Shares in Shanghai plunged nearly 4% overnight as China ordered the U.S. to close its consulate in the southwestern city of Chengdu, a day after Washington forced Beijing to leave its mission in Houston, citing alleged spying. The Chengdu consular district serves as a key U.S. listening post for developments in Tibet and China's development of strategic weapons in neighboring regions. It's the latest flashpoint between the two countries as the tit-for-tat spat clouds prospects for trade between the world's two largest economies.

Escalating toward new cold war

Adding to the tensions is a speech from Secretary of State Michael Pompeo that depicted China's leaders as tyrants bent on global hegemony. "If the free world doesn't change Communist China, Communist China will change us," he declared. "If we bend the knee now, our children's children may be at the mercy of the CCP, whose actions are the primary challenge to the free world." Pompeo also discussed the tech frontier. "We have stopped pretending Huawei is an innocent telecommunications company... we have called it what it is, a national security threat, and taken action accordingly."

Stocks set to extend losses

Tech is under more pressure today with Nasdaq futures down 1.1%, while contracts tied to the Dow and S&P 500 are off 0.4%, as tensions rise between Beijing and Washington. Another rebound of business activity across the eurozone didn't help markets there as the Euro Stoxx 50 fell 1.6%. Over in the U.S., Senate Republicans scrapped their plans to release a proposal for the next coronavirus relief bill Thursday after continued differences with the White House. Stocks have been sensitive to cues about stimulus, as well as the flurry of corporate earnings. On the calendar today, Verizon (NYSE:VZ) and Honeywell (NYSE:HON) are set to report.

One of the world's greatest financial scandals

Goldman Sachs (NYSE:GS) has agreed to a $3.9B settlement with the Malaysian government over the multibillion-dollar 1MDB scandal. Backdrop: Malaysian prosecutors filed charges in December 2018 against three Goldman units for misleading investors over bond sales totaling $6.5B that the bank helped raise for the sovereign wealth fund. However, Goldman has pleaded not guilty to the charges, saying that certain members of government and 1MDB lied to it about how proceeds from the bond sales would be used. GS +1.7% premarket.

End of aircraft subsidies dispute

Along with the governments of France and Spain, Airbus (OTCPK:EADSY) has agreed to amend so-called launch aid arrangements, a subsidy designed to help manufacturers develop new plane models. "After 16 years of litigation at the World Trade Organization, this is the final step to stop the longstanding dispute," Airbus said in a statement, after the U.S. was given the go-ahead to impose tariffs on as much as $7.5B worth of European exports annually. Back in February, Washington state lawmakers also repealed a key tax break for Boeing (NYSE:BA) to head off a parallel action by the EU at the WTO.

A bid for Brooks Brothers

Major U.S. mall owners have been increasingly looking for deals to salvage retailers - in many cases major tenants - that have been hit hard by the coronavirus pandemic. The latest? A company known as Sparc, which is comprised of Simon Property Group (NYSE:SPG) and Authentic Brands, has been designated as the "stalking horse" for bankrupted Brooks Brothers after making a $305M bid. The offer, still subject to better and higher bids and court approval by Aug. 5, pledges to keep at least 125 of Brooks Brothers' stores open for business (it currently has 250 locations in North America).

Tech antitrust hearing delay

A high-profile House Antitrust hearing on Monday is likely headed for a delay due to a ceremony for the late Rep. John Lewis, Politico reports. When it does come, the hearing - set to feature Amazon's (NASDAQ:AMZN) Jeff Bezos, Facebook's (NASDAQ:FB) Mark Zuckerberg, Apple's (NASDAQ:AAPL) Tim Cook and Google's (GOOG, GOOGL) Sundar Pichai - will be one of the most highly anticipated such appearances in years. Not only will it be the first time the four testified at the same hearing, it will be the first congressional appearance for Bezos. In related news, Apple shares stumbled 4.5% yesterday on reports that multiple U.S. states are probing the tech giant for deceptive trade practices.

Film release shakeup

Just hours after Disney (NYSE:DIS) cleared the decks by delaying Mulan for the fourth time, as well as pushing back Star Wars and Avatar movies, more high-profile film releases are packing up for later dates. Paramount's (NASDAQ:VIAC) Top Gun: Maverick, a sequel to 1986 hit Top Gun, was set to bow on Dec. 23 but now heads to July 2021. The studio had previously delayed A Quiet Place Part II to Labor Day weekend, as well as Sonic the Hedgehog 2, Jackass, Under the Boardwalk and The Tiger's Apprentice. Sony (NYSE:SNE) is also moving its latest Spider-Man live-action sequel back a month.

Thursday's Key Earnings

American Airlines (NASDAQ:AAL) +3.6% with lower cash burn rate.
AT&T (NYSE:T) -0.9% on double-digit WarnerMedia decline.
Blackstone (NYSE:BX) -2.3% after distributable earnings miss.
Dow (NYSE:DOW) -3.4% posting larger-than-expected Q2 loss.
Freeport-McMoRan (NYSE:FCX) -2.2% as virus has 'forever changed the way it runs.'
Intel (NASDAQ:INTC) -11.1% AH delaying next-generation chips.
Mattel (NASDAQ:MAT) +7.3% AH seeing growth in Barbie and games.
Southwest Airlines (NYSE:LUV) -1.5% hit by a $915M loss.
Twitter (NYSE:TWTR) +4.1% reporting strong Q2 user growth.

Today's Markets

In Asia, Japan -0.6%. Hong Kong -2.2%. China -3.9%. India flat.
In Europe, at midday, London -1%. Paris -1.3%. Frankfurt -1.6%.
Futures at 6:20, Dow -0.4%. S&P -0.4%. Nasdaq -1.1%. Crude +0.7% to $41.36. Gold -0.1% to $1888.70. Bitcoin -0.7% to $9562.
Ten-year Treasury Yield flat at 0.59%

Today's Economic Calendar

9:45 PMI Composite Flash
10:00 New Home Sales
1:00 PM Baker-Hughes Rig Count