June 19, 2018 / 12:28 PM / 5 months ago

US STOCKS-Futures slide as China-U.S. trade dispute heats up

* Trump's new threat follows Friday's tit-for-tat tariffs

* Futures down: Dow 1.38 pct, S&P 1.11 pct, Nasdaq 1.3 pct (Adds comment, adds details, updates prices)

By Medha Singh

June 19 (Reuters) - Futures on the three main U.S. indexes slumped more than a percent on Tuesday as President Donald Trump's latest threat to impose duties on additional Chinese goods heightened concerns that tit-for-tat tariffs could spiral into a trade war.

U.S. President Donald Trump threatened to impose a 10 percent tariff on $200 billion of Chinese goods and Beijing warned it would fight back with "qualitative" and "quantitative" measures.

At 7:51 a.m. ET, Dow e-minis were down 344 points, or 1.38 percent. S&P 500 e-minis were down 30.75 points, or 1.11 percent and Nasdaq 100 e-minis were down 94.75 points, or 1.3 percent.

The Dow Jones Industrial Average was set to tumble more than 350 points at the open, which would erase all the bluechip index's gains so far this year. Twenty-nine of the index's 30 components were in the red premarket.

The U.S. President's unexpectedly swift and sharp move, which also sent global financial markets skidding, marks an escalation of the two countries' moves last Friday to slap tariffs on $50 billion of each other's goods.

"While it is hard to see these trade tensions escalating into a trade war, the President has shown that he is not afraid to leave the negotiating table," said Michael Olivia, a financial planner with Westpac Wealth Partners.

"From a negotiation perspective, it's a powerful tool. From a market perspective, it leads to increased uncertainty. In the near-term, we would expect to see volatility in markets as they attempt to price in the net impact of tariffs."

The CBOE Volatility Index, the most widely followed barometer of expected near-term volatility in the S&P 500, hit a more than two week high at 14.67, before easing to 14.38.

Shares of Boeing, which has acted as a proxy for trade war tensions with China as it is the single largest U.S. exporter to the country, fell 2.1 percent premarket. Construction equipment maker Caterpillar dropped 2.3 percent.

Chipmakers, which depend on China for a large portion of their revenue, also slipped with Intel, Broadcom , Qualcomm and AMD, all down more than 1.5 percent.

Adding fuel to the intensifying trade dispute was the passage of a defense bill that set up a potential battle with the White House over whether ZTE Corp, can resume business with its U.S. suppliers.

Yields on the benchmark U.S. Treasury note fell to more than two week low as demand for safe U.S. debt rose. (Reporting by Medha Singh, additional reporting by Aparajita Saxena in Bengaluru,; Editing by Sriraj Kalluvila)

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