By Amy Caren Daniel

(Reuters) – U.S. stock index futures fell on Tuesday, tracking a global shift out of riskier assets, as investors grappled with simmering geopolitical tensions and fears of a recession due to a drawn-out U.S.-China trade war.

Increasingly violent protests in Hong Kong and a crash in Argentina’s currency and its stock market pushed up demand for U.S. bonds, gold and the Japanese yen.

“Where markets head next will largely hinge on whether the threatened tariffs are implemented, and how the Federal Reserve responds,” Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote in a note.

President Donald Trump’s latest tariff threat on Chinese goods has raised bets of at least three more rate cuts this year, with a reduction in rates at the Fed’s September meeting being fully priced in, according to CME Group’s FedWatch program. [MMT/]

The U.S. central bank lowered key borrowing rates for the first time in more than a decade in July and flagged risks from the ongoing trade war on economic growth.

At 6:40 a.m. ET, were down 36 points, or 0.14%. S&P 500 e-minis were down 3.75 points, or 0.13% and were down 17.25 points, or 0.23%.

Industrial bellwethers Caterpillar Inc (N:) and Boeing Co (N:) slipped 0.5% and 0.3%, respectively, in premarket trading.

Chipmakers, which depend on China for a large portion of their revenue, were also under pressure. Micron Technology Inc (O:), Nvidia Corp (O:) and Advanced Micro Devices Inc (O:) fell between 0.3% and 1.25%.

FAANG group of stocks – Facebook Inc (O:), Inc (O:), Apple (O:), Netflix Inc (O:) and Google-parent Alphabet Inc (O:) – fell between 0.6% and 0.8%.

A survey showed German business sentiment plunged far more than expected in August, hurt by trade disputes and higher chances of a no-deal Brexit, painting a dismal picture of Europe’s biggest economy.

The Labor department’s June consumer price index (CPI) data will be closely watched as tame U.S. inflation remains a worry. Economists polled by Reuters expect CPI to rise 0.3% in July, compared with a gain of 0.1% in June.

In a bright spot, China’s Inc (O:) rose 4.6% after the e-commerce company beat estimates for quarterly revenue and forecast third-quarter sales above expectations.

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