The dollar rose on risk aversion and global stock markets fell on Monday as U.S.-Chinese bickering over the origin of the coronavirus outbreak sparked fear of a new trade war, but Wall Street rebounded as the lifting of lockdowns in some U.S. states boosted optimism.
U.S. stocks rallied at the end of the session, with the Nasdaq gaining more than 1 percent, as hard-hit New York became the latest state to announce a phased reopening of business activity, starting with select industries.
“The key turnaround this afternoon stemmed from (the) California governor’s optimistic tone,” said Edward Moya, senior market analyst at OANDA. “Some regional openings in California helped financial markets end the day on a positive note.”
“People want to believe that things are going to get better,” said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey. “All these announcements of state plans to reopen has given some optimism to investors that things can only improve from here.”
Oil prices jumped higher after settlement prices showed modest gains, but the strengthening safe-haven dollar and gold held their ground.
A 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.
U.S. 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.
An editorial in China’s Global Times said he was “bluffing” and called on the United States to present its evidence.
“The headlines of further tariffs and supply-chain disruptions come at a time where global growth expectations are already fragile,” said Simon Harvey, currency analyst at broker Monex Europe.
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 closed down 2.65%, while MSCI’s gauge of stocks across the globe shed 0.66%.
Wall Street rose after the Dow industrials and S&P 500 traded lower almost the entire session.
The Dow Jones Industrial Average rose 26.07 points, or 0.11%, to 23,749.76. The S&P 500 gained 12.03 points, or 0.42%, to 2,842.74 and the Nasdaq Composite added 105.77 points, or 1.23%, to 8,710.72.
The Nasdaq moved the most.
“If you’re going to buy this market, psychologically you want to buy the companies that you think can really do well,” Meckler said. “This has been a very hard market to bottom fish in, to buy the wounded names.”
Airline stocks got hammered after billionaire Warren Buffett’s Berkshire Hathaway dumped stakes in major U.S. airlines, but they pared losses as the market rebounded.
Shares of Delta Air Lines Inc, American Airlines Group Inc, Southwest Airlines Co and United Airlines Holdings Inc fell between 5.1% and 7.7%, as Buffett said “the world has changed” for the aviation industry.
Earlier, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 2.5%, pulled down by the Hang Seng in Hong Kong.
The dollar rose against most major currencies. The dollar index rose 0.288%, with the euro down 0.76% to $1.0899.
The Japanese yen strengthened 0.25% versus the greenback at 106.72 per dollar.
Gold rose as the 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 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.
Brent crude futures rose 76 cents to settle up at $27.20 a barrel, while U.S. crude futures added 61 cents to settle at $20.39 a barrel. U.S. WTI later added about $1 a barrel, and Brent almost the same.
Benchmark 10-year notes last rose 4/32 in price to yield 0.6289%.