U.S. stock futures tumbled Friday after President Donald Trump made a surprise announcement to impose tariffs on imports from Mexico, and amid reports China may be readying fresh retaliatory moves against the U.S.

How are major benchmarks faring?

Dow Jones Industrial Average futures

YMM19, -0.88%

fell 271 points, or 1%, to 24,922, while S&P 500 futures

ESM19, -0.92%

dropped 29.15 points, or 1%, to 2,762 and Nasdaq-100 futures

NQM19, -1.23%

futures slid 87.25 points, or 1.2%, to 7,168.

On Thursday, the Dow Jones Industrial Average

DJIA, +0.17%

rose 43.47 points, or 0.2%, to close at 25,169.88. The S&P 500 index

SPX, +0.21%

gained 5.84 points, or 0.2%, to 2,788.86 and the Nasdaq Composite Index

COMP, +0.27%

 climbed 20.41 points, or 0.3%, to 7,567.72.

What’s driving the market?

Late Thursday, just as Asian markets began trading, Trump announced in a tweet that the U.S. would impose a 5% tariff on all goods from Mexico until that country stops the flow of illegal immigrants into the country. He said the tariffs will rise to 10% on July 1 if the crisis persists, and by another 5% for every successive month, up to 25% by Oct. 1.

“Tariffs will permanently remain at the 25 percent level unless and until Mexico substantially stops the illegal inflow of aliens coming through its territory,” Trump said. Earlier Thursday, the White House administration triggered the process for submitting a bill to Congress that would implement the new the United States-Mexico-Canada Agreement, the successor to the North American Free Trade Agreement.

Stock futures fell on the Mexico news, then dropped lower during early European trading after a tweet from Hu Xijin, the widely followed editor of the Global Times, a Chinese tabloid believed to have a pro-government slant. “Based on what I know, China will take major retaliative measures against the U.S. placing Huawei and other Chinese companies on Entity List. This move indicates Beijing will not wait passively and more countermeasures will follow,” the editor tweeted.

The Mexican peso

USDMXN, +2.6042%

was under attack, with that currency recently down over 2% against the dollar to the weakest level in over two months.

Rattled investors also moved into perceived haven assets such as bonds, with the yield on the 10-year note

TMUBMUSD10Y, -2.44%

dropping 4 basis points to 2.1775% — a September 2017 low. Gold

GCQ19, +0.57%

 was also higher, climbing 0.5% to $1,297.80 an ounce, while the Japanese yen

USDJPY, -0.74%

climbed 0.6% against the dollar.

Also on the China trade front, Bloomberg reported that Beijing has a plan ready to go to restrict exports of rare earth materials to the U.S. if they feel it is necessary. Those measures would be concentrated on heavy rare earths, which are used in autos and lots of consumer products and particularly needed by the U.S. News that China might use the rare earth materials a lobby against the U.S. as a trade weapon rattled markets earlier in the week.

Investors were also dealing with negative economic news out of China, as manufacturing activity contracted in May, weighed by weaker export orders amid escalating trade tensions with the U.S.

In the U.S., personal income, consumer spending and core inflation for April are due at 8:30 a.m. Eastern Time, followed by the Chicago purchasing managers index for May at 9:45 a.m. Eastern and the consumer sentiment index at 10 a.m. Eastern. See a data preview here.

What are analysts saying?

“Trump is going all out here. The move to start a trade war on another front has shaken sentiment in an already fragile market,” said Jasper Lawler, head of research at London Capital Group, in a note to clients.

Lawler added that the fresh data on China was also of concern for investors. “China’s manufacturing sector is clearly being hit by US tariffs. This is heightening concerns over a global growth slowdown. Miners could have a rough run today.” he said.

How were other markets trading?

Stocks in Asia were mixed, with the Japan’s Nikkei 225

NIK, -1.63%

falling 1.6% as the yen climbed and weighed on exporters. China’s Shanghai Composite Index

SHCOMP, -0.24%

was steady, while Europe stock futures were under pressure.

In commodities markets, oil prices

CLN19, -0.94%

fell another 1%, and the ICE Dollar Index

DXY, -0.17%

was fractionally lower.

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