Dow futures slide 130 points as G-7 leaders feud over trade

Wall Street stocks were setting up for hefty losses at the open Friday, as futures moved firmly lower after tensions between the U.S. and major allies flared up ahead of the G-7 meeting in Canada.

What are markets doing?

Futures for the Dow Jones Industrial Average  slumped 131 points, or 0.5%, to 25,153, while those for the S&P 500 index  lost 11.65 points,or 0.4%, to 2,764.25. Futures for the Nasdaq-100 index  fell 46.25 points, or 0.6%, to 7,138.25.

The prospect of a selloff follows a mixed trading day on Thursday. The Dow  ended 0.4% higher, but the S&P 500  and Nasdaq Composite Index  closed with modest losses, as a slide in technology shares put on the pressure.

As of Thursday’s close, the Dow was heading for a 2.5% weekly advance, while the S&P was up 1.3% and the Nasdaq was 1.1% higher.

What is driving the market?

The downbeat mood on Friday comes as leaders of the Group of Seven advanced economies gathered in Quebec for a two-day summit.

Fears of a global trade war have spooked markets on-and-off since March, when President Donald Trump said his administration planned to slap tariffs on aluminum and steel imported into the U.S. Those levies have since been implemented against partners such as the European Union as well as against countries such as China, fanning the trade tensions.

Hostilities between Trump and leaders of two close allies — Canada and France — intensified ahead of the meeting after a dispute erupted, mainly on Twitter.

“The American President may not mind being isolated, but neither do we mind signing a 6-country agreement if need be,” French President Emmanuel Macron said in a tweet.

“Because these 6 countries represent values, they represent an economic market which has the weight of history behind it and which is now a true international force,” he said, pointing out that the six other members of the G-7 — Canada, Italy, Germany, France, Japan and U.K. — added together make up a bigger market than the U.S.

Trump responded to Macron with pointed words, then followed up with tweets aimed at Canadian Prime Minister Justin Trudeau and the European Union:

The U.S. president is now planning to leave the G-7 summit early, to go to Singapore ahead of his scheduled meeting there with North Korea leader Kim Jong Un on Tuesday.

Away from international relations, investors are starting to focus on the Federal Reserve meeting next week, when policy makers are expected to hike interest rates.

What are strategists saying?

“There is little doubt that trade will top the agenda at the Friday and Saturday Summit in Canada. Given Trump’s trade levies on U.S. allies and his general unpredictability, uncertainty could continue to form a central pillar to trading as we move through the summit and into the weekend,” said Jasper Lawler, head of research at London Capital Group, in a note.

“Trump has already had a twitter spat with France’s President Macron prior to the event, which doesn’t bode well. However, the big question for traders is unlikely to focus on Trump’s actions, but rather the level of hostility and aggression that the other leaders will show,” he added.

Stock movers

Broadcom Inc.  dropped 3.2% in thin premarket trade after reporting earnings late Thursday.

U.S.-listed shares of Deutsche Bank AG  fell 3.2% ahead of the bell. Bloomberg reported that the German lender is exploring options to merge with rival  .

What’s on the economic calendar?

In a relatively quiet day for economic data, the major release is a reading on wholesale inventories for April, due at 10 a.m. Eastern Time.

There are no Fed speakers, as the central bank is in a blackout period before the Federal Open Markets Committee meeting next week.

What are other markets doing?

Stocks in Asia closed sharply lower, while European equities lost ground.

The dollar  rebounded after logging a three-day losing streak, while the yield on 10-year U.S. Treasury notes  fell 1.9 basis points to 2.901%.

Oil prices  declined after data showed a drop in Chinese oil imports in May. Gold  was slightly lower.