Trump and China traded fresh blows over the weekend as the president launched his most aggressive attack yet over China’s handling of the coronavirus outbreak. The Dow Jones Industrial Average (DJIA) slumped lower on Monday in response.
President Trump riled tensions on Sunday night with a string of accusations against China. He accused the nation of trying to cover up the virus and suggested it may have been leaked from a Wuhan laboratory.
The Chinese press went into overdrive, accusing the United States of “propaganda warfare.” The Global Times, China’s English speaking newspaper closely associated with the Chinese Communist Party, wrote in a heated editorial:
The Trump administration continues to engage in unprecedented propaganda warfare while trying to impede global efforts in fighting the COVID-19 pandemic.
The coronavirus outbreak has heightened tensions between the two super-powers. And it could tip the US and China back into a trade war.
The month of May has started with a limp. After falling 2.5% on Friday, the stock market is extending losses on Monday.
As of 9:47 am ET, the Dow Jones had suffered a 316.67 (1.33%) slide, dropping the index to 23,407.02.
The S&P 500 and Nasdaq are down 1% and 0.5%, respectively.
In a Fox News Town Hall interview, President Trump said China made a “horrible mistake” by trying to cover up the coronavirus. The country is accused of silencing scientists and researchers that sounded the alarm in the early days of the outbreak.
The White House has even latched onto a once-fringe theory that Covid-19 was leaked from a Wuhan laboratory. Secretary of State Mike Pompeo claimed there was “enormous evidence” behind this theory. And Trump promised a “conclusive report” on the virus origins.
We will be giving a very strong report on what we think happened, and I think it will be very conclusive.
The response from China’s press has been ruthless. The Global Times editorial this morning said Pompeo had “lost his moral compass” in spreading the Wuhan lab theory.
There’s a similar backlash across most of the Chinese state-owned press. A recent editorial in the People’s Daily – the Chinese Communist Party’s official newspaper, accused the U.S. of a “colossal moral deficit.”
The China Global Television Network (CGTN) – a state-owned media organization – previously accused Pompeo of “turning his back on humanity” and “spreading a political virus.”
The increasingly hostile rhetoric between the two nations is bad news for the stock market. Fears of a trade war between the U.S. and China rattled the Dow Jones for months between 2018-2020. Those fears are returning.
We will terminate the deal…
… Trump threatened in last night’s Town Hall. It shows just how serious he is about holding China accountable.
The economic slowdown has also threatened China’s ability to meet the phase one trade deal agreement. The country agreed to purchase some $200 billion of U.S. goods as part of the deal. But with the Chinese economy ravaged by the coronavirus, it may no longer be able to follow through.
Elsewhere, traders are digesting Warren Buffet’s marathon, four-hour statement over the weekend. The Oracle of Omaha poured cold water on hopes of a quick stock market recovery. He is still sitting on the sidelines with $138 billion in cash waiting for a better opportunity.
Across the U.S., states are tentatively re-opening for business this week. Some stay-at-home orders are being relaxed while nonessential business resumes. Traders will be watching how consumers respond and whether it triggers a second wave of the virus. Marc Chaikin, CEO of Chaikin Analytics explains.
The biggest risk to the stock market is a premature reopening of the U.S. economy. If rising Covid-19 curves reemerge and economies are shut down again, the damage to the stock market’s psyche will be dramatic.
Earnings reports this week include Coca-Cola, Walt Disney, Fiat Chrysler, Beyond Meat, PayPal, General Motors, and Uber.
This article was edited by Samburaj Das.
Last modified: May 4, 2020 1:49 PM UTC