US stock futures tumble, yen gains on trade war

[SYDNEY] US equity futures tumbled while the yen and Treasury contracts climbed after the latest escalation in the Sino-American trade war. The yuan slumped and stocks looked headed for steep losses in Asia.

Equity futures indicated losses of more than 2 per cent in Tokyo and Hong Kong. S&P 500 futures fell more than 1 per cent after sliding Friday, when President Donald Trump announced additional levies on Chinese imports and called for American companies to pull out of Asia's largest economy, after China said it would impose retaliatory tariffs on US goods.

Mr Trump acknowledged having second thoughts on escalating the trade war, only for his top spokeswoman to clarify he meant he regretted not raising tariffs even more. The yen touched a fresh 2019 high against the greenback. The Aussie and kiwi dipped.

The latest turn in the trade war comes during an already tumultuous August for financial markets amid concerns of slowing global economic growth. On Friday, Mr Trump bumped existing tariffs on Chinese goods to 30 per cent from 25 per cent and planned duties to 15 per cent from 10 per cent.

That followed retaliatory levies from China, which indicated it will follow through with tariffs on US$75 billion of US goods it announced Friday and fight the trade war to the end, according to an editorial in the state-run People's Daily.

"We view risks of further escalation as meaningful," Chetan Ahya, chief economist at Morgan Stanley, wrote in a report Sunday.

"If the US raises tariffs on all imports from China to 25 per cent, and China makes a matching response with these measures staying in place for four to six months, we believe that the global economy will be in recession in six to nine months."

Elsewhere, oil extended losses from Friday, when China announced tariffs on US oil for the first time.

Stocks

Futures on the S&P 500 retreated 1.4 per cent as of 7.02am in Tokyo. The underlying index sank 2.6 per cent on Friday.

Futures on Japan's Nikkei 225 fell 2.6 per cent.

Hang Seng futures declined 2.4 per cent.

Futures on Australia's S&P/ASX 200 Index lost 1.3 per cent.

Currencies

The yen rose 0.5 per cent to 104.93 per US dollar.

The offshore yuan dropped 0.6 per cent to 7.1752 per US dollar.

The euro gained less than 0.1 per cent to US$1.1148.

The Aussie fell 0.3 per cent to 67.38 US cents.

Bonds

Futures on 10-year Treasuries advanced about 0.4 per cent to 131-14+. The yield on 10-year Treasuries fell seven basis points to 1.54 per cent on Friday.

Commodities

West Texas Intermediate crude fell 2.1 per cent to US$54.17 a barrel.

Gold rose 0.6 per cent to US$1,536.27 an ounce.

BLOOMBERG