The major U.S. index futures are pointing to a sharply lower opening on Tuesday, as traders express concerns about a trade war between the U.S. and China.
Trade concerns are likely to weigh on Wall Street after President Donald Trump directed the U.S. Trade Representative to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent.
Trump said the tariffs would go into effect if China refuses to change its unfair trade practices and insists on going forward with recently announced tariffs.
The potential tariffs announced by Trump come as the U.S. and China both announced plans to impose tariffs on up to $50 billion worth of goods imported from the other country.
Trump threatened to pursue additional tariffs on another $200 billion worth of goods if China increases its tariffs yet again.
"The United States will no longer be taken advantage of on trade by China and other countries in the world," Trump said. "We will continue using all available tools to create a better and fairer trading system for all Americans."
Despite the threat from Trump, China vowed to retaliate with "strong" countermeasures if the U.S. goes ahead with the new tariffs.
"This practice of extreme pressure and blackmail deviates from the consensus reached by both parties on many occasions and is disappointing for the international community," the Commerce Ministry said in a statement.
The statement added, "The United States has initiated a trade war that violates market laws and is not in accordance with current global development trends."
Stocks regained some ground after an initial move to the downside but still ended Monday's trading mostly lower. The Dow closed lower for the fifth consecutive session, although the tech-heavy Nasdaq managed to close just above the unchanged line.
While the Nasdaq inched up 0.65 points or less than a tenth of a percent to 7,747.02, the Dow fell 103.01 points or 0.4 percent to 24,987.47 and the S&P 500 dipped 5.79 points or 0.2 percent to 2,773.87.
The weakness on Wall Street reflected lingering concerns about a global trade war after the U.S. and China announced plans to impose tariffs on billions of dollars worth of imported goods.
President Donald Trump announced plans to impose tariffs on $50 billion worth of Chinese goods last Friday, leading China to announce plans to impose tariffs on 545 products imported from the U.S.
Traders have expressed concerns the new tariffs announced by the U.S. and China could negatively affect global economic growth.
On the U.S. economic front, the National Association of Home Builders released a report showing an unexpected deterioration in homebuilder confidence in the month of June.
The report said the NAHB/Wells Fargo Housing Market Index dipped to 68 in June from 70 in May. Economists had expected the index to come in unchanged.
"Builders are increasingly concerned that tariffs placed on Canadian lumber and other imported products are hurting housing affordability," said NAHB Chairman Randy Noel.
He added, "Record-high lumber prices have added nearly $9,000 to the price of a new single-family home since January 2017."
Tobacco stocks turned in some of the market's worst performances on the day, dragging the NYSE Arca Tobacco Index down by 1.5 percent.
Significant weakness was also visible among telecom stocks, as reflected by the 1.2 percent loss posted by the NYSE Arca Telecom Index.
Pharmaceutical, biotechnology and semiconductor stocks also showed notable moves to the downside, while energy stocks rebounded along with the price of crude oil.
Commodity, Currency Markets
Crude oil futures are tumbling $1.03 to $64.82 a barrel after climbing $0.79 to $65.85 a barrel on Monday. Meanwhile, after rising $1.60 to $1,280.10 an ounce in the previous session, gold futures are sliding $3.90 to $1,276.20 an ounce.
On the currency front, the U.S. dollar is trading at 109.91 yen compared to the 110.55 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1555 compared to yesterday's $1.1623.
Asia
Asian shares tumbled on Tuesday as a trade dispute between the U.S. and China intensified and oil turned volatile ahead of a critical meeting of crude-producing nations that will determine whether it's time to ramp up production.
Traders eyed looming trade wars after President Donald Trump threatened new tariffs on $200 billion worth of Chinese goods and Beijing vowed to "immediately" retaliate.
Chinese stocks hit a two-year low and the yuan weakened after the Ministry of Commerce vowed to retaliate with "strong" countermeasures against U.S. companies, deepening a trade dispute between the world's two biggest economies.
The benchmark Shanghai Composite Index plunged 115.47 points or 3.8 percent to 2,906.43, while Hong Kong's Hang Seng Index plummeted 841.34 points or 2.8 percent to close at 29,468.15.
Japanese shares posted their biggest single-day loss in three months to reach 2-1/2-week lows as a strong yen amid escalating global trade tensions soured investors' appetite for risk.
