US stock futures slip as Trump’s tariff hike looms

Tokyo — US stock futures turned negative and Asian shares pared gains on Friday as global investors waited nervously to see if Washington would suspend its plan to raise tariffs on Chinese imports at midday. 

The White House said the two sides would resume negotiations on Friday morning in Washington after concluding the first of two days of talks on Thursday to rescue a trade deal that is close to collapsing.

There was no word yet from Washington on any change to plans announced earlier this week to raise tariffs on $200bn worth of Chinese goods to 25% from 10% at 4.01am GMT. Beijing has vowed to retaliate.

US President Donald Trump said on Thursday he had received a “beautiful letter” from Chinese President Xi Jinping, stoking hopes of a deal.

“Even though talks don’t seem to be going that well, there’s a glimmer of hope there … it would appear that the extension of the talks is a slight positive. But of course, they’ve been talking a long time. So it’s probably more of a mean reversion trade as opposed to let’s buy that dip,’ said Matt Simpson, senior market analyst at Gain Capital in Singapore.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.8%, led by gains in Chinese shares.

The Shanghai composite rose as much as 3.1% before paring some of its gains and last stood at 2.2%.

Japan’s Nikkei rose 0.7%, while e-mini futures for the US S&P 500 were last down 0.15% in volatile trade.

Still gains were driven by short-covering after heavy selling this week. On the week, the Shanghai index is still down 5.9%, the Nikkei 3.2% and ex-Japan Asia MSCI 4.2%.

“I’d say there’s 50% chance the tariffs will be raised as announced, which should lead to fresh selling in stocks later today,” said Norihiro Fujito, chief investment in Mitsubishi UFJ Morgan Stanley Securities.

Trump also said on Thursday he was taking steps to authorise new tariffs on $325bn in Chinese imports.

Rising geopolitical tensions are not helping.

North Korea fired what appeared to be two short-range missiles on Thursday in its second such test in less than a week and the US said it had seized a North Korean cargo ship.

On Iran, Trump said he could not rule out a military confrontation after Tehran relaxed restrictions on its nuclear programme in response to US sanctions imposed following Trump’s withdrawal of the US from the accord a year ago.

The 10-year US Treasuries yield stood at 2.446% near its lowest levels since late March.

In the currency market, the yen is favoured, with the dollar changing hands at ¥109.83, having hit a three-month low of ¥109.47 on Thursday.

The euro firmed slightly to $1.1226 while the Chinese yuan perked at 6.8453/$ having hit a four-month low of 6.8638/$ the previous day.

MSCI’s emerging market currency index also tumbled to a four-month low.

Oil prices held firm after Trump’s comments on Xi’s letter raised hopes for a deal.

Brent rose 0.5% to $70.78 a barrel while US West Texas Intermediate crude gained 0.8% to $62.16.

Reuters