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Stocks fall as U.S./China tensions threaten rebound

Stock Markets May 04, 2020 04:41AM ET
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2/2 © Reuters. FILE PHOTO: A man wearing protective face mask walks in front of a stock quotation board outside a brokerage in Tokyo 2/2
 
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By Julien Ponthus

LONDON (Reuters) - European stock markets and oil prices fell on Monday as a spat between top U.S. officials and China over the origin of the coronavirus fuelled fears of a new trade war, derailing a rebound in global markets.

European shares opened down 2.5% with U.S. stock futures trading close to 1% in the red.

Earlier, MSCI (NYSE:MSCI)'s broadest index of Asia-Pacific shares outside Japan fell 2.5%, pulled down by Hong Kong where the Hang Seng returned from a two-session holiday with its biggest drop in six weeks.

U.S. Secretary of State Mike Pompeo said on Sunday there was "a significant amount of evidence" that the virus emerged from a laboratory in the central Chinese city of Wuhan.

Pompeo did not provide evidence or dispute an earlier U.S. intelligence conclusion that the virus was not man-made.

An editorial in China's Global Times said he was "bluffing" and called on the United States to present its evidence.

"Concern on the potential for another flare up between the US and China is dominating price action", commented RBC strategist Adam Cole in a morning note.

Simon Black, head of investment management at wealth management firm Dolfin said investors were also adjusting their forecasts over the depth of the economic damage inflicted by the pandemic.

"It's also the economic reality sinking in", he said, adding that the rebound of over 20% from lows hit in March by global equities was likely not sustainable.

Graphic - Rebound: https://fingfx.thomsonreuters.com/gfx/mkt/azgpomkqqpd/Pasted%20image%201588580132961.png

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

Manufacturing activity in the euro zone collapsed last month as government-imposed lockdowns to stop the spread of the new coronavirus forced factories to close and consumers to stay indoors, a survey showed on Monday.

"We've just come off a rally of hopes, not a rally on fundamentals", Black said, pointing to the massive monetary and fiscal stimulus pledged by governments and central banks around the world.

Recent economic data paints a dire picture of the global economy after weeks of lockdowns.

In the United States, manufacturing plunged to an 11-year low last month, consumer spending collapsed, and some 30.3 million Americans have filed claims for unemployment.

Oil prices fell again, paring last week's gains, on worries a global oil glut may persist even as coronavirus pandemic lockdowns start to ease.

U.S. West Texas Intermediate (WTI) crude futures fell to $18.66 a barrel while Brent crude futures were down 1.7% at $26, after touching a low of $25.50. Brent rose about 23% last week following three consecutive weeks of losses.

In currency markets, the dollar rose 0.1% to 99.38 against a basket of currencies while the euro was down 0.48% at $1.0930.

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

Global coronavirus cases have surpassed 3.5 million and deaths have neared a quarter of a million, according to a Reuters tally.

Stocks fall as U.S./China tensions threaten rebound
 

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Comments (16)
Ronald Warren
Ronald Warren May 04, 2020 8:16AM ET
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The FED is out.
Xin Zhang
Xin Zhang May 04, 2020 5:55AM ET
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People, don't worry! Next title "DOW surges on trade optimism"!
pdyuy veagx
pdyuy veagx May 04, 2020 4:50AM ET
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No it falls because the ecpnomy is breaking down. Even with help packages the economy cant be saved for the short term (2 years)
Deep Singh
Deep Singh May 04, 2020 4:49AM ET
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war without trade...let d trade 2 initiate
Michael King
Michael King May 04, 2020 2:13AM ET
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US must already have working vaccine for COVID. No one in congress has ever been tested positive in COVID. Those people are mostly very old peoples and have been in contact with people carrying COVID in many public assembly occasions without wearing masks. No one was panic last year when over ten million of Americans caught the flu which killed over 15k people in 2-3 months. This is simply because no one use it to scare people to win clicks on internet. US should be reopened. DOW can go to 0. But Americans have to go back to work to raise the family rather than being locked at home just because of a stupid order from the government.
NEO Matrixx
NEO Matrixx May 04, 2020 2:13AM ET
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they all cleaned themselves with bleach..
Marco Hugeri
Marco Hugeri May 04, 2020 2:12AM ET
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These comments here are unbelievable... So closed- minded. I am seriously worried about the US...
Rehoboam IO
Rehoboam May 04, 2020 2:12AM ET
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Wake up to the reality of China. People like you turn your head away from evil and allow it to grow.
Gimu Meme
Gimu Meme May 04, 2020 2:12AM ET
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Should have been worried years ago, the internet is great for echo chambers to manifest. Bad faith actors are using every medium possible to control the gullible. People lack critical thinking, sadly.
James Hilton
James Hilton May 04, 2020 1:50AM ET
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Except the ASX, which is red green colour blind.
Michael King
Michael King May 03, 2020 11:38PM ET
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Why Trump keep talking trade war for years rather than simply cut ties with all the countries he does not like? What is he afraid of?  I really don't like that Trump being so sisi. US president should behaviors like a man as the most powerful country in the world.
Browning Lui
Browning Lui May 03, 2020 11:38PM ET
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That's call manipulation....
anony mous
anony mous May 03, 2020 11:38PM ET
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Supply chain for US companies
Patrick Brisebois
Patrick Brisebois May 03, 2020 11:08PM ET
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Nothing will come out good after this corona crisis! The stock market will tale years to recover. Let’s not be over optomistic
TeaMaker Tex
TeaMaker Tex May 03, 2020 11:07PM ET
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China needs to be put back behind the iron curtain. Oh but greedy WS would never go for that. Pull all US companies out of China. NOW.
Yisheng Zhao
Yisheng Zhao May 03, 2020 11:07PM ET
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go ahead please
Michael King
Michael King May 03, 2020 11:07PM ET
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Ye, take down wall street. Put all the wall street board members and anyone in the government who has ever talked to Chinese officials to jail.
 
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