Lower Open Likely For US Markets Over Mexico Tariffs: Oil Down

Lower open expected for the U.S. stock markets Friday after President Donald Trump’s threat to impose tariffs on Mexican imports pulled down top stock market futures on Friday morning.

Around 6:57 a.m. ET, Dow futures showed a negative open of more than 258 points. Futures on the S&P 500 and Nasdaq were down 1.2 percent and 1.5 percent respectively.

Investors fear Trump’s threat of tariffs will push the U.S. economy into a recession.

Trump warned that the tariffs starting at 5 percent on Mexico from June 10 could increase to 25 percent by early October if it fails to act on checking the influx of undocumented migrants to the U.S. southern border.

On Friday morning, the 10-year Treasury yield dropped to a new low of 2.154 percent. It was more than 2.5 percent in early May.

Asian markets mixed as China’s factory data dips

Asia stocks had a mixed outlook on Friday after the fall of manufacturing data below the expectations of analysts.

Japan’s Nikkei 225 fell 1.63 percent, while the Topix index dropped 1.29 percent. Mainland Chinese stocks traded lower with the Shanghai composite declining 0.24 percent.

Australia’s ASX 200 moved up fractionally, while South Korea’s Kospi jumped 0.14 percent. The Hang Seng index of Hong Kong slipped 0.7 percent in the final hour of trading.

China’s manufacturing activity declined in May. The official manufacturing Purchasing Managers’ Index (PMI) for May was down to 49.4, versus 49.9 expected by economists. If PMI is below 50, it indicates contraction.

According to Jian Chang, China economist at Barclays, the breakdowns show trade-related indices have fallen significantly. He said the recent tariff hike by the U.S from 10th of May has played a big role in driving down China’s orders and business sentiments.

In Europe, markets fell sharply following President Trump’s threat to impose a 5 percent tariff on all Mexican imports.

The pan-European Stoxx 600 plunged 1.3 percent and hit the lowest level in three months.

Oil down

Oil plunged on Friday and the oil market is heading towards its biggest monthly drop in six months.

The outlook on demand became tight after Trump announced tariffs on Mexican goods as a penalty on not curbing illegal immigration.

Brent crude futures fell to $65.72 at 0844 GMT, shedding $1.15 from last session’s close. The U.S. West Texas Intermediate (WTI) crude futures were down 74 cents at $55.85 per barrel, from the last settlement.

Gold jumps

In gold price, a revival was seen on Friday with the yellow metal heading towards the first monthly gain since January after safe-haven demand increased.

The new trigger was U.S. President Donald Trump’s threat to clamp tariffs on Mexican imports. It hiked concerns of a global economic slowdown.

Spot gold jumped 0.5 percent at $1,294.72 per ounce at 0711 GMT. The U.S. gold futures soared 0.6 percent to $1,294.70 an ounce.