Monday June 18th


Dow set to drop 200 points as trade tensions linger

U.S. stock index futures fell sharply ahead of Monday's open amid heightened trade tensions between the U.S. and China, the two largest economies in the world. At 7:42 a.m. ET, Dow Jones industrial average futures dropped 203 points, indicating a negative open of 204.48 points. Nasdaq 100 and the S&P 500 futures also indicated a negative start to the session for their respective markets. Shares of Boeing and Caterpillar both fell 1 percent in the premarket. The two companies are seen as bellwethers for global trade concerns given their large amounts of overseas business. On Friday, President Donald Trump announced that the U.S. would inflict tariffs that would impact up to $50 billion worth of Chinese goods. According to Washington, the action comes "in light of China's theft of intellectual property and technology and its other unfair trade practices." Consequently, the move triggered China to retaliate, with Beijing announcing its own selection of duties on U.S. goods. The Chinese State Council's commission on tariffs and customs stated that a 25 percent tariff would occur in early July on $34 billion of U.S. products. "There are many problems with tariffs. First and foremost is that they benefit far fewer people than they harm," said Ed Yardeni, president and chief investment strategist at Yardeni Research, in a note. "They are intended to boost employment in the industries that benefit from such protectionism, but they immediately raise prices of the protected goods for all consumers." Still, stocks "may continue to zig and zag through the summer as the Jekyll and Hyde sides of Trump struggle to dominate his persona," he said. "On the one hand, there's Trump, the Deregulator and Tax-Cutter—his benevolent Dr. Jekyll persona. On the other is Trump, the Protectionist—his dark Mr. Hyde." International markets also traded deep in the red on Monday, with Asia closing lower and Europe posting strong losses. Japan's Nikkei 225 declined 0.75 percent, or 171.42 points, to close at 22,680.33. South Korean markets recorded steeper losses, with the benchmark Kospi ending the session down 1.16 percent at 2,376.24. Markets in China, Hong Kong, Taiwan and Indonesia were closed on Monday for holidays. The moves Monday come after the major U.S. indexes closed well off session lows on Friday, as investors tried to shrug off concerns over trade. In data, the business leaders' survey is due out at 8:30 a.m. ET, followed by the NAHB/Wells Fargo Housing Market Index at 10 a.m. ET. No major corporate earnings are scheduled to be published. Oil prices rose on Monday ahead of an OPEC meeting this week that is widely expected to increase global crude supply and as investors assessed the impact of a trade dispute between the United States and China. International oil prices rose, with Brent crude futures up 83 cents, or 1.1 percent, at $74.27 per barrel by 8:39 a.m. ET (1239 GMT). U.S. West Texas Intermediate (WTI) crude edged up 23 cents to $65.29, after earlier touching a two-month low at $63.59 per barrel. Brent hit a 3½-year high above $80 a barrel in May but has since eased back on reports that top suppliers Saudi Arabia and Russia will increase production. Gold prices inched higher on Monday after falling to a 5-1/2-month low in the previous session, as a trade dispute between the world's two largest economies triggered safe-haven buying, but a strong dollar put a cap on the upside. Spot gold edged up 0.1 percent to $1,279.70 per ounce by 0255 GMT. The yellow metal touched its weakest since late December at $1,275.01 an ounce on Friday. U.S. gold futures for August delivery were up 0.3 percent at $1,282.10 per ounce.