Renewed jitters over China-US trade tensions pull Wall Street lower in premarket trading

US markets slumped early on Tuesday after Chinese sanctions against the US subsidiaries of a major South Korean shipbuilder shook a fragile sense of calm over trade tensions with Washington.

Futures for the S&P 500 lost 1 per cent before the opening bell, while futures for the Dow Jones Industrial Average slid 0.6 per cent. Nasdaq futures tumbled 1.3 per cent as a broad of swath of technology companies saw their shares slide.

China’s Commerce Ministry on Tuesday said it was banning dealings by Chinese companies with five subsidiaries of South Korean shipbuilder Hanwha Ocean, swiping at President Donald Trump’s efforts to rebuild the industry in America.

“China just weaponised shipbuilding,” said Kun Cao, deputy chief executive at consulting firm Reddal. “Beijing is signalling it will hit third-country firms that help Washington counter China’s maritime dominance.”

South Korea and the US have been building closer ties in shipbuilding in response to China’s dominance as the world’s largest shipbuilder. Hanwha acquired the Philly Shipyard in Pennsylvania last year and has contracts with the US Navy to perform maintenance, repair and overhaul work for US naval vessels.

Hanwha Ocean’s shares fell 5.8 per cent in Seoul on Tuesday and the benchmark Kospi lost 0.6 per cent to 3,561.81.

International shipping and shipbuilding have become a major source of friction between Washington and Beijing, with each side imposing new port fees on each other’s vessels. Those fees went into effect on Tuesday.

Markets had calmed on Monday after Trump wrote “Don’t worry about China” on his Truth Social media platform on Sunday. On Friday, Trump helped spur a sell-off after he threatened to hike tariffs on China by 100 per cent in reaction to Beijing’s latest controls on exports of rare earths.

While waiting for Federal Reserve chair Jerome Powell to speak later on Tuesday, investors are taking in a slew of corporate earnings reports, most significantly big US banks.

JPMorgan Chase shares inched down 0.7 per cent after the US investment bank breezed past Wall Street’s sales and profit expectations for the seventh straight quarter. JPMorgan said its results benefited from record third-quarter markets revenue and increased merger and acquisition activity.

Wells Fargo also easily beat analysts’ targets in the July-September period and its shares rose 2.8 per cent in premarket. Wells CEO Charlie Scharf highlighted growth in net interest income and growth in fee income in both its consumer and commercial banking business.

Domino’s jumped 3.5 per cent after the pizza delivery giant beat analysts’ third-quarter sales and profit targets. The company highlighted several promotions that helped boost US same-store sales growth by 5.2 per cent.

Elsewhere, in Europe at midday, France’s CAC 40 declined 1.1 per cent, while the German DAX lost 1.4 per cent. Britain’s FTSE 100 shed 0.3 per cent.

During Tuesday trading, Japan’s benchmark Nikkei 225 dropped 2.6 per cent to finish at 46,847.32. The slide reversed a rally last week in Tokyo after conservative lawmaker Sanae Takaichi was chosen to lead the country’s ruling Liberal Democratic Party.

The subsequent collapse of the LDP’s 26-year-old coalition with the Buddhist-backed Komeito has cast doubt over whether Takaichi will become Japan’s first female prime minister and added to political uncertainty.

The renewed sense of unease over the state of China-US trade tensions pulled benchmarks in Hong Kong and Shanghai lower. Hong Kong’s Hang Seng lost 1.7 per cent to 25,441.35, while the Shanghai Composite shed 0.6 per cent to 3,865.23.

Australia’s S&P/ASX 200 rose nearly 0.2 per cent to 8,899.40.

In energy trading, benchmark US crude lost $1.36, about 2.3 per cent, to $58.13 a barrel. Brent crude, the international standard, fell $1.37 to $61.93 a barrel.