US pre-open: Stocks to drop as China-US relations sour further
US stocks looked set for losses at the open on Monday as escalating tensions between the US and China undermined sentiment.
At 1210 BST, Dow Jones Industrial Average and Nasdaq futures were down 0.5%, while S&P 500 futures were 0.6% lower.
On Friday, Trump announced 25% tariffs on up to $50bn worth of Chinese imports. China then retaliated by announcing 25% tariffs on $34bn worth of imports from the US.
Oanda analyst Craig Erlam said: "We’re seeing a slightly risk averse tone in financial markets at the start of the week after the trade spat between the US and China ramped up over the weekend.
"Both countries have laid out plans to impose tariffs on one another on 6 July which is making investors a little uncomfortable, more so due to the potential for the situation to escalate further than the tariffs themselves. The question now is how much pain both sides will be willing to inflict on the other - and themselves in the process - before coming to an agreement that removes tariffs and eases investor concerns.
"It’s possible that with the US economy doing so well and President Donald Trump last week securing a significant victory following his meeting with North Korean leader Kim Jong Un, he may be willing to use some of this political credit he’s earned and make the necessary economic sacrifice in order to force China into concessions. That’s certainly the impression he’s giving."
Meanwhile, oil prices were mixed ahead of the OPEC meeting at the end of the week, with the cartel set to discuss reducing or even ending the coordinated output cut that was imposed to try to bring inventories back in line with the five-year average.
"An increase in production from the OPEC nations and others including Russia involved in the deal will be welcomed by Trump who has recently been berating them for pushing prices higher, despite the fact that part of this has been driven by US sanctions on Iran," Erlam said.
West Texas Intermediate was down 0.6% to $64.68 a barrel, while Brent crude was 0.7% higher at $73.95.
In corporate news, electric car maker Tesla was likely to be in focus after chief executive Elon Musk showed off the company's newest production line over the weekend on Twitter.
Elsewhere, W.P. Carey announced a proposed merger with Corporate Property Associates 17 in a stock-for-stock deal valued at around $6bn.
On the data front, the NAHB housing market index for June is due at 1500 BST. Investors will also eye speeches from Atlanta Fed President Raphael Bostic at 1800 BST and New York Fed President John Williams at 2045 BST.