The threats from United States President Donald Trump to reignite his country's trade conflict with China over coronavirus have sparked yet another sell-off on global financial markets as the pandemic's economic consequences continue to increase.
Against the context of growing friction between the two global economic super powers, stock prices continued a downhill plunge in London on Friday with the FTSE 100 dropping by 144 points, or 2.5 per cent.
At an event at the White House on Thursday, Trump raised the possibility of using taxes to sanction the Chinese government for the way it handled the coronavirus crisis.
The Washington Post disclosed that the administration had been considering retaliatory measures, including the cancelation of some of the US debt commitments to China. Economic leaders were swift to reject the proposal and Trump proposed tariffs as an option when asked about it.
Treasuries rallied following Trump's threats. Safe haven demand lifted U.S. bonds up along with the US greenback and Japanese yen. Benchmark yields headed for their first decline in three days, with bleak corporate updates and falling economic figures worsening the situation.
Trump was also reported to be looking at blocking a state retirement fund from investing in Chinese bonds on grounds of it being a risk to national security.
The ongoing global health crisis is destroying both the US and the world economy. Jobless rate is climbing. The country's gross domestic product is crashing at historic lows. Company revenues are deteriorating. The manufacturing sector is contracting.
Even Trump could worsen the hardship by seeking to use tariffs or other measures to prosecute China for its part in the health problem. Analysts caution that such a plan could go badly, eventually transforming into a full-blown depression.
Selling pressure continued in New York after notching modest rallies in recent days in the midst of mounting optimism a turning point had been reached for the coronavirus crisis.
Meanwhile, trepidation over the economic impact from the virus deepens and as the White House ramped up the threat of a renewed trade conflict with Beijing, the Dow Jones industrial average fell by more than 2 percent in afternoon trading in New York.
Gold shook off initial losses on Friday to report moderate gains in turbulent trade as risk sentiment dimmed in the US as Trump placed new tariffs on China. Spot gold rose 0.9 percent by 11:37 a.m. to $1,694.56 an ounce. U.S. futures for gold fell 0.7 percent to $1,706.80.
