US open: Stocks tumble as trade war tensions escalate, Harley-Davidson warns on EU tariffs

US stocks slumped in early trade on Monday as weakness in the technology and energy sectors, a warning from Harley-Davidson on the impact of EU tariffs and more trade threats from President Trump dented risk appetite.

At 1550 BST, the Dow Jones Industrial Average was down 1% to 24,335.47, the S&P 500 was 1% lower at 2,726.90 and the Nasdaq was 1.5% weaker at 7,576.43. Neil Wilson, chief market analyst at Markets.com, pointed out that 24,280 is "the magic number" for the Dow and said a close below this level would be a sign that the market is prepared to test new lows.

Trump has threatened to curb Chinese investments in the US for reasons of "national security", with a draft series of restrictions on inbound Chinese investments due to be published later in the week. He also threatened at the end of last week to impose a 20% tariff on all European cars after the EU began implementing tariffs on Friday on $3.2bn of US imports.

Spreadex analyst Connor Campbell said: "Things worsened as the US markets got involved this Monday, the trade war fearing losses turning even uglier as the afternoon wore on.

"Beyond the basic fact of the rumoured next round of China-attacking trade restrictions set to be announced by Trump this week, ones specifically targeting the tech sector, an announcement from Harley-Davidson seems to have played its role in the bloodying of trading boards this Monday. The motorcycle firm said it would be shifting production of bikes for EU destinations out of the US in order to avoid the ‘substantial’ burden of the retaliatory tariffs introduced by the European Union last week.

"That concrete example of the impact of Trump’s approach to trade has added fuel to the market dumpster fire, with the Dow Jones nearly doubling the losses suggested by its futures."

Harley-Davidson, which was trading down nearly 5%, also said that EU tariffs were likely to cost the company $90m to $100m on an annual basis.

Elsewhere, energy shares took a hit as Brent crude gusher lower after an initial surge following Opec's decision last Friday to boost production, with Chevron and Exxon Mobil both in the red.

Semiconductor stocks were also on the back foot on news that Trump is planning to further restrict China's investment in US technology companies.

General Electric fell after saying it has agreed to sell its distributed power business to private equity firm Advent International for $3.25bn.

Education Realty Trust bucked the trend, pushing higher after announcing it has agreed to be bought by Greystar Student Housing Growth and Income Fund in an all-cash deal valued at around $4.6bn.

On the data front, a widely-followed gauge of US economic activity turned lower in May, but remained above levels seen the previous year.

The Federal Reserve Bank of Chicago's national activity index slipped from a reading of +0.42 points for April to -0.15 in May. That saw its three-month moving average slow from a reading of +0.48 in the month before to +0.18.

Production-related indicators accounted for the bulk of the move to the downside, contributing -0.29 points in May, versus +0.33 in April.

The contribution from personal consumption and housing was slightly more negative as well, with their contribution slipping from -0.03 to -0.04.

In the same month one year ago the, the activity index stood at -0.19, while the three-month moving average was at +0.10.

Data from the Commerce Department, meanwhile, showed that sales of new US single-family homes rose in May.

New home sales were up 6.7% to a seasonally-adjusted annual rate of 689,000 from a revised rate of 646,000 in April. Economists had been expecting a rate of 667,000. Compared with May 2017, new home sales were up 14.1%.

The median price of a new home was $313,000, down from $318,500 in April.