US pre-open: Stocks to edge lower as US-China tensions escalate

US stocks looked set to edge lower on Monday as trade tensions resurfaced after China called off planned trade talks with Washington over the weekend and as fresh tariffs on Chinese imports kick in.

At 1410 BST, Dow Jones Industrial Average and S&P 500 futures were down 0.1% and 0.2%, respectively, while Nasdaq futures were 0.4% lower.

Joshua Mahony, market analyst at IG, said: "Hopes of renewed trade talks between the US and China have been thrown out, with China ruling out further talks amid supposed ‘blackmail’ by the US. For most countries Trump’s policy of forcing trade deals through the imposition of tariffs has worked, yet in China he is facing a substantial stumbling block that is proving a longer haul issue.

"While markets no doubt believe that the current trade concerns are unlikely to be the beginning of a long-term phenomenon, the latest breakdown in talks highlights the possibility that this will rumble on for some time yet. With the US midterms ahead, Trump is unlikely to give any concessions at the risk of seeming less effective, thus lessening any hopes of a breakthrough in the coming months."

A 10% levy on $200bn worth of Chinese goods came into effect on Monday. Meanwhile, China has retaliated to this US levy by announcing tariffs on an additional $60bn of imports from the US.

Oil stocks could be a bright spot as Brent crude hit its highest level since 2014, climbing above $80 a barrel after OPEC and its allies refrained from agreeing a production increase over the weekend.

David Cheetham, chief market analyst at XTB, noted that OPEC and its allies had been rumoured to be considering raising their output by 500,000 barrels a day at their meeting in Algeria and this speculation caused a swift drop in the price on Friday afternoon.

"This rumour was given greater credence by a Trump tweet a couple days beforehand in which the US president called for the organisation to get prices down, but the inaction has buoyed the market which has opened up strongly following the inaction."

In corporate news, Michael Kors shares were likely to be active following reports it's on the cusp of agreeing a $2bn deal to buy Italian fashion house Versace.

Elsewhere, Comcast was likely to be in focus after outbidding 21st Century Fox over the weekend for London-listed broadcaster Sky.

On the data front, the Chicago Fed national activity index for August is at 1330 BST, while the Dallas Fed manufacturing business index for September is at 1530 BST.