Arrest of Huawei CFO sparks global stock market rout
Worst day of trading for FTSE 100 since Britain voted to leave EU as £56bn is wiped off UK companies
THE arrest of a senior Huawei executive has sparked a huge sell off in stock markets around the world as worries about China’s relationship with the US mount.
Meng Wanzhou, the daughter of the Chinese telecommunications giant’s founder Ren Zhengfei, was arrested in Canada on Sunday on allegations of breaching US sanctions against Iran and for cyber espionage. News of her arrest only surfaced yesterday.
The Chinese government has demanded the release of Ms Wanzhou, whom the US was seeking to extradite, according to Canadian officials. The arrest reignited concern that the trade ceasefire between America and China, which had only been brokered at the G20 summit in Argentina last weekend, would deteriorate, sending stocks screaming into the red.
Connor Campbell, a financial analyst at SpreadEx, said: “The Huawei arrest appears to be the straw that broke the camel’s back.” The news first hit Asian markets, with the Hang Seng index dropping 2.5pc to 26,156 and the techheavy Shenzhen Composite index falling 2.2pc to 1,351.
The UK’s benchmark FTSE 100 index took its lead from Asia, suffering its worst day of trading since Britain voted to leave the EU, closing down 3.2pc at a two-year low of 6,704, and wiping around £56bn off the value of the country’s largest listed companies. The FTSE 250 tumbled 2.8pc to 17,753.
A similar scene played out across Europe. The Dax in Germany, one of the biggest exporters to China, fell 3.5pc, putting the index into a bear market as it has now lost a fifth of the value since its last high. In the US, the Dow Jones Industrial Average fell 3.9pc and the S&P 500 and the Nasdaq both tumbled more than 2pc before recovering some of their losses.
Technology and automotive stocks were among the hardest hit, as well as mining and oil companies, setting markets up for a turbulent end to the year. The arrest appears to meet two foreign policy aims of the Trump administration – enforcing a hard-hitting sanctions regime against Iran and confronting Chinese businesses suspected of corporate espionage.
Mr Trump and his officials have been working hard to convince other signatories to the 2015 Iran nuclear deal to pull out and have been threatening to punish businesses that flout the sanctions they reapplied this year.
The US president has also railed against Chinese companies accused of stealing confidential information from American firms, while his intelligence chiefs have raised fears that Huawei could pose a security risk given its close ties to the Chinese government.
The arrest risks escalating tensions between Mr Trump and Xi Jinping, the Chinese president, after they appeared to have agreed a 90-day truce in their trade war to allow for further negotiations. The exact terms of the agreement remain unclear.
The White House’s involvement in the arrest request remains unclear. NPR, the US broadcaster, reported that John Bolton, the White House national security adviser, knew about the arrest in advance.
Ben Sasse, the Republican senator for Nebraska, praised the move and said that it was “for breaking US sanctions against Iran”.
Global markets have reacted dramatically to the arrest fearing it will damage relations between the US and China
Meng Wanzhou, chief financial officer for Huawei, was arrested in Canada and the US is pressing for her extradition