Asia stocks tumble as Trump revives US-China trade war fears; STI closes down 2.3%

Hong Kong's Hang Seng index plunged 3.9 per cent.
Hong Kong's Hang Seng index plunged 3.9 per cent.PHOTO: AFP

HONG KONG (AFP, REUTERS) - Asian markets suffered steep losses on Monday (May 4), tracking a selloff in New York after Donald Trump sparked fears of a renewed trade war with China over its role in the coronavirus pandemic.

Claims by the US president and Secretary of State Mike Pompeo that the disease started in a lab in Wuhan, and that those responsible would be held to account, overshadowed a further slowing of infections and deaths from Covid-19.

With China and Japan on holiday, Hong Kong led the selloff, sinking 4.2 per cent ahead of first-quarter economic data. After markets closed, the government announced the economy suffered its worst quarter on record, contracting 8.9 per cent from a year ago as the pandemic battered a city already weakened by political unrest.

South Korea’s Kospi index fell 2.7 per cent with sentiment also taking a beating from bleak domestic factory readings. 

Singapore’s Straits Times Index closed down 2.3 per cent in line with regional markets and ahead of its own factory data.

South Korea’s Kospi index fell 2.7 per cent with sentiment also taking a beating from bleak domestic factory readings.

Australia’s S&P/ASX 200 Index rose 1.4 per cent, driven by gains in healthcare and industrial stocks, while payments technology company Afterpay surged more than 35 per cent after unveiling China's Tencent Holdings as a shareholder.

The losses across the region come as investors returned from an extended weekend break and after all three main indexes on Wall Street tanked between 2.6 and 3.2 per cent, having enjoyed their best month in decades in April.

Trump suggested he could lump new tariffs on China over its handling of the virus outbreak, claiming he had seen evidence linking a Wuhan lab to the contagion. The warning fanned worries of a return to the trade standoff between the world’s top two economies that battered global markets last year until a partial agreement was reached in December.

It also comes as Trump faces a tough fight to be re-elected in November with the economy tanking 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.

He added that “while the market is already factoring in a less globalised world during the initial phase of the post-pandemic recovery as economies internalise, 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.”


Analysts warned that after a strong April - fuelled by optimism 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.

“My concern is that the market has priced in all that optimism before we have confronted the worst of the bad news on the economy and on some industries and earnings,” Michael Jones at Caravel Concepts LLC told Bloomberg TV.

“There are some challenges and setbacks that are going to be hitting us in the face over the next four weeks and we are no longer priced cheaply enough to just look past all that bad news.”

The US dollar rose against most major currencies amid fears that last year's US-China dispute would be reignited, this time over the origins of the pandemic that has stalled economies around the world.


The euro was down 0.37 per cent at US$1.0933 and the pound retreated 0.72 per cent to US$1.2407.

Gold prices also rose as investors sought safety. Spot gold was up 0.3 per cent at US$1,704.31 per ounce.


Oil snapped a three-day gain as optimism over a nascent recovery in demand was replaced by worries a global oil glut may persist even as lockdowns start to ease.

US West Texas Intermediate (WTI) crude futures fell 5.5 per cent to US$18.69 a barrel while Brent crude futures were down 2.8 per cent at US$25.70.