Inventories fall as U.S.-China tensions threaten rebound

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LONDON (Reuters) – European stock markets and oil prices plummeted on Monday as discussions between senior US officials and China over the origin of the coronavirus fueled fears of another trade war, derailing the rebound world markets.

FILE PHOTO: The offices of the London Stock Exchange Group are seen in the city of London, in Great Britain, on December 29, 2017. REUTERS / Toby Melville

European stocks fell 2.5%, with US equity futures trading close to 1% in the red.

Earlier, the largest index of MSCI’s Asia-Pacific region stocks outside of Japan fell 2.5%, pulled by Hong Kong where the Hang Seng returned from a two-session stay with its biggest drop in six weeks.

US Secretary of State Mike Pompeo said Sunday 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 challenge an earlier conclusion from US intelligence that the virus was not of human origin.

An editorial in the Global Times of China said it was “bluffing” and called on the United States to present its evidence.

“Concerns about the potential for a new push between the United States and China are dominating price action,” said RBC strategist Adam Cole in a morning note.

Simon Black, chief investment officer of wealth management company Dolfin, said investors were also adjusting their forecasts to the depth of economic damage caused by the pandemic.

“It’s also the economic reality that is sinking,” he said, adding that the rebound of more than 20% from the lows reached in March by global stocks was probably not sustainable.

Graphic – Rebound: here

Companies listed on the pan-European STOXX 600 are currently expected to report a 40% drop in profits in the second quarter.

Manufacturing activity in the eurozone collapsed last month, forced closings imposed by the government to prevent the spread of new coronaviruses that forced factories to close and consumers to stay inside, according to published survey Monday.

“We have just come out of a gathering of hopes, not a gathering of fundamentals,” said Black, noting the massive monetary and fiscal stimulus promised by governments and central banks around the world.

Recent economic data paints a disastrous picture of the global economy after weeks of deadlock.

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.

Oil prices fell again, reducing last week’s gains, due to fears that the global oil glut will persist, even as the blockages of the coronavirus pandemic begin to ease.

West Texas Intermediate (WTI) crude futures fell to $ 18.66 per barrel, while Brent crude futures fell 1.7% to $ 26, after bottoming out. $ 25.50. Brent crude rose about 23% last week after three consecutive weeks of losses.

On the foreign exchange markets, the dollar rose 0.1% to 99.38 against a basket of currencies while the euro fell 0.48% to $ 1.0930.

The safe haven yen fell 0.2% to 106.72 per dollar.

Coronavirus cases worldwide have exceeded 3.5 million and deaths have approached a quarter of a million, according to a Reuters count.

Report by Julien Ponthus; Editing by Hugh Lawson

Our standards:Principles of the Thomson Reuters Trust.

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