US stock index futures yesterday plunged after US President Donald Trump threatened to hike tariffs on US$200 billion of Chinese goods, halting a period of relative calm in the markets.
Standard & Poor’s futures lost more than 2 percent overnight after the Wall Street Journal reported that China was considering canceling a round of US talks this week in the wake of Trump’s comments.
However, China said that a delegation was still preparing to go to the US for trade talks.
Trump said tariffs on US$200 billion of Chinese goods would increase to 25 percent on Friday from 10 percent.
Investors pulled back from riskier bets on fears that the trade dispute between the world’s biggest economies was escalating, especially as hopes of a deal have helped stocks surge this year, with the S&P 500 and the NASDAQ indices hitting records last week.
All the 28 Dow components that were trading premarket were in the red. Boeing Co, the single largest US exporter to China, fell 3.3 percent, while Caterpillar Inc also declined 3.3 percent.
“The risk-off sentiment has been the response to this swerve from Trump,” said Han Tan, a market analyst at FXTM. “While it remains to be seen whether the Trump administration will press ahead with the added tariffs, it’s already evident that markets are taking some risk off the table, undermining the base case that investors had been pricing in: a formalized US-China trade deal in the near future.”
Wall Street’s fear gauge, the CBOE Volatility index, spiked to its highest level since Jan. 30.
Chipmakers, which get a good portion of their revenue from China, tumbled. Shares of Nvidia Corp, Micron Technology Inc and Intel Corp fell between 2.4 percent and 5.3 percent.
At 6:09am, Dow e-minis were down 508 points, or 1.92 percent. S&P 500 e-minis were down 53.25 points, or 1.81 percent, and NASDAQ 100 e-minis were down 179.75 points, or 2.29 percent.
Apple Inc, Amazon.com Inc, Alphabet Inc, Microsoft Corp and Netflix Inc fell between 1.9 percent and 3.4 percent.
Tesla Inc fell 2.3 percent after US trade officials rejected the company’s bid for relief from tariffs on the Chinese-made Autopilot “brain” of its Model 3.
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