• Sentiment was bolstered on the ECB measures; but failed to hold to the optimism
• ECB announced EUR 750bln Pandemic Emergency Purchase Programme, conducted until end-2020
• Fed announced to launch mutual money market fund facility to lend to financial institutions
• RBA lowered Cash Rate Target by 25bps to 0.25% and announced QE as speculated
• Looking ahead, highlights include US Initial Jobless Claims, SARB Monetary Policy Announcements

CORONAVIRUS UPDATE

Mainland China reported 34 additional cases of coronavirus and 8 additional deaths on March 18th vs. Prev. 13 additional cases and 11 additional deaths on March 17th to brings total mainland cases to 80928 and death toll at 3245. (Newswires) Note: the numbers arose from imported cases as opposed to local cases.

China to step up fiscal stimulus including infrastructure investment (such as 5G networks) and is considering plans to cut its 2020 growth target to as low as 5% from 6% agreed in Dec. (Newswires)

Italy coronavirus cases rose to 35713 (Prev. 31506) and the death toll rose by 475 to 2978. (Newswires)

German Coronavirus cases to 10999 from 8198 (+2801), according to RKI Health Institute. (Newswires)

-        German Ministers are yet to sign off on the EUR 40bln support package for small/medium Co's, could be in excess of EUR 40bln, according to Gov't sources

South Korea reported 152 additional coronavirus cases to take total to 8565 and deaths increased by 7 to a total of 91, while there were an additional 407 that fully recovered to bring the total to 1947. (Newswires)

California Governor says modelling shows 60k homeless in the state could contract coronavirus over next 8 weeks

US President Trump tweeted that he only signed the Defense Production Act to combat the Chinese Virus should we need to invoke it in a worst-case scenario in the future, although he added that hopefully there will be no need. (Twitter)

Italy are to extend virus lockdown measures, according to PM Conte cited by AFP. (Twitter) French Interior Minister says the Government will extend the lockdown period if it is necessary. (Newswires)

EU Chief Brexit Negotiator Barnier has tested positive for the coronavirus. (Newswires)

CENTRAL BANKS

ECB announced EUR 750bln Pandemic Emergency Purchase Programme (PEPP) in which it will launch a new temporary asset purchase programme of private and public sector securities to counter serious risks to monetary policy transmission mechanism. Purchases will be conducted until the end of 2020 and will include all the asset categories eligible under the existing asset purchase programme (APP). Furthermore, the GC said it is fully prepared to raise size of programmes, as well as adjust composition by as much as necessary and for as long as needed. A waiver of the eligibility requirements for securities issued by the Greek government will be granted for purchases under PEPP. (ECB) Link to release

ECB's Lagarde said extraordinary times require extraordinary action, while she added there are no limits to our commitment to the Euro and are determined to use full potential of all our tools within our mandate. (Newswires)

ECB's Villeroy said ECB is absolutely determined to fight fragmentation risk between Eurozone countries and noted it will buy more bonds if needed in this exceptional period, while he also stated that French banks are solid and do not need nationalisation. (Newswires)

Fed announced to launch mutual money market fund facility to lend to financial institutions which it said will help meet demands for redemptions by households and other investors to enhance credit provisions throughout the economy.  Furthermore, the program includes USD 10bln of credit protection from US Treasury Exchange Stabilization Fund. (Newswires)

New York Fed plans to purchase USD 100bln in Treasury purchases over Thursday and Friday. (Newswires)

SNB left Policy Rate unchanged at -0.75% as expected, CHF is “even more highly valued” vs. Prev. “highly valued”; SNB is intervening even more in FX markets. SNB is raising the exemption threshold as of 1 April 2020, thus reducing the negative interest burden on the banking system. The threshold factor will increase from 25 to 30. SNB is examining whether a relaxation of the countercyclical capital buffer would be possible despite the risks on the mortgage and real estate markets. The SNB will take additional steps to ensure liquidity as necessary. Even under this assumption, however, GDP growth is likely to be negative for the year as a whole. The return to normality from the second half of the year onwards could thereafter be reflected in strong positive growth in 2021. (SNB)

SNB Governor Jordan: SNB can cut interest rates further in the future but it is unfavourable at the moment, Switzerland is not a currency manipulator; SNB does not intervene to get an advantage vs. other countries. Notes, there is no co-ordinated measures with other central banks. Talks are ongoing with Swiss Govt but its too early to give details of further supportive steps (Newswires)

