Reader Comments

MORNING BID-U.S.-China tensions overshadow end to rip-roaring May

"Rod Daulton" (2020-06-01)

LONDON, May 29 (Reuters) - A look at the day ahead from Tommy Wilkes, senior markets correspondent, EMEA. The views expressed are his own.

Nerves ahead of Washington's response as China tightened its control over Hong Kong look set to overshadow the end of what has been another rip-roaring week and month for Tour Quế Lâm global stock markets that were focused on the speed at which economies are reopening from the coronavirus shutdowns. Following Wall Street's slide on Thursday, Asian shares headed lower and European markets lost 1% amid concern that U.S.-China tensions will take a turn. While relations between the two have deteriorated during the COVID-19 pandemic, Hong Kong is a flash point and investors say a major U.S. response could derail the market rally.

The S&P 500 has gained 4% this month and is on track for its best May since 2009. Global stocks have notched up their best weekly performance since early April, with a 3.5% gain since Monday. Investors have piled into stocks because, despite dire data, many economies are re-opening faster than they had anticipated and -- so far at least -- those countries that have re-opened shops and offices have not seen signs of a second spike in cases. Economists estimate the UK economy, for example, ran at 80% of its capacity earlier in May, above the April lows. European travel stocks have surged as investors reckon summer holiday will be possible for millions of people with easing travel restrictions.

Friday's jittery mood was reflected in foreign exchange markets, with the Japanese yen - a safe haven for times of uncertainty - gaining nearly 0.5% against the dollar. The U.S. currency fell before a press conference on Hong Kong U.S. President Donald Trump. The dollar has been pulled in different directions this week - falling after the European Commission this week introduced a fiscal recovery package, but rising on bouts of risk aversion. The euro rallied to a two-month high.

In a rare piece of positive corporate news, coffee maker JDE Peet went ahead with its virtual IPO. It pulled off a 15.6 billion-euro valuation and shares surged in early trading. But it was the familiar round of layoffs and slashed sales targets elsewhere. Carmaker Renault is opening talks with unions to restructure some French plants and potentially close others as it confirmed plans to cut around 15,000 jobs worldwide. Sweden's airbag and seatbelt maker Autoliv reported North American and European markets grinding to a halt in April. German car parts supplier ZF Friedrichshafen is planning to reduce its workforce by up to 15,000 jobs. On the bright side, Volkswagen has agreed to invest 2.1 billion euros in two Chinese electric-vehicle players.

In commodity markets, oil prices edged lower after U.S. inventory data showed lacklustre fuel demand. The drop comes in the context, however, of the best month for Tour Quế Lâm từ Hà Nội oil prices on record. WTI is on track to rise about 76% for May and Brent has gained 38%, their strongest month since March 1999. Gold prices inched higher as investors sought safety.

Hong Kong shares slipped on Friday, while emerging-market stocks were little changed before Trump's press conference. The yuan fared less well, easing in onshore trade and set for its third monthly loss in four. (Reporting by Tommy Reggiori Wilkes, editing by Larry King)