Tuesday June 19th

19-06-2018

Dow is set to drop more than 250 points as Trump ratchets up pressure on China with more tariffs

U.S. stock index futures fell sharply on Tuesday after President Donald Trump's latest threat to China increased fears of an impending trade war between the world's largest economies. Dow Jones industrial average futures dropped 301 points, indicating a decline of 290.47 points at the open. S&P 500 and Nasdaq 100 futures, meanwhile, fell 26.25 points and 86.25 points, respectively. Shares of some of the biggest chipmakers fell in the premarket given their large exposure to China. Qualcomm, Advanced Micro Devices, and Nvidia all dropped at least 1 percent. Ford Motor, which also does a large amount of business in China, saw its stock pull back about 1 percent before the bell. Meanwhile, Caterpillar and Boeing — considered to be two bellwethers for trade tensions on Wall Street —both dropped at least 1.3 percent. Trump asked the United States Trade Representative to identify $200 billion worth of Chinese goods for additional tariffs, at a rate of 10 percent. If China "refuses to change its practices" and insists on continuing with the new tariffs it recently declared, then the additional levies would be imposed on Beijing, Trump said Monday night. Soon after, the Chinese Commerce Ministry issued a response, stating that the latest threat of more tariffs violates previous negotiations and consensus reached between both the U.S. and China. "The United States has initiated a trade war that violates market laws and is not in accordance with current global development trends," the ministry said. "At some point you've got to wonder how many times stocks are going to react to the same general bit of news. It may all just be a game of one-up-manship as a negotiating tactic to get to some sort of deal," said Willie Delwiche, investment strategist at Baird. However, "with investor optimism as high as it is, there might not be much margin for error, and there is a real risk that this starts to erode consumer and business confidence." Chinese markets led losses in Asia on Tuesday, with major markets in the region closing sharply lower after U.S. President Donald Trump fired a fresh salvo in the ongoing trade spat between the U.S. and China. Greater China markets recorded heavy losses on the back of that news. On the mainland, the Shanghai composite fell 3.82 percent to close below the 3,000 mark at 2,906.43. The smaller Shenzhen composite sank 5.77 percent and closed at 1,594.05. Hong Kong's Hang Seng Index fell 3.08 percent by 3:05 p.m. Other Asian markets saw slimmer losses, with Japan's Nikkei 225closing down 1.77 percent, or 401.85 points, at 22,278.48 and South Korea's Kospi declining 1.52 percent to end at 2,340.11. Oil fell on Tuesday as an escalating trade dispute between the United States and China unleashed sharp selloffs in many global markets. The crude price was also dented by expectations that producer group OPEC and partner Russia will gradually increase output in order to make up for involuntary losses in Venezuela and potential shortfalls from Iran, which is facing U.S. sanctions related to its nuclear activity. Brent crude futures fell 20 cents to $75.14 a barrel by 0903 GMT, while U.S. crude futures lost 72 cents on the day to trade at $65.13 a barrel. Gold prices rose on Tuesday, supported by safe-haven buying as an escalating trade spat between the United States and China sparked a sell-off in equity markets. Spot gold was up 0.2 percent at $1,280.29 an ounce by 0640 GMT. U.S. gold futures for August delivery were 0.2 percent higher at $1,282.60 per ounce.