Claims from U.S. officials regarding the origins of Cpvod-19 may spook markets, reports Adam Button.
U.S. Indices paring their losses into the final hour of Monday's trade, while the U.S. dollars recovers after a broadly negative week. Monday began deep in the red in Asia and throughout Europe after the U.S. Secretary of State Pompeo asserted the coronavirus came from a Wuhan lab, while Warren Buffett revealed he dumped airlines stocks.
A war of words is brewing between the United States and China with the source of COVID-19 at the center. On Saturday, Fox Business reported that “there is agreement among most” of the 17 U.S. intelligence agencies that the virus originated in a Wuhan Lab and was inadvertently released.
Secretary of State Pompeo took it a step further on Sunday and told ABC there is “enormous evidence” it came from a lab in the city. However, the TV exchange was as confused as it was remarkable as he said: “the best experts seem to think it was man-made.”
Moments later the interviewer told him that the release from the Director of National Intelligence said it was not man-made, he then said he “has no reason to doubt that.”
To be clear, this is third-highest member of the U.S. executive branch accusing China of a crime against humanity, yet he can't seem to get the story straight.
At best China will brush this off as an election tactic, but more likely it invites a strong rebut that will accelerate the decoupling of the world's two largest economies. A report on Thursday also suggested the United States will pursue some kind of punishment or compensation from China for the virus.
Even without the Coronavirus, the deterioration in US-China relations would justify the 15% decline in the S&P 500.
Worse still, the Oracle of Omaha was far-from inspiring at Berkshire Hathaway's annual meeting. While he extolled America's ability to overcome challenges and predicted a bright, long-term future, he also repeatedly warned about uncertainties around the virus. His actions spoke even louder as he dumped his entire position in U.S airlines and didn't invest any of his $137 billion cash hoard.
May Seasonals & Payroll Tax Cuts
Risk assets are soft to start the week and the seasonal trend is for more along those lines. May is the strongest month for the U.S. Dollar Index and even more so for the Swiss franc (CHF) n the past 10 years. It's also the worst month for the Australian dollar (AUD) and the euro over the past decade.
Meanwhile, President Trump insists he won't pass any further stimulus measures to combat the economic fallout of the virus, unless a payroll tax cut is passed. The measure would be seen as a complementary stimulus to helicopter money, but its impact on widening the deficit remains considerable.
Update
Shutdowns relaxed in Italy and Spain. President Trump raised the expected U.S. death toll from Covid-19 to 100K and Russia reported over 10K new cases. Gilead's newly approved anti-virus drug remdesivir will be sent to hospitals this week.
Watch this space for a conversation with Ashraf on Trends in Yield Differentials
Adam Button is co-owner and managing director of ForexLive.com and a contributor at AshrafLaidi.com. You can see Ashraf’s daily analysis at www.AshrafLaidi.com and sign up for the Premium Insights. Ashraf's Tweet on indices here.
