DOW FUT : China`s Tensions Rise
(Thu, 16 July 2020). Tensions between China and the United States could spill over into the stock market in the second half of the week. Despite reaching a trade deal with China, the Trump administration`s battle with Beijing is only getting started.
Dow futures give up modest gains as stocks turn lower in overnight trading. The Dow is riding a three-day winning streak on vaccine optimism and stronger than expected data. Tensions between the United States and China show no signs of easing. Futures on the Dow and broader U.S. stock market reversed course Wednesday night, as geopolitical tensions between China and the United States continued to reverberate.
The world’s two biggest superpowers are locking horns on issues ranging from Hong Kong to Huawei and up to the South China Sea.
Dow, S&P 500, Nasdaq Futures Tumble
Futures on all three major U.S. indexes pivoted lower Wednesday evening, reversing earlier gains. Dow Jones futures fell 45 points or 0.2%. S&P 500 futures declined 0.2%. The Nasdaq 100 mini futures contract is off 0.6%. U.S. stocks are coming off a breakout session that saw all three majors post sizable gains. The S&P 500 Index is back to trading above 3,200 for the first time since June, while the Nasdaq is approaching another all-time high. The CBOE Volatility Index, commonly known as the VIX, also fell for a second straight day. The VIX closed at 27.76 in New York trading.
U.S.-China Tensions Far Exceed Trade Dealings
Sino-American relations took another turn for the worse last month after China implemented a new security law for Hong Kong. The legislation, which was passed without much consideration from Hong Kong authorities, grants Beijing broad powers to crack down on so-called “grave” political offenses. In response, President Trump has ended Hong Kong’s special trading privileges and launched new efforts to isolate Huawei, China’s telecom behemoth.
According to Secretary of State Mike Pompeo, the United States will restrict entry visas for employees of Huawei and other Chinese companies involved in human rights abuses. In response, China has warned it will impose new sanctions on U.S. personnel and other entities.
Washington is also rejecting China’s claims in the South China Sea, a region known for its importance to global maritime trade. Earlier this week, the Department of State issued a press statement outlining its position on maritime claims in the region.
The press release asserts that China has used “intimidation to undermine sovereign rights of Southeast Asian coastal states” in the area.
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