By Mike Bird and David Hodari
Stock markets around the world were rattled Thursday by the arrest of a high-profile Chinese executive in Canada, even as Beijing reiterated its intent to follow through on promises aimed at easing trade hostilities with the U.S.
Europe's Stoxx 600 index fell 1.3% in the opening minutes of trading, with the benchmark's tech sector sliding 1.8%. That followed heavier losses in Asia, where Japan's Nikkei 225 fell around 2%. Hong Kong's Hang Seng Index, as well as tech-dominated indexes like China's Shenzhen A-Share and the Taiwanese Taiex, were all more than 2% lower.
China's Commerce Ministry said Thursday that Beijing would "immediately implement" agreements made at the Group of 20 summit in Argentina involving the Chinese purchase of U.S. products. The ministry also said planned talks on U.S. intellectual property and market access concerns would occur within the allotted 90-day window before U.S. tariff increases are set to resume.
The statements came after the arrest by Canadian authorities of Huawei Technologies Co.'s chief financial officer, which fanned fears of another escalation in tensions between the world's two largest economies.
U.S. futures contracts pared some of the losses that initially followed news of the arrest, but S&P 500 and the Dow Jones Industrial Average remained 1% and 1.1% lower, respectively. Trading volumes were thin after U.S. markets were closed Wednesday for the funeral of former President George H.W. Bush.
The Hong Kong-listed shares of China's ZTE Corp.--a rival to Huawei and the nation's second-largest telecom equipment maker--fell 7.6%. Shares of Huawei's suppliers and partners also slumped, with phone-camera-lens supplier Sunny Optical Technology down more than 5%.
The U.S. dollar bonds of privately-owned Huawei touched new lows after news broke of its CFO's arrest. The company's debt maturing in 2025 has already been hit this year, and its yield climbed to 5.865% Thursday, up by more than 2 percentage points since January. Bond yields rise when prices fall.
The arrest came after British wireless carrier BT Group PLC said it is removing Huawei equipment from the core of its network for transferring calls and internet traffic.
"The panic reaction reflected investors' concerns over a technology battle between the U.S. and China," said Steven Leung, an executive director at UOB Kay Hian. The incident also dampened hopes for a near-term resolution of the trade dispute between the U.S. and China, despite the recent temporary truce, Mr. Leung said.
Icy trade relations between the U.S. and China have weighed on markets and prompted fears of slowing global growth so far this year, with the Shanghai Composite and Shenzhen A-Share indexes down 21% and 29% respectively.
The Chinese yuan, which has borne the brunt of trade anxieties, was last down 0.4% against the U.S. dollar, its earlier losses softening after China's Commerce Ministry's announcements Thursday. The ministry also said it was confident about reaching consensus with the U.S. within three months.
Sharp selling Thursday marked a continuation of downbeat trading seen earlier in the week, as optimism from the G-20 waned amid persistent growth fears and sliding U.S. bond yields.
The yield on U.S. 10-year Treasurys was last 2.897% having slipped from 2.921% late Tuesday. The WSJ Dollar Index was last up 0.2%.
In addition to headlines out of China, U.S. investors were awaiting a speech scheduled for Thursday from Federal Reserve Chairman Jerome Powell, which will be scrutinized for signals related to the central bank's interest-rate policy.
While CME data gave an 80.1% probability of a rate increase at the Fed's December meeting, figures show a less clear consensus for 2019, reflecting estimates of just over one rate raise. But some analysts see that as an overly dovish forecast.
"Now everyone is looking at the Fed. The market took the Fed's recent commentary as dovish and our view is that that was an exaggerated interpretation," said Christian Keller, head of economics research at Barclays Investement Bank.
Elsewhere, market participants were looking to Vienna, where the Organization of the Petroleum Exporting Countries and its allies were expected to announce energy supply cuts to stem the sharp recent fall in oil prices. Brent crude oil, the global benchmark, was last down 2.2% at $60.22 a barrel.
Joanne Chiu contributed to this article
Write to Mike Bird at Mike.Bird@wsj.com and David Hodari at David.Hodari@wsj.com
(END) Dow Jones Newswires
December 06, 2018 04:19 ET (09:19 GMT)
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