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U.S. Markets Drop, Following Global Stocks Down Amid Fresh Trade Fears Markets Drop as Huawei Arrest Stokes Fears of U.S.-China Cold War
(35 minutes later)
Stock market losses mounted on Thursday, as worries about the world’s economic outlook, heightened tension between the United States and China and another tumble in energy prices left few areas unscathed. The arrest of a top Chinese technology executive intensified concerns about an emerging cold war between the world’s two largest economies, sending stock markets around the world lower on Thursday.
On Wall Street, the S&P 500 stock index dropped more than 2.5 percent, falling into negative territory for the year, after news that a prominent Chinese technology executive was arrested in Canada at the request of the United States. Markets in Europe and Asia also faced steep declines. The chief financial officer of the Chinese telecom giant Huawei, Meng Wanzhou, was arrested on Saturday as President Trump and President Xi Jinping of China agreed to a trade truce. A trade deal between the United States and China, which was already facing tense negotiations, looks even more complicated in the wake of the arrest.
Investors in the United States have already been rattled about the prospect that a trade war with China would begin to impact the economy at home. Over the weekend, the two countries declared a truce in the trade war, promising to halt any further tariffs on imports as they negotiated a trade deal, but doubts and confusion over the nature of their agreement emerged almost immediately. The Trump administration has accused China of unfair trade practices, particularly over cutting-edge technology. Last weekend, the two leaders appeared to find common ground as they agreed to negotiate. Mr. Trump undercut those efforts this week by threatening further tariffs on imports from China.
News of the arrest of the chief financial officer for the Chinese tech giant Huawei, Meng Wanzhou, generated fresh uncertainty about the truce. It also raised the possibility of a new phase in the trade war, one that could pose substantial risks for United States tech companies that have driven major gains for American investors in recent years. The trade war has set investors on edge. The markets have been rattled about the prospect that the conflict with China would begin to impact the economy at home at a time when global growth is slowing. Few parts of the markets have been left unscathed, with the S&P 500-stock index in negative territory for the year. Markets in Europe and Asia have also faced steep declines.
“This is going to continue to be a headwind at a time when people are worried about global growth,” said Dan Clifton, a head of policy research with analysis firm Strategas.“This is going to continue to be a headwind at a time when people are worried about global growth,” said Dan Clifton, a head of policy research with analysis firm Strategas.
Ms. Meng was arrested in Vancouver on Saturday, even as President Trump and President Xi Jinping of China were dining together in Buenos Aires. United States authorities are seeking Ms. Meng’s extradition but have not said what prompted the arrest. Ms. Meng was arrested in Vancouver on Saturday. United States authorities are seeking Ms. Meng’s extradition but have not said what prompted the arrest.
Shares of large American tech companies dropped again on Thursday. Apple, Amazon and Facebook all declined by more than 2 percent. Apple’s tumble came as analysts from UBS cut their price target for the stock, citing survey data that showed declining interest among consumers to buy iPhones. Plans to buy iPhones hit a new low among Chinese consumers, UBS analysts noted. But it could pose substantial risks for large American technology companies that have driven major gains for American investors in recent years.
Apple, Amazon and Facebook all declined by more than 2 percent on Thursday. Apple’s tumble came as analysts from UBS cut their price target for the stock, citing survey data that showed declining interest among consumers to buy iPhones. Plans to buy iPhones hit a new low among Chinese consumers, UBS analysts noted.
But the pain spread beyond technology stocks, with the S&P 500 energy sector seeing an even steeper slump. Exxon Mobil and Chevron both dropped more than 2 percent in early trading, amid an ongoing sell-off in crude oil markets.But the pain spread beyond technology stocks, with the S&P 500 energy sector seeing an even steeper slump. Exxon Mobil and Chevron both dropped more than 2 percent in early trading, amid an ongoing sell-off in crude oil markets.
Benchmark American oil prices were down more than 4 percent on Thursday, with prices nearing $50 a barrel. The declines came even as Saudi Arabia pressed OPEC for production cuts in an effort to shore up prices.Benchmark American oil prices were down more than 4 percent on Thursday, with prices nearing $50 a barrel. The declines came even as Saudi Arabia pressed OPEC for production cuts in an effort to shore up prices.
Persistently weak prices for crude oil have raised questions about the strength of the global economy. In Europe, growth has slowed amid ongoing uncertainty surrounding Britain’s exit from the European Union and the chance that Italy’s populist government is gearing up for a showdown with Brussels over budgetary issues.Persistently weak prices for crude oil have raised questions about the strength of the global economy. In Europe, growth has slowed amid ongoing uncertainty surrounding Britain’s exit from the European Union and the chance that Italy’s populist government is gearing up for a showdown with Brussels over budgetary issues.
