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For all the optimism stemming from the gradual easing of lockdown measures in some of the biggest economies, there are too many worries on the minds of traders to sustain the momentum from last month. The fear of a second wave of coronavirus infections, the collapse in corporate earnings and the shocks reverberating from the economic data are toxic enough. Now throw in a new eruption of political sparring between the U.S. and China, this time over the origin of the virus.
“A fresh threat of U.S.-China tariff escalation is yet another aftershock of the original crisis that is reinforcing a dollar-supportive backdrop,” said JPMorgan Chase (NYSE:JPM) & Co. currency strategists including London-based Paul Meggyesi and Meera Chandan.
On Monday, Asian and European markets provided a taste of how the week may unfold. Hong Kong’s Hang Seng Index tumbled 4.2%, while French and German stocks sank more than 3%. S&P 500 Index futures retreated as much as 1.8%. Japan and China’s onshore markets were shut for holidays.
The dollar and yen rose on demand for haven assets, with the Bloomberg Dollar Spot index gaining 0.2%. The Indonesian rupiah led a drop in emerging-market currencies, posting its biggest decline in six weeks.
Warren Buffett on Saturday tempered his normally bullish optimism during a meeting for Berkshire Hathaway Inc . (NYSE:BRKa) shareholders. A lot of uncertainty hangs over the market, he said. Still, he expects equities will outperform Treasuries over the long run and urged investors not to bet against America.
Though U.S. stocks clocked up their best month since 1987 in April, prices slipped Friday as a string of companies issued profit warnings and President Donald Trump stepped up condemnation of China over trade and the handling of the Covid-19 outbreak. The S&P 500 retreated 2.8% and U.S. Treasury yields dropped.
The following are comments looking ahead to a week in markets:
JPMorgan strategists, including Meggyesi and Chandan:
Adarsh Sinha, co-head of Asia foreign-exchange and rates strategy at Bank of America Merrill Lynch (NYSE:BAC) in Hong Kong:
Adam Cole, Royal Bank of Canada’s chief currency strategist in Europe:
Eric Stein, Boston-based co-director of global fixed income at Eaton Vance (NYSE:EV) Corp.
Jameel Ahmad, a markets analyst at FXTM in London:
Ali Malik, a senior investment adviser at Bank of Singapore Ltd:
Iyad Abu Hweij, managing partner at Allied Investment Partners PJSC in Dubai:
(Updates throughout.)
©2020 Bloomberg L.P.
