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GLOBAL MARKETS-Stocks fall as U.S.-China tensions threaten rally

Published 05/05/2020, 05:02 am
Updated 05/05/2020, 05:06 am
© Reuters.
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* Pompeo says 'significant evidence' virus emerged from lab

* Dollar, gold rise on new trade tensions

* Global equity markets fall; oil prices rise

By Herbert Lash and Julien Ponthus

NEW YORK/LONDON, May 4 (Reuters) - Global stock markets fell on Monday on concerns U.S.-Chinese bickering over the origin of the coronavirus outbreak will ignite a new trade war, speculation that strengthened the dollar and drove gold prices higher.

The rise in risk aversion came as business surveys showed Asian and European factory activity in April fell deeper into contraction, adding to a dismal outlook as government lockdowns to contain the pandemic froze global production and slashed demand. Secretary of State Mike Pompeo on Sunday said there was "a significant amount of evidence" that the coronavirus emerged from a Chinese laboratory, remarks that rattled investors though he did not dispute U.S. intelligence agencies' conclusion that it was not manmade. editorial in China's Global Times said he was "bluffing" and called on the United States to present its evidence.

"This morning's session is being dominated by risk-averse trading as investors weigh the negative consequences to global growth from another escalation in U.S.-China tensions," said Simon Harvey, currency analyst at broker Monex Europe.

"The headlines of further tariffs and supply-chain disruptions come at a time where global growth expectations are already fragile," he said.

New orders for U.S.-made goods suffered a record decline in March and could sink further as pandemic-related disruptions fracture supply chains and depress exports, the Commerce Department said in a series of increasingly bleak economic data reports.

IHS Markit's final manufacturing PMI for the euro zone sank to 33.4, its lowest since the survey began in mid-1997 and far below the 50-point line dividing growth from contraction.

The pan-European STOXX 600 index .STOXX closed down 2.65%, while MSCI's gauge of stocks across the globe .MIWD00000PUS shed 1.04%.

Stocks were mixed on Wall Street. The Dow Jones Industrial Average .DJI fell 120.01 points, or 0.51%, to 23,603.68. The S&P 500 .SPX lost 4.36 points, or 0.15%, to 2,826.35 and the Nasdaq Composite .IXIC added 46.68 points, or 0.54%, to 8,651.63.

Airline stocks got hammered after billionaire Warren Buffett's Berkshire Hathaway (NYSE:BRKa) dumped stakes in major U.S. airlines.

Shares of Delta Air Lines Inc (NYSE:DAL) DAL.N , American Airlines Group Inc AAL.O , Southwest Airlines (NYSE:LUV) Co LUV.N and United Airlines Holdings Inc UAL.O fell between 7.2% and 10.5%, as Buffett said "the world has changed" for the aviation industry. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 2.5%, pulled down by the Hang Seng .HSI in Hong Kong.

The dollar rose against most major currencies. The dollar index =USD rose 0.272%, with the euro EUR= down 0.75% to $1.0901.

The Japanese yen JPY= strengthened 0.20% versus the greenback at 106.76 per dollar.

Gold rose as U.S.-China tensions over the coronavirus outbreak kindled fears of a new trade war, leading investors to seek safe havens.

U.S. gold futures GCcv1 settled 0.7% higher at $1,713.30 an ounce.

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

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

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

Brent crude futures LCOc1 rose 76 cents to settle up at $27.20 a barrel, while U.S. crude futures CLc1 added 61 cents to settle at $20.39 a barrel.

Benchmark 10-year notes US10YT=RR last fell 1/32 in price to yield 0.6415%.

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