Norges Bank state that, due to the recent moves in the NOK, they may intervene in the market via the purchase of NOK; are to offer extraordinary F-loans to banks, as of March 19th; will have a 1-week, 1-month, 3, 6 & 12 month maturities; all will be fully allotted (Norges Bank)

RBA lowered Cash Rate Target by 25bps to 0.25% and announced to buy government bonds in secondary market as speculated, which will commence on Friday. Furthermore, the RBA announced to offer 3yr funding (TFF) to authorized deposit taking institutions with the facility valued at least AUD 90bln, while it stated that banks will have access to additional low-cost funding if they expand lending to businesses. (Newswires)

BoJ January Meeting Minutes noted that most members stated they must be mindful of downside risks to the economy but momentum for hitting price target is sustained. (Newswires)

ASIA

Asian equity markets extended on losses with price action turbulent as ongoing coronavirus fears and disruptions, which now threatens to lockdown New York and London, offset the various global policy efforts to tackle the fallout including the ECB announcement of a EUR 750bln Pandemic Emergency Purchase Programme and RBA rate cut with QE. The announcement by the ECB initially boosted US equity futures and propelled Euro Stoxx 50 futures higher by over 3%, although the momentum then waned which fully wiped out the earlier gains. ASX 200 (-3.4%) swung between gains and losses heading into the off-schedule RBA monetary policy announcement which despite the RBA actions, did little to support the Australian benchmark which was heavily pressured by a collapse in the real estate sector, energy and financials. Nikkei 225 (-1.0%) also gave back opening gains with Tokyo exporters weighed by the safe haven flows into the domestic currency and with participants diminishing risk ahead of tomorrow’s holiday closure. Hang Seng (-2.6%) and Shanghai Comp. (-1.0%) were subdued as the coronavirus jitters continue to ruffle markets and as earnings also entered the fray including Hong Kong heavyweight Tencent which missed on its Q4 net. Finally, 10yr JGBs were subdued and continued to test support at 151.00 where prices have found a base. The BoJ were also active in the market today in which it announced 2 unscheduled special operations to purchase a total of JPY 1.3tln of JGBs although this only briefly underpinned prices, while Japanese CPI data and outdated BoJ minutes from the January meeting were largely ignored given that the data was mixed and meeting was prior to the blow up of the coronavirus pandemic.

PBoC skipped open market operations for a daily net neutral position. (Newswires) PBoC set USD/CNY mid-point at 7.0522 vs. Exp. 7.0486 (Prev. 7.0328)

Japanese National CPI (Feb) Y/Y 0.4% vs. Exp. 0.5% (Prev. 0.7%). (Newswires) Japanese National CPI Ex. Fresh Food (Feb) Y/Y 0.6% vs. Exp. 0.6% (Prev. 0.8%) Japanese National CPI Ex. Fresh Food & Energy (Feb) Y/Y 0.6% vs. Exp. 0.7% (Prev. 0.8%)

Japanese Bank lobby head said the economy has been impacted more seriously by the coronavirus than was expected. (Newswires)

UK/EU

Whitehall sources said most shops could close and transport could be restricted in London by the weekend under plans being considered by UK Government. (Sky News)

Transport for London adjusted its service operations in which it will shut the Waterloo & City Line and close up to 40 stations, as well as suspend the night tube and night overground although night buses will still operate for essential journeys. (Sky News)

EU Market Watchdog states that effective start of reporting requirements for securities finance transaction are to be delayed to July (3-month delay) due to the outbreak. (Newswres)

German Ifo Prelim Business Climate Index (Mar) 87.7 (Prev. 96.1, Rev. 96.0); Current Conditions 93.8 (Prev. 98.9, Rev. 99.0); Expectations 82 (Prev. 93.4, Rev. 93.2) - Ifo notes that German economy is falling into recession. (Newswires)

German DIW Institute says virus outbreak is to massively impact German economy in the next two quarters at lease, could turn out to be much more severe if uncertainty persists, German economy to shrink 0.1% in 2020 assuming optimistic V-shaped recovery. (Newswires)

