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Stocks Drop With Sentiment Fragile; Dollar Rises: Markets Wrap

U.S. flags are displayed in front of the New York Stock Exchange (NYSE) in New York, U.S., on Tuesday, April 21, 2020. Treasury futures ended Tuesday mixed, with front-end yields slightly cheaper on the day and rest of the curve richer, yet off session lows reached during U.S. morning. Photographer: Michael Nagle/Bloomberg
By Bloomberg
04 May 2020 0

Stocks in Asia retreated along with U.S. and European futures, indicating the risk-off move that’s hit markets at the start of this month may have further to run. The dollar climbed.

S&P 500 futures declined more than 1.5% after global stocks posted a more than 2% slide on Friday. Shares in Hong Kong saw the bulk of losses, with shares in Seoul and Singapore also dropping. The Sydney market edged up after tumbling the previous session. China’s yuan extended Friday’s slide amid concern tensions with the U.S. are increasing. The Australian dollar slipped along with the pound and euro, while Australian bonds nudged higher. Trading volumes may be light due to holidays in China and Japan, and Treasuries won’t trade until the London open. Treasury futures climbed and oil began the week on the back foot.
After surging from March lows, gains are ebbing for global equities

The more than 10% rally in world shares in April is being tested as investors assess efforts from countries starting to ease lockdown restrictions against fears of a second wave of infections and a steady steam of bad economic data. Westpac Banking Corp. in Australia on Monday said profit tumbled and became the latest bank to delay a dividend payment. Earnings roll on this week, with firms including Disney, BMW, and Air France-KLM scheduled to report.

“While it is unlikely that we will retest the March lows, at least there is some chance that we head back toward the bottom of the April trading range -– which would be a further 7-10% downside from here, for most risk assets,” said Ciaran Mulhall, managing director at Solus Capital Partners Ltd.

Also weighing on sentiment is fresh political sparring between the U.S. and China. Secretary of State Michael Pompeo said “enormous evidence” shows the novel coronavirus outbreak began in a laboratory in Wuhan, China, but didn’t provide any proof for his claims. That comes after President Donald Trump and his aides last weeks sharpened their criticism of Beijing, demanding answers about the virus’s origin and hinting at possible retaliation.

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On the virus front, Gilead Sciences Inc. plans to get its drug remdesivir to patients within days after getting U.S. backing for emergency use. New York added the fewest new deaths in more than a month, while fatalities slowed in the U.K. and Italy.

“My concern is that the market has priced in all that optimism before we have confronted the worst of the bad news on the economy and on some industries and earnings,” Michael Jones, chief executive officer at Caravel Concepts LLC, said on Bloomberg TV. “There are some challenges and setbacks that are going to be hitting us in the face over the next four weeks and we are no longer priced cheaply enough to just look past all that bad news.”

Meantime, North Korean troops fired at their South Korean counterparts in the demilitarized zone that divides the two countries for the first time in years. The move came a day after Kim Jong Un resurfaced at a fertilizer factory, ending weeks of speculation about his whereabouts.

Here are some key events coming up:

  • Regional Federal Reserve chiefs are due to speak, including Charles Evans and James Bullard.
  • The Reserve Bank of Australia has a policy decision on Tuesday and the Bank of England on Thursday.
  • Friday brings the U.S. jobs report for April, expected to show severe impact from the pandemic. The median forecast in a Bloomberg survey of economists calls for a 21 million plunge in payrolls — that would mark the most on records dating back to 1939. The unemployment rate is expected to surge to more than 16%.

These are the main moves in markets:

Stocks

  • Futures on the S&P 500 Index dropped 1% as of 12:53 p.m. in Sydney. The gauge lost 2.8% on Friday.
  • Hong Kong’s Hang Seng Index fell 3.7%.
  • Australia’s S&P/ASX 200 Index added 0.7%.
  • South Korea’s Kospi index declined 2%.
  • FTSE 100 futures sank 1%.
  • Euro Stoxx 50 futures retreated 3.5%.

Currencies

  • The yen added 0.2% to 106.70 per dollar.
  • The euro bought $1.0947, down 0.3%.
  • The offshore yuan slipped 0.1% to 7.1389 per dollar.
  • The Bloomberg Dollar Spot Index rose 0.4%.
  • The pound fell 0.3% to $1.2462.
  • The Aussie lost 0.4% to 63.94 U.S. cents.

Bonds

  • The yield on 10-year Treasuries fell three basis points to 0.61% on Friday. Futures rose 0.2%.
  • Australia’s 10-year yield declined three basis points to 0.84%.

Commodities

  • West Texas Intermediate crude fell 6.6% to $18.49 a barrel.
  • Gold retreated 0.2% to $1,697.41 an ounce.
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