U.S. Stock Futures Tumble, Yen Gains on Trade War: Markets Wrap

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U.S. equity futures tumbled while the yen and Treasury contracts climbed after the latest escalation in the Sino-American trade war. The yuan slumped and stocks looked headed for steep losses in Asia.

Equity futures indicated losses of more than 2% in Tokyo and Hong Kong. S&P 500 futures fell more than 1% after sliding Friday, when President Donald Trump announced additional levies on Chinese imports and called for American companies to pull out of Asia’s largest economy after China said it would impose retaliatory tariffs on U.S. goods. Trump acknowledged having second thoughts on escalating the trade war, only for his top spokeswoman to clarify he meant he regretted not raising tariffs even more. The yen touched a fresh 2019 high against the greenback. The Aussie and kiwi dipped.

The latest turn in the trade war comes during an already tumultuous August for financial markets amid concerns of slowing global economic growth. On Friday, Trump bumped existing tariffs on Chinese goods to 30% from 25% and planned duties to 15% from 10%. That followed retaliatory levies from China, which indicated it will follow through with tariffs on $75 billion of U.S. goods it announced Friday and fight the trade war to the end, according to an editorial in the state-run People’s Daily.

“We view risks of further escalation as meaningful,” Chetan Ahya, chief economist at Morgan Stanley, wrote in a report Sunday. “If the U.S. raises tariffs on all imports from China to 25% and China makes a matching response with these measures staying in place for 4-6 months, we believe that the global economy will be in recession in 6-9 months.”

Elsewhere, oil extended losses from Friday, when China announced tariffs on U.S. oil for the first time.

Here are the main moves in markets:

Stocks

  • Futures on the S&P 500 retreated 1.4% as of 7:02 a.m. in Tokyo. The underlying index sank 2.6% on Friday.
  • Futures on Japan’s Nikkei 225 fell 2.6%.
  • Hang Seng futures declined 2.4%.
  • Futures on Australia’s S&P/ASX 200 Index lost 1.3%.

Currencies

  • The yen rose 0.5% to 104.93 per dollar.
  • The offshore yuan dropped 0.6% to 7.1752 per dollar.
  • The euro gained less than 0.1% to $1.1148.
  • The Aussie fell 0.3% to 67.38 U.S. cents.

Bonds

  • Futures on 10-year Treasuries advanced about 0.4% to 131-14+. The yield on 10-year Treasuries fell seven basis points to 1.54% on Friday.

Commodities

  • West Texas Intermediate crude fell 2.1% to $54.17 a barrel.
  • Gold rose 0.6% to $1,536.27 an ounce.

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