U.S. stocks plunge on global trade tensions, fears of slowing growth
Wall Street’s investor rout deepened on Thursday after news of the arrest of a top executive at Chinese tech company Huawei stoked fears it could hinder progress in China-U.S. trade talks.
The Dow dropped 432 points, or 1.7 percent, in the first moments of trading Thursday. The decline represents a continuation of Tuesday’s 800-point plunge in the Dow Jones Industrial Average before stock and bond trading was closed in the U.S. Wednesday in observance of a national day of mourning for former President George H.W. Bush.
The news of Huawei CFO Meng Wanzhou’s arrest sent shares sharply lower on fears of rising tensions between China and the U.S. The incident comes after President Donald Trump and his Chinese counterpart Xi Jinping agreed over the weekend to hold off on further retaliatory moves in a festering trade war.
But confusion over what the two sides agreed to and whether the deal will enable Beijing and Washington to resolve longstanding, profound differences over technology policy and other issues led to the rout on Tuesday.
Privately held Huawei recently surpassed Apple as the second biggest maker of cellphones after South Korea’s Samsung Electronics. China is demanding Meng’s immediate release.
“We are closely watching the developments in Asia after reports that Canada has arrested the Huawei CFO facing U.S. extradition for allegedly violating Iran sanctions. This headline is quite significant as the U.S. government is attempting to persuade allies to stop using Huawei equipment due to security fears, and this headline could weigh negatively on tech stocks,” said Stephen Innes, head of trading at Oanda in Singapore.
In a statement, Huawei said Meng was changing flights in Canada when she was detained “on behalf of the United States of America” to face “unspecified charges” in New York. It added that it is “not aware of any wrongdoing by Ms. Meng.”
Meanwhile, oil prices dropped as OPEC countries gathered on Thursday for a two-day meeting to find a way to support the falling price of oil, with analysts predicting the cartel and key ally Russia would agree to cut production by at least 1 million barrels per day.
Benchmark U.S. crude lost $1.00 to $51.89 a barrel in electronic trading on the New York Mercantile Exchange. It fell 0.7 percent to $52.89 per barrel in New York. Brent crude, used to price international oils, dropped 99 cents to $60.57 per barrel.
Crude prices have been falling since October because major producers — including the U.S. — are pumping oil at high rates and due to fears that weaker economic growth could dampen energy demand.
The price of oil fell 22 percent in November and was down again on Thursday amid speculation that OPEC’s action might be too timid to support the market. Saudi Arabia, the heavyweight within OPEC, said Thursday it was in favor of a cut.