Local markets in Asia retreat as US President Trump talks up revised trade war

Steep losses are the order of the day as local markets follow the lead from a sell off in New York after US President Trump foreshadowed a new round of trade sanctions on China. The US President and his Secretary of State Mike Pompeo have openly accused the Chinese government that the Covid-19 started in a lab in Wuhan, and that those responsible would be held to account.

Yesterday, the Secretary of State ramped up White House administration claims that China mounted efforts to hide the extent of the coronavirus spread, including concealing the severity of the situation, while stockpiling medical supplies.

In the wake of threats of economic retaliation, and their impact on US indices, Asian markets have already suffered steep losses today.

The claims have overshadowed better news indicating a further “levelling of the curve” of infections and deaths from Covid-19 in the US and around the world.

All three main indices on Wall Street tanked between 2.6 – 3.2%, having previously enjoyed their best month in decades in April. Hong Kong led this morning’s selloff, dropping more than 3%, while Seoul, Taipei, Singapore, Manila and Jakarta were all down more than 2%. However, Sydney edged up slightly.

President Trump is threatening to lump new tariffs on China over its handling of the virus outbreak, claiming he had seen evidence linking a Wuhan lab to the contagion. He did not made the contents of the report open to the media or public.

Analysts warned that after a strong rebound in April, fuelled by hopes that the worst of the disease has passed, equities could suffer a tumultuous May as corporate earnings and other indicators reveal the extent of the damage inflicted on the US economy.

Meanwhile the US economy is tanking and millions of Americans have already lost their jobs because of the Covid-19 crisis. Economists also fear another wave of losses on the markets and further pressure on the US dollar following the biggest bailout of the economy in history by the US Federal Reserve.

The threat of another long-winded trade war between the two economic superpowers is sparking further fears whilst the world economy is teetering on a major recession.

Oil prices dropped again after surging last week as top producers began to ease up on production following a deal agreed last month to slash output by 10 million barrels a day.