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© Reuters. By Geoffrey Smith
Investing.com – Happy Star Wars Day! (May the fourth be with you!) Markets suffer after President Trump revived the prospect of trade actions against China as punishment for his role in the Covid-19 pandemic. Warren Buffett has staked out American airlines and can’t find anything he wants to buy, even with the recent devaluations. Europe is gradually lifting confinement, but Russia’s problems with the disease are going from bad to worse. And the reporting season continues with updates from Tyson Foods (NYSE 🙂 and Oaktree Capital. Here are the top five issues to watch for on Monday, May 4, in the financial markets.
1. Trump and Pompeo lash out at China as death toll continues to rise
United States President Donald Trump revived the prospect of new trade measures against China to punish it for perceived deficiencies in its management of the Covid-19 outbreak. It has also threatened to break last year’s trade deal with China if it fails to honor its commitment to buy the promised volumes of American products.
“They have taken advantage of our country. Now they have to buy and, if they do not buy, we will be able to end the agreement,” Trump told Fox News in a virtual municipal meeting.
Both Trump and Secretary of State Mike Pompeo (the latter in statements to ABC) have reiterated their accusations that the virus had originated in a laboratory in Wuhan. Neither has produced new evidence to support those claims, which China denies.
2. Spring in Europe (Russia is not included)
Confinement in Europe is rising as the death toll from the Covid-19 virus reaches a two-month low in most of the region’s largest economies.
Italy, the most affected country, has reopened its parks and restaurants and has lifted the ban on personal visits. Spain has also relaxed its containment measures, while German churches have reopened their doors over the weekend after the government also announced plans to reopen playgrounds and other outdoor spaces.
The one that has turned off the trend in Europe is Russia, where the number of new infections has continued to rise considerably this weekend. The Russian ruble, which continues to grapple with the impact of low oil prices, is at its lowest level against the dollar in nearly two weeks.
3. The shares point to a downward opening; the dollar goes up
US actions point to a downward opening due to the impact of the Trump Administration’s statements on China this weekend, along with Trump’s admission that the US death toll could reach 100,000.
At 12:30 p.m. (CET), the futures contract is down 240 points, or 1.0%, widening losses after the brisk sell-off on Friday. The S&P 500 futures contract is down 0.8% and the futures contract 0.7%.
The dollar, for its part, loses positions against the yen, but gains against the higher yielding currencies. The dollar index, which follows the evolution of this currency with respect to a basket of six other major currencies, rises 0.4% to 99.42. Futures rise 1.1% to $ 1,718.95 per ounce as yield on US Treasuries falls and spreads on European sovereign bonds widen, amid concerns over Tuesday’s court ruling in Germany on the legality of purchases of ECB bonds.
4. Buffett gets rid of airline stocks
Legendary investor Warren Buffett has expressed confidence that the US and world economies will avoid the worst-case scenario described by others earlier in the year when the Covid-19 pandemic broke out. He has spoken of “American magic”.
At his company’s Berkshire Hathaway (NYSE 🙂 annual meeting, Buffett announced that he had sold all of his airline shares last quarter, fearing that the long-term outlook for the sector had worsened.
Buffett also had to defend himself against criticism for the lack of agreements, despite the massive sale in the markets.
“We haven’t found anything attractive,” said Buffett. Berkshire has been scalded from a couple of big frog bets in recent years, most notably its acquisition of Kraft Heinz (NASDAQ 🙂 with Brazil’s 3G, and its support of Anadarko’s debt-financed acquisition by from Occidental Petroleum (NYSE 🙂 last year.
5. Tyson Foods and Oaktree top list of earnings reports for today
The reporting season resumes on Monday with Oaktree Capital, the investment firm of Howard Marks, a colleague of investment guru Warren Buffett.
Other reports of interest will be that of Tyson Foods, whose closure of the meat plants has led to an intervention by the president last week to keep them open, and that of Sprint (NYSE :), awaiting its imminent merger with T-Mobile. (NASDAQ 🙂 later this year. We’ll also get to know the results of insurance giant AIG (NYSE 🙂 and aspiring Chinese Netflix (NASDAQ 🙂 IQIYI, whose accounting practices have recently come under attack by short seller Muddy Waters Research.
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