U.S. Stocks May See Further Downside Amid Rising U.S.-China Tensions

Following the sell-off seen yesterday afternoon, stocks are likely to see some further downside in early trading on Friday. The major index futures are currently pointing to a lower open for the markets, with the Dow futures down by 93 points.

Concerns about rising tensions between the U.S. and China may weigh on Wall Street after Beijing decided to revoke the license for the establishment and operation of the U.S. Consulate General in Chengdu.

The move comes just days after the U.S. government ordered China to close its consulate in Houston, Texas, amid accusations Chinese diplomats aided in economic espionage and the attempted theft of scientific research.

A statement from China’s Foreign Ministry claimed the move by the U.S. violated international law and seriously damaged U.S.-China relations and called the closure of the U.S. consulate in Chengdu a “legitimate and necessary response to the unreasonable actions of the United States.”

“The current situation between China and the United States is something China does not want to see, and the responsibility rests entirely with the United States,” the statement said, urging the U.S. to immediately revoke the “erroneous decision.”

Worries about the continued spike in coronavirus cases may also generate some negative sentiment, with the U.S. reporting 68,663 new cases on Thursday, according to data compiled by Johns Hopkins University.

According to analysis by CNBC, daily new cases are rising, on average, by at least 5 percent in 25 states and the District of Columbia as of Thursday.

Semiconductor giant Intel (INTC) may helped lead the markets lower after reporting better than expected second quarter results but warning of further delays in production of its next-generation chips.

Shortly after the start of trading, the Commerce Department is scheduled to release its report on new home sales in the month of June. Economists expect new home sales to jump 3.6 percent to an annual rate of 700,000.

After showing a lack of direction early in the session, stocks moved sharply lower over the course of the trading day on Thursday. The major averages pulled back firmly into negative territory, with the tech-heavy Nasdaq showing a particularly steep drop.

The major averages moved roughly sideways going into the close, stuck in the red. The Dow tumbled 353.51 points or 1.3 percent to 26,652.33, the Nasdaq plunged 244.71 points or 2.3 percent to 10,461.42 and the S&P 500 slumped 40.36 points or 1.2 percent to 3,235.66.

In overseas trading, stock markets across the Asia-Pacific region moved notably lower during trading on Friday, with the Japanese markets still closed for a holiday. China’s Shanghai Composite Index plummeted by 3.9 percent, while Hong Kong’s Hang Seng Index sank by 2.2 percent.

The major European markets have also shown significant moves to the downside on the day. While the German DAX Index has tumbled by 1.6 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index are down by 1.2 percent and 1.1 percent, respectively.

In commodities trading, crude oil futures are rising $0.24 to $41.31 a barrel after sliding $0.83 to $41.07 a barrel on Thursday. Meanwhile, after spiking $24.90 to $1,890 an ounce in the previous session, gold futures are climbing $3.40 to $1,893.40 an ounce.

On the currency front, the U.S. dollar is trading at 106.17 yen versus the 106.86 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1611 compared to yesterday’s $1.1596.

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