/US futures point to slightly higher open
US futures point to slightly higher open

US futures point to slightly higher open


U.S. stock index futures sank on Tuesday after President Donald Trump suggested he may want to delay a trade deal with China until after the 2020 presidential election.

At 8:11 a.m. ET, Dow Jones Industrial Average futures indicated a drop of 200 points at the open, after trading slightly higher earlier in the session. Futures on the S&P 500 and Nasdaq also pulled back.

Caterpillar slid 1.6%, Intel dropped 1% and Apple lost 1.5% in premarket trading.

“In some ways, I like the idea of waiting until after the election for the China deal, but they want to make a deal now and we will see whether or not the deal is going to be right,” Trump told reporters earlier on Tuesday. When asked if he had a deal deadline, he added: “I have no deadline, no … In some ways, I think it is better to wait until after the election if you want to know the truth.”

The two nations have been haggling over a “phase one” trade deal over the past several weeks, an effort seen by many investors as an attempt at a sort-of truce until the globe’s two largest economies can agree on a longer-term relationship. Both sides have introduced tariffs on billions of dollars’ worth of imports as the disagreement escalated over the last year; additional U.S. tariffs are set to take effect on Dec. 15.

“Today’s session will hinge on the market’s interpretation of Trump’s overnight comments which concluded he has no deadline for a trade deal with China,” wrote Ian Lyngen, head of U.S. rate strategy at BMO Capital Markets.

However, that doesn’t seem to be how investors are interpreting the president’s comments, Lyngen added.

“There are several potential reads of these remarks; the first of which would simply be to take them at face value and assume the trade war will be a semi-permanent facet of global commerce throughout next year,” Lyngen added. “There is also the very real probability he’s simply raising the stakes as a negotiating tactic.”

If stock and bonds traders took Trump’s remarks as anything more than a negotiating tool, the losses in risk markets and the bid for safe-haven assets like Treasurys would also be more extreme, he wrote.

Trump also ratcheted up economic barbs with French President Emmanuel Macron for comments he made disparaging NATO and the European country’s new digital-services tax.

The French tax imposes a 3% tax on revenues tech companies generate in France, including targeted advertising and digital marketplaces. In response, the White House on Monday said it could impose duties of up to 100% on $2.4 billion in imports of French champagne, cheese and other luxury goods.

“Look, I’m not in love with those companies — Facebook and Google and all of them, Twitter. Though I guess I do well with Twitter,” Trump said from London. “But they’re our companies, they’re American companies. I want to tax those companies. They’re not going to be taxed by France.”

“I’m not going to let people take advantage of American companies because if anyone’s going to take advantage of the American companies it’s going to be us,” he added.

US President Donald Trump speaks during his meeting with Nato Secretary General Jens Stoltenberg at Winfield House, London on December 3, 2019.

NICHOLAS KAMM | AFP | Getty Images

Tuesday’s losses would add to a steep decline from the previous session. The S&P 500 dropped 0.9% on Monday, its worst one-day performance since Oct. 8, while the Dow lost nearly 270 points. The Nasdaq closed down 1% on Monday. The previous session’s pullback was sparked by disappointing manufacturing data as well as renewed trade uncertainty between the U.S. and two South American partners.
Trump announced Monday the U.S. will restore steel and aluminum tariffs on imports from Brazil and Argentina. He also suggested the move was necessary because Brazil and Argentina had been “presiding over a massive devaluation of their currencies.” However, in recent months, both countries have been seeking to strengthen their respective currencies against the dollar.
The South American trade tariffs have rekindled broader concerns about a protracted dispute between the U.S. and China, with investors monitoring the prospect of a limited agreement. Washington and Beijing have imposed tariffs on billions of dollars’ worth of one another’s goods since the start of 2018, battering financial markets and souring business and consumer sentiment.
Ahead of his trip to London, Trump said he was “very happy” the world’s two largest economies were holding talks to try to secure a so-called phase one agreement. The U.S. president has joined other world leaders in the U.K.’s capital city to mark the 70th anniversary of NATO.
On the data front, the latest quarterly financial report will be released at 10 a.m. ET, with light vehicle sales figures for November set to follow slightly later in the session.
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