Shares slumped across Asia and Europe this morning and oil dropped again after the US launched a fresh round of claims that the coronavirus pandemic that has swept across the world was made in a lab in China.

Mike Pompeo, US secretary of state, reiterated claims from President Trump and the US government that the virus was linked to a laboratory in Wuhan province in China, although the White House is yet to provide any evidence of this.

The friction between the two superpowers sparked panic in markets, with Hong Kong’s Hang Seng down 4% and Japan’s Nikkei off 2.8%. Oil markets were also weaker, with crude off nearly 5% at just under $20 a barrel. Futures point lower US shares.

It was also an action-packed weekend for investment fans, as Berkshire Hathaway (BRK-A), of which billionaire Warren Buffett is the chairman, held its annual shareholder meeting. One of the top takeaways was that Berkshire sold its entire airline stake, which totaled several billion dollars, due to the impacts of the pandemic. Berkshire had investments in airlines including United (UAL), American (AAL), Southwest (LUV)and Delta (DAL). Buffett said that “the world has changed for the airlines” and that he is uncertain what the impact of the current crisis will be on American’s travel habits over the long run. 

Berkshire’s enormous cash pile — which sits at $137bn — and when Buffett might look to deploy it, has long been the subject of speculation given the lack of major investments made by the firm over the past several years. During the weekend’s shareholder meeting, Buffett said that he is willing to make a big deal but reiterated a point he has repeatedly made, that he has not seen anything attractive. “I mean, you could come to me on Monday morning with something that involved $30bn, or $50bn. And if we really like what we are seeing, we would do it,” he said.

Relative calm descends on stocks as US GDP shrinks and unemployment soars

US stocks ended the week on a down note, taking all three major indices to a slight loss for the week. The S&P 500 fell 2.8% on Friday, losing 0.2% over the course of the week. “The market’s recent shift to a slight downward track was a big departure from mid-February to mid-April, a period of extreme volatility,” investment firm John Hancock noted. It was a busy week for corporate earnings, and analyst expectations for the quarter have been improving as earnings season has gone on. As of May 1, analysts anticipate a 13.7% decline in Q1 corporate earnings for all of the companies in the S&P 500, an improvement on the 16.1% projected a week prior.

US GDP shrinking 4.8% during the first quarter of 2020 was the main economic headline of the week, along with new unemployment filings for the crisis so far topping 30 million. The unemployment rate spike caused by the current economic shutdown is expected to eclipse that of the 2008/09 crisis. Financial advice firm Edward Jones said in a Friday note that April’s market rally — the biggest since 1987 — was not based on current fundamental indicators, which it believes will deteriorate in the near term. “Rather, we think April’s stock gains largely reflect investor optimism that the economy can weather the economic storm of the global pandemic and sow an economic recovery,” the note said. 

In the most spectacular moment of the day, Tesla (TSLA) founder and CEO Elon Musk sent his own firm’s stock tumbling more than 10% on Friday, after posting on Twitter that the company’s share price is “too high.” He also posted that he is selling all of his physical possessions and continued throwing his support behind those protesting the Covid-19 induced lockdown. The controversial posts are reminiscent of Musk’s infamous “funding secured” tweet, when he claimed the company would be taken private at $420 a share.

S&P 500: -2.8% Friday, -12.4% YTD (-0.2% last week) (SPY)

Dow Jones Industrial Average: -2.6% Friday, - 16.8% YTD (-0.2% last week) (DIA)

Nasdaq Composite: -3.2% Friday, -4.1% YTD (-0.3% last week) (COMP)

Rolls-Royce looking at mass layoffs

London-listed mid cap stocks outperformed their large cap counterparts last week, with the FTSE 250 gaining 2.9% to the FTSE 100’s 0.2%. In economic data, March car production in the UK fell 37.6% year-over-year, while mortgage approvals fell from 73,670 in February to 56,200 in March.

Over the weekend, it was reported that Rolls-Royce (RYCEY) is preparing to cut as many as 8,000 jobs out of its 52,000 global workforce, following similar announcements from British Airways (IAG) and Ryanair (RYAAY). The final number may change for Rolls Royce, which is in discussions with unions. Travel restrictions and a widespread grounding of fleets is hitting the jet engine manufacturer hard since aircraft production is at a virtual standstill. Rolls Royce stock fell 5.1% on Friday, although that was eclipsed by easyJet’s 5.8% loss and Royal Dutch Shell’s 7.1% drop. The best performer in the index on Friday was Royal Bank of Scotland (RBS), which jumped 2.4%, taking its weekly gain to 10.6%. 

FTSE 100: -2.3% Friday, -23.6% YTD (+0.2% last week)

FTSE 250:-1.9% Friday, -26.2% YTD (+2.9% last week)

What to watch

Ferrari: New York-listed Ferrari (RACE) reports its Q1 2020 earnings on Monday morning. The luxury sports car maker has held up relatively well versus the broader market in 2020, and its share price is down 10% year-to-date. Ferrari takes orders well in advance of delivering vehicles, with customers often waiting over a year to receive their cars, meaning the company can continue selling cars even with production shut down. The firm has already confirmed it has not seen cancellations due to the pandemic, and analysts on the company’s earnings call will likely focus on how the company is handling supply chain and production issues. Currently, the stock has 10 buy ratings, three overweights, three holds and three sells.

Tyson Foods: Tyson Foods (TSN) makes meat products including chicken, ready meals, and hot dogs. The $20bn firm’s share price is down 34.1% year-to-date despite consumer stocking up on groceries due to the pandemic. Tyson has had to shut down some of its plants due to the crisis, and the company’s chairman John Tyson recently warned that the shutdowns could potentially lead to food shortages and even the mass destruction of millions of animals that farmers cannot sell. President Trump signed an executive order last week using the Defense Production Act (DPA) to force companies to keep meat processing plants running, but that has not yet pushed any of the shuttered facilities back online. Tyson Foods reports its earnings for the first three months of 2020 today. 

Skyworks Solutions: Semiconductor firm Skyworks (SWKS) reports its latest set of quarterly earnings today after the market closes, having rallied 23.1% over the past month. The stock is still down 18.2% year-to-date but is up 12.8% over the past 12 months. Skyworks is involved in creating technology for 5G networks and operates in markets ranging from consumer Wi-Fi to products supporting defense applications. Investors will be watching for any benefits the firm might be deriving from the mass shift to working from home, as well as how the current disruption might be affecting its involvement in the uptake of 5G technology. Analyst expectations have fallen marginally recently; three months ago, Wall Street was expecting the firm to report a $1.46 earnings per share figure for the first three months of 2020, but expectations are now pointing to $1.33. 

April jobs report: The most closely watched economic data this week will be April’s US jobs report, which will be released on Friday by the Labor Department. Economists are anticipating that the report will show that the unemployment rate jumped well into double digits in April. Investors will be watching for how many of those who recently lost work have been temporarily laid off, and the sector-by-sector breakdown of employment numbers. If the 16% unemployment rate being expected is hit, the figure will be the highest since 1948.

Crypto corner: Women emerging as major force ahead of Bitcoin halving

The largest cryptoasset market data provider, CoinMarketCap, has reportedly seen over 40% growth in female users in the first quarter of 2020. Its report said, compared to last year, the number of female users is up 43.24%, using data compiled by analytics tools including Google Analytics.

The news comes ahead of Bitcoin’s halving event which has caused a huge surge in prices for all cryptoassets. Bitcoin (BITCOMP) hit a high of $8,816 over the weekend, before profit-taking took it lower overnight. It is currently at $8,622, 80% above its March low.

All data, figures & charts are valid as of 04/05/2020.