Wednesday April 4th

4-04-2018

Stock futures plunge, with the Dow set for a more than 500-point drop, after China announces tariffs

U.S. stock index futures tumbled ahead of Wednesday's open, as concerns over a potential trade war between the U.S. and China intensified. Around 8:30 a.m. ET, Dow Jones industrial average futures indicated a drop of 547 points at the start of trading in New York. The Nasdaq 100 and the S&P 500 futures also indicated heavy losses at the open for their respective markets. The moves in premarket trade come as China announced brand-new tariffs on 106 U.S. products, including cars, whiskey, aerospace and defense, and soybeans. "I think the market is just concerned about this thing escalating right now," James Paulsen, chief investment strategist at The Leuthold Group, told CNBC's "Squawk Box." "It's not so bad if we have a few tariffs on a few products, but if it escalates worldwide, … then you're really threatening the recovery globally." Automakers were down sharply, with Ford and General Motors off 3.3 percent and 4 percent, respectively. Boeing was also slammed, falling more than 5 percent. Caterpillar declined 4 percent, while United Technologies — another Dow component — fell 3.4 percent. The move comes less than a day after President Donald Trump issued a list of Chinese imports that the U.S. administration aims to target as part of a crackdown on what the president sees as unfair trade practices. U.S. futures extended losses following the announcement, with worries over technology and trade already putting markets on edge. Wednesday's premarket trade paints a different picture to that of Tuesday's session, when stocks on Wall Street rose sharply to finish the day on a positive note. The Dow closed almost 400 points higher as technology rebounded from sharp losses seen in Monday's sessions. Ahead of Friday's nonfarm payrolls, investors will digesting the latest economic news, including the ADP National Employment Report. The report showed private companies added 241,000 jobs in March, more than the expected gain of 205,000. The services purchasing managers' index (PMI) is scheduled for release at 9:45 a.m. ET. Meantime at 10 a.m. ET, non-manufacturing ISM report on business is due as well as factory orders. Asian stocks closed mixed on Wednesday as the overnight bounce on Wall Street stalled. Recent concerns over trade tensions also persisted amid new China-U.S. trade developments. Japan's Nikkei 225 closed higher by 0.13 percent, or 27.26 points, at 21,319.55 amid choppy trade. Elsewhere, South Korea's benchmark Kospi index lost 1.41 percent to close at 2,408.06. Greater China markets were in negative territory after trading higher earlier in the session. Hong Kong's Hang Seng Index gave up early gains to sink 1.45 percent by 3:13 p.m. HK/SIN. Mainland stock indexes also reversed early gains: The Shanghai composite slipped 0.15 percent to finish at 3,131.84 and the smaller Shenzhen composite shed 0.57 percent to close at 1,831.70. Oil prices fell on Wednesday after China said it would impose tariffs on a number of U.S. goods including agricultural products, raising the prospect of a growing trade war that could impact global growth. "This morning, it is all about the macro (economic) situation and how the trade relationship between the U.S. and China is evolving," BNP Paribas head of commodities strategy Harry Tchilinguirian told the Reuters Global Oil Forum. Brent crude futures were down 86 cents, or 1.3 percent, to $67.26 per barrel by 8:50 a.m. ET (1250 GMT). U.S. WTI crude futures fell 98 cents, or 1.5 percent, $62.53 a barrel. Gold prices gained on Wednesday, as investors stayed away from risk assets after the United States slapped tariffs on $50 billion worth imports from China, raising the stakes in a growing trade showdown with Beijing. Spot gold rose 0.2 percent to $1,334.64 per ounce as of 0700 GMT, after falling 0.6 percent in the previous session. U.S. gold futures were up 0.1 percent at $1,338.40 an ounce.