By William Watts, MarketWatch

Brexit fears re-emerge

Stock-index futures point to a lower start for Wall Street Friday as a bounceback from a rout inspired by the U.S.-China trade battle appears in danger of running out of steam, after reports in Chinese state media indicated little appetite from the Chinese to continue trade talks following Trump administration's move to raise tariffs on Chinese imports last week.

How are the major benchmarks performing?

Futures for the Dow Jones Industrial Average fell 158 points, or 0.6% to 25,705, while those for the S&P 500 lost 18.10 points, or 0.6%, to 2,864.5 Nasdaq-100 futures , meanwhile, declined 59.50 points, or 0.8% to 7,541.

On Tuesday, the Dow Jones Industrial Average rallied 214.66 points, or 0.8%, to 25,862.68, and the S&P 500 index climbed 25.36 points, or 0.9%, to 2,876.32. The Nasdaq Composite Index rose 75.90 points, or 1%, to 7,898.05.

What's driving the market?

The Chinese government and state media sent a clear signal to markets Thursday and Friday that it is reluctant to resume trade talks with the U.S., when a spokesman for the Ministry of Commerce called the Trump administration's moves (http://www.xinhuanet.com/english/2019-05/16/c_138064271_2.htm) to raise tariffs last week, and the threat of additional tariffs on the roughly $300 billion in annually imported Chinese so far untouched by new duties, "bullying behavior," that has resulted in "severe negotiating setbacks."

Chinese state media also took aim at the Trump administration's decision to put Chinese tech giant Huawei Technologies Co. Ltd. on a list of entities that are working contrary to U.S. interests, which could result in U.S. companies needed to secure special permits to sell the company chips it relies on for end products.

See:Trump's Huawei ban rattles shares of chip suppliers (http://www.marketwatch.com/story/trumps-huawei-ban-rattles-shares-of-chip-suppliers-2019-05-16)

State-run media, including the Communist Party's People's Daily and Xinhua News Agency, published scathing attacks on U.S. actions in recent days. "The United States has made an irrational act in trying to blackmail China with tariff hikes, which will be proven over time to be shortsighted and doomed to fail," read an editorial (http://www.xinhuanet.com/english/2019-05/16/c_138064262.htm) in the Xinhua early Friday.

Foreign Ministry spokesman Lu Kang was asked about these reports Friday and said, "because of certain things the U.S. side has done during the previous China-U.S. trade consultations, we believe if there is meaning for these talks, there must be a show of sincerity," according to Reuters (https://www.reuters.com/article/us-usa-trade-china-media/china-evokes-patriotism-past-wars-as-trade-conflict-with-u-s-heats-up-idUSKCN1SN094).

The Ministry of Commerce also said that the Chinese economy will be able to withstand the effects of new trade sanctions. "With many policy tools and adequate room for macro policies, China is confident and capable of coping with any difficulty or challenge," a spokesman said, according to Xinhua.

Meanwhile, the British pound came under pressure (http://www.marketwatch.com/story/british-pound-slumps-to-3-month-low-on-no-deal-brexit-fears-2019-05-16) after talks between the country's Labour and Conservative parties ended without an agreement on how to leave the European Union, raising fears of a disorderly exit, potentially further adding to geopolitical uncertainty that has weighed on global equity markets.

What are analysts saying?

"Despite yesterday's rebound during the EU and U.S. sessions we are still reluctant to trust a long-lasting reversal in risk appetite," wrote Charalambos Pissouros, senior market analyst with JFD Group in a Friday note. "With the U.S. attacking China, and China willing to respond to any actions taken by the U.S., we cannot assume that the worst is behind us . . . we would like to see concrete 'truce' signals before we get confident that equities could scale back their recent losses."

 

(END) Dow Jones Newswires

May 17, 2019 07:55 ET (11:55 GMT)

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