Markets Drop in Asia on Rising China-U.S. Tensions Over Virus

A man rides a bicycle in front of an electronic stock board showing Japan’s Nikkei 225 index at a securities firm in Tokyo. (AP Photo/Eugene Hoshiko)

Shares skidded in Asia on Monday as investors eyed rising tensions between the Trump administration and China over the origins and handling of the coronavirus pandemic.

Facing criticism over his handling of the crisis, President Donald Trump has tried to shift the blame to China. Beijing has repeatedly pushed back on U.S. accusations that the outbreak was China’s fault.

Hong Kong’s benchmark fell 4% on Monday while the Sensex in India dropped 5.1%. Other regional markets also were lower. Trading was halted for holidays in mainland China, Japan and Thailand.

Stocks closed broadly lower on Wall Street on Friday after disappointing results from Amazon and other big companies drove home the damage to the economy from the pandemic.

Pressure has been building between Washington and Beijing over the pandemic for some time. Washington and Beijing had just managed to strike a truce in a trade war when the virus led to China shutting down much of its economy in late January.

“The renewed possibility of the return of the trade war that had plagued markets since at least 2017 once again weighed on sentiment,” Jingyi Pan of IG said in a commentary.

Tensions over the pandemic and threats to hit back with trade sanctions have amped up risk, Mizuho Bank said in a report.

“Even as growth-stifling containment measures are set to be phased out in May, the global downturn looks to deepen in Q2,” it said, adding that anti-China threats from Trump, on top of record job losses, may result in a continuation of the “May Day” type of fear dynamics.

May Day itself brought a 2.8% drop in the S&P 500, to 2,830.71, a day after it closed out its best month since 1987, its second straight weekly loss. The Dow Jones Industrial Average fell 2.6% to 23,723.69, while the Nasdaq, which is heavily weighed with technology stocks, slid 3.2% to 8,604.95. The Russell 2000 index of smaller company stocks fell more than the rest of the market, shedding 3.8%, to 1,260.48.

Wall Street has been bracing for a poor showing by companies this earnings season due to the economic shock from the coronavirus. Many companies have pulled their earnings guidance for the rest of the year, citing uncertainty about how much of an impact the outbreak will have on their business and the economy, which is now in a recession.

Bleak trade and manufacturing data are also discouraging investors on the lookout for upbeat news on steps to stop the pandemic and prevent a resurgence in cases in places that are beginning to reopen after shutdowns.

In Asian trading on Monday, the Hang Seng was down 991.11 at 23,652.48. India’s Sensex shed 1,692.60 to 32,025.00 after the government extended a lockdown to fight the pandemic. The Kospi in South Korea dropped 2.6% to 1,895.69. Shares also fell by more than 2% in Singapore, Taiwan and Jakarta.

The outlier was Australia, where the S&P ASX/200 gained 1.4% to 5,320.30, rebounding from early losses on gains in miners and banks.

The futures for the S&P 500 lost 0.6% while the contract for the Dow industrials lost 0.7%. The yield on the 10-year Treasury held steady at 0.61%, well below its 1.90% level at the start of the year.

A four-page Department of Homeland Security intelligence report dated May 1 and obtained by The Associated Press contends that Chinese leaders “intentionally concealed the severity” of the pandemic from the world in early January.

It alleges, citing variances in trade patterns, that China was downplaying the severity of its outbreak, first reported in the central Chinese city of Wuhan, while stockpiling medical supplies.

China did muzzle doctors who warned of the virus early on. But it informed the World Health Organization of the outbreak on Dec. 31, contacted the U.S. Centers for Disease Control on Jan. 3, and publicly identified the pathogen as a novel coronavirus on Jan. 8. Many of its missteps appear to have stemmed from bureaucratic hurdles. There is no public evidence of an intentional plot to buy up the world’s medical supplies.

Benchmark U.S. crude oil fell $1.43 to $18.35 per barrel in electronic trading on the New York Mercantile Exchange. It gained 94 cents on Friday to $19.78 per barrel. U.S. crude has plunged from its perch of roughly $60 at the start of the year on worries about a collapse in demand and strained storage facilities. Brent crude, the international standard, gave up 39 cents to $26.05 per barrel.

The dollar fetched 106.75 Japanese yen, down from 106.88 yen on Friday. The euro weakened to $1.0939 from $1.0980.