US Stocks Weaken as Trump Preps $200 Billion Tariff Move in China Trade War
Frankfurt (Sept 17) Global stocks weakened Monday, pulling U.S. equity futures into the red, as investors pulled cash from risk markets around the world amid reports that President Donald Trump is ready to impose tariffs on $200 billion worth of China-made goods as early as today while official in Beijing have vowed to retaliate to protect the nation's interests.
The rapid escalation of the ongoing trade war between the world's two biggest economies, which has been simmering for months, snapped a three-day winning streak for stocks in Asia, which fell notably amid thin market liquidity owing to a national holiday in Japan which kept markets closed throughout the session.
The Wall Street Journal's weekend report of a Trump Administration plan to slap tariffs of 10% on $200 billion worth of product was enough to have kicked off a weaker Asia session, with caution increasing amid both China's reply -- in the form of an editorial in the state-run Global Times Newspaper -- which said the country was "looking forward to a more beautiful counter-attack and will keep increasing the pain felt by the U.S.".
That view dovetailed with the Journal's reporting that suggested China may selectively target components essential to the U.S. supply chain as part of its retaliation, a move that could disrupt end-production schedules, especially in the tech sector, if the White House goes ahead with its threat. China has also reportedly said it will skip planned trade talks with Treasury Secretary Steve Mnuchin if the Trump tariffs are imposed.
The MSCI Asia ex-Japan index, the region's broadest measure of share prices, was marked 0.98% lower, led by loses in mainland China, were the Shanghai Composite fell 1.1% to close at 2,651.79 points, the lowest since November 2014. Hong Kong's Hang Seng index was also sharply lower, falling 1.85% as the island recovered from the impact of super typhoon Mangkhut, the most severe in the city's history that brought 120 mile per hour winds and severe flooding in certain areas.
Early indications from U.S. equity futures suggest follow-on weakness on Wall Street, as well, with contracts tied to the Dow Jones Industrial Average marked for a 30 point pullback while those linked to the S&P 500 suggest a 3.4 point dip for the broader benchmark.
China's implied threat to disrupt the tech-sector supply chain, which many of the biggest U.S. sector companies heavily rely upon, is likely to add to recent concerns for share price performance. The S&P 500 Information Technology Index is down 1.15% so far this month, while the Philadelphia SE Semiconductor index, a benchmark for the chip sector, is down 1.7%. Futures tied to the Nasdaq Composite suggest a 17.5 point fall for the tech-focused index.
European stocks opened in the red, as well, with the Stoxx 600 index falling 0.1% to 377.47 points by early afternoon in Frankfurt, led to the downside by the auto sector, which is hyper-sensitive
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