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U.S. Stocks May Come Under Pressure As China Announces Retaliatory Tariffs


Stocks are likely to come under pressure in early trading on Monday, pulling back following the substantial rebound seen over the course of the previous session. The major index futures are currently pointing to a sharply lower open for the markets, with the Dow futures down by 486 points.

Concerns about the escalating trade dispute between the U.S. and China are likely to weigh on Wall Street after China announced plans to raise tariffs on up to $60 billion worth of U.S. goods.

China said increased tariffs on a total of 5,140 U.S. products would take effect June 1st, with the tariffs reportedly ranging from 5 percent to 25 percent.

The decision to raise tariffs on U.S. goods comes in retaliation for the U.S. move to increase the tariffs on approximately $200 billion worth of Chinese goods to 25 percent from 10 percent.

China is following through on its pledge to take "necessary countermeasures" in response to the tariff increase even though President Donald Trump warned the situation "will only get worse" if China retaliates.

Trump has sought to continue to pressure China to reach a trade agreement in a series of posts to Twitter, telling the communist country the deal will become "far worse for them if it has to be negotiated in my second term."

"I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don't make a deal because companies will be forced to leave China for other countries. Too expensive to buy in China," Trump tweeted. "You had a great deal, almost completed, & you backed out!"

Reflecting considerable sensitivity to sentiment regarding the escalating U.S.-China trade dispute, stocks showed a substantial turnaround over the course of the trading session on Friday after moving sharply lower early in the session.

The major averages bounced well off their worst levels of the day and into positive territory. The Dow climbed 114.01 points or 0.4 percent to 25,942.37, the Nasdaq inched up 6.35 points or 0.1 percent to 7,916.94 and the S&P 500 rose 10.68 points or 0.4 percent to 2,881.40.

Despite the rebound on the day, the major averages moved sharply lower for the week. The Nasdaq plunged by 3 percent, while the Dow and the S&P 500 tumbled by 2.1 percent and 2.2 percent, respectively.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Monday. Japan's Nikkei 225 Index slid by 0.7 percent, while China's Shanghai Composite Index slumped by 1.2 percent.

The major European markets have also moved to the downside on the day. While the German DAX Index has tumbled by 1.4 percent, the French CAC 40 Index is down by 1.1 percent and the U.K.'s FTSE 100 Index is down by 0.5 percent.

In commodities trading, crude oil futures are jumping $0.96 to $62.62 a barrel after edging down $0.04 to $61.66 a barrel last Friday. Meanwhile, after rising $2.20 to $1,287.40 an ounce in the previous session, gold futures are climbing $3.40 to $1,290.80 an ounce.

On the currency front, the U.S. dollar is trading at 109.11 yen compared to the 109.95 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.1258 compared to last Friday's $1.1233.

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