Stocks drop, yen gains on Trump trade war, China deflationary pressure

Wall Street futures looked to open lower on Monday, declining alongside world stocks as building deflationary pressure in China added to growth worries from a lacklustre U.S. economy and an escalating global trade war. Dow E-minis (/1YMcv1) were last down 1.12%, S&P 500 E-minis (/EScv1) were down 1.37%, and Nasdaq 100 E-minis NQcv1 were down 1.65% as world stocks EURONEXT:IACWI fell 0.3% to their lowest level in almost two months. European shares also flirted with month lows. Europe's broader STOXX 600 regional benchmark fell by as much as around 1%, just as a gauge of equity volatility (.V2TX) nudged up to a fresh 4-month high above 26 points."This week is a big week. We have some massive policy decisions coming up that potentially define not only the next quarters but possibly the years to come," James Rossiter, head of global macro strategy at TD Securities, said. Stock investors were holding back because of a lack of conviction amid the uncertainty, Rossiter added. European Union finance ministers this week are set to discuss how to pay for defence through new joint borrowing, existing EU funds and a greater role for the European Investment Bank.German leaders agreed last week to overhaul state borrowing rules to boost defence spending and also set aside 500 billion euros ($541 billion) for infrastructure investments over 10 years.Investors looked ahead to Germany's inflation figures later this week, a reading that comes as European Union trade tensions with the United States simmer. In the U.S., Federal Reserve speakers scheduled to speak include Chair Jerome Powell on the U.S. economic outlook. China's consumer price index fell at the sharpest pace in 13 months in February, data showed, while producer price deflation persisted in the latest hit to consumer confidence in the world's second-biggest economy. China's blue-chip CSI300 Index closed 0.4% lower, while the Shanghai Composite Index eased 0.2%. Hong Kong's benchmark Hang Seng (.HIS) fell 1.9%.The yen strengthened 0.7% to 146.975 per dollar. Beijing pledged more stimulus to boost consumption and foster innovation in artificial intelligence at the start of the week-long National People's Congress meeting that runs until Tuesday.'CAVALIER APPROACH'U.S. President Donald Trump in a Fox News interview on Sunday declined to predict whether his on China, Canada and Mexico would result in a U.S. recession.A run of soft U.S. economic data continued on Friday after monthly figures showed the labour market created fewer jobs than expected in February, in the first payrolls report capturing 's policies."I think it's Trump's cavalier approach to economic policy that's rattling sentiment," Kyle Rodda, senior financial markets analyst at Capital.com, said."Unlike during his first administration, where signs of an economic slowdown or market correction would see a pivot on policy, he is genuinely focused on significant, structural change to the economy - even if it comes at the expense of short-term growth."The 10-year U.S. Treasury yield dropped 7 basis points to 4.2474% and the two-year yield (US2YT=RR) fell 6 bps to 3.945%.The U.S. dollar index , which measures the currency against six others, was steady at 103.79. The euro steadied to $1.0841 and sterling was little changed at $1.2926.In his latest warning to Canada, Trump said on Friday that reciprocal tariffs on dairy and lumber could be imminent."For those struggling to keep up, that means that Canadian tariffs were imposed on Tuesday, tweaked on Wednesday, delayed on Thursday, then expanded again on Friday," Michael Brown, senior research strategist at Pepperstone, said."In that sort of an environment, it is frankly impossible for any market participant to price risk."The U.S. president also said he is strongly considering sanctions on Russian banks and tariffs on Russian products to try and bring a speedy end to the war in Ukraine.Crude oil rose with both Brent up 44 cents to $70.70 while U.S. West Texas Intermediate crude climbed by 51 cents to $67.55 a barrel.Cryptocurrency bitcoin lost as much as 7.2% from Friday to reach its lowest this month at $80,085.42, and was last at $82,982.The long-awaited executive order on creating the a strategic reserve of cryptocurrencies came on Friday, but disappointed many investors by saying there would be no additional buying of bitcoin.