By Wayne Cole
SYDNEY (Reuters) -Losses in Wall Street futures dragged Asian stocks lower on Monday as the latest round of threats in the U.S. tariff wars kept investors on edge, though the fallout was limited by hopes this was mainly bluster by President Donald Trump.
Trump on Saturday said he would impose a 30% tariff on most imports from the EU and Mexico from August 1, even as they are locked in long negotiations.
The European Union said it would extend a suspension of countermeasures to U.S. tariffs until early August and continue to press for a negotiated settlement, though Germany’s finance minister called for firm action if the levies went ahead.
Investors have become largely inured to Trump’s chaotic policy methods and stocks eased only modestly, while the dollar gained just a fraction on the euro.
“It is hard to say whether the muted market response is best characterised by resilience or complacency,” said Taylor Nugent, a senior markets economist at NAB.
“But it is difficult to price the array of headlines purportedly defining where tariffs will sit from August when negotiations are ongoing.”
For now, MSCI’s broadest index of Asia-Pacific shares outside Japan were little changed, while Japan’s Nikkei eased 0.5%.
S&P 500 futures and Nasdaq futures both eased 0.4%. Earnings season kicks off this week with the major banks leading the pack on Tuesday.
S&P companies are expected to have increased profits by 5.8% from the year-earlier period, down from an expectation of a 10.2% gain on April 1, according to LSEG IBES.
Analysts at BofA noted the bar was low for earnings with consensus seeing a slowdown to 4% growth, from the previous quarter’s 13%.
“We expect a modest beat of 2%, below the 3% average and last quarter’s 6% figure, though medium-term, we are more constructive,” they wrote in a note.
PRESSURING POWELL
In bond markets, Treasuries got a very marginal safety bid and 10-year yields held at 4.41%. Futures for the Federal Reserve funds rate edged higher as markets priced in a little more policy easing for next year.
While Fed Chair Jerome Powell has signalled a patient outlook on cuts, Trump is piling up political pressure for more aggressive stimulus.
White House economic adviser Kevin Hassett over the weekend warned Trump might have grounds to fire Powell because of renovation cost overruns at the Fed’s Washington headquarters.
Trump said on Sunday that it would be a great thing if Powell stepped down.
Figures on U.S. consumer prices for June are due on Tuesday and could finally start to show early upward pressure from tariffs, though retailers still have pre-levy inventory to draw on and some companies are absorbing the costs into margins.
