Aug 7, 2019

Dow | Before The Bell Update: Stock futures losses accelerate, Dow now set to open 160 points lower

Fred Imbert, Sam Meredith

U.S. stock index futures dropped on Wednesday as the ongoing trade war sparked fears of a global economic slowdown and drove investors away from riskier assets and into traditional safe havens like bonds and gold.  
At around 8:10 a.m. ET, Dow Jones Industrial Average futures indicated a drop of 160 points. S&P 500 and Nasdaq 100 futures also pointed to a drop at the open. Futures were trading higher earlier on Wednesday morning. 
The drop in stock futures came as Treasury yields fell to their lowest level since 2016 while gold reached a more than six-year high. The benchmark 10-year Treasury yield traded at 1.63% after staring August above 2%. The spread between the 10-year rate and the 2-year yield fell to its lowest level since 2007.
Gold futures broke above $1,500 per ounce for the first time since April 2013. The metal’s returns are now higher than the S&P 500′s for the year. 
Tensions between China and the U.S. have been rising since last week, when President Donald Trump announced a 10% tariff on an additional $300 billion worth of Chinese goods. On Monday, China let its currency fall to its lowest level in more than a decade against the U.S. dollar, with the yuan breaking below 7 per U.S. dollar and triggering the worst sell-off of the year on Wall Street. China insists, however, the move was not in response to the newly announced tariff. 
“This looks more like a warning shot than active devaluation, with the yuan’s fall a reflection of worsening economic fundamentals and rising trade tariff risks,” said Mark Haefele, global chief investment officer at UBS GWM. “For policymakers in China, arbitrarily defending the 7.0 mark amid these pressures represents a moral hazard, and one which only worsens the longer it is left to build up.”
The trade war between China and the U.S. has been going on for more than a year. Investors have been worried about its ramifications in terms of global growth and corporate profits. Some central banks have even started cutting interest rates amid these pressures. 
Overnight, New Zealand, India and Thailand all cut interest rates. The Federal Reserve had cut rates last week by 25 basis points.
In corporate news, Disney shares slid on weaker-than-expected results for the previous quarter. Disney’s results were weighed down by increasing losses in streaming services such as Hulu, ESPN+ and  Disney+. The media giant also blamed the integration of Fox’s entertainment assets for the weak numbers. Disney shares traded down more than 3% in the premarket. 
—Reuters contributed to this report.

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