Dollar appreciates and Asian stocks tumble

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SINGAPORE (Reuters) – Dollar soared, stock markets struggled for traction and oil fell on Monday as US-China spitting on the origin of coronavirus dampened optimism about an economic recovery as countries around the world relax restrictions.

FILE PHOTO: Man in protective mask, following coronavirus epidemic (COVID-19), walks past stock market chart outside brokerage house in Tokyo, Japan on 10 March 2020. REUTERS / Stoyan Nenov / File Photo

In thinned trade, with China and Japan on vacation, US equity futures fell 0.7% last. Futures on FTSE fell 0.6% and European stocks looked set to return after a May 1 break with a slump. Futures on EuroSTOXX 50 fell 3%.

US crude broke three gain sessions with a 6% drop and the safe haven US hit weeklong highs against risk-sensitive Australian and New Zealand dollars.

The largest MSCI Asia-Pacific equity index outside Japan fell 2.5%, pulled by Hong Kong where the Hang Seng returned from a two-session trip with its biggest drop in six weeks.

These measures extended an austere start to May, which began on Friday with gloomy US data and the threat of further hostilities in the trade war between the two largest economies in the world.

US President Donald Trump and Secretary of State Mike Pompeo have added to concerns with new efforts to blame the pandemic in China, where the new coronavirus epidemic is believed to have originated.

The latest salvo came from Pompeo on Sunday, which said there was “a significant amount of evidence” that the virus had emerged from a laboratory in the central city of Wuhan in China.

Pompeo did not provide any evidence or contest a conclusion of the American intelligence according to which the virus was not of human origin, whereas an editorial of the Global Times of China declared that it “bluffé”, calling the United States United to present the evidence.

But Pompeo’s comments double Washington’s pressure on China as death and economic damage increases in the United States.

An editorial in the China Global Times said that Pompeo had no evidence that the virus came from Wuhan’s laboratory and that it was “bluffing”, calling on the United States to present the evidence.

“The risk of decline has increased this week,” said Chris Weston, director of brokerage research at Melbourne Pepperstone.

“The United States is not alone in publicly targeting China, but whether it is Trump, Kudlow or Pompeo, the story is more frequent and traders sell yuan,” he said.

With the Chinese markets closed on the mainland, the offshore yuan hit a seven-week low at 7.1560 per dollar before flattening out in mid-session.

The Australian dollar fell below 64 cents for the first time in a week, dropping 0.5% to $ 0.6385.

Futures for the benchmark 10-year US Treasury bills did not move with an implicit return of 0.50%, as demand for safe haven assets was firm. Gold rose to $ 1,700.00 an ounce.

BLAME GAME

An increase in tension between Washington and Beijing comes as the pandemic hits the global economy.

Asian factory activity was devastated in April, business surveys showed on Monday, and the outlook has waned further as restrictions on movement to contain the coronavirus epidemic have frozen global production and reduced demand .

Manufacturing in the United States plunged to an 11-year low last month, consumer spending plummeted and some 30.3 million Americans filed for unemployment.

“Trump is seeking re-election,” said Jim McCafferty, joint head of APAC equity research, comparing his attacks on China to “attacks on Japan” by then-president Ronald Reagan. , In the 1980’s.

“We have seen it before,” he said. “And I think governments around the world are focusing more and more on the country … finding a bad guy elsewhere makes a lot of sense.” “

This means a challenge for income-seeking investors who seem to have baffled even billionaire Warren Buffett so far.

Buffett firm Berkshire Hathaway posted a loss of nearly $ 50 billion in the first quarter, but ended it with record cash and nothing to spend.

Buffett said he still wants to make a big acquisition, but did not provide financial support to businesses as he did during the 2008 financial crisis because he saw nothing attractive enough.

Elsewhere on the foreign exchange markets, the safe haven yen rose 0.2% to 106.72 per dollar while the euro, pound sterling and New Zealand dollar fell in trade eased considerably by the holidays. the “Golden Week” in Japan, which last until the resumption of trade on Thursday.

In the commodity markets, US crude futures have recovered from their previous lows, but have been kept under pressure by concerns over oversupply of oil and a collapse in demand, although some states and cities in the United States are beginning to relax restrictions on the coronavirus pandemic.

West Texas Intermediate crude futures last fell $ 1 at $ 18.74 a barrel, while Brent futures fell 1%, or 27 cents, at $ 26.22.

The April jobs report for the United States will be released on Friday, but analysts say it may not fully reflect the number of people who have been fired from work.

Editing by Kim Coghill and Jacqueline Wong

Our standards:Principles of the Thomson Reuters Trust.

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