View in browser By Julia Horowitz • Tuesday, May 19 Good morning. In today's newsletter: Trade tensions are a huge threat to markets. Plus, Walmart reports earnings, and risk managers identify their top concerns.
US stock futures fell after the Dow and S&P 500 rallied sharply on Monday. Markets in Europe dropped in early trading, while stocks in Asia posted gains.
▸ Forwarded this newsletter? Want global markets news and analysis from Cnn Business reporters every morning? You can sign up here. What's happening now in markets: ADVERTISEMENT MARKET FLASH Why looming trade tensions are a big threat to markets
Financial markets have enjoyed a massive rebound in recent weeks as investors peg their hopes to a coronavirus vaccine, government and central bank stimulus and an economic recovery in the second half of this year. But trade tensions — particularly between the United States and China — have resurfaced as a major risk.
What's happening: The Dow and the S&P 500 logged their best performances in six weeks on Monday after a coronavirus vaccine developed by Moderna showed positive early results.
But investors are increasingly concerned about the tenuous trade truce between Washington and Beijing as the world's two largest economies exchange criticism over handling of the pandemic.
"Equities may be turning already to refocus on trade tensions," Societe Generale strategist Kit Juckes said in a note to clients Tuesday. There have been fresh signs that the US-China relationship is deteriorating just in the past few days.
The United States is pushing for a new crackdown on telecom equipment and phone maker Huawei, moving to further restrict its ability to work with US companies on Friday. The Global Times, one of the most combative and outspoken state media outlets in China, hinted that Beijing could soon retaliate by unveiling a long-rumored blacklist of foreign companies.
And the announcement Monday that Kevin Mayer, the executive who led Disney's streaming efforts, is leaving the company to become the CEO of TikTok sparked a fresh round of calls for much tougher regulatory scrutiny of the Chinese-owned app.
"[TikTok] previously told me they couldn't attend hearings and testify because executives were located in #China," Republican Sen. Josh Hawley tweeted. "But this new executive lives in the USA. I look forward to hearing from him. Under oath."
These developments only add to anxiety that President Donald Trump, who has claimed without providing evidence that the virus originated in a laboratory in Wuhan, could hit China with more tariffs as punishment for the pandemic.
Such a development would be seriously problematic for a global economy already facing its deepest slump since the Great Depression.
From my CNN Business colleague Laura He: "The pandemic has left the global economy in a much more precarious position than it was when the two countries began sparring over trade two years ago. And neither can afford the damage another full-blown trade war would inflict."
Watch this space: The coronavirus isn't stopping China from launching its own tariffs on key trading partners. Beijing has imposed an 80.5% tariff on Australian barley exports following an anti-dumping investigation. Australia's trade minister said Tuesday that it isn't interested in a trade war.
This dynamic adds to uncertainty as countries try to keep the spread of the coronavirus under control and get their economies back on track. Not everyone is confident that volatility in markets is behind us, even without taking trade into account.
"Given the substantial S&P 500 advance over the past two months, we would anticipate more limited upside going forward and we would expect a bumpier road in the months ahead," Citi strategist Tobias Levkovich told clients this week. VOICES Uber has laid off a quarter of its workers during the pandemic "We are making really, really hard choices now, so that we can say our goodbyes, have as much clarity as we can, move forward, and start to build again with confidence."
UBER CEO DARA KHOSROWSHAHI (IN AN EMAIL TO STAFF)
Read more from CNN Business. EARNINGS MONITOR Online sales spike at the biggest US retailer Walmart's sales at stores open at least a year soared 10% last quarter as demand for food and other items spiked.
The latest: Online sales were particularly robust, jumping 74% between January and March, the company said Tuesday. Shares rose 4% in premarket trading.
The current quarter could be tougher. US retail sales plummeted by 16.4% in April compared to the prior month, the largest decline since this data series began in 1992.
But Cowen analyst Oliver Chen notes that Walmart and Target have both invested heavily in curbside pickup and home delivery — a bet that is paying off now, despite higher costs tied to Covid-19.
"We see [Walmart] emerging from the Covid-19 crisis as one of the biggest winners in the grocery category as early investments in grocery pickup and delivery capabilities positioned it well to handle the surge in demand," Chen said in a recent note to clients. |