Stock markets around world tumbled on Thursday as the arrest of a top Chinese technology executive cast further shadows on U.S.-China trade relations, while oil prices sank on fears of smaller-than-expected output cuts.
The arrest of smartphone maker Huawei Technologies Co.’s Chief Financial Officer Meng Wanzhouof in Canada for extradition to the United States came as Washington and Beijing prepared for key talks aimed at resolving a bitter trade spat.
Canada’s main stock index plunged to its lowest level in more than two weeks on Thursday, as oil prices pulled down energy shares, while the Bank of Canada Governor Stephen Poloz predicted that low oil prices would hurt the country’s economic growth.
Comments from Poloz are likely to reinforce market expectations that the pace of future rate hikes will ease off, a day after the central bank kept interest rates on hold.
At 2 p.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 275.82 points, or 1.82 per cent, at 14,906.82.
The losses were broad-based with 10 of the index’s 11 major sectors in the red, with the energy sector’s 4.9-per-cent slump leading the decliners.
Oil tumbled in a volatile session after OPEC signaled it may agree to a smaller-than-expected output cut.
The financials sector slipped 1.9 per cent, while the industrials sector fell 2.1 per cent.
The materials sector, which includes precious and base metals miners and fertilizer companies, lost 1.1 per cent.
The Dow Jones Industrial Average fell 313.48 points, or 1.26 per cent, to 24,710.83, the S&P 500 lost 29.01 points, or 1.06 per cent, to 2,671.42 and the Nasdaq Composite dropped 15.73 points, or 0.22 per cent, to 7,141.95.
MSCI’s gauge of stocks across the globe shed 2.53 per cent, while the pan-European STOXX 600 index lost 3.31 per cent.
Emerging market stocks lost 2.76 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 2.28 per cent lower, while Japan’s Nikkei lost 1.91 per cent.
Canadian authorities late on Wednesday said they had arrested Meng, also the daughter of Huawei’s founder, on Dec. 1, the same day that U.S. President Donald Trump and Chinese leader Xi Jinping met at the G20 summit in Argentina.
The world’s two economic superpowers had agreed on a 90-day trade truce period to hammer out a more permanent agreement, which sent global stock markets soaring on Monday. Equities reversed course the next day as uncertainty grew that the U.S. and China could, in fact, find common ground.
“In general, we all have the same questions we did on Tuesday,” said Art Hogan, chief market strategist at B. Riley FBR in New York. “The news on Huawei throws another level of uncertainty on our ability to actually come to some agreement with China.”
China’s foreign ministry said neither Canada nor the United States had clarified the reason for the arrest, but a source earlier told Reuters it was related to violations of U.S. sanctions.
Earlier this week, shorter-dated yields rose above medium yields for the first time since early 2008, which fanned fears about a U.S. recession in the coming months and also sent Wall Street shares sliding.
U.S. Treasury yields tumbled on Thursday with 10-year yields hitting three-month lows as worries about U.S.-China trade and Brexit spurred safe-haven bids.
Additionally, traders scaled back expectations on the number of rate hikes the Federal Reserve would implement amid weakening economic data and market volatility.
U.S. jobs data is due on Friday. If the figures show any serious weakness, markets are likely to react, said Shuji Shirota, HSBC’s head of macro economic strategy.
The U.S. dollar weakened against major peers as Treasury yields slipped and traders scaled back rate hike expectations.
The euro was 0.39 per cent higher against the dollar at $1.1388.
Also pulling down equity markets were oil prices.
Oil fell more than 4 per cent in choppy trading after OPEC ended a key meeting having made no decision on crude output, as it prepared to debate the matter with other exporters the next day.
An OPEC delegate said the organisation had agreed a tentative deal to cut oil output but had not yet come up with a final figure.
U.S. crude sank 4.65 per cent to $50.43 per barrel and Brent was last at $58.86, down 4.39 per cent on the day.
The two have lost 30 per cent in value this quarter alone, but this week’s OPEC meeting could bring more surprises.
“The real impact of the meeting will be evident (on Friday) following the release of the OPEC+ joint declaration,” said Abhishek Kumar, Senior Energy Analyst at Interfax Energy.