NEW YORK/LONDON (Reuters) – Global stock markets fell on Monday on concerns U.S.-Chinese bickering over the origin of the coronavirus outbreak will ignite a new trade war, speculation that strengthened the dollar and drove gold prices higher.
The rise in risk aversion came as business surveys showed Asian and European factory activity in April fell deeper into contraction, adding to a dismal outlook as government lockdowns to contain the pandemic froze global production and slashed demand.
U.S. Secretary of State Mike Pompeo on Sunday said there was “a significant amount of evidence” that the coronavirus emerged from a Chinese laboratory, remarks that rattled investors though he did not dispute U.S. intelligence agencies’ conclusion that it was not manmade.
An editorial in China’s Global Times said he was “bluffing” and called on the United States to present its evidence.
“This morning’s session is being dominated by risk-averse trading as investors weigh the negative consequences to global growth from another escalation in U.S.-China tensions,” said Simon Harvey, currency analyst at broker Monex Europe.
“The headlines of further tariffs and supply-chain disruptions come at a time where global growth expectations are already fragile,” he said.
IHS Markit’s final manufacturing PMI for the euro zone sank to 33.4, its lowest since the survey began in mid-1997 and far below the 50-point line dividing growth from contraction.
A gauge from the United States published on Friday showed manufacturing activity plunged to an 11-year low in April.
The pan-European STOXX 600 index lost 2.26% while MSCI’s gauge of stocks across the globe shed 1.12%.
On Wall Street, The Dow Jones Industrial Average fell 195.57 points, or 0.82%, to 23,528.12. The S&P 500 lost 12.58 points, or 0.44%, to 2,818.13 and the Nasdaq Composite added 27.74 points, or 0.32%, to 8,632.69.
Volatility gauges for European and American blue-chip stocks shot up to a two-week high.
Earlier, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 2.5%, pulled down by the Hang Seng in Hong Kong.
The dollar rose against most major currencies. The dollar index rose 0.163%, with the euro down 0.51% to $1.0927.
The Japanese yen strengthened 0.09% versus the greenback at 106.90 per dollar.
Gold prices also rose as investors sought safety. Spot gold added 0.5% to $1,707.26 an ounce.
Simon Black, head of investment management at wealth management firm Dolfin said investors were also adjusting their forecasts for the depth of the economic damage the pandemic will inflict.
“It’s also the economic reality sinking in,” he said, adding that a rebound by global equities of over 20% from lows hit in March was not likely to be sustainable.
GRAPHIC: Rebound – here
Global coronavirus cases have surpassed 3.5 million and deaths have neared a quarter of a million, according to a Reuters tally.
U.S. crude recently rose 2.33% to $20.24 per barrel and Brent was at $26.76, up 1.21% on the day.
Benchmark 10-year notes last fell 1/32 in price to yield 0.6415%.
Reporting by Herbert Lash and Julien Ponthus; editing by Jonathan Oatis