US-China tensions add to bitter cocktail for markets

“With the effects of a deadly pandemic continuing to rage, the addition of a renewed trade war between the US and China made for a bitter cocktail for stocks on Monday,” says AJ Bell Investment Director Russ Mould.

News that Warren Buffett can’t find anything to buy, as he caught up with Berkshire Hathaway shareholders over the weekend, was hardly an encouraging portent for equities. The investment guru also sold his airline holdings.

“The markets have remained almost heroically optimistic amid the coronavirus crisis, bolstered by unprecedented central bank and government support, but a material escalation in tensions between the world’s two largest economies might test even the sunniest of optimists.

“Given the societal and economic damage caused by the outbreak, a measure of finger pointing was always likely and it seems to have begun in earnest.

“In the context of the more pronounced weakness in Asian markets overnight, today’s start for the FTSE 100 actually wasn’t too bad. Rolls-Royce was the top faller after weekend press revealed the challenges facing the company as the aviation industry enters hibernation. Travel stocks were also grounded.

“April was a month of recovery for the markets, with several major indices enjoying double-digit gains. The start of May has been less promising and investors will be left pondering if the month will see an acceleration of the recovery, consolidation of the ground won back or capitulation.”

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