LDN - Business

Stock futures fall on concerns over U.S.-China trade fallout

[July 09, 2019] By Medha Singh

(Reuters) - U.S. stock futures fell on Tuesday as investors worried over a hit to earnings from the prolonged U.S.-China trade war and receding hopes of a sharp rate cut by the Federal Reserve later this month.

In the latest indication of the U.S.-China trade dispute hurting businesses, German chemicals giant BASF <BASFn.DE> warned of a 30% fall in adjusted annual profit.

RBC Capital Markets downgrade of 3M Co <MMM.N> to "sector perform" on macro pressures from China, auto and electronics added to the downbeat sentiment. The industrial conglomerate's shares fell 1.3% in premarket trade.

China-exposed stocks slipped, with Boeing Co <BA.N>, the single largest U.S. exporter to China, dipping 0.2% ahead of release of its orders and deliveries for the second quarter. Caterpillar Inc <CAT.N> fell 0.4%.

Chipmakers, including Micron Technology Inc <MU.O>, Broadcom Inc <AVGO.O> and Intel Corp <INTC.O> and Nvidia Corp <NVDA.O> were down between 0.6% and 1%.

Stocks have retreated from their recent highs since a robust June jobs report on Friday tempered expectations of an aggressive 50 basis point rate cut by the Fed at its July policy meeting.

The market forecast a 75% chance of a 25-basis-point cut, and a 25% chance of a 50-basis-point cut a week ago, according to CME Group's FedWatch tool. In premarket trade, the chances were 95% and 5%, respectively.

Focus this week will be on the Fed chief Jerome Powell's remarks at his two-day testimony before the Congress, starting Wednesday. Also due on Wednesday is the central bank's June policy meeting minutes.

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Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., July 1, 2019. REUTERS/Brendan McDermid

At 7:09 a.m. ET, Dow e-minis <1YMcv1> were down 95 points, or 0.35%. S&P 500 e-minis <EScv1> were down 11 points, or 0.37% and Nasdaq 100 e-minis <NQcv1> were down 38.5 points, or 0.49%.

Banking stocks will be watched on Tuesday as the Fed conducts a conference to discuss the effectiveness of its stress tests for large lenders, as the U.S. central bank considers changes to its critical post financial crisis tool.

PepsiCo Inc <PEP.O> rose 1.1% after the beverage maker beat analysts' estimates for quarterly revenue and profit, benefiting from demand for its sodas and Lays chips, as well as its sparkling waters.

Second-quarter earnings is expected to start in earnest next week with Citigroup <C.N> kicking off results for big U.S. lenders on Monday and FANG-member Netflix Inc <NFLX.O> scheduled to report later in the week.

Profits at S&P 500 companies is expected to dip 0.1% from a year earlier, according to Refinitiv IBES data.

(Reporting by Medha Singh in Bengaluru; Editing by Sriraj Kalluvila)

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