£56bn wiped off FTSE 100 after Huawei official arrested

A STOCK market bloodbath saw £56bn wiped off the FTSE 100 yesterday, spurred by fears that the arrest of a senior Huawei official in Canada could reignite tension between the US and China.

London’s blue-chip index closed 217.79 points, or 3.2% lower, at 6,704.05. France’s Cac was down 3.3% while Germany’s Dax fell 3.5%. Huawei’s chief financial officer, Meng Wanzhou, faces possible extradition to the United States after her arrest on suspicion of trying to evade sanctions against Iran.

A Chinese government statement said Meng broke no US or Canadian laws and demanded that Canada “immediately correct the mistake” and release her.

David Madden, market analyst at CMC Markets, said: “Equity markets suffered severe losses as investors are worried the relationship between the US and China has been strained by the arrest.

“The US-China relationship was moving in the right direction after the G20 summit, and now dealers feel all the good work could be undone. It is a broadbased sell-off that we are seeing in London, as mining, energy, financial and consumer stocks are all lower.” Sterling was trading relatively flat against both the US dollar and euro at 1.277 and 1.123 respectively, as Brexit fears kept the British currency shackled.

Brent crude was trading down 2.8% at 59.77 US dollars a barrel, despite Opec countries agreeing to cut oil production. Crude has been falling since October as countries such as the US and Saudi Arabia produce at higher rates, and due to fears that weaker economic growth will dampen energy demand.

Mr Madden said: “The cartel will give further details on the size of the cut tomorrow, but traders are sceptical it won’t be enough to prop up the price.

“Going into the meeting, there was talk of a 1.4 million-barrel cut, and it was reported that Saudi Arabia are keen for a cut of only one million barrels.”