Friday August 2nd

2-08-2019

Dow futures fall 85 points on trade war fears, uncertainty about Fed’s next move

U.S. stock index futures fell on Friday as investors digested key employment data along with news of an additional 10% tariff on Chinese imports. Dow Jones Industrial Average futures fell 85 points. S&P 500 and Nasdaq 100 futures also pointed to a lower open. The U.S. economy added 164,000 jobs in July, just below a Dow Jones estimate of 165,000. The job gains pushed the size of the U.S. labor force to a record high. Wages topped analyst expectations. They rose 3.2% on a year-over-year basis, surpassing a Dow Jones forecast by 0.1 percentage points. The strong wage number could be seen by traders as a sign of rising inflation, which could keep the Federal Reserve from cutting rates multiple times later this year. The Fed cut interest rates by 25 basis points on Wednesday. In a series of tweets on Thursday, President Donald Trump said the 10% charge would be imposed on $300 billion worth of Chinese goods. The levy will take effect starting September 1. The move breaks a truce in the long-running trade war between the world’s two largest economies, with investors fearful it could further disrupt global supply chains. China’s foreign ministry pushed back against Trump’s latest tariff threat on Friday morning, reportedly saying the world’s largest economy should give up its illusions, shoulder some responsibility and come back to the right track on resolving the trade war. China’s spokesperson at the foreign ministry, Hua Chunying, said at a daily press briefing that Beijing would have to take countermeasures if the U.S. was committed to putting more tariffs on Chinese goods, Reuters reported. Trump’s tariff threat came as a surprise to financial markets in the previous session, in large part because negotiators for the two sides had just met earlier this week in China. Trump is also scheduled to make a trade announcement on the European Union later on Friday. Asia stocks dropped on Friday after a surprise tariff announcement from the United States overnight escalated trade tensions between Washington and Beijing. U.S. President Donald Trump said Thursday that the U.S. is putting 10% tariffs on another $300 billion worth of Chinese goods starting Sept. 1. In the wake of the unexpected move, mainland Chinese stocks tumbled on the day. The Shanghai composite fell 1.41% to about 2,867.84, the Shenzhen component slipped 1.42% to 9,136.46 and the Shenzhen composite shed 1.484% to approximately 1,539.86. Over in Hong Kong, the Hang Seng index declined 2.35% to close at 26,918.58. In South Korea, the Kospi declined 0.95% to close at 1,998.13. Notably, the losses for Japanese stocks surpassed even those seen in the mainland Chinese markets: The Nikkei 225 plunged 2.11% to close at 21,087.16 and the Topix index also fell 2.16% to end its trading session at 1,533.46. Oil prices rose around 2% on Friday, regaining ground after their biggest falls in years on U.S. President Donald Trump’s vow to impose more tariffs on Chinese imports. The move, due to take effect on Sept. 1, would intensify a trade war between the world’s top two economies and crude consumers that has disrupted global supply chains and roiled financial markets. Brent crude slumped more than 7% on Thursday, their steepest drop in more than three years. U.S. West Texas Intermediate (WTI) crude futures fell nearly 8% to post their biggest drop in more than four years. The collapse ended a fragile rally built on steady drawdowns in U.S. inventories even though global demand looked shaky due to the trade dispute. Brent futures rose $1.50, or 2.5%, to $62 a barrel by 0845 GMT on Friday, while WTI futures gained $1.07, or 2%, to $55.02 a barrel. Gold prices fell nearly 1% on Friday, as investors booked profit after U.S. President Donald Trump’s fresh salvo in the year-long trade spat with China increased demand for the safe-haven metal in the previous session. Spot gold was down 0.5% at $1,438.16 per ounce, after hitting a two-week high of $1,446.10 earlier in the session. The metal has risen about 1.4% so far this week, heading for a third weekly gain in four. U.S. gold futures rose 1% to $1,446.80 an ounce.