By Marc Jones
LONDON (Reuters) - Global stock markets slumped for a third day running on Thursday as the arrest of a top executive of Chinese tech giant Huawei in Canada for extradition to the United States fed fears of fresh tensions between the two economic superpowers.
Asian markets took a beating. Huawei is not listed, but China's second-largest telecom equipment maker, ZTE Corp, sank 9 percent in Hong Kong while most of the nearby national bourses lost at least 2 percent.
London, Frankfurt and Paris then slumped to 2-year lows as tech companies, banks and carmakers fell nearly 3 percent. Oil stocks headed for their worst day in 2 1/2 years as crude prices spilled as much as 5 percent going into an OPEC meeting in Vienna.
"We had this very ugly new turn and just the degree to which the market has reacted just suggests to me that they are vulnerable right now," said John Hardy, Saxo Bank's head of FX strategy. "It think we should all be very careful. It is not looking good, especially if the S&P 500 goes to new lows."
S&P 500 futures were down almost 2 percent.
Wall Street was closed on Wednesday, so there was an element of catch-up play but the strain on futures was clearly strong. CME Group's Chicago Mercantile Exchange had implemented a series of 10-second trading halts in Asia that had limited the initial drops.
Japan's Nikkei had shed 1.9 percent, closing at its lowest level since Oct. 30, with semiconductor-related shares leading the losses. Huawei is one of the world's largest makers of smartphones and telecommunications network equipment.
MSCI's ex-Japan Asia-Pacific index lost 2.0 percent too. Hong Kong's Hang Seng dropped 2.5 percent and Chinese blue chips fell 2.1 percent to take their 2018 loss to 20 percent.
Consensus among analysts was for somewhere between 1 million and 1.3 million barrels per day, but Brent dropped as much as 5 percent to back under $60 a barrel as Saudi Arabia said going into the meeting that 1 million "would be enough".
All the various spikes in volatility also shoved currency markets in all kinds of directions.
The Australian dollar, which is highly sensitive to U.S. China tensions due to huge Aussie metals sales to China, shed 1 percent despite China's commerce ministry saying it was "very confident" about striking a U.S. trade deal.
It was last at $0.72 to the U.S. dollar while the greenback itself fell as much 0.4 percent against the yen to 112.77 yen as it suffered slightly too.
China's yuan was on course for its worst day in the offshore spot markets since August as it dropped to 6.9 per dollar, while the crude crunch sent oil currencies like Norway's crown and Russia's rouble down just as much.
Another oil-sensitive currency, Canada's dollar, also languished near an 18-month low. It had been hit hard the day before when a cautious-sounding Bank of Canada dampened expectations of a January rate hike.
The move heightened the sense of a collision between the world's two largest economies, not just over tariffs but also over technological hegemony.
"The U.S. has been telling its allies not to use Huawei products for security reasons and is likely to continue to put pressure on its allies," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
Yields on top-rated German government bonds held near six-month lows, while those on benchmark 10-year U.S. Treasuries were near a three-month low at 2.886 percent.
Adding to worries about U.S. recession risks, the Treasury 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.
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.
(Reporting by Marc Jones, editing by Larry King)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)