Stock futures pared back losses on Tuesday, but investor kept a close eye on trade tensions after U.S. officials confirmed that China tariffs would be raised by the end of the week.

How are benchmark indexes faring?

From a loss of more than 150 points, Dow Jones Industrial Average futures

YMM9, -0.20%

 were last down 30 points, or 0.1% to 26,373, while S&P 500 futures

ESM9, -0.25%

 dropped 4.4 points to 2,927.50. Nasdaq-100

NQM9, -0.23%

 futures dipped 14.26 points, or 0.2%, to 7,790.

U.S. stocks finished lower on Monday, but recouped deeper losses. The Dow Jones Industrial Average

DJIA, -0.25%

 slid 66.47 points, or 0.3%, to 26,438.48 after being down almost 500 points earlier in the session. The S&P 500 index

SPX, -0.45%

 declined 0.5% to 2,932.47, while the Nasdaq Composite Index

COMP, -0.50%

retreated 0.5%, to 8,123.29 after touching a Monday low near the open at 7,981.85.

What’s driving markets?

U.S. Trade Representative Robert Lighthizer said Monday that the Trump administration will make good on a threat to lift tariffs on $200 billion in Chinese goods early Friday. That threat had been laid out on Sunday by President Donald Trump, catching investors off guard and triggering risk-off activity across global markets.

Read: With Trump threatening to tighten the trade screws, here’s a look at what tariffs have done so far

Further details behind those increased tensions were revealed by Treasury Secretary Steven Mnuchin in a briefing with Lighthizer. He told reporters that the U.S. administration was made aware over the weekend that China was trying to back away from “some of the language” that had been hammered out in prior talks.

U.S. officials said that tariffs on those Chinese goods will rise from 10% to 20% at 12:01 a.m. Eastern time Friday, and markets will likely be monitoring China for further reaction. Thus far, Chinese delegates are expected to arrive for planned trade talks on Thursday, one day later than expected, though it remains unclear exactly who will be representing Beijing.

Chinese stocks took the latest developments in stride, while haven assets appeared to get less of a bid from investors who were adjusting to the latest developments.

What are analysts saying?

“The overriding concern here is that Trump has single-handedly halted the recent recovery in risk appetite by potentially derailing trade talks,” said Jasper Lawler, head of research at London Capital Group, in a note to traders.

Lawler said traders were “placated” by news that Chinese delegates would still arrive in Washington this week for talks, but skeptical the two sides can work out the latest fracture by the Friday deadline. “This means markets probably need to see the Friday deadline for raising U.S. tariffs on Chinese goods pushed back to avoid another selloff,” he said.

How are other markets trading?

In Asia, the Shanghai Composite Index

SHCOMP, +0.69%

 slipped 0.3%, while the Nikkei 225

NIK, -1.51%

back from an extended holiday break, fell 1.6%. European stock futures were pointing to a lower start.


GCM9, -0.05%

 eased slightly, while the U.S. Dollar Index

DXY, -0.02%

 slipped 0.1%, and U.S. crude oil

CLM9, -0.27%

 was flat.

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