Rising Trade Tensions May Weigh On Wall Street

The major U.S. index futures are currently pointing to a lower open on Monday, with stocks likely to move to the downside after ending last Friday’s volatile session little changed.

Renewed trade concerns are likely to weigh on the markets amid further signs of rising tensions between the U.S. and China.

China on Monday pushed back against President Donald Trump’s claims that it had broken the Geneva trade agreement, accusing the U.S. of violating the deal with increased tech export restrictions and the revocation of Chinese student visas.

“These practices seriously violate the consensus reached by the two heads of state on January 17, seriously undermine the existing consensus of the Geneva economic and trade talks, and seriously damage China’s legitimate rights and interests,” a Chinese Ministry of Commerce spokesperson said.

A collapse of the U.S.-China trade agreement could lead to considerable weakness among stocks, which have shown a considerable recovery since Trump’s “reciprocal tariff” announcement in early April.

The Trump administration has also announced it will double the current tariff rate on steel and aluminum imports from 25 percent to 50 percent.

Stocks shook off a sluggish start on Friday, with the major averages posting a mild recovery to finish mixed and little changed.

The Dow inched up 54.34 points or 0.1 percent to finish at 42,270.07, while the Nasdaq slipped 62.11 points or 0.3 percent to close at 19,113.77 and the S&P 500 eased 0.48 points or less than a tenth of a percent to end at 5,911.69.

The early selling pressure on Wall Street came after President Donald Trump accused China of violating the trade agreement reached last month.

Trump said in a post on Truth Social that “everything quickly stabilized and China got back to business as usual” following the trade deal.

“Everybody was happy! That is the good news!!!” Trump said. “The bad news is that China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US. So much for being Mr. NICE GUY!”

However, bargain hunters fueled the mild recovery later in the day.

In U.S. economic news, a closely watched report release by the Commerce Department showed consumer prices in the U.S. crept slightly higher in the month of April.

The Commerce Department said its personal consumption expenditures (PCE) price index inched up by 0.1 percent in April after coming in unchanged in March. The uptick matched economist estimates.

The report also said the annual rate of growth by the PCE price index slowed to 2.1 percent in April from 2.3 percent in March. Economists had expected growth to slow to 2.2 percent.

Excluding prices for food and energy, the core PCE price index still crept up by 0.1 percent in April following a revised 0.1 percent uptick in March. The modest increase came in line with expectations.

The annual rate of growth by the core PCE price index slowed to 2.5 percent in April from 2.7 percent in March, matching economist estimates.

The Federal Reserve’s preferred readings on consumer price inflation were included in the Commerce Department’s report on personal income and spending.

The Commerce Department said personal income increased by 0.8 percent in April after climbing by 0.7 percent in March, while personal spending rose by 0.2 percent in April after rising by 0.7 percent in March.

Commodity, Currency Markets

Crude oil futures are soaring $2.90 to $63.69 a barrel after slipping $0.15 to $60.79 a barrel last Friday. Meanwhile, after slumping $28.20 to $3,288.90 an ounce in the previous session, gold futures are surging $72.80 to $3,361.70 an ounce.

On the currency front, the U.S. dollar is trading at 142.72 yen versus the 144.02 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1428 compared to last Friday’s $1.1347.

Asia

Asian stocks closed mostly lower in thin trading on Monday, with mainland China, New Zealand and Malaysian markets closed for holidays.

Trade tensions returned to the fore as Beijing accused U.S. of violating the Geneva trade truce over chip curbs and the Trump administration announced it will double the current tariff rate on steel and aluminum imports from 25 percent to 50 percent.

Escalating Russia-Ukraine tensions and disappointing manufacturing data from China, Japan and South Korea for May also kept investors on edge.

Oil prices jumped over 2 percent in Asian trading as Ukraine launched a major drone strike, destroying 40 key Russian aircraft, further reducing the prospects for an end to the fighting.

Gold also jumped more than 2 percent to trade above $3,350 per ounce as the dollar weakened against its major rivals, weighed down by weakening U.S. macroeconomic fundamentals.

Hong Kong’s Hang Seng Index dropped 0.6 percent to 23,157.97 in view of rising Sino-U.S. tensions and weak PMI data from China.

Tech and EV stocks tumbled as the U.S.-China trade truce risked falling apart over China’s slow-walking on rare-earth exports and the U.S. curbs restricting the sale of chip design software, chemicals, other products to China.

Investors also digested data that showed Chinese factory activity data contracted at a slower pace in May than the month prior.

Japanese markets tumbled as a stronger yen due to rising uncertainties about trade issues weighed on export-related shares such as automakers. The Nikkei 225 Index slumped 1.3 percent to 37,470.67 while the broader Topix Index settled 0.9 percent lower at 2777.29.

Mitsubishi Motors, Honda Motor and Toyota lost 2-3 percent. Chip-related stocks also declined, with Advantest tumbling 3.8 percent and Tokyo Electron falling 1.7 percent.

Seoul stocks recovered from an early slide to end on a flat note. The Kospi finished marginally higher at 2,698.97 ahead of Tuesday’s snap election.

Australian markets ended modestly lower, dragged down by banks and energy stocks on renewed Sino-U.S. trade tensions.

The benchmark S&P/ASX 200 Index dipped 0.2 percent to 8,414.10, while the broader All Ordinaries Index closed 0.3 percent lower at 8,637.50.

Shares of Brickworks soared 27.6 percent after an announcement that the building products maker and investment company Washington H Soul Pattinson’s will merge to create a new A$14 billion entity.

Europe

European stocks are broadly lower on Monday as U.S. President Donald Trump’s decision to double tariffs on steel and aluminum imports along with rising Sino-U.S. tensions threatened to rekindle global trade tensions.

In economic news, the downturn in euro zone manufacturing eased further in May, with the corresponding PMI rising to 49.40 from 49 points in April. The downturn in British manufacturing was also less steep than first feared in the month.

Elsewhere, U.K. house prices grew 0.5 percent on a monthly basis in May, in contrast to the 0.6 percent fall in April, according to data from Nationwide Building Society. Prices were expected to remain flat.

The French CAC 40 Index is down by 0.6 percent and the German DAX Index is down by 0.4 percent, although the U.K.’s FTSE 100 Index has bucked the downtrend and inched up by 0.1 percent.

Indivior has moved to the downside. The pharma firm said it would cancel its secondary listing on the London Stock Exchange, effective July 25.

Atos has also moved notably lower. The company said it has received an offer from the French state for the group’s advanced computing assets.

Meanwhile, Novartis has jumped as it announced upbeat interim analysis results from a Phase III study of its PSMA-targeted radioligand therapy Pluvicto.

GSK has also moved to the upside on news that the U.S. FDA has accepted to review the marketing authorization application for linerixibat.

British Airways owner IAG has also moved sharply higher after launching the second trace of its share buyback program.

U.S. Economic News

The Institute for Supply Management is scheduled to release its report on manufacturing activity in the month of May at 10 am ET. The ISM’s manufacturing PMI is expected to rise to 49.5 in May from 48.7 in April, but a reading below 50 would still indicate contraction.

Also at 10 am ET. The Commerce Department is due to release its report on construction spending in the month of April. Construction spending is expected to increase by 0.3 percent in April after falling by 0.5 percent in March.

Chicago Federal Reserve President Austan Goolsbee is scheduled to participate in a moderated question-and-answer session before the 2025 Quad Cities Business Journal Mid-Year Economic Review at 12:45 pm ET.