Tuesday October 8th

8-10-2019

Dow set to drop 200 points as optimism dims around US-China trade talks

U.S. stock index futures fell sharply on Tuesday morning as investor optimism around the upcoming U.S.-China trade talks faded. Around 7 a.m. ET, Dow futures indicated a drop of more 205 points at the open. S&P 500 and Nasdaq 100 futures also pointed to steep losses. The South China Morning Post reported China is toning down its expectations ahead of trade negotiations with the United States. The report said Chinese Vice Premier Liu He — who will lead the country’s trade delegation — will not carry the title of “special envoy,” signaling he has not received any specific instructions by President Xi Jinping. U.S.-China trade talks are set to start Thursday.  The U.S. also expanded its trade blacklist to include some of China’s top artificial intelligence firms on Monday, punishing Beijing for its treatment of predominantly Muslim ethnic minorities. The decision appeared likely to draw a sharp response from China, with investors worried it might harm the chances of a breakthrough later this week. China’s foreign ministry said to stay tuned for retaliation following the blacklist expansion. Bloomberg News also reported the White House is looking to limit Chinese stocks within government pension funds. The White House has scheduled an increase in U.S. tariffs on $250 billion worth of Chinese goods to 30% from 25% on Oct. 15. President Donald Trump has said the tariff increase will take effect if no progress is made in bilateral trade negotiations. The world’s two largest economies have imposed tariffs on billions of dollars’ worth of one another’s goods since the start of 2018, battering financial markets and souring business and consumer sentiment. U.S. producer prices unexpectedly fell in September, weighed down by decreases in the costs of goods and services, which could give the Federal Reserve room to cut interest rates again this month to limit the drag on the economy from trade tensions and slowing growth overseas. The Labor Department said on Tuesday its producer price index for final demand dropped 0.3% last month, the largest decline since January, after edging up 0.1% in August. In the 12 months through September the PPI increased 1.4%, the smallest increase since November 2016, after rising 1.8% in August. Economists polled by Reuters had forecast the PPI nudging up 0.1% in September and advancing 1.8% on a year-on-year basis. Asia markets gained on Tuesday, with major indexes in Japan, South Korea, China and Hong Kong trading higher. The Nikkei 225 in Japan rose 0.99% to 21,587.78 while the Topix index added 0.87% to 1,586.50. South Korea’s Kospi index was up 1.21% to 2,046.25. Chinese markets returned to trade following a week-long public holiday: The Shanghai composite rose 0.29% to 2,913.57, the Shenzhen composite added 0.21% to 1,598.64 and the Shenzhen component index gave up most of its gains to finish up 0.3% at 9,474.75. In Hong Kong, the Hang Seng index rose 0.51% in late-afternoon trade. Oil prices increased on Tuesday as unrest in Iraq and Ecuador raised supply concerns, but worries about U.S.-China trade negotiations capped the market’s gains after U.S. President Donald Trump said a quick deal was unlikely. Brent crude rose 43 cents, or 0.7%, to $58.78 a barrel by 0903 GMT. U.S. West Texas Intermediate crude was at $53.12, up 37 cents, or 0.7%. Gold rose on Tuesday, shaking off losses from earlier in the session, while the dollar eased and European stocks fell ahead of minutes from the U.S. Federal Reserve and trade talks between Washington and Beijing. Spot gold rose 0.7% to $1,503.34 per ounce. Prices had dropped as much as 1% in the previous session. U.S. gold futures were up 0.3% at $1,509.10.