CORONAVIRUS UPDATE
· China reports dwindling new cases, pivots to control risk from overseas
China reported on Wednesday another drop in new coronavirus cases as its attention turns to controlling the risk of infection from abroad, as clusters of the disease that originated in China appear around the world.
Mainland China had 119 new confirmed cases of coronavirus on Tuesday, the National Health Commission said, down slightly from 125 the previous day, in a broad trend that has seen numbers of new cases fall from the middle of February.
The total number of cases on the mainland has now reached 80,270.
The number of deaths rose by 38 to bring the total toll for mainland China to 2,981 by March 3.
All but one new death occurred in Hubei province, the epicenter of the outbreak. Hubei reported 37 new deaths and 115 new cases.
· The number of confirmed coronavirus infections in Japan reached the 1,000 mark on Wednesday, as the government reiterated that plans to host the Tokyo Summer Olympics in July remained on track.
Cases in Japan have now hit the 1,000 mark, public broadcaster NHK said. Of those, 706 are from the Diamond Princess cruise ship, while 12 have died, the health ministry said.
· Japan's Hokkaido reports three more coronavirus infections
Japan’s northern island of Hokkaido reported three more cases of coronavirus infections on Wednesday, bringing the total to 82 in the prefecture.
· South Korean President Moon Jae-in on Wednesday canceled his planned trip to the UAE, Egypt and Turkey in mid-March, over coronavirus, according to the presidential Blue House.
· Scotland has only one confirmed case of coronavirus so far. The patient, from the Tayside area, is "clinically well", but is in isolation in hospital as a precaution.
The number of cases across the UK currently stands at 51, rising from 39 on Monday.
A total of 914 tests have now been confirmed negative in Scotland.
· Dollar downbeat as Fed rate cut brings more worry than calm
The dollar hovered near five-month lows versus the yen on Wednesday after the U.S. Federal Reserve’s emergency 50 basis point rate cut sparked more anxiety about the impact of the coronavirus and sent Treasury yields tumbling to record lows.
The greenback also traded near the lowest in almost two years against the Swiss franc, with investors flocking to traditional safe havens as rate cuts were deemed insufficient to offset risks posed by the global spread of the coronavirus.
The euro was one of the currencies to benefit most from the broad-based dollar weakness as traders bet the Fed will cut rates more than the European Central Bank.
Disappointment that a Group of Seven statement on Tuesday did not lay out a specific response to a global slowdown caused by the coronavirus has reinforced the view among some investors that policymakers have fallen behind the curve.
· “The G7 and the Fed were not enough to support markets,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.
“This Fed rate cut is bad for dollar/yen, partly because Treasury yields are now very low. The dollar’s weakness is reflected in the euro, because the Fed will likely ease more than the ECB.”
The dollar fell to 106.85 yen JPY=EBS in Asia on Wednesday, its lowest in almost five months, and then steadied at 107.36 yen.
The greenback bought 0.9566 Swiss franc CHF=EBS, close to its weakest level in almost two years.
· Interest rate futures traders were pricing in a 55.7% probability of a further 25 basis point cut in April, according to the CME Group’s FedWatch Tool.
The rate cut failed to arrest a sell-off in U.S. equities and sent benchmark 10-year Treasury yields US10YT=RR crashing to a record low of 0.906%, further reducing the appeal of the dollar.
In the onshore market, the yuan CNY=CFXS jumped to a six-week high of 6.9288 per dollar in another sign of the U.S. currency's weak bias.
The yuan shrugged off data showing China’s services sector crumbled to its weakest on record in February, but the grim numbers offer a sign of the economic impact of the spread of the flu-like virus.
The euro EUR=EBS last traded at $1.1158, close to a two-month high reached on Tuesday.
· US 10-year yield falls below 1% for first time
The yield, which moves inversely to price, on the 10-year Treasury dropped to a fresh all-time low of 0.999 per cent in afternoon trading in New York. The 10-year Treasury is one of the most important interest rates in global finance, underpinning borrowing and savings rates across the globe.
Other benchmark US government bond yields were also in freefall on Tuesday. The two-year yield dropped almost over 20 basis points to 0.69 per cent.
