption of the weakness ahead of today’s OPEC+ meeting where the cartel’s recommendation of a deeper and longer cut of an additional 1.5mln bpd to last throughout the whole of the year, hangs in the balance and on a reluctant Russia, with the slump in risk appetite doing no favours for the energy complex. Elsewhere, gold extended its surge helped by a weaker greenback and flight to safety with the precious metal on track for its largest weekly gain in 8 years, while copper prices was subdued on the global stock market rout brought on by coronavirus fears.

OPEC Statement noted it decided to recommend to OPEC+ an additional 1.5mln BPD cut that should last until the end of 2020. There were also comments from OPEC Secretary General Barkindo that there is no reason to doubt Russia's commitment and outcome of the consultations, while he responded that he doesn’t share the pessimism when asked if Non-OPEC doesn't agree to the cuts. (Newswires)

White House seeks to appeal Federal Court Decision on small refinery exemptions for biofuel blending laws, according to sources. (Newswires)

Kuwait offers Khafji oil for export in April for the first time after years of production halts. (Newswires)

GEOPOLITICS 

Russian President Putin said we have been able to find a common ground regarding Idlib, Syria and have agreed to a ceasefire with Turkish President Erdogan. However, the Turkey Defense Ministry had announced it had killed 21 members of the Syrian Army and destroyed 2 artillery and 2 missile launchers after 2 of its soldiers died in Idlib. (Newswires)

US 

The TPLEX caught another bid on Thursday, this time indiscriminately across the curve, as opposed to the steepener on Wednesday. The move comes amid a decline in risk sentiment after the bounce higher on Wednesday, exacerbating the haven flows and pronouncing the decline in growth expectations. Looking at STIRs, one market source contacted the desk noting that rates desks had been bidding some chunky sized puts in the Euribor and Short Sterling white strips, which one trader believes is likely a result of the Libors pricing in rate cuts at a slower pace than the Sonias/Eonias/OISs are in the o/n markets, leading to basis widening, that if/when central banks cut further, will tighten again. Meanwhile, some draw attention to potential dollar funding pressures amid the virus shock which could be leading desks to hedge against their collateral to avoid potential for pricey dollars, this time via puts in STIRs. Further down the Treasury curve, the term structure had flattened marginally by settlement, with the 2s10s -1bps, with the 10-year yield down 7bps to 0.922%, close to its record low of 0.899 which it printed earlier in the session. US T-note futures (H0) settled 16+ ticks higher at 136-24+.

Fed's Williams (Voter, Neutral) said fundamentals of the US economy remains strong and that the coronavirus will have near-term effects on global economy. Williams also stated that central banks have an important role to play in addressing impact from the outbreak and NY Fed will ensure ample supply of reserves, while he added the Fed remains flexible and ready to make adjustments to ensure monetary policy is implemented effectively. (Newswires)

Fed's Kaplan (Voter, Dove) said the situation is moving so rapidly that what occurs just 3 days from now, could alter the view, while he added that ups and downs of stock market did not factor into decision to cut rates. Kaplan added that he won’t read much into jobs data for February but will be watching the path of diagnosed cases and will factor that into the decision for the March meeting. Furthermore, Kaplan suggested there will be different actions from different central banks globally and that when you have limited ammunition, it is wise to use it sooner and more boldly. (Newswires)

Fed's Kashkari (Voter, Dove) said he views this week's rate cut as insurance and stated that erring on side of taking out a little insurance is prudent, while he added the Fed may need to do more if the virus is really bad although could raise rates if virus the virus impact is not that bad. (Newswires)