U.S. equity futures slumped and shares in Europe and Asia dropped as investors awaited countermeasures promised by China after America escalated their trade war last week. The yuan tumbled and Treasuries rallied.
Contracts on the S&P 500, Dow Jones Industrial Average and Nasdaq 100 indexes all slid, pointing to a big drop at the U.S. open. In Europe, the Stoxx Europe 600 index was dragged into the red as almost every industry sector retreated. With no date scheduled for a resumption in bilateral Sino-U.S. talks, shares dropped in all principal Asian markets except Hong Kong, which was closed for a holiday. Trade-sensitive commodities including soybeans and cotton fell.
The dollar strengthened as 10-year Treasury yields fell to the lowest level since late March, while the yen rose. Oil climbed as Saudi Arabia said two of its tankers were “sabotaged.”
Investors are struggling to find positive catalysts for risk assets after the U.S. stepped up punitive tariffs on $200 billion in annual imports from China. While both economic superpowers have worked hard since talks ended Friday to project calm and emphasize that they plan to continue negotiations, markets seem to sense fundamental divisions between the two sides.
On Monday, American officials are expected to announce details of their plans to boost tariffs on all remaining imports from China — some $300 billion in trade. Beijing is still working on its retaliation. Trump said the U.S. was “right where we want to be” and it would be wise for China to “act now” to complete a trade deal. Larry Kudlow, his top economic adviser, told Fox News that China invited trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin back to Beijing, though no date has been set. He also said Trump would meet with Chinese President Xi Jinping during the G20 meeting in late June.