May 6, 2019 / 10:34 AM / a year ago

US STOCKS-Futures sink after Trump escalates China tariff threat

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* Futures fall: Dow 1.92%, S&P 1.81%, Nasdaq 2.29%

By Amy Caren Daniel

May 6 (Reuters) - U.S. stock index futures plunged on Monday after President Donald Trump shocked investors by threatening to hike tariffs on $200 billion worth of Chinese goods, raising fears of a global slowdown and halting a relative period of calm in the markets.

S&P futures lost more than 2% overnight after the Wall Street Journal reported China was considering canceling a round of U.S. talks set for this week in the wake of Trump's comments.

However, China said on Monday a delegation is still preparing to go to the United States for trade talks.

Trump said tariffs on $200 billion worth of Chinese goods would increase to 25 percent on Friday from 10 percent, reversing a decision he made in February to keep them at the 10 percent rate thanks to progress between the two sides.

Investors pulled back from riskier bets on fears the trade war between the world's biggest economies was escalating, especially as hopes of a deal have helped stocks surge this year, with the S&P 500, and the Nasdaq indexes hitting record highs last week.

All the 28 Dow components that were trading premarket were in the red. Boeing Co, the single largest U.S. exporter to China, fell 3.3%, while Caterpillar Inc also declined 3.3%.

"The risk-off sentiment has been the response to this swerve from Trump," said Han Tan, market analyst at FXTM.

"While it remains to be seen whether the Trump administration will press ahead with the added tariffs, it's already evident that markets are taking some risk off the table, undermining the base case that investors had been pricing in: a formalized US-China trade deal in the near future."

Wall Street's fear gauge, the CBOE Volatility index, spiked to its highest level since Jan. 30.

Chipmakers, which get a good portion of their revenue from China, tumbled. Shares of Nvidia Corp, Micron Technology Inc and Intel Corp fell between 2.4% and 5.3%.

At 6:09 a.m. ET, Dow e-minis were down 508 points, or 1.92%. S&P 500 e-minis were down 53.25 points, or 1.81% and Nasdaq 100 e-minis were down 179.75 points, or 2.29%.

Marquee names such as Apple Inc, Inc , Alphabet Inc, Microsoft Corp and Netflix Inc fell between 1.9% and 3.4%.

Tesla Inc fell 2.3% after U.S. trade officials rejected the company's bid for relief from Trump's tariffs on the Chinese-made Autopilot "brain" of its Model 3 and other electric vehicles. (Reporting by Amy Caren Daniel and Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta)

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