U.S. equity futures weakend Monday, while European stocks extended gains, as global investor concern over an impending trade war eased and government bond yields pulled away from multi-year highs.
Contracts tied to the Dow Jones Industrial Average marked 74 points lower from Friday's close, indicating an opening bell decline of 71 points while those linked to the broader S&P 500 were priced 9 points to the downside after an early indication of an 18.75 decline earlier in the session amid concern over a potentially growth-damaging trade war between the United States and its various commercial and economic partners.
We are on the losing side of almost all trade deals. Our friends and enemies have taken advantage of the U.S. for many years. Our Steel and Aluminum industries are dead. Sorry, it's time for a change! MAKE AMERICA GREAT AGAIN!
- Donald J. Trump (@realDonaldTrump)March 5, 2018The U.S. dollar index, which gauges the greenback against a basket of six global currencies, was marked 0.2% lower from Friday's opening levels to 90.07 while benchmark 10-year Treasury yields were seen about 1.5 basis points lower from Friday at 2.84%. Gold prices were marked 0.25% higher at $1,325.60 while bitcoins were quoted at $11,485 each on the bitstamp exchange in Luxembourg.
When i surveyed trade this weekend to see where retaliation might be i come back with remarkably few companies that can be retaliated against.. .
- Jim Cramer (@jimcramer)March 5, 2018President Donald Trump's Tweets followed escalating war of words with European Commission President Jean-Claude Juncker over the weekend, both of which threatened specific sectors in each other's economies as potential targets for tariffs and trade barriers after Trump reveal his intention to slap a 25% levy on steel imports late last week.
"If the Americans impose tariffs on steel and aluminum, then we must treat American products the same way," Juncker said Friday when he detailed a package of tariffs that could impact $3.5 billion in U.S. exports. "We must show that we can also take measures. This cannot be a unilateral transatlantic action by the Americans."
"So now we will also impose import tariffs. This is basically a stupid process, the fact that we have to do this. But we have to do it. We will now impose tariffs on motorcycles, Harley Davidson (HOG) , on blue jeans, Levis, on Bourbon."
"We can also do stupid," he said.
Trump fired back the following day with a Tweet that vowed reciprocal tariffs on European cars as he alluded to a $22.3 billion "automotive vehicle and parts" trade deficit last year with Germany.
Europe's Stoxx 600 benchmark, the region's broadest measure of share prices was marked 0.52% higher from Friday's close in early trading even as investors clipped prices for German automakers following a weekend Tweet from President Donald Trump that suggested they could be his next trade tariff target.
Germany's DAX performance index gained 0.73% by mid-day in Frankfurt even as gains were held down by notable declines for Volkswagen AG (VLKAY) , which fell 1% to ?,?157.7, rival Daimler AG (DMLRY) which slid .0.71% to ?,?67.37 and BMW AG (BMWYY) slumped 1.32% to ?,?83.34 each.
France's AXA SA (AXAHY) fell more than 7% in the opening hour of trading in Paris after Europe's second-largest insurance group said it had agreed to pay around $15 billion for Bermuda-based insurer XL Group in a cash and share deal that would create the world biggest property and casualty group.
Stocks in Asia reflected such a concern, with Japan's Nikkei 225 benchmark falling 0.66% to close at an October 2017 low of 21,049.99 points as the broader MSCI Asia ex-Japan index slumped 1.16% to head to the end of the session at 564.45 points as investors reacted to Trump's suggestion that he plans to slap a 25% levy on steel imports late last week.
European markets were also focused on political developments in Italy and Germany, with the former holding national elections that failed to deliver a decisive victory for any of the country's major parties, setting up weeks of horse-trading between various center-right and center-left factions that could ultimately lead to a fresh poll later in the year.
Stocks in Italy, however, opened weaker, with the benchmark FTSE MIB falling 0.81% to a six-month low after an indecisive result from Sunday's national elections that could spark an extended political sclerosis in Europe's third-largest economy.
"Political risk is back roaring," said Antoine Lesn?(C), head of EMEA strategy and research for SPDR ETFs at State Street. "Italy was always going to be the country where some of the Eurozone construction issues would be the most acute."
"Despite the recent toning down of anti-euro rhetoric, this is a blow to the strong consensus that the common currency has been enjoying of late," he added. "It may still be too soon to expand into another full blown Eurozone crisis and the market will have to analyse the impact of this election on actual reforms."
In Germany, however, members of the centre-left Social Democratic Party voted to join a coalition government with their rival Christian Democrats of the centre-right. The move paves the way for Merkel's fourth term as Chancellor and allows for a major push on big constitutional and structural changes table by France's President, Emmanuel Macron.