Global shares had a lackluster start to the week and oil prices declined as tensions between the U.S. and China escalated over possible blame for the origin of the coronavirus pandemic.
Futures tied to the S&P 500 retreated 0.7%, suggesting U.S. shares could fall Monday. In Europe, the pan-continental Stoxx Europe 600 fell 2.3%.
Benchmarks in Asia fell, with Hong Kong’s Hang Seng Index, which was closed for the previous two sessions, playing catch-up to lose 3.9%. South Korea’s Kospi Composite fell more than 2.5%. Markets in mainland China and Japan were closed for holidays
Adding pressure on the market was the Trump administration stepping up assertions that the new coronavirus originated at a laboratory in the Chinese city of Wuhan, with Secretary of State Mike Pompeo saying Sunday that he has seen “enormous evidence” for this.
“Investors are taking this [increase in tensions between the U.S. and China] seriously, the last escalation was pretty detrimental for equity markets,’’ said Sebastien Galy, a macro strategist at Nordea Asset Management. “It’s definitely something to keep an eye on. A de-escalation process can take weeks.”
U.S. crude-oil futures for delivery in June fell 5.2% to $18.74 a barrel, while Brent crude, the global benchmark, declined 0.6% to $26.29.
Kerry Craig, an Australia-based global-market strategist at J.P. Morgan Asset Management, said investors were also concerned about economic growth and corporate profits.
Mr. Craig said a deteriorating earnings outlook had yet to be reflected in consensus forecasts, which for the U.S. market for 2021 suggest higher earnings than in 2019.
“It’s quite an optimistic scenario in our view,” he said.
Mr. Craig said many investors were concerned about what could lengthen a recession that most people assume will be short. Some were happy to trim positions after a strong rally since the market troughed in March, he added.
Iris Pang, chief economist for Greater China at ING Bank in Hong Kong, said renewed concerns about tensions between the world’s two largest economies were reflected in the offshore-traded Chinese yuan. It was little changed at 7.1391 a dollar Monday, after weakening nearly 1% Friday. There was no trading of the more tightly controlled onshore yuan Monday because of a public holiday.
Ms. Pang said she thought President Trump was likely to levy new tariffs on Chinese goods to help shore up his support ahead of the presidential election. She said a full-blown trade war could weaken the yuan beyond 7.2 a dollar.
Investors will have plenty of economic data to scrutinize this week, including trade figures from China due Thursday and Friday’s U.S. employment report, which is likely to show heavy job losses and skyrocketing unemployment for April.
Due Monday are earnings from meat processing giant Tyson Foods in the morning and insurer American International Group after the market closes.
Benchmarks in Asia fell, with Hong Kong’s Hang Seng Index losing 3.9%.
Photo: Vincent Yu/Associated PressWrite to Joanne Chiu at joanne.chiu@wsj.com and Anna Hirtenstein at anna.hirtenstein@wsj.com
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May 04, 2020 at 02:43PM
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