Morning Report – Monday 4th May

Main Headlines

Warren Buffett got out of airline stocks in April, four years after piling in — and booking losses in the process. “The world has changed for the airlines,” he said at Berkshire Hathaway’s annual meeting, which was streamed online. He also said he hoped he’d convinced his followers to “bet on America.” Berkshire was sitting on a record $137 billion pile of cash at the end of the first quarter.

WTI pared losses after falling more than 8% as investors continued to cut exposure to short term contracts. Brent edged lower. Asian shares were mixed, with Hong Kong leading declines, and Sydney rebounding into positive territory. U.S. and U.K. equity futures added to losses after global stocks slid more than 2% on Friday. Japan and China were shut for a holiday. Gold was steady. Haven currencies were in demand after factory data across South Korea and Taiwan showed output plummeted to record lows in April as global lockdowns weighed.

Roche received emergency-use authorisation from the FDA for its new test determining if someone has been exposed to Covid-19. The drug maker said it has already started making shipments and tens of millions of the antibody test will be available in the U.S. and much of Europe this month. Gilead will get its antiviral drug Remdesivir to patients as soon as this week, its CEO told CBS.

GBP

The Bank of England is due to release its monetary policy and financial stability reports this week, giving an assessment of the state of the economy as well as the banking system. The bank is likely to unveil some extremely downbeat forecasts which will leave the door open for more policy action. It is expected that the central bank will keep rates on hold but will increase its asset purchase programme by £75 billion in both June and August. Sterling has started the week on the backfoot.

EUR

Euro sentiment remains fragile after a risk off start to the month. The Euro area is facing a host of challenges and it is expected that they will start to weigh increasingly on the currency. As Europe tries to deal with a new crisis, German’s top court is about to rule on a key program that helped it get out of the last one. The judges will decide on Tuesday whether Germany can continue to participate in the European Central Bank’s Public Sector Purchase Program. Under the program, dubbed quantitative easing, or QE, the central bank buys bonds of euro zone governments. Air France-KLM won European Union approval for a 7 billion euro ($7.65 billion) French aid package consisting of a state guarantee and a subordinated shareholder loan as airlines face a collapse in revenue from the coronavirus outbreak.

USD

The dollar rose against all Group-of-10 currencies on haven demand amid flaring tensions between the Trump administration and China over the coronavirus. President Donald Trump promised a “conclusive” report on the Chinese origins of the coronavirus outbreak. He also said that tariffs would be the “ultimate punishment” for China. U.S. multinational companies have begun to feel the sting of a strong dollar on their bottom lines, and there’s no guarantee the pain will go away as economies around the world attempt to reopen. Several companies, from Apple Inc. and Facebook Inc. to Harley- Davidson Inc., have warned the dollar’s appreciation is hurting foreign revenue.

Main Economic Data/Central Banks/Government (All Times BST)

• 8:00 a.m.: Turkey April Manufacturing PMI, CPI
• 8:15 a.m.: Spain April Manufacturing PMI
• 8:45 a.m.: Italy April Manufacturing PMI
• 8:50 a.m.: France April Manufacturing PMI
• 8:55 a.m.: Germany April Manufacturing PMI
• 9:00 a.m.: Euro-Area April Manufacturing PMI

Corporate Events

Earnings include Ferrari, Endesa, Sempra Energy