Huawei executive arrested by Canadian officials at USA request

Lloyd Doyle
December 6, 2018

United States stocks tumbled again, knocking 600 points off the Dow Jones Industrial Average and putting the benchmark S&P 500 on track for its worst week since March.

Adrian Lowcock, Head of Personal Investing at Willis Owen, said: "Optimism over a ceasefire in the US-Chinese trade war has proven very short-lived with the arrest of Huawei's CFO in Canada, putting a reconciliation in greater doubt".

Traders continued to shovel money into bonds, a signal that they see weakness in the economy ahead. The yield on the 10-year Treasury note fell to 2.85 per cent from 2.92 per cent on Tuesday, a large move. US markets were closed on Wednesday in honor of President George H.W. Bush's funeral.

Meng's arrest could have a significant effect on markets and on US-China relations.

"The market seems right now to be focused on increased risks for a 2020 recession, " said Patrick Schaffer, Global Investment Specialist, JP Morgan Private Bank. The drop brings the Dow's 2-day losses to 1,500 points.

As reported by Bloomberg, tensions are back on the rise between the USA and China following the Canadian arrest of Huawei's global CFO, who is set to be extradited to the United States to face charges of violating Iran sanctions. The Nasdaq was still slightly higher for 2018.

Major indexes overseas also fell sharply.

But casting Huawei as the Chinese equivalent of Apple understates its reach and importance - Huawei also manufacturers a tremendous amount of the equipment used by phone and internet companies, as well as providing IT consulting services both in China and around the globe.

China's foreign ministry urged Canada and the U.S. to "clarify" the reason for Meng's detention.

The arrest came shortly after news broke that China and the USA had agreed to a 90-day suspension of their ongoing trade war.

Investors knocked 600 points off the Dow Jones, and put the S&P 500 on track for its worst week since March.

The CFO's arrest - the same day Donald Trump and Xi Jinping dined in Buenos Aires -- is likely to be regarded back home as an attack on one of China's foremost corporate champions. That optimism quickly faded as scepticism grew that Beijing will yield to USA demands anytime soon, leading to a steep sell-off in global markets on Tuesday.

"Trade tensions aren't going away, " Schaffer said.

Asian stocks tumbled overnight on the news of the arrest.

Oil ministers are gathering in Vienna for an Opec meeting, where the cartel is widely expected to agree a production cut. Analysts predicted the cartel and some key allies, like Russian Federation, would agree to cut production by at least 1 million barrels per day.

James Lewis, the director of technology policy at the Center for Strategic and International Studies, told Axios the US should be prepared for a backlash and warned American tech executives to steer clear of China for now.

Wanzhou has been arrested for allegedly attempting to evade newly-implemented U.S. sanctions that kicked in at the start of November.

The US dollar weakened to 112.47 yen from 113.19 yen late on Wednesday.

Ericsson ERICb.ST rose 1.5 percent, while the Paris-listed shares of Nokia NOKIA.PA added 0.1 percent.

Other reports by Iphone Fresh

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