U.S. markets slumped early Tuesday after Chinese sanctions against the U.S. 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% before the opening bell, while futures for the Dow Jones Industrial Average slid 0.6%. Nasdaq futures tumbled 1.3% as a broad of swath of technology companies saw their shares slide.
China’s Commerce Ministry said Tuesday 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 weaponized shipbuilding,” said Kun Cao, deputy chief executive at consulting firm Reddal. “Beijing is signaling it will hit third-country firms that help Washington counter China’s maritime dominance.”
South Korea and the U.S. 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 U.S. Navy to perform maintenance, repair and overhaul work for U.S. naval vessels.
Hanwha Ocean’s shares fell 5.8% in Seoul on Tuesday and the benchmark Kospi lost 0.6% 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 others’ vessels. Those fees went into effect on Tuesday.
Markets had calmed Monday after Trump wrote on his Truth Social media platform Sunday, “Don’t worry about China. ″ On Friday, Trump helped spur a sell-off after he threatened to hike tariffs on China by 100% in reaction to Beijing’s latest controls on exports of rare earths.
While waiting for Federal Reserve chair Jerome Powell to speak later Tuesday, investors are taking in a slew of corporate earnings reports, most significantly big U.S. banks.
JPMorgan Chase shares inched down 0.7% after the U.S. 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% 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% after the pizza delivery giant beat analysts’ third-quarter sales and profit targets. The company highlighted several promotions that helped boost U.S. same-store sales growth by 5.2%.
Elsewhere, in Europe at midday, France’s CAC 40 declined 1.1%, while the German DAX lost 1.4%. Britain’s FTSE 100 shed 0.3%.
During Tuesday trading, Japan’s benchmark Nikkei 225 dropped 2.6% 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-U.S. trade tensions pulled benchmarks in Hong Kong and Shanghai lower.
Hong Kong’s Hang Seng lost 1.7% to 25,441.35, while the Shanghai Composite shed 0.6% to 3,865.23.
Australia’s S&P/ASX 200 rose nearly 0.2% to 8,899.40.
In energy trading, benchmark U.S. crude lost $1.36, about 2.3%, to $58.13 a barrel. Brent crude, the international standard, fell $1.37 to $61.93 a barrel.