US stock futures took a sharp move downward, a sign that the global stock rout is set to continue amid heightened trade war fears after the US-led arrest of a Chinese executive.
Sabrina Meng Wanzhou, the CFO of Huawei, was arrested for allegedly attempting to evade newly-implemented US sanctions. That further shook markets on Thursday, a contrast from the start of the week when investors were in a buoyant mood on eased tensions. Investors have now lost confidence in the long-term effectiveness of the agreement struck between Presidents Trump and Xi at the G20.
“Investors may fear this will stir up tensions between China and the US,” says Russ Mould, investment director at AJ Bell, referring to the arrest.
Wanzhou has been arrested for allegedly attempting to evade newly-implemented US sanctions that kicked in at the start of November.
“Having swung between optimism and skepticism about a US-China trade war truce through February, and we note Chinese diplomats making positive noise overnight (‘friendly and candid atmosphere’ between Xi and Trump), traders are understandably cautious,” Mike van Dulken, senior markets analyst at Accendo Markets wrote on Thursday morning.
Wanzhou’s arrest initially spooked Asian investors, with all mainland Chinese and Hong Kong stocks dropping sharply during trading. Fears have spread, and all major European indexes and US index futures are down more than 1.7%. Here’s the scoreboard:
- S&P 500 and Dow futures are each down 1.7% on Thursday morning. Nasdaq futures are plunging 2.3%.
- The benchmark Euro Stoxx 50 is down 2.2%,Germany’s DAX is 2.5% lower, whileBritain’s FTSE 100 was down 2.7%, now lower than it was at the start of 2000.
- Shanghai Composite closed 1.7% lower.Hong Kong’s Hang Seng was down 2.6%.Japan’s Nikkei 225 was down 1.9%.
Markets are so spooked right now that trading on US futures had to be stopped several times overnight after high volatility led to huge price swings.
China fires back
The Chinese embassy in Canada has strong warnings about the arrest:
“The Chinese side firmly opposes and strongly protests over such kind of actions which seriously harmed the human rights of the victim,” it said in a statement on the embassy website. “The Chinese side has lodged stern representations with the US and Canadian side, and urged them to immediately correct the wrongdoing and restore the personal freedom of Ms. Meng Wanzhou. We will closely follow the development of the issue and take all measures to resolutely protect the legitimate rights and interests of Chinese citizens.”
CME Group had to repeatedly halt trading in US stock futures for brief periods this morning because of violent price moves, in an unusual intervention that has stunned traders. US markets had been closed on Wednesday in a mark of respect for the funeral of former US President George HW Bush, so missed out on the negative price action on the day.
Oil is plunging
Elsewhere in markets, oil is jittery ahead of a final meeting of the year between OPEC member states in Vienna later in the day.
Member states are expected to agree a cut in oil production levels by around 1.3 to 1.5 million barrels per day, but traders seem unconvinced so far, with both Brent and WTI sliding on Thursday morning.
Brent crude, the international benchmark, tumbled 4.3%, while US-centric WTI crude is off 4.2%.