Published: May 5th, 2020
The resurgence of the Sino-U.S. tensions coupled with strained markets because of the holidays and strained movement brought about mixed market sentiments. The back and forth between China and the U.S. over the former’s handling of coronavirus outbreak compelled Donald Trump to issue threats of retaliatory tariffs on Beijing. As a result, the greenback gained some ground over most of its peers. The stocks, however, declined steeply.
U.S. President Donald Trump has threatened China with a fresh set of tariffs over Beijing’s handling of the coronavirus outbreak. Trump reiterated that he is privy to intelligence that links a Wuhan laboratory to the outbreak of the contagious infection.
The threats may be bad news for China. Back in the U.S., however, Trump’s words helped the dollar to surge above most of its peers. Coming from a steep decline on Thursday, April 30, the dollar climbed even as the U.S. equities fell by almost 1.5%.
President Trump said that his hard-fought deal with the populous Asian nation now comes second after the coronavirus pandemic. It is the reason he wants to introduce new tariffs to punish Beijing for its role in the outbreak of the virus. Trump’s honed attacks against China showcases his growing frustration over the health crisis. So far, COVID-19 has climbed to over 3.5 million confirmed cases with almost 250,000 deaths worldwide. The U.S. which is the hardest-hit nation has almost 1.2 million cases with over 153,000 deaths.
It is believed that the total number of cases and deaths could be more considering that various countries are still under-testing and some jurisdictions apply different methods in counting their dead. Besides, certain nations such as China have been accused of underreporting and concealing the true situation.
Aside from the deaths, the world’s biggest economy suffered another slump last week when almost 4 million Americans filed for unemployment. The new figures take the total to an all-time high of over 30 million individuals.
The downturn now threatens Trump’s reelection in November, which may explain his continued unpleasant diatribes.
Just to get a good grasp of how bad things are, the lay-offs now translate to one in every six Americans being jobless. Or, the entire population of the expansive southern state of Texas.
Some economists predict that the U.S. unemployment figures for April may rise to 20%, a figure that has not been recorded since the 1930s Great Depression when the unemployment figures hit 25%.
The grim data is replicated elsewhere in Europe where more than 130,000 people have died from complications associated with coronavirus. The 19 countries in the Eurozone have seen their collective GDP shrink by almost 4% in the first quarter of 2020. This is the worst performance for the zone since 1995 when it started keeping joint statistics.
According to a report by experts at the High Frequency Economics, a New York-based economic research consultancy, these are the saddest times ever recorded for the global economy.
Trump is confident that the disease originated from a Wuhan-based infectious disease laboratory. The controversial head of state added that he was contemplating a raft of retaliatory measures following China’s poor handling of the outbreak that led to the global spread. Among the measures, the president hinted, are stringent tariffs on Chinese goods coming into the U.S.
The president confirmed to reporters that he has seen evidence that instills his confidence that the virus came from the Wuhan Institute of Virology. The institute is located in Wuhan City in Hubei Province where the virus was detected in December 2019.
The president, however, did not tell the reporters what prompted him to issue the threats or what he thought his actions would have in the markets.
The sentiments by President Trump are not great for the economy, especially now. According to Ross Burland, a columnist for online Forex resource FXStreet, the trade wars are a bad recipe for the market and as well be the last nail in the coffin for benchmarks and equities that have struggled with uncertain times in the past eight weeks.
Trump’s threats may just be the gravitational force that sends these market instruments into an uncertain black hole. It is weird but expected that the dollar spiked on the news on Thursday.
Despite President Trump’s utterances, he fell short of mentioning if President Xi was directly responsible for the misinformation coming out of China. Political analysts think that despite the noise, Trump is keen to foster even better relations with China. The careful approach to the spat with China supports this school of thought.
While Trump’s threats provided a momentary respite for the dollar, it was not so great news for stocks. The major global stock indices dove sharply following threats that the world’s two leading economies could reignite their trade war.
The Dow Jones Industrial Average vomited 622.03 points to stand at 23,723.69 representing a drop of 2.55%. The S&P 500 was another loser, dropping 81.72 points to settle at 2,830.71, a 2.81% decline. The Nasdaq Composite shrunk by 3.2% or 284.60 points to settle at 8,604.95.
Elsewhere in the world, the London FTSE lost 2.31% while the global MSCI which gauges the performance of equities the world over lost some 2%. In a surprise twist, however, the global index was up by 1%.
The U.S. Treasury yields did not change much even after the news emerged that the U.S. manufacturing activity dropped to an 11-year low.
The confusion over the origin of coronavirus is sending world leaders on a wild goose chase. President Trump who believes that the virus and the ensuing pandemic is China’s doing is considering introducing stricter tariffs as a way of punishing the expansive Asian country for letting the situation spiral out of hand. The news, however, was good news for the dollar that surged well above its peers. The global stocks and equities, on the other hand, were not as buoyant. They plunged because of the fears that China and the U.S. may descend back into their protracted trade wars.