NEW YORK (REUTERS) - Wall Street took a nosedive on Friday (May 1) on fears that the world's two largest economies could resume a trade war, dragging down a global stocks index on a day that many financial markets were closed for a holiday.
The euro rose and the US dollar fell against most of its peers, while the pound succumbed to weak economic data. Crude oil prices traded in and out of negative territory.
A threat by US President Donald Trump to impose new tariffs on China in retaliation for its handling of the novel coronavirus outbreak soured investor sentiment. London, Tokyo and New York markets were all open on Friday, although much of Europe and Asia were closed for International Workers' Day.
Mr Trump offered no evidence after claiming on Thursday he had seen proof that the virus originated in a Chinese laboratory.
The pandemic, which has cost more than 60,000 lives in the United States alone, has sparked a steep economic contraction and is threatening Mr Trump's chances of re-election in November.
"A rise in tension between China and the US certainly could have a negative impact on the US economy and business confidence, which is already hurt from the shutdowns," said Ms Carin Pai, director of equity management at Fiduciary Trust International in New York.
The Dow Jones Industrial Average fell 622.03 points, or 2.55 per cent, to 23,723.69, the S&P 500 lost 81.72 points, or 2.81 per cent, to 2,830.71, and the Nasdaq Composite dropped 284.60 points, or 3.2 per cent, to 8,604.95.
The benchmark London stocks index lost 2.34 per cent and MSCI's gauge of stocks across the globe shed 2.17 per cent. The global index rose over 1 per cent this week.
US Treasury yields were little changed after data showed that manufacturing activity in the world's largest economy plunged to an 11-year low in April.
The market looked ahead to next week's projection for US borrowing in the second quarter to finance enormous stimulus efforts aimed at combating the economic fallout of the coronavirus outbreak.
Mr Tom Simons, money market economist at Jefferies in New York, said the US Treasury's projection for second-quarter borrowing is going to be "astronomical."
"There's a lot of uncertainty how Treasury is going to handle the financing issues because the total number they have to come up with is so big," he said.
Benchmark 10-year notes last rose 2/32 in price to yield 0.6181 per cent, from 0.625 per cent late on Thursday.
In a sign of the challenge facing global policymakers, the European Central Bank said the euro zone economy is likely to rebound in the second half of this year but may fail to return to last year's level until as late as 2022 due to the pandemic.
However, the euro index rose the most in nearly six weeks.