U.S. Stock Futures Sink as Prospects for Trade Deal Dwindle
(Bloomberg) -- U.S. stock-index futures tanked after China's yuan sank beyond 7 per dollar for the first time in more than a decade, reflecting dimmer hopes for a resolution to the nations' trade war.
S&P 500 Index futures contracts expiring in September fell as much as 1.3% after China's central bank weakened its daily currency fixing past the key level, fueling speculation that Beijing was allowing currency depreciation to counter President Donald Trump's latest tariff threat. Dow Jones Industrial Average contracts shed as much as 1.2%, while those on the Nasdaq 100 slipped as much as 1.7%. The S&P 500 Index closed lower Friday.
“It's become clear that despite the economics of the trade war being very clear cut, and a quick resolution very desirable, the politics of it have become murkier,” said Michael McCarthy, chief market strategist at CMC Markets.
Losses in Asian markets intensified after Bloomberg reported that China asked its state-owned enterprises to suspend imports of U.S. agricultural products in response to Trump's latest tariff proposal. The U.S. president on Thursday suggested adding 10% tariffs on a further $300 billion in Chinese imports from Sept. 1.
U.S. stocks will open after on Friday recording their worst week since the sell-off in December. A solid July U.S. jobs report did little to alter views on the economy and path for interest-rate policy. Eyes may now turn to any reaction by Trump to the Monday news about China's exchange-rate slide. In the past he has criticized China for manipulating its currency for competitive export advantage.
“In a statement likely to anger Trump, the PBOC has explicitly linked today's devaluation with the renewed tariff threat made by the U.S. last week,” Julian Evans-Pritchard, a senior China economist with Capital Economics, wrote in a note to clients. “In doing so, the PBOC has effectively weaponized the exchange rate, even if it is not proactively weakening the currency with direct FX intervention.”
To contact the reporter on this story: Jackie Edwards in Sydney at jedwards160@bloomberg.net
To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Naoto Hosoda, Min Jeong Lee
©2019 Bloomberg L.P.
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