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Global Markets: Stocks slide as Huawei arrest risks new strains in U.S.-China ties

Reuters  |  TOKYO 

By and Daniel Leussink

TOKYO (Reuters) - U.S. stock futures and Asian shares slumped on Thursday after Canadian authorities arrested a top of Chinese tech giant for extradition to the United States, feeding fears of a fresh flare-up in tensions between the two superpowers.

The came as and are set to begin negotiations aimed at de-escalating their bruising trade war, which is adding to deepening worries over higher U.S. interest rates and other risks to global growth.

The sell-off looked set to extend into European trading, with spreadbetters expecting London's FTSE 100 to drop 0.9 percent at the open, Frankfurt's DAX to lose 1.5 percent and Paris' CAC 40 to fall 1.4 percent.

S&P500 futures fell almost 2 percent at one point in thin Asian morning trade and were last were down 1.3 percent.

The losses in the first few minutes of trading might have been even steeper, but CME Group's implemented a series of 10-second trading halts that helped limit the initial drop.

Japan's Nikkei shed 1.9 percent, closing at its lowest level since Oct. 30, with related shares leading the losses. is one of the world's largest makers of and

MSCI's ex-Asia-Pacific index lost 2.0 percent. Hong Kong's Hang Seng dropped 2.9 percent while shares dipped 1.7 percent.

Canadian authorities said they had arrested Huawei's in Vancouver, where she is facing extradition to the

The arrest is related to violations of U.S. sanctions, a person familiar with the matter said, though officials have so far stayed mum on her allegations.

The arrest heightened the sense of a major collision between the world's two largest economic powers not just over tariffs but also over technological hegemony.

Britain's said it was removing Huawei's equipment from the core of its existing and 4G mobile operations. and have also rejected Huawei's products.

"The U.S. has been telling its allies not to use products for security reasons and is likely to continue to put pressure on its allies," said Norihiro Fujito, at

"So while there was a brief moment of optimism after the weekend U.S.-talks but the reality is, it won't be that easy," he said.

Shares of China's second-largest sank 9.1 percent in Hong Kong and 6.5 percent in

ZTE had to temporarily halt much of its earlier this year after the U.S. imposed an export ban on the company related to it illegally shipping U.S.-origin goods to and


Markets had initially brightened this week after U.S. and Chinese leaders agreed a temporary trade truce at a meeting on Saturday. But the mood quickly soured on scepticism that the two sides can reach a substantive deal on a host of hugely divisive issues within the tight 90-day time frame set out.

The Treasury 10-year yield hit a three-month low of 2.874 percent, its lowest level since Sept. 7, before pulling up to 2.884 percent. U.S. markets were closed on Wednesday to mark the death of former

Adding to worries about U.S. recession risks, the yield curve remained inverted between two- and five-year zones, with five-year notes yielding 2.763 percent, below 2.778 percent on two-year notes.

"If the upcoming U.S. jobs data on Friday shows some weakness, markets will face a major challenge," said Shuji Shirota, of macro economic strategy at

The yield inversion is a symptom of a weak economy, said Bryan Whalen, of in Los Angeles, noting the U.S. has not been able to achieve sustainable economic growth of more than 2 percent in recent years.

"If the U.S. couldn't break the 2 percent growth environment, with zero-bound interest rates and a rapidly expanding balance sheet early in the economic cycle, why would you ever think we could do it when interest rates are rising and balance sheet is shrinking and we are basically 9-10 years into an aging economic cycle," he said.

"It's hard to envision a scenario where U.S. growth doesn't dip down, if not kind of going into a recession."

fell ahead of a meeting by group that is expected to result in a supply cut aimed at draining a glut that has pulled down crude prices by 30 percent since October.

A monitoring committee of and its allies, including Russia, agreed on the need to cut in 2019, two sources familiar with the discussions said.

Still, lack of details could suggest such an agreement could be elusive, some analysts also said.

U.S. Intermediate (WTI) crude futures fell 1 percent, or 51 cents a barrel, to $52.38 by 0612 GMT. Brent were down 0.8 percent, or 49 cents, at $61.07.

In the currency market, the dollar fell 0.4 percent against the yen to 112.77 yen on a risk-averse mood while the Australian dollar shed 0.6 percent to $0.7229.

The yuan eased 0.3 percent to 6.8835 per dollar in offshore trade while the euro held steady at $1.1338.

Sterling dipped 0.2 percent to $1.2708 as Theresa May's Brexit deal faced fresh criticism from allies and opponents alike.

(Editing by and Jacqueline Wong)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, December 06 2018. 12:30 IST