The Thursday Market Minute
- Global stocks slide as investors worry the arrest of a key China business executive will unravel the recently-agreed trade truce between Washington & Beijing.
- Huawei CFO reportedly faces extradition from Canada for allegedly violating U.S. sanctions on Iran
- European stocks fall more than 2.2%, the most since the July 2016 Brexit vote, to a two year low as investors eye bond market developments alongside U.S.-China trade tensions.
- Oil drifts lower on demand concerns ahead of OPEC meeting in Vienna where production cuts of as much as 1.3 million barrels per day are expected to be announced.
- U.S. equity futures point to sharp opening bell losses as Wall Street resumes trading following a National Day of Mourning for President George HW Bush.
Global stocks slumped Thursday, pulling U.S. equity futures heavily into negative territory, following the arrest of a high-level Chinese business executive in Canada that threatens to unravel the recently agreed trade truce between Washington and Beijing.
Meng Wanzhou, the CFO of China's Huawei Technologies and the daughter of the company's founder, was detained in Vancouver on December 1 and faces extradition to the United States amid reported allegations that she assisted the world's second-largest smartphone maker in evading U.S. sanctions on Iran. News of the arrest, which only came to light late Wednesday, sent U.S. futures sharply lower and pulled stocks in Asia in Europe firmly the downside as investors worried of reprisals from Beijing and the potential collapse of the uneasy truce between Presidents Donald Trump and Xi Jinping.
"At the request of the U.S. side, the Canadian side arrest a Chinese citizen not violating any American or Canadian law," China Embassy in Canada said in a statement. "The Chinese side firmly opposes and strongly protests over such kind of actions which seriously harmed the human rights of the victim."
Contracts tied to the Dow Jones Industrial Average (^DJI) suggest a 370 point opening bell decline for the 30-stock average and a 38 point pullback for the broader S&P 500 (^GSPC) . The tech-focused Nasdaq Composite (^IXIC) is expected to open 135 points to the downside as chipmakers linked to Huawei slide and smartphone rivals such as Apple Inc. (AAPL) - Get Report face the prospect of consumer boycotts or restrictions should authorities in China choose to react.
European stocks suffered their biggest one-day decline since the July 2016 Brexit vote amid the global sell-off, with the Stoxx 600 benchmark plunging 2.14% to a fresh two-year low while markets in Germany and France notched declines of around 2.4%. Britain's FTSE 100 fell 2.3% in the opening minutes of trading in London even as the pound slipped to 1.2727 against the dollar amid the ongoing government chaos surrounding Britain's impending exit from the European Union and oil majors BP plc (BP) - Get Report and Royal Dutch Shell plc (RDS.A) fell 3.75% and 3.4% respectively.
European chipmakers linked to Huawei were marked heavily to the downside in the opening minutes of trading, with STMicroelectronics (STM) - Get Report falling 4.12% in Amsterdam and AMS AG (AMSSY) slumping 5.12% in Vienna. Apple's German-listed shares were marked 2.6% lower on the Deutsche Boerse and trading at €152.00 each for 150 units.
Stocks in Asia were hit hard, as well, with the Nikkei 225 falling 1.91% in Tokyo to close at 21,501.62 points while the region-wide MSCI Asia ex-Japan index was marked 1.9% lower heading into the final hours of trading, led by a 2.16% decline for China's tech-heavy CSI 300 and a 2.54% decline for the Hang Seng index in Hong Kong.
The defensive tone in global markets spilled over into bonds, as well, with benchmark 10-year Treasury note yields falling to 2.88% and 2-year notes fell to 2.758%, putting the slope of the yield curve modestly steeper at around 12.2 basis points. The dollar index, which tracks the greenback against a basket of six global currencies, was little-changed from its Wednesday levels at 97.06.
Global oil markets plunged Thursday after Saudi Arabia's powerful energy minister dampened hopes for steep production cuts at today's OPEC meeting in Vienna amid speculation that non-member allies such as Russia many not follow the cartel's lead despite a glut in global crude that has prices more than 30% lower over the past two months.
Khalid Al-Falih told reports in Vienna that no agreement had been reached on output cuts, and that members did not want to "shock the market" with significant changes in the cartel's current baseline, and suggested that trimming output by around 1 million barrels would be sufficient. He also said that non-member allies, such as Russia, are not willing to make similar decisions, "we will wait until they are".
The comments added downward pressure to crude prices ahead of the meeting, with Brent crude contracts for February delivery, the global benchmark, falling $1.2 lower from their Wednesday close in New York and changing hands at $60.35 per barrel while WTI contracts for January delivery, which are more tightly liked to U.S gas prices, were marked $1.28 lower at $51.61 per barrel.