US futures drop as treasury names China a currency manipulator

[NEW YORK] US stock-index futures slid after the Treasury Department designated China a currency manipulator, adding to heightened trade tensions.

S&P 500 Index futures contracts expiring in September fell 1.3 per cent as of 8.18am in Tokyo after the US announced the decision. Dow Jones Industrial Average contracts were down 1.4 per cent while those on the Nasdaq 100 declined 1.5 per cent. S&P 500 futures were set for a seven-day slide, which would be the longest since an eight-day decline ended Dec 24.

The move comes after China's central bank allowed the yuan to fall below 7 per dollar in retaliation for new tariffs on its imports. The S&P 500 suffered its biggest rout of the year Monday and bonds rallied as investors fretted about the escalating trade war.

"As soon as 7 broke on the CNY, the obvious reaction by the Trump administration was to call China a currency manipulator," said Nader Naeimi, AMP Capital's head of dynamic markets in Sydney. "But I don't know how you can call someone a currency manipulator when all they have done has been to keep the currency from depreciating."

Mr Naeimi said it's possible that the market is in for a global stock selloff that's as bad as the one seen during the fourth quarter of last year. "Seasonals are turning negative as well. We are seeing breakdowns across most market bellwethers across FX, equity and bond markets," he said.

More than US$700 billion was wiped from the value of US equities on Monday, with the S&P 500 Index plunging 3 per cent and all but 11 companies on the gauge trading lower. The Cboe Volatility Index surged about 40 per cent.

BLOOMBERG