The moves lower came after the US central bank cut its main policy rate by half a percentage point in a bid to support financial markets, following a more than 10 per cent drop in the S&P 500 since coronavirus concerns intensified at the beginning of last week.
· Central banks have ‘far less ammunition’ to save the global economy from coronavirus
Central banks around the world, including the U.S. Federal Reserve, have lowered interest rates to support their respective economies amid a rapidly spreading coronavirus — and more are expected to follow suit.
But investors and economists said there’s not much monetary policy can do to save the global economy, especially when some major central banks — such as the European Central Bank and Bank of Japan — have already cut interest rates into the negative territory.
“The fact is, we’re coming into this crisis with far less ammunition globally. It’s not just Europe or Japan, even in China they have much less ammunition than the last time they had to launch a stimulus package,” Alex Wolf, J.P. Morgan Private Bank’s head of investment strategy in Asia, told CNBC’s “Squawk Box Asia” on Wednesday.
· Brian Martin, senior international economist at Australian bank ANZ, outlined in a Wednesday report the possible moves by those three major central banks:
-The European Central Bank is expected to cut its deposit rate by 10 basis points before its next meeting scheduled on March 12. The ECB’s current deposit rate is at a record low of -0.5%
-The Bank of Japan could also cut rates deeper into negative territory
-The Bank of England is expected to cut rates by 25 basis points, possibly before its Mar. 26 meeting
· Fed's Evans expects virus impacts on economy to be short-lived
The coronavirus outbreak will likely have only a “short-lived” impact on the U.S. economy, with a hit to growth in gross domestic product limited to perhaps a few tenths of a percentage point, Chicago Federal Reserve Bank President Charles Evans said on Tuesday night.
Evans said the rate reduction should help sustain business and household confidence and guard against any economic fallout from the fast-spreading virus.
Evans said that while such events are unpredictable and the virus could become a more serious economic threat, he expected it to “play out” in perhaps six months.
Where the Fed goes next, he said, is uncertain.
· China’s central bank kept short-term borrowing costs steady on Wednesday, shrugging off the U.S. Federal Reserve’s emergency policy rate cut overnight.
· German retail sales rebound in January
German retail sales bounced back in January after plunging in the previous month, data showed on Wednesday, suggesting that private consumption helped prop up growth in Europe’s largest economy at the start of this year.
Retail sales rose by 0.9% on the month in real terms after an upwardly revised drop of 2.0% in the previous month, data from the Federal Statistics Office showed. This was slightly below a Reuters forecast of analysts for a 1.0% increase.
On the year, retail sales rose by 1.8% in real terms after an upwardly revised rise of 1.7% in December, the data showed.
· BOK says will keep Fed's surprise rate cut in mind in conducting policies
South Korea’s central bank chief said on Wednesday that it will take into account the U.S. Federal Reserve’s emergency interest rate cut as it conducts monetary policy.
Bank of Korea Governor Lee Ju-yeol, however, stressed the limits of monetary policy and called for a more targeted measures from the government to deal with the outbreak of coronavirus.
“(The Bank) will closely monitor markets and focus on stabilizing markets,” Lee said in an urgently scheduled policy meeting in Seoul.
· Oil rise as OPEC, allies move closer to deeper output cuts
Oil prices rose on Wednesday on hopes that major producers have made progress towards sealing an agreement to implement deeper output cuts aimed at offsetting the slump in demand caused by the global coronavirus outbreak.
Brent crude LCOc1 rose by 20 cents, or 0.39%, to $52.06 a barrel at 0736 GMT, after settling down 4 cents in the previous session. U.S. West Texas Intermediate (WTI) futures CLc1 rose by 27 cents, or 0.57%, to $47.45 a barrel, up for a third session.
A panel of the Organization of Petroleum Exporting Countries (OPEC) and its allies, a grouping known as OPEC+, recommended cutting oil output by an extra 1 million barrels per day (bpd) on Tuesday. The recommendation may mean that Russia and Saudi Arabia, the two biggest producers in the OPEC+ group, are close to a deal to support prices.
That would be in addition to 2.1 million bpd in output cuts that include 1.7 million bpd in curbs by OPEC+ and other voluntary reductions by Saudi Arabia, the world’s biggest exporter. The group is set to meet in Vienna on March 5-6.
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