US equity-index futures extended a retreat alongside European stocks on Tuesday as investor optimism over looming trade talks was knocked by news the White House is moving towards possible restrictions on capital flows into China. Treasuries and gold advanced.
Contracts for the three major US gauges had gained earlier, but they reversed after China said it strongly opposed an American decision to blacklist some of its technology firms over involvement in alleged human-rights abuses. Losses deepened when Bloomberg reported the Trump administration is moving ahead with discussions around possible restrictions on capital flows, with a particular focus on investments made by US government pension funds. The Stoxx Europe 600 Index fell after two days advancing.
The euro climbed as a jump in manufacturing fuelled a surprise improvement in German industrial production, while most European bonds tracked Treasuries higher. The pound extended its decline after Boris Johnson told German Chancellor Angela Merkel a Brexit deal is essentially impossible if the EU demands Northern Ireland should stay in the bloc’s customs union.
Official confirmation that Chinese Vice Premier Liu He and People’s Bank of China Governor Yi Gang will both head to Washington for negotiations generated some optimism during Asian trading, but the mood changed as China signalled it would hit back after America decided to blacklist eight of its tech firms.
Foreign Ministry spokesman Geng Shuang said the US is interfering in his country’s internal affairs.
Asian equity benchmarks had jumped from Tokyo and Seoul to Shanghai and Hong Kong, where trading showed little concern about ongoing unrest. The tech-heavy South Korean index led the regional advance after Samsung Electronics Co earnings beat analyst estimates.
Elsewhere, Turkey’s lira stabilised after tumbling Monday in wake of US President Donald Trump threatening to “destroy” the country’s economy if it acts in excess in a military operation targeting Kurdish forces in Syria. West Texas crude fluctuated.
Fed Chairman Jerome Powell was expected to speak on Tuesday on the final day of NABE’s annual conference in Denver;
on the following day, minutes are released on the last policy meeting of the Fed’s rate-setting committee. The account of the ECB’s last gathering is due on Thursday. Chinese President Xi Jinping and Indian PM Narendra Modi reportedly will meet at an unofficial summit.
The US releases a key measure of inflation on Thursday.
Futures on the S&P 500 Index fell 0.6% in London. The Stoxx Europe 600 Index sank 1%. The UK’s FTSE 100 Index declined 0.2%. The MSCI Asia Pacific Index gained 0.6%. The MSCI Emerging Market Index increased 0.2%.
The Bloomberg Dollar Spot Index was little changed. The euro gained 0.2% to $1.099. The British pound declined 0.6% to $1.2214. The Japanese yen advanced 0.3% to 106.90 per dollar. The yield on 10-year Treasuries decreased three basis points to 1.53%.