- Oil ended a three-day advance
- Yields at the lowest since March 23
- US futures fell with global stocks as US-China tensions reawaken
KEY EVENTS
The first full trading week of May opened in the red on Monday. US futures contracts for the Dow Jones, S&P 500, NASDAQ and Russell 2000 each dropped around 1% or more, European shares are significantly lower and Asian markets all closed down this morning.
The reason? A renewal of tensions between the US and China over the possible origins of the cornonvirus, which could rekindle trade tensions between the world's biggest economies.
Yields fell and gold jumped.
GLOBAL FINANCIAL AFFAIRS
Yesterday, echoing President Donald Trump's bellicose accusations, US Secretary of State Mike Pompeo charged that COVID-19 originated in a Wuhan, China lab. He also said that the Asian nation's government wasn’t cooperating on information-sharing to help create a vaccine. This was a clear extension of Trump’s trade war revival threat from last week; there was even talk about America deleting its Chinese debt.
The world’s largest economies appear to be headed toward a cold war, which begs the question: can the US actually afford a cold war with China, the place where so many components of American corporate manufacturing are sourced?
Additional concerns are equally germane. Is the US consumer prepared to refrain from buying cheap goods imported from China? Can China withstand the potential loss of demand?
Which leads to one wondering, who has more power in this supply-demand equation? Last year, big American companies were already in search of new, inexpensive regional locations from where they could manufacture their goods, as the US-Sino trade war escalated in 2018-2019.
If current tensions continue to escalate, there might be another seismic shift in global commerce on the horizon that would restructure the business landscape.
As of early Monday, all four major US contracts are down, having been ranging for the past six hours, after rebounding from a lower open.
SPX Futures Daily
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