Singapore/London, Feb 4 (Reuters) - U.S. stock futures and the dollar declined on Tuesday, as Hong Kong shares retreated from two-month highs amidst escalating trade tensions between the U.S. and China.
Shane Oliver, chief economist at AMP in Sydney, emphasized that the "trade war story remains alive and well," driving market volatility.
S&P 500 futures, responding to news on potential tariffs, shifted to a 0.2% loss, while the dollar index decreased to 108.86, reversing earlier gains.
Despite hopes for negotiations, European stocks were down 0.1% in morning trading, with Germany's DAX index flat and Britain's FTSE 100 0.3% lower.
Amidst the market turmoil, Hong Kong's Hang Seng initially surged but later settled around 2.8% higher, boosted by expectations of increased Chinese stimulus measures.
Following the imposition of tariffs by both the U.S. and China, Ben Bennett, Asia-Pacific investment strategist at Legal & General Investment Management in Hong Kong, noted investor disappointment and the expectation for diplomatic resolution.
As market uncertainties persisted, the dollar fluctuated against the offshore yuan and the Australian dollar, commonly indicative of yuan trends, dropped to $0.6209.
With Chinese markets closed for the Lunar New Year, attention turned to Wednesday’s currency trading band fixing for insights into potential yuan devaluation to offset tariff impacts.
In the evolving trade landscape, Naka Matsuzawa, chief macro strategist at Nomura in Tokyo, highlighted the complexity of U.S.-China relations due to economic rivalry, suggesting challenges in reaching a resolution without significant concessions.
Trump's trade policies and upcoming company earnings reports contributed to market uncertainty with the Canadian dollar fluctuating and the S&P 500 closing lower.
Amidst the chaos, gold prices neared record highs, and bond yields rose slightly, with the 10-year Treasury at 4.579%.
Fed's cautious stance was reinforced by recent events, as reflected by J.P. Morgan's chief U.S. economist, Michael Feroli.
UBS Group exceeded expectations in Q4 profits with a buyback announcement, while BNP Paribas surpassed earnings forecasts but adjusted this year's profit target.
Google’s earnings report post-market close and ongoing scrutiny regarding AI spending were under investor radar following recent developments.
Brent crude oil prices fluctuated, initially rising but then falling around 1%, touching a month-low at $74.81 a barrel.