Stock Futures Plummet Under Trump Tariff Threat

Stock Futures Plummet Under Trump Tariff Threat


Major US stock-Index futures tumbled heavily during the Asian session as Trump revives the trade war between China and the United States. Following several positive comments on the progress of trade talks between the world's largest economies for the past weeks which fueled investors' risk sentiment, Trump tweets that his administration will raise tariffs on $200 billion of Chinese goods from 10% to 25%. His tweet triggered a sell-off in the global equity markets and investors were seen rushing to safety. China is considering canceling the planned trade talks following Trump's tweet. The Dow Jones Industrial Average futures dropped to a five-week low of 25932, the S&P500 futures declined to 2885, and the Nasdaq futures tumbled to 7667.


The dollar index which measures the greenback against a basket of major currencies fell on Friday following a mixed jobs report. The report showed that the US economy created 263,000 jobs in April beating the estimates of 190,000 and the Unemployment rate dropped to 3.6% the lowest since 1969. However, the participation rate declined to 62.8%, and the Average Hourly Earnings rose by only 0.2% missing the estimates of 0.3%. Moreover, the ISM Non-Manufacturing PMI weakened to 55.5 from 56.1 prior. The US 10-year yields fell to 2.51%, the USDJPY tumbled to 110.28, and the EURUSD rose to $1.1200.


Metals prices surged as the dollar weakened along with US Treasury yields. Also, Trump's threat to raise tariffs fueled risk-off sentiment which supported gold prices. The price of a gold ounce rose to $1286, the silver ounce rose to $14.95, and palladium hovered above $1360.


Oil prices kicked-off the week on a gap lower weighed down by Trump's tweet. The concerns over a full-blown trade war between China and the United States were revived by Trump as he tweeted about raising tariffs on Chinese products. The West Texas Intermediate crude futures fell to a low of $60.02, and Brent futures dropped to $68.82.

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