The Nikkei 225 Index ended down 401.85 points or 1.8 percent at 22,278.48, the lowest level since June 1st, as the dollar fell below 110 yen. The broader Topix Index closed 1.6 percent lower at 1,743.92.
China-related Komatsu fell 2.5 percent and Hitachi Construction Machinery dropped 1.5 percent. Fujifilm Holdings shed 1.6 percent after it sued Xerox for a canceled merger. Flea market app Mercari soared 76.7 percent from its IPO price on its debut on the Tokyo Stock Exchange.
Australian shares gave up early gains to finish marginally lower as the Reserve Bank of Australia's June board meeting minutes offered little surprise on the macro front. The benchmark S&P/ASX 200 Index closed just below the unchanged line at 6,102.10.
Mineral Resources slumped 4.4 percent as junior miner Atlas Iron gave it three days to match a buyout offer from Hancock Prospecting.
Meanwhile, healthcare stocks such as CSL and Cochlear climbed 1-3 percent as the Aussie dollar extended its slide to hit a fresh 2018 low.
Energy stocks such as Woodside Petroleum, Santos and Oil Search all rose about 1 percent, helped by an overnight rebound in crude oil prices. Macquarie Group rallied 1.8 percent after Morgan Stanley upgraded the investment bank's stock rating. The big four banks ended on a mixed note.
IAG jumped 2.4 percent after it entered into an agreement with Japanese insurer Tokio Marine & Nichido Fire Insurance Co. to sell its Thai and Indonesian operations.
Europe
European stocks have fallen sharply to two-month lows on Tuesday as a slew of profit warnings coupled with an escalating trade spat between the world's two biggest economies soured investors' appetite for risk.
While the U.K.'s FTSE 100 Index has fallen by 0.6 percent, the French CAC 40 Index and the German DAX Index are down by 1.3 percent and 1.4 percent, respectively.
Carmakers are among the major losers on concerns that more U.S. tariffs on car imports could be on the horizon.
Netherlands-based telecom operator Altice has fallen on reports that it may sell a stake in its telecom towers business to private equity firm KKR.
Department stores group Debenhams has also moved notably lower in London after issuing another profit warning for the third time this year.
Similarly, Footasylum shares has plunged after the footwear retailer noted that trading since the beginning of the new financial year has been impacted by the widely documented weak consumer sentiment on the high street.
In economic news, the euro area current account surplus declined to a 10-month low in April, the European Central Bank reported.
The current account surplus fell to 28.4 billion euros in April from 32.8 billion euros in March. This was the lowest surplus since June 2017.
Meanwhile, European Central Bank President Mario Draghi said the bank will remain patient in determining the timing of the first interest rate increase and will take a gradual approach to adjusting policy thereafter.
At a conference in Sintra, Portugal, Draghi said the bank stands ready to adjust all instruments as appropriate to ensure that inflation continues to move towards the target.
U.S. Economic Reports
While the Commerce Department released a report showing a much bigger than expected jump in new residential construction in the U.S. in the month of May, the report also showed a much steeper than expected drop in building permits.
The report said housing starts spiked by 5.0 percent to an annual rate of 1.350 million in May after tumbling by 3.1 percent to a revised rate of 1.286 million in April.
Economists had expected housing starts to climb by 1.8 percent to a rate of 1.310 million from the 1.287 million originally reported for the previous month.
Meanwhile, the Commerce Department said building permits plunged by 4.6 percent to an annual rate of 1.301 million in May after falling by 0.9 percent to a revised rate of 1.364 million in April.
Building permits, an indicator of future housing demand, had been expected to edge down by 0.1 percent to a rate of 1.350 million from the 1.352 million originally reported for the previous month.
Stocks In Focus
Shares of Tesla (TSLA) are moving notably lower in pre-market trading after a report from CNBC said CEO Elon Musk sent a company-wide email claiming an unnamed employee had engaged in "extensive and damaging sabotage."
Toy maker Mattel (MAT) may also move to the downside after UBS downgraded its rating on the company's stock to Neutral from Buy.
On the other hand, shares of Foundation Medicine (FMI) are moving sharply higher in pre-market trading after Swiss drug giant Roche agree to acquire the outstanding shares of the company it does not already own for $2.4 billion.
Telecom giant Verizon (VZ) may also see early strength after Deutsche Bank upgraded its rating on the company's stock to Buy from Hold.
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