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Renewed Trade Concerns May Lead To Pullback On Wall Street

The major U.S. index futures are pointing to a sharply lower opening on Wednesday, with stocks likely to give back ground after trending higher in recent sessions.

Concerns about the economic impact of a global trade war are likely to weigh on the markets after President Donald Trump's administration proposed new tariffs on China.

Trump has ordered U.S. Trade Representative Robert Lighthizer to begin the process of imposing tariffs of 10 percent on an additional $200 billion of Chinese imports.

The move comes after the U.S. imposed a 25 percent tariff on $34 billion worth of Chinese imports last Friday, leading China to retaliate by imposing tariffs on $34 billion worth of U.S. exports.

"For over a year, the Trump Administration has patiently urged China to stop its unfair practices, open its market, and engage in true market competition," Lighthizer said. "We have been very clear and detailed regarding the specific changes China should undertake."

"Unfortunately, China has not changed its behavior - behavior that puts the future of the U.S. economy at risk," he added. "Rather than address our legitimate concerns, China has begun to retaliate against U.S. products. There is no justification for such action."

China has vowed to take countermeasures in response to the new tariffs, which will not effect until after a two-month review process.

Following the rally seen on Monday, stocks saw some further upside during trading on Tuesday. With the upward move on the day, the S&P 500 reached its best closing level in five months.

The major averages all closed in positive territory, although the Nasdaq inched up just 3.00 points or less than a tenth of a percent to 7,759.20. The Dow climbed 143.07 points or 0.6 percent to 24,919.66 and the S&P 500 rose 9.67 points or 0.4 percent to 2,793.84.

The continued strength on Wall Street came as optimism about the upcoming earnings season overshadowed recent trade concerns.

Snack food and beverage giant PepsiCo (PEP) released its second quarter results before the start of trading, reporting earnings that exceeded analyst estimates.

Financial giants Citigroup (C), JPMorgan Chase (JPM) and Wells Fargo (WFC) are due to report their quarterly results before the start of trading on Friday.

Another light day on the U.S. economic front kept some traders on the sidelines, however, with closely watched reports on producer and consumer price inflation due to be released in the coming days.

Oil service stocks showed a strong move to the upside on the day, driving the Philadelphia Oil Service Index up by 1.1 percent. The strength among oil service stocks came amid an increase by the price of crude oil.

Chemical, semiconductor, and utilities stocks also turned in strong performances, while most of the other major sectors showed more modest moves.

Commodity, Currency Markets

Crude oil futures are sliding $0.80 to $73.31 a barrel after rising $0.26 to $74.11 a barrel on Tuesday. Meanwhile, after falling $4.20 to $1,255.40 an ounce in the previous session, gold futures are dropping $3.80 to $1,251.60 an ounce.

On the currency front, the U.S. dollar is trading at 111.21 yen compared to the 111.00 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.1747 compared to yesterday's $1.1744.


Asian stocks succumbed to selling pressure on Wednesday after the U.S. proposed tariffs on an additional $200 billion worth of Chinese goods and China vowed to take countermeasures.

China's Shanghai Composite Index plunged 50.42 points or 1.8 percent to 2,777.20 and the yuan drifted lower on worries the ongoing trade dispute could hurt economic growth. Hong Kong's Hang Seng Index tumbled 370.56 points or 1.3 percent to 28,311.69.

Japanese shares ended lower to snap a three-day winning streak as fears about the global economic outlook due to the escalating trade war weighed on shippers and machinery makers.

The Nikkei 225 Index slumped 264.68 points or 1.2 percent to 21,932.21, while the broader Topix index closed 0.8 percent lower at 1,701.88.

Mitsui OSK Lines, Nippon Yusen, Komatsu and Hitachi Construction Machinery lost 2-3 percent. Oil refiner Idemitsu Kosan soared 9 percent and Showa Shell Sekiyu jumped 7.9 percent to extend gains from the previous session after they agreed on a merger.

Core machine orders in Japan fell 3.7 percent sequentially in May, the Cabinet Office said, coming in at 907.9 billion yen. The headline figure compared to expectations for a decline of 4.9 percent following the 10.1 percent spike in April.