EQUITIES

Major European bourses trade mixed having waned off earlier highs [Eurostoxx 50 Unch] after sentiment in the equity sphere was bolstered by ECB’s EUR 750bln PEPP announcement, which at the time prompted European stock futures high and US futures to follow suit, although

the latter failed to climb to positive territory. UK’s FTSE 100 (-1.7%) lags despite the GBP weakening to multi-decade lows, as the announced European package failed to reverberate into the sentiment across the channel. Meanwhile the DAX 30 (-0.6%) lost steam amid a bleak Ifo Survey and a string of downbeat economic forecasts from various institutes, all forecasting a 2020 German recession. Italy’s FTSE MIB (+2.1%) remains underpinned by the 3-month long short ban sale coupled with the ECB announcement. European sectors are all higher and largely reflect risk appetite, although Consumer Staples and Telecoms outperform given as the ongoing lockdown prompts additional broadband usage and stockpiling of staple goods. Swiss Banks meanwhile received a fleeting boost in light of the SNB monetary policy announcement in which it sweetened its tiering terms to a multiple of 30x from 25x, Swiss Banks remain supported with UBS higher to the tune of 7%. In terms of individual movers, Next (+13.0%) shares are supported post-earnings.

FX                        

USD - In spite of concerted if not quite coordinated attempts to intervene, the Greenback remains on an upward trajectory and extending gains vs all G10 counterparts plus the bulk of EM currencies, with very few exceptions, like the Rouble that has clawed back some losses following CBR buying aimed at preventing Brent and Ural crude from caving too far below Usd25/brl. Indeed, the DXY has just posted a new ytd peak at 102.020 and closer to the next bullish technical objective at 102.260.

NZD/JPY/EUR/AUD/CHF/GBP - All trailing further behind the Buck, as the Kiwi lags within a gaping 0.5472-0.5748 range and Yen loses even more of its safe-haven premium alongside Gold between 109.55-107.87 parameters. Meanwhile, the Euro is testing bids/support around the 1.0800 handle in wake of another bleak German business survey (Ifo echoing downbeat ZEW sentiment readings) and multi GDP downgrades via economic institutes, and the Aussie is languishing just above 0.5700 after RBA QE and more emergency funding, albeit off worst levels close to 0.5500 at one stage overnight. Elsewhere, the Franc is still mixed around 0.9750 and 1.0550 against the single currency following the SNB maintaining policy and only reinforcing NIRP intentions alongside stronger FX interventions despite upgrading its valuation of the unit to even more high from high. Last, but by no means least, scant reprieve for Sterling as Cable only clambers back from circa 1.1475 lows to 1.1500 awaiting a probable London lockdown and a likely further delay to Brexit negotiations resuming given that the EU’s chief representative Barnier contracting COVID-19.

CAD/SCANDI/EM - The Loonie is doing better than most to resist its US peer’s advances, but still prone either side of 1.4500 if oil prices tank again and/or risk aversion really picks up, in the same vein as the Norwegian and Swedish Crowns as the former has only gleaned a degree of support from the Norges Bank hinting an direct intervention to supplement increased regular daily foreign currency purchases announced yesterday. As noted above, the Rub is the notable ‘outperformer’, though not before more pronounced weakness that triggered CBR action, while the Zar is trading defensively in the run up to the SARB that is expected to cut rates by 50 bp.

FIXED INCOME

UK debt has been underperforming since Liffe resumed, but the 10 year bond is now diverging further in wake a so-so DMO auction and as Britain braces for more extreme preparations/contagion from nCoV. Gilts are threatening to lose the 129.00 handle in contrast to Bunds keeping afloat of 169.00, albeit well off best levels above 171.00 and US Treasuries hold close to 135-00+ recovery highs.

COMMODITIES

WTI and Brent front-month futures experience a day of reprieve in the aftermath of the 24% drop in prices in the prior session – with underlying themes still failing to fade but with sentiment supported by the ECB’s PEPP announcement. WTI has clambered of its near-multi-decade low after testing USD 20/bbl to the downside, whilst its Brent counterpart drifts closer to the USD 25/bbl, albeit ultimately in positive territory on the day. Meanwhile, spot gold remains sub-1500/ozwith prices subdued amid the flight for cash. The yellow metal meanders around 1475/oz in early EU trade and sees a recent low at USD 1452/oz. Finally, copper prices see detrimental downside amid the overall demand implications of the virus and a firmer Buck. The red metal briefly gave up the USD 2/bl level during overnight trade before trimming some losses as European players entered the market.