• European equities have once again faced heavy selling pressure as their global stockmarket rout continues
• Bunds, Gilts and 10-year USTs have soared in European trade but are now some distance away from best levels and braced for the next leg of the bull run or further retracement
• In FX, The Dollar continues to slide vs major peers while outperforming against the majority of its EM counterparts
• Moscow will only agree to extend the existing OPEC+ oil cuts, will not agree to extra cuts and its position will not change, Russian High-level source
• Looking ahead, highlights include 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)

Chinese government official says coronavirus control and prevention work in Beijing is now at its most crucial and challenging period. (Newswires) China's top health authority expects the coronavirus vaccines to be available for use for emergency and clinical research use in April, CNBC's Yoon. (Twitter)

South Korea coronavirus cases increased by 827 to take the total to 6593 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. Germany’s total has increased to 534 cases. (Newswires)

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)

China has granted tariff exemptions on imports of US soybeans for some crushers for one year with no cap on volume, according to sources. (Newswires)

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 (-2.7%) 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 (-2.3%) and Shanghai Comp. (-1.2%) 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)

BoJ has purchased JPY 101.4bln of ETFs today, for the second time this week. (Newswires)

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)

US

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)

UK/EU

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

EU Trade Chief Hogan says that hopefully we can come to some mini-deal or understandings with the US in the coming weeks. (Newswires)

-        There are multiple difficult issues to resolve with the US but is pleased by the atmosphere in discussions, needs to see if some agricultural trade barriers can be lowered

ISTAT says that its February leading indicator is pointing towards further weakness for the Italian Economy; noting that their latest indicator does not include the impact of the coronavirus. (Newswires)

EQUITIES

Further pain for European equities this morning (Eurostoxx 50 -3.1%) as losses in global stock markets show no sign of letting up. Once again, there hasn’t been too much in the way of notable macro newsflow, instead, attention remains on the ongoing climbing case count with particular focus Stateside amid a pickup in COVID-19 diagnosis’ and reports of 2733 people being quarantined in New York City. Commentary around the 2020 Presidential election race continues to impose itself on the market narrative, however, it appears to still be playing second fiddle to the fallout from COVID-19. Furthermore, the market is also trying to wrestle with the narrative over who will be the most favourable candidate for Trump to face in November with Biden viewed as more market-friendly than Sanders, with Sanders an easier candidate for Trump to defeat. In terms of price action in Europe, the sell-off for the DAX gathered momentum early doors (as did other global asset classes) with the Mar’20 contract taking out support at 11617 (March 2nd low) before finding some composure after stalling at 11600. However, as the session progressed, the velocity of the price action in markets accelerated dramatically with the index eventually troughing at 11446. Stateside, futures unsurprisingly indicate a negative open with the e-mini S&P lower by circa 80 points. All ten sectors in Europe are lower with slight underperformance in industrials, consumer discretionary and IT names, whilst consumer staples and telecoms are faring marginally better than their peers, however, are ultimately lower on the session. In terms of individual movers, there is a distinct lack of green on the board with focus instead, once again, to the downside with Capita (-12.6%) the notable laggard in the Stoxx 600 after adding to yesterday’s dire performance. Elsewhere, Prysmian (-9.5%) are markedly lower following disappointing FY results, Atlantia (-8%) are being weighed on after its Autostrade unit delayed results, Airbus (-6.0%) are being sold after posting no new orders in February, whilst executives at Boeing remain bullish on a return of the 737 MAX by mid-year.

Tesla (TSLA) have secured Chinese Gov't approval for the sale of longer-range Model-3 vehicles which are made in China. (Newswires)

FX

USD - The Dollar continues to slide vs major peers while outperforming against the majority of its EM counterparts as US Treasury and other core global bond yields tank amidst more pronounced bull-flattening across the debt curves. As a result, the DXY has extended post-Fed emergency ease lows to 95.993 and there’s little in the way of technical support ahead of 95.950 if the purely psychological or sentimental round number really gives way. NFP looms and usually matters, but in the current environment China’s COVID-19 and contagion appears all consuming

