Markets tumble as Huawei arrest rekindles US-China trade fears
WORLD markets slumped on Thursday as the arrest of a top executive at Chinese telecom giant Huawei raised doubts over the recent trade truce agreed by US president Donald Trump and his Chinese counterpart Xi Jinping.
Fears over the potential trade fallout saw the Frankfurt DAX index, London and Paris all shed 3 per cent. The Wall Street too joined the global stocks sell-off. Losses on Wall Street deepened in late morning trade on Thursday. Near 16.30 GMT, the Dow Jones Industrial Average was down 2.3 per cent at 24,446.09. The broadbased S&P slid 2 per cent to 2,645.74, while the tech-heavy Nasdaq Composite Index shed 2.4 per cent to 6,998.19. London stocks tumbled more than 3 per cent. At 16.00 GMT, the FTSE 100 shares index sank 3.12 per cent to 6,705.66 points compared to Wednesday’s closing level, mirroring losses in Frankfurt and Paris.
.... I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so. It will always be the best way to max out our economic power. We are right now taking in $billions in Tariffs. MAKE AMERICA RICH AGAIN — Donald Trump Tweet that had triggered mass stock sell-off
AGLOBAL market rout triggered a sell-off in the domestic equity markets that weakened the rupee on Thursday, which slipped to the 71-mark after six sessions. But smaller-than-expected oil production cut proposed by Saudi Arabia after the Organisation of the Petroleum Exporting Countries (Opec) meeting led to sharp correction in Brent prices and helped the rupee to recover.
After opening lower at 70.82, the rupee plunged to the day’s low at 71.14 but recovered to finally settle for the day at 70.90 down 44 paise over its previous closing price of 70.46 against the dollar.
Investor sentiment took a hit after Canadian authorities arrested a top executive of Chinese tech giant Huawei Technologies for suspected Iran sanctions violations, fanning fears of further tensions between China and the US. This led to both the dollar and the yen rising on safehaven buying.
Madhavi Arora, economist at Edelweiss Securities said, “The rupee saw a volatile session on Thursday. While it opened weaker against the dollar in line with other Asian forex amid weaker global growth concerns, and conflicting signals on the US-China trade deal. Besides, pressure on Asian forex, led by Chinese yuan renminbi, increased as markets were nervous that the US and China tension may amplify after the arrest of a top executive at Chinese tech giant Huawei.”
“However, smaller-than-expected oil production cut proposed by Saudi after the Opec meeting led to sharp correction in Brent and helped in recovery in the rupee. The rupee nearterm dynamics would be contingent on Brent’s direction after the outcome of Opec and five states elections outcome as the US-China trade truce optimism starts to fade and the Fed reiterates data-dependency ahead in the December policy,” added Arora.
The Opec is meeting in Vienna to decide its production policy in coordination with non-OPEC produce
ers including Russia, Oman and Kazakhstan.
Expectations had been of a joint cut of 1- 1.4 million barrels per day (bpd), until Saudi energy minister Khalid al-Falih said before the meeting that the “Opec+” group would be happy with a cut of just 1 million bpd.
The Opec and its allies are working towards cutting oil output but could fail to reach a deal if no compromise is found with its friend Russia, Falih said.
Oil prices snapped lower after Falih’s comments. Brent oil futures fell 3 per cent to below $60 per barrel on fears that there could be no deal.
Meanwhile, rating agency Fitch said it expects the rupee to weaken to 75 against the dollar by the middle of next year due to a widening current account deficit and tighter global financing conditions. Despite a few recent advances, the rupee is on track for its worst yearly performance in five years in 2018. Fitch has lowered India’s GDP growth forecast to 7.2 per cent in 2018-19, followed by 7 per cent in 2019-20 and 7.1 per cent in 2020-21. Benchmark equity indices cracked for the third consecutive session on negative global cues.
Fitch is expecting the rupee to weaken to 75 against the dollar by the middle of next year