US STOCKS-Wall St set to open sharply lower as trade tensions escalate

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* China ready to hit back at U.S. with rare earths
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* Bond yields at lowest since 2017; Bank stocks fall
* 27 of 30 Dow stocks trading premarket were lower
* Capri plunges after profit forecast disappoints
* Futures down: Dow 0.76%, S&P 0.65%, Nasdaq 0.85%

(Changes comment, updates prices)
By Amy Caren Daniel
May 29 (Reuters) - Wall Street was set to open at its lowest
level in at least two months on Wednesday after China signaled
readiness to escalate the trade war with the United States, with
investors fearing that the dispute could be long drawn and weigh
on global growth.
China is ready to use rare earths, a group of 17 chemical
elements used in everything from high-tech consumer electronics
to military equipment, to strike back at the United States,
Chinese newspapers warned. Adding to worries, China's Huawei Technologies Co Ltd
HWT.UL filed a lawsuit against the U.S. government, in the
telecoms equipment maker's latest bid to fight sanctions from
Washington that threaten to push it out of global markets.
"Earlier in the year we thought the U.S.-China agreement was
close to being done, and now it looks more far away than ever
and that is making investors worried," said Kim Forrest, chief
investment officer at Bokeh Capital Partners in Pittsburgh.
"Fears of a recession is being compounded by two things, one
is the reality of what the trade war could bring, another is
whenever the markets hit a new high it is a self-fulfilling
prophesy to say we can't go any higher."
The benchmark S&P 500 .SPX index is now 5.4% away from its
all-time high of 2,954.13 hit on May 1.
Trade worries and slowdown fears have pressured investors to
dump shares globally and seek safety in German and U.S.
government debt.
Yields on the benchmark U.S. 10-year notes US10YT=RR fell
13 basis points below the 3-month US3MT=RR rates, causing a
yield-curve inversion, typically seen as a leading indicator of
a recession. US/
Interest-rate sensitive bank stocks fell in premarket
trading, with JPMorgan Chase & Co JPM.N and Bank of America
Corp BAC.N down more than 1.2%.
The declines were broad based, with 27 of the 30 Dow
components that were trading premarket posting losses.
Tariff-sensitive stocks such as Apple Inc AAPL.O , Boeing Co
BA.N and Caterpillar Inc CAT.N fell about 1%.
At 8:28 a.m. ET, Dow e-minis 1YMc1 were down 192 points,
or 0.76%. S&P 500 e-minis ESc1 were down 18.25 points, or
0.65% and Nasdaq 100 e-minis NQc1 .
Oil majors Exxon Mobil Corp XOM.N and Chevron Corp CVX.N
dropped 1%, as crude prices tumbled more than 2%. O/R
Chipmakers, which get a large portion of their revenue from
China, also declined, with shares of Nvidia Corp NVDA.O ,
Micron Technology Inc MU.O and Intel Corp INTC.O were off
more than 1%.
Among other stocks, General Mills GIS.N dropped 3.3% after
Goldman Sachs downgraded the stock to "sell".
Capri Holdings Ltd CPRI.N plunged 7% after the Michael
Kors owner forecast first-quarter profit below expectations as
it spends more on marketing and opening new stores for its
recently acquired Versace brand.