Jeez it has been an intense week for US-China relations. The post-G20 trade truce is starting to feel like a distant memory, with Tariff Man Donald Trump, and now the arrest of Huawei’s Meng Wanzhou, serving to undermine whatever (naïve) hopes of progress had built up on Monday.
Wanzhou, global chief financial officer of telecoms equipment at the Shenzen-based smartphone firm and daughter of its founder, was detained in Canada last Saturday and is now facing extradition to the USA, relating to an investigation into whether or not she violated sanctions against Iran.
China has, obviously, been quick to criticise the arrest, while Huawei (SZ:002502) is demanding her release. It is yet another huge blow to what was already looking like a fragile and inchoate ceasefire, and has sent the markets into another value-eroding funk.
Absent from normal trading on Wednesday due to the day of mourning for George HW Bush, the futures are indicating the Dow Jones is going to return to some rather nasty scenes. The US index itself is expected to drop 300 points, a loss in line with the situation in Europe.
The FTSE, which is really feeling the weight of its commodity stocks at the moment, dropped 1.5%, slipping to 6830 for the first time in 2 years. The DAX, meanwhile, lost 170 points as it strained to keep above 11000, with the CAC back at 4860 as it fell 1.6%.
The forex markets, in contrast, were pretty calm. The pound slipped 0.1% against the dollar and remained unchanged against the euro, the currency escaping some Brexit-fretting due to the headline-dominance of the US-China situation.
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