TOKYO -- Wall Street stock futures weakened in early trade on Monday, setting a dour tone for Asian markets after tit-for-tat tariffs between the United States and China took effect, reinforcing investors' gloomy expectations for global growth prospects.
The E-mini futures for US S&P500 fell as much as 1.06 percent in early trade and last stood down 0.68 percent at 2,905 while Chicago-traded Nikkei futures suggest Japan's Nikkei is on course to fall 0.7 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan , which lost 4.7 percent last month, is likely to stay under pressure.
The United States slapped 15 percent tariffs on a variety of Chinese goods on Sunday - including footwear, smart watches and flat-panel televisions - while China imposed new duties on US crude, the latest escalation in a bruising trade war.
A variety of studies suggest the tariffs will cost US households up to $1,000 a year and the latest round will hit a significant number of US consumer goods.
In retaliation, China started to impose additional tariffs on some of the US goods on a $75 billion target list. Beijing did not specify the value of the goods that face higher tariffs from Sunday.
Many market players said the market's reaction was likely exaggerated by algorithm-driven players' flows in thin trading conditions at start of Asian trade on Monday.
Liquidity could be even more limited than usual because of a US market holiday on Monday.
"(The market move) goes to show you how many data mining algos are involved with equity linked compared to forex-linked. Was anyone surprised by these tariffs that took effect yesterday?" said Takeo Kamai, head of execution at CLSA in Tokyo.
Despite the volatility, the moves lower reflect investors' underlying worries about increasing costs of Sino-US trade war on the global economy.
An official survey published on Saturday showed factory activity in China shrank in August for the fourth month in a row, further evidence of hit to the world's second-largest economy from trade war.
Tension is also running high in Hong Kong, with police and protesters clashing in some of the most intense violence since unrest erupted more than three months ago over concerns Beijing is undermining democratic freedoms in the territory.
Thousands of protesters blocked roads and public transport links to Hong Kong airport and police made several arrests after demonstrators smashed CCTV cameras and lamps with metal poles and dismantled station turnstiles.
China, eager to quell the unrest before the 70th anniversary of the founding of the People's Republic of China on Oct. 1, has accused foreign powers, particularly the United States and Britain, of fomenting the unrest.
Oil prices also fell in early Monday trade.
Brent crude futures fell 0.68 percent to $58.85 a barrel while U.S. West Texas Intermediate (WTI) crude lost 0.54 percent to $54.80 per barrel.
The currency market was calmer for now, with the dollar down slightly against the yen at 106.12 yen, down 0.13 percent from late US levels.
The euro stood almost flat at $1.09905, not far from two-year low of $1.0963 hit in U.S. trade on Friday.