Wall Street was set to open lower for the second straight session on Tuesday, after a report that the Trump administration was moving ahead with discussions around possible curbs on capital flows into China stirred up fresh worries over the outcome of the high-level trade talks later this week.
The report came as tensions escalated after the U.S. widened its trade blacklist to include Chinese video surveillance firm Hikvision (002415.SZ) and surveillance equipment maker Zhejiang Dahua Technology (002236.SZ) among others, drawing a sharp rebuke from Beijing.
The discussions on capital flow restrictions focused on investments made by U.S. government pension funds, Bloomberg reported on Tuesday.
Adding to the pessimism, a South China Morning Post report said China had toned down its expectations ahead of the high-level trade talks set to begin on Thursday and that the Chinese delegation could depart Washington a day earlier than planned.
“I don’t think there’s really much hope that we are going to see a completed deal any time soon,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida. “For markets, it may be enough to just see a stop in the escalation.”