US pre-open: Stocks set to tumble as Trump declares trade war on another front

Wall Street futures were pointing to heavy losses at the bell after Donald Trump made a surprise announcement that the US would impose tariffs on imports from Mexico.

As of 1105 BST, Dow futures indicated losses of 1.11% at the opening bell, with the S&P 500 and Nasdaq on track to tumble by 1.20% and 1.52%, respectively.

The Dow looked set to open 279 points lower following the news, which itself came amidst reports that China could be readying fresh retaliatory moves against the US.

Hu Xijin, the editor of Chinese tabloid the Global Times, tweeted: "Based on what I know, China will take major retaliative measures against the US placing Huawei and other Chinese companies on Entity List.

"This move indicates Beijing will not wait passively and more countermeasures will follow."

Elsewhere, Bloomberg revealed that Beijing had a plan in place to restrict exports of rare earth materials to the US if the Asian power feels necessary to do so.

The measures were said to be focussed on heavy rare earths, used in vehicles and many consumer products.

With China still in mind, market participants were also coming to terms with negative economic data out of the country, as manufacturing activity contracted in May, weighed down by weaker export orders as a result of the escalating trade tensions with Washington.

Oanda analyst Craig Erlam said: "The President is still engaged in a trade war with China, one that’s turned sour and looks set to escalate before compromise will be found.

"Moreover, he's slapping tariffs on another major trading partner before the USMCA is ratified and ahead of an election year. And that's before you throw a wobbly stock market into the equation, with the tariffs only likely to make nervy investors more anxious."

On the US data front, personal income, consumer spending and core inflation figures for April were all due at 1330 BST.

The Chicago purchasing managers index for May will be posted at 1445 BST and the consumer sentiment index will follow at 1400 BST.

Things were quite light on the corporate calendar, with just Big Lots, Currency Exchange International and Elastic NV reporting earnings on Friday.