Equities down on rising US-China tensions - 4.5.2020

The Dollar weakening reversed today ahead of factory orders report due later in the afternoon. The live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, edged down less than 0.1% to 99.01 Friday as the Institute for Supply Management manufacturing index came in at above expected 41.5 for April. Readings below 50 indicate a contraction in activity. The EUR/USD continued rising Friday while GBP/USD reversed its climbing after the final Markit manufacturing purchasing managers’ index reading for UK showed on Friday British manufacturing suffered its worst decline in output for three decades in April. Both pairs are lower currently. USD/JPY joined AUD/USD’s continued fall on Friday with the dynamics intact for both pairs currently.

Futures on three main US stock indexes are lower currently after closing sharply lower on Friday. President Trump indicated he considered imposing import tariffs on China. Investors are repricing risk estimates after growing number of companies decline to provide earnings guidance stating high uncertainty due to coronavirus as did Apple. As of Friday only about 65% of the companies that have already reported results are beating estimates, the lowest beat ratio since the 2008 financial crisis, according to JP Morgan. More companies including Ferrari N.V. , American International Group (AIG) , and Eli Lilly will report quarterly results today. Stock indexes in US ended subdued on Friday : the three main US stock indexes recorded losses ranging from 2.6% to 3.2% led by technology shares. European stock indexes are sharply lower currently after markets in Germany, France, Italy and other major European economies reopened following Labour Day holiday Friday. Asian indexes are mixed today with markets in Japan and mainland China closed for holidays: Hong Kong’s Hang Seng index sank 4.1%, leading the decliners.

Brent is extending losses today. Oil prices ended mixed last session as the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, started cutting production after agreeing in April to reduce output by 9.7 million barrels a day in May and June. The US oil benchmark West Texas Intermediate (WTI) futures ended higher Friday: June WTI gained 5% but is falling currently. July Brent crude closed 0.2% lower at $26.44 a barrel on Friday, however booking a 6.6% gain for the week.