Dow Futures Pump 100 points, but Ex-White House Insider Warns of Recession

The US stock market looks set to open in positive territory on Wednesday as Dow futures pump 100 points higher in early trading.

Despite the bounce, experts are increasingly nervous about flared tensions between Trump and China. Lawrence Summer, former US Treasury Secretary and White House advisor, said the threat of recession has magnified since May’s trade deal breakdown.

“[Chance of recession is] “much higher than it needs to be and much higher than it was two months ago” - via Bloomberg TV.

Dow futures pump 100 points

At 6.23 am ET, Dow Jones Industrial Average (DJIA) futures popped 100 points higher (0.39 percent), implying a strong open on Wall Street on Wednesday.

Dow futures chart
Dow futures surged 100 points on Wednesday, but traders are ignoring the bigger recession signs. Source: TradingView

 

It comes off the back of a middling Asian session in which the Shanghai Composite and Japan’s Nikkei index both trickled lower. Stocks pumped higher in Europe, with Germany’s DAX up 1.3 percent.

S&P 500 futures followed the Dow higher, while Nasdaq Composite futures eked out a 0.6 percent rise. 

Recession fears grip the stock market

As CCN reported, the Treasury’s own recession indicator is now at its sharpest level since 2007, just months before the financial crisis. The yield curve inversion has historically predicted every major downturn in the previous 50 years.

The latest recession risk comes as Trump and China ramp up threats over trade. The US president said he would hit China with new 10% tariffs on a further $300 billion products. In retaliation, China let its yuan currency slide to the lowest level in a decade. As Lawrence told Bloomberg:

“You can often play with fire and not have anything untoward happen, but if you do it too much you eventually get burned.”

Dow would soar if Trump eased off

Analysts widely agree that escalated trade tensions are choking the Dow and S&P 500 by throwing uncertainty into the markets. Economist Ryan Sweet at Moody’s said:

“If Trump backs off, the economy will take off again.”

Morgan Stanley takes a similar position, saying the ongoing trade war could tilt the world economy into recession. If Trump ramps up tariffs to 25 percent, Goldman Sachs sees a strong chance of economic downturn in the next year.

This article is protected by copyright laws and is owned by CCN Markets.

About the author

Ben Brown
Ben Brown

Ben is a journalist with a decade of experience covering financial markets. Based in London, UK, his writing has appeared in The Huffington Post and he was Chief Editor at Block Explorer, the world's longest-running source of Blockchain data. Reach him at benjamin-brown.uk or on Twitter at _Ben_Brown. Email ben @ benjamin-brown.uk.

Do NOT follow this link or you will be banned from the site!