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Global stock markets dropped on Friday as a string of weak US corporate earnings and the threat of new tensions between the US and China undermined investor confidence.
London’s FTSE 100 slid 2.6 per cent on the first day of trading in May, while futures tied to the S&P 500 on Wall Street fell more than 2.3 per cent. Most continental European bourses were closed for a public holiday.
The falls on Friday could mark a turn in sentiment for investors, who have been emboldened of late by hopes of a potential treatment for Covid-19 and the ending of economic lockdowns in the US and Europe. US stocks in April notched their biggest monthly rally since 1987.
But sentiment has darkened at the end of this week, following more exceptionally weak US jobs data and red flags in the overnight earnings from Amazon and Apple, two important companies in a tech sector that has led the US market’s rebound.
US ecommerce group Amazon warned that severe coronavirus-related strain could leave operating income in the second quarter anywhere between a loss and gain of $ 1.5bn. That sent shares down 5 per cent in pre-market trading.
That, and technology company Apple’s decision to withhold guidance for the current quarter, has raised fresh concerns over the corporate impact of the global health crisis. Shares in Apple fell 2.5 per cent after the US market closed.
Adding to investor concerns: Donald Trump escalated his attacks on China at his daily Covid-19 briefing on Thursday.
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The US president raised the prospect of using tariffs against Beijing, but denied a US media report that he was considering canceling US debt held by China.
“The last thing the financial markets need now as it grapples with Covid-19 is a renewal of the trade war between the US and China,” said Derek Halpenny, head of European markets research at MUFG.
“There is certainly a high risk of geopolitical tensions escalating considerably as lockdowns reverse and now this could include the US imposing additional trade tariffs on China,” I added.
China’s currency weakened to its lowest level since early April against the US dollar, while stocks in Asia fell.
The offshore-traded renminbi fell 0.7 per cent to Rmb7.1302 per dollar, its sharpest move in six weeks.
“This exchange rate is vitally important for markets and a further move higher would send a signal and flag a devaluation risk that would spook markets,” said Saxo Bank’s chief economist Steen Jakobsen.
Australia’s economy is heavily exposed to trade with China, and the country’s benchmark S & P / ASX 200 dropped 5 per cent, weighed down by miners. Japan’s Topix closed down 2.2 per cent, while markets in mainland China, Hong Kong and South Korea were closed for public holidays.
Japanese stocks were under pressure after purchasing managers’ index data for April signaled the sharpest drop since 2009, as the pandemic spurred factory shutdowns and a collapse in demand.
Oil prices were stable. International benchmark Brent fell 1 per cent to $ 26.20 a barrel, while US marker West Texas Intermediate climbed 0.2 per cent to $ 18.91.
