World markets slumped Thursday as the arrest of a top executive at Chinese telecoms giant Huawei raised doubts over the recent trade truce agreed by US President Donald Trump and Chinese counterpart Xi Jinping.
Fears over the potential trade fallout saw the Frankfurt DAX index, London and Paris all shed three percent and Wall Street joined the global stocks sell-off, opening sharply lower as the Dow Jones Industrial Average slid 2.0 per cent.
The broad-based S&P 500 sank 1.9 per cent to 2,648.04, while the tech-rich Nasdaq Composite Index shed 2.2 per cent to 7,002.02 as Wall street returned to action. The US markets were closed Monday for the funeral of former president George H.W. Bush.
"After some semblance of tranquility on Wednesday, markets are in the thick of it as news regarding Chinese smartphone Company Huawei suggest that US-China tensions are well beyond the tit for tat tariff war," said Oanda's Stephen Innes.
The markets tanked after the arrest of Huawei executive Meng Wanzhou in Canada for extradition to the US in an investigation into suspected Iran sanctions violations by the company.
On the foreign exchange markets, the pound held up despite Britain lurching toward a potential no-deal Brexit. Prime Minister Theresa May faces defeat in her bid to push a controversial agreement with the EU through parliament.
Trump and Xi had sparked a brief global markets rally on Monday after appearing to clinch a tariffs ceasefire last weekend in Buenos Aires.
Also Read
But the rally ran out of steam with investors fretting over the fragile state of the world economy and Brexit uncertainty.
"Stocks have sold-off severely ... as traders are worried that US-China relations have deteriorated," said CMC Markets analyst David Madden.
"The arrest of Huawei CFO Meng Wanzhou in Canada over the weekend has rattled investor confidence.
"US-China relations were on the mend after the G20 summit ... and now the arrest might have thrown a spanner in the works."
"But the early indications are that the size of the reduction may not be enough to halt the market's declines."
Disclaimer: No Business Standard Journalist was involved in creation of this content