US stocks made a comeback Monday despite tensions between Washington and Beijing resurfacing and traders following famed investor Warren Buffett who abandoned airline stocks.
The S&P 500 reduced its previous losses and increased by 0.4%, while the technology-rich Nasdaq Composite closed up 1.2%. Their rebound follows the weakness of Asian and European equities.
The latest massive sale by US airlines triggered Buffett’s admission over the weekend that Berkshire Hathaway had abandoned $ 6 billion in investments in the sector. The industry would be significantly changed by the coronavirus pandemic, he said on Saturday.
The stocks of the four largest American carriers, United, American, Delta and Southwest, all closed at least 5%, but below their worst levels.
By the end of Monday, traders had also resolved tensions between the United States and China, including repeated claims Sunday by Mike Pompeo, US Secretary of State, linking the coronavirus outbreak to a laboratory in Wuhan. Beijing has denied the allegations.
“Global stocks have retreated in recent days and may face more pressure in the near term if tensions between the United States and China continue to rise,” analysts at Capital Economics wrote in a note to clients. “However, the latest push between them does not change our broader view that most stock markets have yet to rise this year. “
In Europe, the Stoxx 600 benchmark, which tracks the region’s largest companies, closed down 2.7%. The losses were most pronounced in continental Europe, where markets had missed Friday’s liquidation due to a public holiday. In Frankfurt, the Dax fell 3.6%, while the CAC 40 in Paris was 4.4% lower. London’s FTSE 100, which had dropped more than 2% in the previous session, fell further 0.2%.
Jeffrey Kleintop, chief global investment strategist at Charles Schwab, said investors were “genuinely concerned” about the sour relations between the two largest superpowers in the world, adding that this creates “additional vulnerability” for an economy that is already on precarious bases.
“We don’t know what the recovery will look like,” he said. “If the recovery takes longer than expected and we get a new outbreak of virus, stocks are brought back to their lowest levels. “
Kit Juckes, a Societe Generale strategist, added: “The last thing we need is more trade war. “
Bank of America strategists said their discussions with customers had revealed “a fairly unanimous opinion that the US-China relationship would get worse in the future.”
The Wall Street bank said the biggest risk was the sustainability of the “phase one” trade agreement signed in January after months of negotiations.
The resurgence of US-China trade tensions also weighed on the price of industrial metals. Copper extended its decline from its peak in late April by $ 5,250 per tonne, trading as low as $ 5,060 on Monday. Aluminum lost 0.7% to $ 1,487.
Weak manufacturing data and the absence of Chinese buyers due to a holiday have added additional pressure to the sector.
“While the global economy appears to be escaping its current lockdown, May will likely be a test month and for that reason, risk appetite will likely remain muted at best,” said Alastair Munro, metals trader at Marex Spectron brokerage. .
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Asian stocks also fell on Monday. Hong Kong’s benchmark Hang Seng fell 4.2%, while the South Korean Kospi lost 2.9%. The markets in Japan and mainland China were closed for the holidays.
Meanwhile, the oil benchmarks have ignored lingering concerns about oversupply and inadequate storage. West Texas Intermediate, the US marker, rose 5% to $ 20.75 a barrel while crude Brent, the international benchmark, rose 4.4% to $ 27.61.
US oil prices plunged into negative territory last month for the first time, as rising costs of increasingly scarce storage prompted producers to pay buyers to take the product away.
But signs of risk aversion were still present Monday, with a $ 500 million exchange-traded fund in Hong Kong, saying that its broker had prevented it from increasing its holdings of crude oil futures.
Citi analysts warned that “the worst is yet to come, given the signs of global storage reaching peaks even as demand picks up”.