Dow Futures reverses gains as tensions between the United States and China simmer

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  • Dow futures give up modest gains while stocks go down in night trading.
  • The Dow is enjoying a three-day winning streak on vaccine optimism and stronger data than expected.
  • Tensions between the United States and China show no signs of easing.

Futures on the Dow Jones and the broader US stock market reversed course on Wednesday evening as geopolitical tensions between China and the United States continued to spill over.

The two largest superpowers in the world lock horns on issues ranging from Hong Kong to Huawei and all the way to the South China Sea.

Dow, S&P 500, Nasdaq Futures Tumble

Futures on the three main US indices pivoted lower on Wednesday evening, canceling out previous gains. Dow Jones futures fell 45 points or 0.2%. S&P 500 futures fell 0.2%. The mini Nasdaq 100 futures contract was down 0.6%.

Dow futures canceled modest gains Wednesday night. | Graphic: Yahoo Finance

US stocks are coming out of a breakout that saw the three majors post significant gains. The S&P 500 is back above 3200 for the first time since June, while the Nasdaq is approaching a new historic record.

The CBOE volatility index, commonly known as VIX, also fell for the second day in a row. The VIX closed at 27.76 in New York.

US-China tensions far surpass trade deals

Sino-US relations worsened last month after China introduced a new security law for Hong Kong. The legislation, which was passed without much consideration on the part of the Hong Kong authorities, gives Beijing wide powers to punish so-called “serious” political crimes.

In response, President Trump terminated Hong Kong’s special trade privileges and launched new efforts to isolate Chinese telecoms giant Huawei.

At a press conference on Tuesday, President Trump said:

Today, I signed a law and an executive decree to hold China accountable for its aggressive actions against the people of Hong Kong.

He added:

Hong Kong will now be treated the same as mainland China – no special privileges, no special economic treatment and no export of sensitive technologies.

According to Secretary of State Mike Pompeo, the United States will limit entry visas for employees of Huawei and other Chinese companies involved in human rights abuses:

Telecommunications companies around the world should think of themselves as opinions: if they do business with Huawei, they do business with perpetrators of human rights abuses.

In response, China warned that it would impose new sanctions on US personnel and other entities.

Washington also rejects China’s claims in the South China Sea, a region known for its importance to global maritime trade. Earlier this week, the State Department released a press release outlining its position on maritime claims in the region.

The press release says China has used “intimidation to undermine the sovereign rights of coastal states in Southeast Asia” in the region.

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