On a yearly basis, machine orders surged up 16.5 percent, topping forecasts for a 10.9 percent spike following the 9.6 percent jump in the previous month.

Australian shares closed lower amid escalating trade tensions between the world's two largest economies. The benchmark S&P/ASX 200 Index fell 42.50 points or 0.7 percent to 6,215.60, while the broader All Ordinaries Index ended down 42.60 points or 0.7 percent at 6,300.20.

Financials paced the decliners, with the big four banks closing down between half a percent and 0.8 percent. Mining heavyweights BHP Billiton and Rio Tinto lost 1-2 percent as traders pondered the trade war's impact on commodity markets.

Oil & gas producer Santos dropped 1.6 percent and Origin Energy tumbled 3.6 percent as oil prices fell in Asian trading after the U.S. said it would consider requests from some countries to be exempted from Iranian sanctions.

Meanwhile, retailer Woolworths advanced 1.4 percent after the latest survey from Westpac Bank showed its consumer confidence index jumped to the highest since late 2013 in July on growing optimism about the economy.

Theme park and cinema operator Village Roadshow remained in a trading halt for a second day to enable the completion of the institutional component of its $51 million capital raising.


European stocks have tumbled on Wednesday as investors fret about an escalating trade war between the world's two largest economies.

The U.K.'s FTSE 100 Index, the German DAX Index and the French CAC 40 Index are all down by 1 percent.

Indivior shares have fallen sharply in London. The company expects its fiscal 2018 net revenue and adjusted net income to be below previous expectations, because of recent U.S. market developments for SUBOXONE and early uptake levels of SUBLOCADE.

Glencore has also moved notably lower on news the commodity trader has set up a board committee to oversee its response to a U.S. probe into possible corruption and money laundering.

Luxury goods group Burberry has also moved to the downside after releasing trading update for its first quarter.

Ericsson has also dropped after the telecommunications firm signed an agreement to divest Ericsson Local Services AB in Sweden to Swedish communication infrastructure company Transtema Group AB.

On the other hand, German IT company Bechtle has rallied after announcing its intention to acquire French IT provider Inmac Wstore S.A.S.

British homebuilder Barratt Developments has also advanced. The company expects its fiscal 2018 profit before tax to be around 835 million pounds, higher than last year's 765.1 million pounds, driven by a strong end to the financial year and early progress on margin initiatives.

U.S. Economic Reports

Producer prices in the U.S. increased by slightly more than expected in the month of June, according to a report released by the Labor Department.

The Labor Department said its producer price index for final demand rose by 0.3 percent in June after climbing by 0.5 percent in May. Economists had expected prices to edge up by 0.2 percent.

Excluding food and energy prices, core producer prices also climbed by 0.3 percent in June, matching the increase seen in May. Core prices had been expected to rise by 0.2 percent.

At 10 am ET, the Commerce Department is scheduled to release its report on wholesale inventories in the month of May. Wholesale inventories are expected to climb by 0.5 percent.

The Energy Information Administration is due to release its report on oil inventories in the week ended July 6th at 10:30 am ET.

Crude oil inventories are expected to tumble by 4.5 million barrels after rising by 1.2 million barrels in the previous week.

At 1 pm ET, the Treasury Department is scheduled to announce the results of its auction of $22 billion worth of ten-year notes.

New York Federal Reserve President John Williams is due to participate in a discussion with Brooklyn business, community, education, and government leaders about issues related to the local economy and efforts around community and workforce development in Brooklyn, N.Y., at 4:30 pm ET.

Stocks In Focus

Shares of WD-40 may come under pressure after the lubricant maker reported better than expected fiscal third quarter results but lowered its full-year guidance.

Aviation and expeditionary services provider AAR Corp. (AIR) is also likely to move to the downside after reporting fiscal fourth quarter earnings that beat analyst estimates but weaker than expected revenues.

On the other hand, shares of Fastenal (FAST) are moving sharply higher in pre-market trading after the industrial and construction products maker reported second quarter results that beat expectations and raised its quarterly dividend.

Travel website operator TripAdvisor (TRIP) may also move to the upside after Barclays upgraded its rating on the company's stock to Overweight from Equal Weight.

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