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* Futures drop: Dow 1.66 pct, S&P 1.70 pct, Nasdaq 2.27 pct
* Chinese factory activity contracts for first time in 19 mths
* 10-year U.S. Treasury yields hit 12-month low
* No signs of workable plan to end U.S. govt shutdown
* High-growth FAANGs, chipmakers fall in premarket trading (Updates prices)
By Shreyashi Sanyal
Jan 2 (Reuters) - U.S. stocks were set to open sharply lower on Wednesday, coming off their worst year in a decade, as weak data in Asia and Europe confirmed fears of a global economic slowdown while the U.S. government shutdown dragged on.
S&P 500 e-minis were down 1.70 percent at 8:27 a.m. ET, while Nasdaq 100 e-minis were down 2.27 percent.
Dow e-minis slid 1.66 percent, indicating the Dow Jones Industrial Average could tumble about 400 points at the open. Twenty-nine of the 30 Dow components were in the red in premarket trading and one flat.
China’s factory activity contracted for the first time in 19 months in December, hit by the Sino-U.S. trade war, the private Caixin/Markit PMI survey showed, with the weakness spilling over to other Asian economies.
While Euro zone manufacturing activity barely avoided contraction, a drop for the fifth month took the reading to its lowest since February 2016.
The grim readings come ahead of the closely watched U.S. manufacturing survey on Thursday, payrolls data on Friday and the U.S. earnings season later this month, which is expected to show corporate profit shrunk in the October-December quarter.
The high-growth FAANGs — Facebook Inc, Apple Inc , Amazon.com Inc, Netflix Inc and Alphabet Inc — were down 2-3 percent.
Shares of chipmakers, which get a sizeable portion of revenue from China, also dropped, with Intel Corp, Micron Technology Inc and Nvidia Corp down 2.5-3 percent.
“Investors are clearly concerned about the growth in 2019 and the lack of confidence is keeping them on the sidelines or they are feeling safer by parking their capital in risk-off assets,” said Naeem Aslam, chief market analyst at Think Markets UK Ltd in London.
A low appetite for risk sparked demand for U.S. Treasuries, sending yields on 10-year debt to a 12-month low of 2.6470 percent. The spread between two- and 10-year yields recently shrunk to the smallest since 2007, a flattening that has been a portent of recessions in the past.
Last year, the Dow, S&P 500 and Nasdaq recorded their biggest one-year percentage declines since 2008, and many of the concerns, mainly to do with a slowing economy, have carried over into this year.
One of them has been the trade dispute between the United States and China. Investors are keenly tuned into updates on the ongoing talks as a March 1 tariff-ceasefire deadline nears.
While U.S. President Donald Trump said last weekend that talks were progressing well, many analysts doubt the two countries can bridge their differences and reach a comprehensive trade deal in so short a negotiating window.
Meanwhile, the U.S. Congress is set to reconvene with no signs of a workable plan to end a 12-day-old partial shutdown and Trump not budging on his demand for $5 billion to fund a border wall. A Democrat plan to approve a two-part spending package does not include these funds.
While the shutdown is expected to have little effect on economic or corporate activity, the longer it lasts, the more it will weigh on an already weak investor sentiment. (Reporting by Shreyashi Sanyal in Bengaluru; Additional reporting by Medha Singh; Editing by Shounak Dasgupta)