Global stocks and US futures fall as US-China tensions return

Hong Kong's Hang Seng Index tumbled more than 4% as tensions escalated, while South Korea's Kospi dropped 2.7%. Other major markets in Asia, including those in Japan and mainland China, were closed for holidays.

European markets dropped sharply even as lockdowns were eased in some of the region's biggest economies. Germany's DAX shed 2.8% in early trading, while France's CAC 40 dropped 3.2%. The FTSE 100 was off 2.3% in London.

Dow futures fell 170 points, or 0.7%. S&P 500 and Nasdaq futures both shed 0.6%.

The declines built on losses on Wall Street late last week, when Trump hinted that the United States could punish China with new tariffs because of the coronavirus outbreak.

US Secretary of State Mike Pompeo on Sunday stepped up administration claims that China mounted efforts to hide the extent of the coronavirus spread, including concealing the severity while stockpiling medical supplies.

He also said there is "enormous evidence" backing Trump's claim that the virus originated in a laboratory in Wuhan, China — though the Office of the Director of National Intelligence has said that the intelligence community concurs with the "wide scientific consensus that the Covid-19 virus was not manmade or genetically modified."

"Trade war clouds once again loom ominously on the horizon," said Stephen Innes, chief global markets strategist for AxiCorp, in a Monday report.

The United States and China in January reached a truce in their lengthy trade war when the two economic superpowers signed a "phase one" agreement that included the reduction of some tariffs and commitments from China to purchase billions worth of agricultural goods and crack down on intellectual property theft.

But Trump's recent comments suggest that trade tensions could return — and reviving the trade war "will likely make any economic improvement exponentially more difficult," Innes said. The global economy is already suffering as the virus brought many countries to a near-standstill.

Meanwhile, Trump said Sunday that the US coronavirus death toll could reach 80,000 to 90,000, a considerable upward shift from his previous estimates last month.

The pandemic is already plunging the global economy into its deepest slump since the Great Depression of the 1930s, according to the International Monetary Fund, which said last month that there was a risk of the recession extending into 2021 if policymakers fail to coordinate a global response to the virus.

"President Trump needs to put some hard facts on the table, or risk sending the world into an L-shaped, trade-war driven recession on top of a recession, that even bottomless monetary and fiscal responses cannot soften," wrote Jeffrey Halley, senior market analyst for Asia Pacific at Oanda.

Dire economic data has already been weighing on investors.

More than 30 million Americans have filed initial unemployment claims since the middle of March. Economists surveyed by Refinitiv expect the unemployment rate to have hit 16.1% last month, which would be its highest level since 1939.

This week is likely to provide greater clarity on the US unemployment picture in the country. The US government releases its latest jobs report on Friday.

Oil, meanwhile, is also falling as the market remains damaged by an enormous lack of demand. Futures for US crude and Brent, the global benchmark, fell 6.7% and 2.6%, respectively, on Monday.