NZD/JPY/CHF/EUR/AUD/GBP - The strongest G10 currencies and roughly in descending order, partly due to relative rate differentials and grades of safe-haven appeal, as Nzd/Usd gathers pace through 0.6350 and Usd/Jpy recoils from 106.30+ overnight peaks below 105.00 (touted as the BoJ’s tolerance line), with supposed bids around 105.50 filled effortlessly along the way. Meanwhile, Usd/Chf is now under 0.9400 and Eur/Chf is threatening another downside breach of 1.0600 that will no doubt ring alarm bells at the SNB, especially as Eur/Usd is bid and now testing 1.1300. Back down under, Aud/Usd has been hampered to a degree by weak Aussie retail sales, though still comfortably above 0.6600, and Cable is approaching 1.3000 even though Eur/Gbp is hovering just shy of 0.8700. In terms of upside bullish objectives, contacts are flagging the 200 WMA around 1.3021, but chart levels are hardly being observed let alone respected at present.

CAD/NOK/SEK - The Loonie is lagging given more dovish BoC guidance in wake of Wednesday’s ½ point rate cut, as Usd/Cad hugs 1.3400 and the same goes for the Scandinavian Kronas irrespective of ordinarily supportive Norwegian GDP and manufacturing production in advance of Riksbank remarks from Ohlsson pledging prompt action (stimulus) if required and then a relatively bland official statement effectively delivering the same message.

EM - In short, risk aversion akin to a rout has taken a toll on all regional currencies, but with the Rouble also undermined by sinking Brent prices awaiting OPEC+, and actually Russia to give its approval to a deeper output cut pact that looks highly unlikely given comments attributed to a top ranking source. However, some solace for the Lira via truce in Syria, albeit fragile.

Notable Expiries, NY Cut:

-        EUR/USD: 1.1175-80 (1BLN), 1.1200-05 (1.4BLN)

-        AUD/USD: 0.6550 (330M), 0.6600-05 (730M)

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

EU Foreign Minister meeting is Zagreb has concluded, and the final statement will not include any explicit mention of financial support for Turkey, FT's Khn. (Newswires)

FIXED

Some signs of the FTQ abating and realignment along the debt curves after extreme demand and especially heavy long end buying forced more margin calls in certain markets at times of lower liquidity. However, benchmark futures remain firmly bid awaiting the return of US participants, the BLS employment report and a host of Fed speakers on the eve of the blackout period before this month’s FOMC meeting that could still be very live despite Tuesday’s off schedule 50 bp rate cut. However, Wall Street’s rection to all the latest nCoV developments and collapse in global stock markets could be pivotal going into the weekend. Back to bonds, Bunds, Gilts and 10 year USTs have been as high as 176.72, 137.82 and 138-04, but now some distance away from best levels and braced for the next leg of the bull run or further retracement.

GEOPOLITICS

Ceasefire in Syria's Idlib is reportedly being observed, Ria citing military sources. (Newswires) Follows on from Turkey and Russia agreed to a ceasefire during yesterday’s discussions. Subsequently, Clashes between Syrian Government forces and Jihadist forces in Syria's Idlib, with 15 killed as a result, Syrian Observatory for Human Rights. (Newswires)

Turkish President Erdogan says the Russian S-400's will be operational in April, have also asked for the Patriot system from the US; could have sent military equipment to Idlib if there was no ceasefire but no support has been received. (Newswires)

COMMODITIES

Focus for the crude complex remains on today’s OPEC+ meeting, where we are still awaiting remarks from Russian Energy Minister Novak himself after OPEC yesterday agreed to a 1.5mln BPD cut and an extension of existing measures. However, comments this morning from a Russian high-level source that Moscow will only agree to extend the existing OPEC+ oil cuts, will not agree to extra cuts and its position will not change caused a significant drop in crude prices. Prior to this, price action was very much subdued anyway in-line with overall sentiment as the rot in global yields and broad-based safe haven flows has exacerbated this morning to such an extent that WTI and Brent crude futures are posting losses in excess of USD 2/bbl at present, and have breached the USD 44/bbl and USD 47/bbl to the downside; with price action generally showing little signs of abating at present. Note, next week does see the monthly oil market reports released and ahead of this OPEC’s 2020 global oil demand forecast is expected to be at 480kBPD, which is a reduction from the 990kBPD mark in February. Moving to metals, where price action has been just as fervent and spot gold has printed a new multi-year high at USD 1689.99/oz, surpassing the USD 1689.29/oz which was set last month; a high which takes us all the way back to January 2013.

Moscow will only agree to extend the existing OPEC+ oil cuts, will not agree to extra cuts and its position will not change, Russian High level source. (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)