Even economic powerhouse Germany, the standout economy on the Continent, contracted during the third quarter, as the uncertainty over global trade crimped its export-focused economy. European stocks tumbled sharply on Thursday, with indexes in Germany, France and Britain all falling more than 3 percent.Even economic powerhouse Germany, the standout economy on the Continent, contracted during the third quarter, as the uncertainty over global trade crimped its export-focused economy. European stocks tumbled sharply on Thursday, with indexes in Germany, France and Britain all falling more than 3 percent.
Many of Germany’s exports go to China, where economic growth has slowed to the most sluggish pace in a decade, amid the ongoing trade tensions with the United States.Many of Germany’s exports go to China, where economic growth has slowed to the most sluggish pace in a decade, amid the ongoing trade tensions with the United States.
In Asia, all major markets ended the trading day down more than 1 percent, and several slid further. The tone for the day was set in Hong Kong, where investors rattled by Ms. Meng’s arrest focused their attention on technology stocks and the overall market dropped 2.5 percent. The shock wave was felt across the border in Shenzhen, where stocks fell 2.2 percent.In Asia, all major markets ended the trading day down more than 1 percent, and several slid further. The tone for the day was set in Hong Kong, where investors rattled by Ms. Meng’s arrest focused their attention on technology stocks and the overall market dropped 2.5 percent. The shock wave was felt across the border in Shenzhen, where stocks fell 2.2 percent.
In Tokyo, the market fell nearly 2 percent after the governor of the Bank of Japan warned that the trade war would hurt the Japanese economy. Traders in Seoul, South Korea, pushed the market down more than 1.5 percent; stocks in Taiwan were down 2.3 percent.In Tokyo, the market fell nearly 2 percent after the governor of the Bank of Japan warned that the trade war would hurt the Japanese economy. Traders in Seoul, South Korea, pushed the market down more than 1.5 percent; stocks in Taiwan were down 2.3 percent.
“The world economy is still expanding at a rapid pace, but cracks are starting to appear in the global growth picture,” Brian Coulton, a chief economist at Fitch Ratings, wrote in a note to clients. Fitch has repeatedly warned of China’s debt binge and the challenges facing the second-largest economy after the United States.“The world economy is still expanding at a rapid pace, but cracks are starting to appear in the global growth picture,” Brian Coulton, a chief economist at Fitch Ratings, wrote in a note to clients. Fitch has repeatedly warned of China’s debt binge and the challenges facing the second-largest economy after the United States.
As stocks tumbled on Thursday, investors shifted money into the safety of American government bonds, pushing the yield on the United States 10-year Treasury note sharply lower, to 2.85 percent. (Bond yields move in the opposite direction of prices.)As stocks tumbled on Thursday, investors shifted money into the safety of American government bonds, pushing the yield on the United States 10-year Treasury note sharply lower, to 2.85 percent. (Bond yields move in the opposite direction of prices.)
Those lower yields can crimp the profitability of banks, which charge interest rates that are based on government bond yields. The threat of such pressures has hammered American financial stocks in recent days. The S&P 500 financial sector index was the worst performing part of the market on Thursday, tumbling more than 3.5 percent before midday.Those lower yields can crimp the profitability of banks, which charge interest rates that are based on government bond yields. The threat of such pressures has hammered American financial stocks in recent days. The S&P 500 financial sector index was the worst performing part of the market on Thursday, tumbling more than 3.5 percent before midday.
The sour mood in stocks on Thursday seems a far cry from Monday, when markets were lifted by the announcement that Mr. Trump and Mr. Xi had reached a trade truce on the sidelines of the Group of 20 meeting. Stocks around the globe soared on the news.The sour mood in stocks on Thursday seems a far cry from Monday, when markets were lifted by the announcement that Mr. Trump and Mr. Xi had reached a trade truce on the sidelines of the Group of 20 meeting. Stocks around the globe soared on the news.
But a series of tweets from Mr. Trump, who called himself “a Tariff Man” prompted a new round of selling on Tuesday. Markets in the United States were closed Wednesday to honor the death of former president George H.W. Bush. The only thing that seems certain is more uncertainty, analysts said.But a series of tweets from Mr. Trump, who called himself “a Tariff Man” prompted a new round of selling on Tuesday. Markets in the United States were closed Wednesday to honor the death of former president George H.W. Bush. The only thing that seems certain is more uncertainty, analysts said.
“While the likelihood of an ongoing dialogue after months of no discussions and the pause on tariffs are still positive developments, it’s clear that negotiations will be challenging and a source of volatility,” Mark Haefele, chief investment officer at UBS wealth management, said in a note to clients.“While the likelihood of an ongoing dialogue after months of no discussions and the pause on tariffs are still positive developments, it’s clear that negotiations will be challenging and a source of volatility,” Mark Haefele, chief investment officer at UBS wealth management, said in a note to clients.