Stock markets fell on Monday after US President Donald Trump sparked fears of a renewed trade war with China over its role in the coronavirus pandemic.
Key eurozone markets were more than 3.5 percent lower at the close on simmering US-China tensions, with Frankfurt and Paris playing catch-up with London after a long holiday weekend.
“Risk sentiment is very fragile as we enter another critical week in terms of economic and corporate data,” Swissquote bank analyst Ipek Ozkardeskaya told us.
“Donald Trump’s attacks on China are really not helping”.
The region’s losses came as millions of Europeans emerged from lockdown on Monday, with Italy, the continent’s hardest-hit country, leading the way out of its two-month coronavirus confinement.
– ‘A bit of worry’ –
On Wall Street, the Dow Jones index was down by roughly 200 points in the late New York morning.
“That economic data are not good is no surprise for investors, but that quite a hefty Chinese-American standoff is being piled onto the pandemic, that is sparking quite a bit of worry,” JP Morgan AM strategist Vincent Juvyns told us.
Oil prices were mixed after last week’s surge, while the US dollar was on the front foot against the European single currency.
Trump had hinted he could impose new tariffs on China over its handling of the virus outbreak, claiming he had seen evidence linking a Wuhan lab to the contagion.
The claim, repeated by US Secretary of State Mike Pompeo, overshadowed a further slowdown in the number of infections and deaths from COVID-19.
– ‘Trade war drums’ –
It also comes as Trump faces a tough fight to be re-elected in November with the economy slumping and millions of Americans losing their jobs because of the virus crisis.
“President Trump is back beating the trade war drums… and increasing the odds of a significant volatility risk event as all roads lead back to trade and tariff,” said AxiCorp’s Stephen Innes.
“Rekindling a dormant US-China trade war will likely make any economic improvement exponentially more difficult. And ripping up the trade agreement will trigger a global equity market rout.”
The tensions outweighed some potentially positive developments for markets, said analysts at Charles Schwab, such as “the beginning of the slow reopening of the US economy and further progress on the COVID-19 treatment front”.
– Key figures around 1540 GMT –
- London – FTSE 100: DOWN 0.2 percent at 5,753.78 points (close)
- Frankfurt – DAX 30: DOWN 3.6 percent at 10,466.80 (close)
- Paris – CAC 40: DOWN 4.2 percent at 4,378.23 (close)
- EURO STOXX 50: DOWN 3.8 percent at 2,816.48
- New York – Dow: DOWN 0.8 percent at 23,537.49
- Hong Kong – Hang Seng: DOWN 4.2 percent at 23,613.80 (close)
- Shanghai – Composite: Closed for a holiday
- Tokyo – Nikkei 225: Closed for a holiday
- Brent North Sea crude: DOWN 0.2 percent at $26.40 per barrel
- West Texas Intermediate: UP 0.7 percent at $19.91
- Euro/dollar: DOWN at $1.0904 from $1.1046 at 2100 GMT on Friday
- Dollar/yen: DOWN at 106.90 yen from 106.91
- Pound/dollar: DOWN at $1.2417 from $1.2506
- Euro/pound: UP at 87.82 pence from 87.81