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* Trump threatens tariffs on Mexico in surprise tweet
* U.S. automakers tumble premarket
* U.S. Treasury yield curve inversion deepens
* Futures fall: Dow 1.11%, S&P 1.16%, Nasdaq 1.40%
By Shreyashi Sanyal
May 31 (Reuters) - U.S. stock index futures tumbled on Friday, as investors feared that President Donald Trump’s shock threat of tariffs on Mexico could risk pushing the world’s largest economy into a recession.
The United States will impose a 5% tariff on all goods coming from Mexico starting on June 10 until illegal immigration is stopped, Trump said in a tweet late on Thursday.
Trump’s latest threat spread more gloom in the markets, which have already been roiled by an escalating trade war between the United States and China.
U.S. Treasury yields fell to new multi-month lows, while the yield curve, as measured in the gap between three-month and 10-year bond yields, remained heavily inverted. An inversion in the yield curve is seen by some as an indicator that a recession is likely in one to two years.
U.S. automakers were the worst hit from Trump’s announcement as they have long built vehicles in Mexico, taking advantage of the country’s cheap labor, trade deals and proximity to the United States.
Shares of General Motors Co slid 4.7%, while those of Ford Motor Co fell 3.6%.
FAANG stocks - Facebook Inc, Apple Inc, Alphabet Inc, Netflix Inc and Amazon.com Inc - were also down between 1.4% and 1.7%.
At 7:13 a.m. ET, Dow e-minis were down 279 points, or 1.11%. S&P 500 e-minis were down 32.25 points, or 1.16% and Nasdaq 100 e-minis were down 101.75 points, or 1.4%.
Wall Street’s three main indexes are down more than 5% for the month.
China’s disappointing manufacturing data for the month of May also added to the woes.
Investors are now awaiting an inflation report from the Commerce Department at 8:30 a.m. ET that is expected to show the personal consumption expenditures (PCE) price index rose to a reading of 0.3% in April from 0.1% in March.
Core PCE, which excludes volatile food and energy components, is the Federal Reserve’s preferred gauge of inflation and is expected to show a rise of 0.2% in April from a flattish level in March.
Among other stocks, Gap Inc tumbled 14.6% after the apparel retailer cut its 2019 profit forecast and posted the biggest drop in same-store sales in at least three years at its Gap brand.
Constellation Brands, which has substantial brewery operations in Mexico, dropped 5.6%. (Reporting by Shreyashi Sanyal and Medha Singh in Bengaluru; Editing by Anil D’Silva)