After the ugliest week for shares since the GFC, early market moves point to another torrid trading session. Commodity exposed currencies fell further at this morning’s opening, and investors seeking safe haven have pushed Australian and New Zealand longer bonds to new all-time highs. China data over the weekend offered hard evidence of the negative impact of the COVID-19 virus, and growth fears are likely to dominate trading today.

The official PMI reads in China released on Saturday showed both manufacturing and non-manufacturing activity contracted during February. The manufacturing index plummeted to 35.7, from a neutral 50.5 previously, and non-manufacturing activity fell from an expansionary 54.1 to a shrinking 29.6.

This macro evidence of the economic impact of the coronavirus could see economists dropping their estimates of GDP growth in China, with potential knock-on effects. Today’s read on the Caixin manufacturing PMI, due mid-session, is forecast at 46.0. A big miss on this read could keep pressure on regional currencies, shares and industrial commodities.

The surge in bond yields comes ahead of tomorrow’s Reserve Bank of Australia board meeting. Short-term markets indicate traders think an interest rate cut tomorrow is a virtual certainty. The combination of lower interest rate expectations and tumbling commodity prices propelled AUD/USD to a new eleven-year low this morning.

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