· China had eight new coronavirus infections in Hubei province, the first time the epicenter of the pandemic recorded a daily tally in single-digits, as more businesses reopened with local authorities cautiously easing strict containment measures.
Wuhan reported all of the new cases on Wednesday, the National Health Commission said on Thursday. Outside of Hubei, mainland China had seven new cases, including six cases imported from abroad.
Overall, the 15 new confirmed cases in mainland China on Wednesday was a drop from 24 cases a day earlier.
· South Korea on Thursday reported 114 new cases of the coronavirus and six more deaths, resuming a relative decline in new cases after a spike the day before.
The new cases bring the country’s total to 7,869, with 66 deaths, the Korea Centers for Disease Control and Prevention said (KCDC), as health officials seek to track down and contain a number of new clusters of infections, including at a call center in the capital Seoul.
The numbers are far lower than the peak of 909 cases reported on Feb. 29, and health officials said the trend does appear to be slowing in what has been the largest outbreak in Asia outside of China.
· Saudi Arabia has extended flight and travel bans over coronavirus fears to include the European Union and 12 other countries after announcing 24 new cases overnight to bring its total to 45, state media reported on Thursday.
· Malaysia is tracking around 5,000 citizens across the country believed to have been potentially exposed to the coronavirus at a religious event in the outskirts of the capital Kuala Lumpur, the health ministry said.
Malaysia reported 20 new cases of coronavirus infection on Wednesday, bringing the cumulative tally to 149.
· Kazakhstan is suspending all public events and taking special preventive measures due to the global spread of the coronavirus, President Kassym-Jomart Tokayev wrote on Twitter on Thursday.
· Australia’s government said it would pump A$17.6 billion ($11.4 billion) into the economy to try to stop the coronavirus outbreak triggering a recession, as it weighed an extension of travel restrictions following a formal pandemic declaration.
The country’s first stimulus package since the 2008 global financial crisis, which helped Australia avert a recession then, illustrates the lengths the government will take to pare the economic impact of the outbreak.
· The dollar slid in another seismic shift to price in more U.S. interest rate cuts on Thursday, after President Donald Trump disappointed markets with a coronavirus plan light on details.
The greenback dropped 1% to 103.32 yen, fell as much as 0.6% to $1.1333 against the euro and lost 0.6% to the safe-haven Swiss franc, while stocks plunged.
Trump announced on Wednesday a ban on travellers from 26 European countries entering the United States for a month.
He unveiled economic steps to counter the virus but his address from the Oval Office was light on medical measures beyond assurances that “the virus has no chance against us”.
Investors are now waiting to see how aggressively the European Central Bank acts at its meeting later on Thursday.
Investors expect a cut to the main deposit rate by 10 basis points. But it is no certainty since rates are already at a record-low -0.5% and further cuts could hurt bank margins and so squeeze lending.
· ECB Preview: Three losing scenarios for Lagarde and EUR/USD as EU leaders fail to counter coronavirus
Between a rock, a hard place, and the coronavirus – that is where the European Central and President Christine Lagarde are at as they try to provide economic relief in the wake of the health crisis.
Well before the world heard about Covid-19, the bank's deposit stood at -0.50% – deep in negative territory and hurting banks. The ECB is also adding liquidity by buying €20 billion of bonds monthly – albeit below the peak of the Quantitative Easing program that reached €80 billion.
In a teleconference with EU leaders, Lagarde warned of a 2008-style crisis if Europe fails to act. Calling for governments to act is not a novelty – Mario Draghi, Lagarde's predecessor, has been doing it for years. However, the crisis provides an opportunity.
Assuming that it does not happen in the eurozone, here the ECB's lose-lose scenarios:
1) No action – EUR/USD declines
In this case, the ECB acknowledges that additional monetary stimulus fails to help the economy and decides to sit on its hands, trying to force governments to act. That would please the hawks on the Governing Council and in theory, send the euro higher.
However, it would show a lack of coordination in Europe, rattling investor confidence and potentially pushing the euro lower.
This scenario has a medium probability. On one hand, additional ECB action would have a limited impact. On the other hand, the ECB would not like to be seen as not playing its role.
2) 10bp rate cut – EUR/USD falls significantly
If Lagarde follows bond markets' guidance and cuts interest rates by 10 basis points to-0.60%, it would cause more damage to commercial banks' balance sheets and not do much to help. Moreover, investors would potentially think that this is as much as the ECB can do, adding to concerns.
In this case, the euro has room for more significant falls. This scenario has a high probability as it would be in line with market expectations.
3) Ramping up QE – EUR/USD tumbles but could bounce
The ECB may decide to "do whatever it takes" and be seen as playing its role, regardless of government action. If Lagarde convinces the hawks to raise the bank's bond-buying pace – especially if it hits €50 billion per month or more – the euro would fall as well.
However, there is a chance that it could boost the euro later on as some may think that this ECB action might precede fiscal stimulus by governments.
This scenario has a low probability as it could be too much to stomach for the hawks.
Conclusion
The ECB's tools were exhausted before the coronavirus crisis and governments have a much bigger role to play in mitigating the economic fallout. The ECB has three options, all euro negative, at least in the short-term.
· Chatham House Chair Jim O’Neill criticized the emergency cut to interest rates from Bank of England (BOE) as “a mistake and too soon.”
The central bank followed the U.S. Federal Reserve Wednesday in announcing a 50-basis point reduction to its benchmark rate, from 0.75% to 0.25%, in a bid to cushion the economic impact of the new coronavirus outbreak.
“There is quite a lot of evidence that QE (quantitative easing) and lower rates to the levels that we’re at here and in many other countries have not worked for years,” he said.
· BoJ's Kuroda: Will provide ample liquidity to markets, will conduct appropriate asset buying. Will monitor situation closely, act without hesitation
· China's February auto sales plunge 79%, biggest monthly drop ever
Auto sales in China plunged 79% in February, marking their biggest ever monthly decline, with demand pummeled by the coronavirus outbreak.
Sales in the world’s biggest auto market tumbled to 310,000 vehicles from the same month a year earlier, falling for a 20th straight month, the China Association of Automobile Manufacturers (CAAM) said.
“China’s auto sales for February returned levels not seen since 2005,” said Chen Shihua, a senior association official.
· Oil prices fell for the second straight day on Thursday amid a broad decline in global markets after the United States banned travel from Europe following the World Health Organization’s decision to declare the coronavirus outbreak a pandemic.
The slump in oil is being compounded by the threat of a flood of cheap supply as Saudi Arabia promised to raise output to a record high in its standoff with Russia.
Brent crude LCOc1 was trading down $1.65, or 4.6%, at $34.14 by around 0718 GMT, a little above earlier lows. The contract fell nearly 4% on Wednesday.
U.S. crude CLc1 was down $1.38, or 4.2%, at $31.60 after also dropping 4% in the previous session.
Reference: Reuters, CNBC, FX Street
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