US pre-open: Stocks to drop as trade worries intensify
US stocks looked set to drop at the open on Tuesday as worries about trade relations between the US and China intensified as it emerged that Beijing is set to ask the World Trade Organization permission to impose sanctions on the US.
At 1240 BST, Dow Jones Industrial Average futures were down 0.5%, while S&P 500 and Nasdaq futures were 0.3% lower.
According to the WTO's meeting agenda, China will ask permission to impose sanctions on the US next week. The request - which follows US President Trump's latest threat to impose tariffs on a further $267bn of Chinese goods, on top of the $200bn already planned - relates to non-compliance by the US with a ruling in a dispute over dumping duties that dates back to 2013.
"This news immediately sparked fears that the next round of trade war-escalation isn’t far off," said Spreadex analyst Connor Campbell.
There was some good news, however, as the US government confirmed it is in the process of arranging a second meeting between President Trump and North Korea’s Kim Jong Un.
CMC Markets analyst David Madden said: "The announcement is seen as a step in the right direction for political stability in the region."
In corporate news, Sonos was sharply lower in pre-market trade after the company's first earnings release since its IPO revealed a drop in revenue and an earnings loss of 45 cents per share.
Elsewhere, Integrated Device Technology Inc surged ahead of the open after Japan's Renesas Electronics said it would buy the US chip maker in a $6.7bn deal.
Data released earlier showed that US small business optimism hit its highest level ever in August. The National Federation of Independent Business's small business optimism index rose to 108.8, a new record in the survey's 45-year history, from 107.9 the month before. This was ahead of expectations for a reading of 108.2.
NFIB president and chief executive officer Juanita Duggan said: "Today’s ground-breaking numbers are demonstrative of what I’m hearing every day from small business owners - that business is booming. As the tax and regulatory landscape changed, so did small business expectations and plans.
"We’re now seeing the tangible results of those plans as small businesses report historically high, some record breaking, levels of increased sales, investment, earnings, and hiring."
Pantheon Macroeconomics economist Ian Shepherdson said: "The record headline is eye-catching but the labour market components released last week meant that a clear increase was always likely. The really good news today, then, is the three-point jump in capex intentions, finally completing the reversal of the post-hurricane weakening last year and taking the index – just - to an 11-year high. It’s not possible to say whether this is a consequence of the tax cuts or would have happened anyway, but the fact that year-on-year business capex in the GDP numbers has been rising steadily since mid-2016 points to the latter."
Still to come, JOLTS job openings are at 1500 BST, along with wholesale inventories.