Wall Street futures skid, dollar dips on US tariff threats
By Wayne Cole
SYDNEY, Jan 19 (Reuters) – U.S. stock futures fell on Monday after President Donald Trump threatened to impose additional tariffs on eight European countries until the United States is allowed to buy Greenland, sending the dollar lower against the safe-haven yen and Swiss franc.
The holiday in U.S. stock and bond markets led to weak trading and likely contributed to a 0.9% decline in S&P 500 futures and a 1.1% decline in Nasdaq futures. Nikkei futures also pointed to a soft start for Asian stocks.
Trump said that he will impose an additional 10 percent import tax on goods coming from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and the United Kingdom as of February 1, and if an agreement is not reached, this rate will increase to 25 percent on June 1.
Major European Union countries have condemned tariff threats against Greenland as blackmail, and France has proposed responding with a range of previously untested economic countermeasures.
The EU’s options include a package of its own tariffs on 93 billion euros of US imports, which were suspended for six months in early August, and measures under an Anti-Coercion Instrument that could hit US trade or investment in services.
Analysts at Deutsche Bank said European countries own $8 trillion in U.S. bonds and stocks, nearly twice as much as the rest of the world combined, and may consider bringing some of that money back to the country.
“With the US net international investment position at record negative extremes, the interdependence of Europe-US financial markets has never been higher,” said George Saravelos, Deutsche’s global head of foreign exchange research.
“What will hurt markets the most is the weaponization of capital, rather than the flow of trade.”
It will also be a worrying few days in Davos, where leaders from around the world, including a large US group led by Trump, gather at the World Economic Forum.
DOLLAR, NO SAFE HEAVEN
China is expected to report on Monday that its economy grew 4.4% from December, slowing from 4.8% in the previous quarter, as strength in exports and manufacturing was offset by weakness in domestic demand.
The Bank of Japan will meet on Friday, and although no interest rate hike is expected this time, policymakers may signal a tightening in April.
Given that Japanese Prime Minister Sanae Takaichi is expected to dissolve parliament soon to allow for elections in February, domestic politics has become another problem.
Delayed data on US core inflation and consumption for November will be released on Thursday, which will clarify investors’ expectations about when the Fed may cut interest rates again.
